1h Tim Clayton/Corbis via Getty Images There are a few money concepts everyone should know by the time they’re 30 if they want to build wealth . Compound interest , bear market and bull market, and diversification are important terms for investors. Net worth , interest, and inflation are good for even non-investors. When it comes to personal finance, education is power.
You may have spent your 20s developing some bad money habits — and hopefully kicking them — but as long as you master some important money concepts by the time you hit 30, you’ll be well on your way to building wealth. Here are nine fundamental money concepts every 30-year-old should know: 1. Net worth “Your net worth is a measure of your financial health,” said certified financial planner Mary Beth Storjohann, founder of Workable Wealth . It’s the result of your total assets minus your liabilities, or the amount you owe.
“Net worth can also be used to measure how far you’ve come over time,” Storjohann says. You’re in good standing if your net worth is well into the positives, and you have some work to do if your net worth is anywhere in the negatives. 2. Inflation Inflation is the increase in the price of goods and services over time.
Historically, the rate is 3% per year, Storjohann says. As prices rise due to inflation, the power of your dollar diminishes. “What’s most important is whether your income is rising at the same rate as inflation,” Storjohann says.
Use this inflation calculator to find out if your salary is keeping up with the annual inflation rate in the US.
3. Liquidity “Liquidity is how accessible your money is,” Storjohann says. Cash is the most liquid your money can be, because you can access it immediately. “Your emergency fund should be in a cash account since it needs to be readily available in case of an emergency,” Storjohann says. You may also store your emergency fund in a money market account — another safe and liquid alternative — where you can earn 1% interest on your money. In contrast, assets such as your home or your retirement accounts are the least liquid. The money isn’t at your fingertips, but rather invested, allowing it to gain value over time. Likewise, Storjohann says, “Money you have invested in the stock market is not as available, because you risk losing some of it if you take it out.
” 4. Interest Interest is a double-sided coin. When it comes to saving money, “Interest means your money is going to work for you,” Storjohann says. When you put your money in a savings account at a bank, you’re letting that bank borrow your money.
Interest is what they pay you to borrow it; it’s a percentage that can go up or down depending on the state of the economy. Most traditional savings accounts have an interest rate of 0.
01%, whereas a high-yield savings account could earn you 1% interest on your money. On the flip side, when you borrow money from someone — whether your credit card issuer or your student loan lender — you pay interest to them for borrowing that money. The longer you take to repay a loan, the more you’ll pay in interest. 5. Compound interest Compound interest is on your side; it’s basically the snowball effect applied to your money.
As time goes on, the money in an account will earn interest, and that sum of money will earn interest on itself, and so on. Here’s an example: If you deposit $100 with an annual interest rate of 7%, after a year you’ll have $107. The following year, you’ll be earning 7% interest on $107 so you’ll earn $7.49 instead of $7. Compound interest is the bedrock of the financial world.
Specifically, it can make all the difference when saving for retirement as it rewards those who start saving early and often. 6. Bull market A bull market refers to a market where stocks are up 20% from a low. A bull market typically means the economy is in a good state, and the level of unemployment is low.
7. Bear market Just the opposite of a bull market, when stocks are down 20% from a high, it’s called a bear market. Share prices are decreasing, the economy is in a downfall, and unemployment levels are rising. It sounds like a bad thing (and it certainly isn’t good), but Storjohann says the most important thing to keep in mind is that the stock market is a “roller coaster,” meaning it’s bound to go up and down and people shouldn’t panic every time the market takes a turn. “Millennials have time on their side,” she explains, “and over time, money has the ability to grow.
” 8. Risk tolerance If the stock market is a “roller coaster,” according to Storjohann, your risk tolerance is how comfortable you are weathering the ups and downs. “It’s about whether you understand the cycle or stress out about it,” she says.
If you have a high risk tolerance, you may get excited during a market downturn and choose to be more aggressive with your investments. If you’re risk-averse, however, you’ll tend to be less aggressive, or perhaps steer clear of the market all together. Risk tolerance isn’t just emotional, though.
Ultimately, it depends on how much time you have to invest (your age), your future earning potential, and the assets you have that are not invested, such as your home or inheritance.
Major banks such as Wells Fargo , Merrill Lynch , and Vanguard provide online tools to help determine your own risk tolerance. 9. Asset allocation and diversification Asset allocation is the balance of risk and reward and the basis of diversification, which allows you to effectively spread your wealth. Take a low-cost target date fund , for example. It’s a diversified retirement account that invests your money into a combination of stocks, bonds, and alternative assets and automatically adjusts your asset allocation and risk exposure based on your age and retirement horizon. If you keep your eggs “all in one basket,” as Storjohann describes it, what happens to your wealth if the basket falls and breaks? You’re going to want money stored elsewhere. “Diversification allows for balancing,” Storjohann says. “You give up some upsides, but you lower some downsides.
