Someone like equity-firm director Gary Sernovitz might consider losing money in a restaurant to be part of the thrilling charm, but some people (maybe yourself) might want to invest in things that actually make them money or don't fail. Every good thing comes from an idea and every idea needs money. Here are five things that might make you money and make the world a better place!
It takes a lot of work to get any kind of medical certification and the dream is generally to open a private practice, usually in a community where the practitioner services a particular need that not many people consider optional. If you have to get braces, you get braces and the profit margins show. Before taxes, dentist offices make, on average, a 15.4% profit margin, outpatient care centers make 14.8%, and general physician practices make a solid 15.5%. Here's Modern Healthcare Magazine on more reasons why more and more people are investing in medical practitioners.
And you're also investing in an essential part of many communities and are in a place to use that profit margin to actually change people's lives.
While the brick-and-mortar establishments ebb and flow with vast amounts of money lost in between, their more mobile cousins have been shown to be more resilient. In fact, according to Josh Tang, founder of mobile food behemoth Mobi Munch, the failure rate for food trucks is only between 10 and 20 percent (compared to 60-90% for restaurants, with much geographical variety). With widely popular street vendors The Halal Guys set to become the 'Middle Eastern Chipotle' and minting out franchises and other studies predicting that food truck revenue will hit $2.7 billion by the end of 2017, it's time to hit the street with your hot cash.
With the results of last Tuesday's election still very much on our minds, people are already turning toward the private sector for the kinds of leadership and administration that people have good reason to believe a Trump White House and a Republican-controlled Congress will provide. Election results or no, both 2015 and '16 have been great years for companies geared toward that underrepresented half of the human race. Back in September, tennis superstar Venus Williams and Mellody Hobson, lesser-known investment superstar, invested big in the Finnish startup Ellevest, a digital wealth management service that focuses explicitly on the needs of female investors, taking into account factors like the longer life expectancy of women.
Also big: new health services and companies that are taking the taboo out of women's healthcare products. Companies like thinx, icon, and the flex have made a place for themselves in the marketplace by aiming directly at women and no one else. Investment, I'm sure, they'll take from anyone.
While foodie waves ebb and flow in an impossible-to-keep-track-of litany, retail is a bit easier to follow. But what's yesterday's fashion in New York and L.A. can remain popular in Midland, USA for decades! And there's no better time to get into the world of selling product like 2016: with the snap, the 'gram, and Pinterest still flowing, it's easier than ever for businesses to get oodles of free advertising that's just a click away from a purchase. And the money's there: the Dow Jones U.S. Retail Index has consistently outperformed the more glamorous S&P 500 over the past decade. People, at the very least, are always buying things.
Spot the next new thing?
While investing in faith-based organizations may seem counterintuitive, Entrepreneur magazine writes, "being not-for-profit doesn't mean your goal shouldn't be." If you want a good place to invest good money that won't just be a sinkhole for operating costs, religious organizations are known to, on average, pull ahead and into the black. Last year, religious nonprofits netted, on average, a solid 12.41% margin. Not a bad profit for a nonprofit!
Any of these industries is a solid place to start for the investing beginner, or a good place to diversify for the investing pro.
When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.