” Original reporting by Sarah Schmalbruch.
Personal Finance Insider offers tools and calculators to help you make smart decisions with your money. We do not give investment advice or encourage you to buy or sell stocks or other financial products. What you decide to do with your money is up to you. If you take action based on one of the recommendations listed in the calculator, we get a small share of the revenue from our commerce partners. Disclosure: Axel Springer is Business Insider’s parent company.
Lyft IPO — What to know in markets Friday
Lyft takes centerstage on Friday. The ride-sharing company is gearing up to have the biggest tech IPO in two years, at least until rival Uber hits the market. On Thursday evening, Lyft priced its stock at $72 per share , valuing the company at over $20 billion. The stock will debut Friday morning on the…
Lyft takes centerstage on Friday.
The ride-sharing company is gearing up to have the biggest tech IPO in two years, at least until rival Uber hits the market. On Thursday evening, Lyft priced its stock at $72 per share , valuing the company at over $20 billion. The stock will debut Friday morning on the Nasdaq under the ticker LYFT.
And some Wall Street analysts have initiated coverage of the stock ahead of the highly-anticipated IPO.
DA Davidson was the first to get bulled up on Lyft. On March 19, the firm initiated Lyft as a Buy and slapped a $75 price target on the stock.
Analyst Tom White argued, “LYFT is the #2 player in U.
S. ridesharing, but has grown its market share from 22% to 39% in the past two years. LYFT has benefited from PR/management/operational stumbles at its largest competitor, but is deftly maximizing the benefits by aggressively differentiating its brand/mission around socially-conscious values and corporate responsibility. This is good PR, but also good for business.”
Then on Thursday, Wedbush initiated Lyft as Neutral with an $80 price target. “The brand loyalty of Lyft has been quite impressive as the company continues to attract drivers and riders with its brand associated with corporate responsibility and social values, an impressive formula to go after the $1.2 trillion market spent annually in the US,” analyst Dan Ives wrote in a note to clients.
Heidi Chung is a reporter at Yahoo Finance.
Follow her on Twitter: @heidi_chung .
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Hong Kong has licensed its first three digital banks — and tech giants may lose out (TCEHY, HSBC, BACHY, BABA, ACN, GS)
Mekebeb Tesfaye 0m This is an excerpt from a story delivered exclusively to Business Insider Intelligence Fintech Briefing subscribers. To receive the full story plus other insights each morning, click here . The Hong Kong Monetary Authority (HKMA), the territory’s de facto central bank, has granted the first set of its long-awaited digital-only banking licenses,…
Mekebeb Tesfaye 0m This is an excerpt from a story delivered exclusively to Business Insider Intelligence Fintech Briefing subscribers. To receive the full story plus other insights each morning, click here . The Hong Kong Monetary Authority (HKMA), the territory’s de facto central bank, has granted the first set of its long-awaited digital-only banking licenses, reports Bloomberg. Business Insider Intelligence The first batch of approvals has been given to firms that have partnered with Standard Chartered, Bank of China Hong Kong, and Chinese digital insurance firm ZhongAn, and the firms intend to begin operating within nine months. Although at least two of the joint ventures — with Standard Chartered and ZhongAn, respectively — had been expected to receive approval, the decision not to award licenses to Chinese tech giants Tencent and Alibaba affiliate Ant Financial has surprised many observers, per the Financial Times. Here’s what it means: The licenses should ignite competition by giving holders access to a hugely profitable banking market where consumers continue to be frustrated by their options.
Hong Kong’s banking sector is heavily dominated by a handful of incumbents.
The four largest lenders — HSBC, Bank of China, Hang Seng Bank, and Standard Chartered — account for 66% of retail banking loans and 77% of mortgages, per Bloomberg citing Goldman Sachs. And their share of the market is lucrative: For example, two-thirds of HSBC’s global profits last year came from its retail and wealth management operations in the territory, reports Reuters. However, the new licenses are anticipated to put up to 30% or $15 billion of Hong Kong’s total banking revenues up for grabs — threatening the big four’s entrenched position. Hong Kong registers among the lowest rates of customer satisfaction for a developed economy due to a lack of banking competition. Only 59% of consumers in Hong Kong say they like their bank, compared with 62% of global consumers and the 74% who say the same in the US. Further, less than half (43%) of bank customers in Hong Kong say they have a positive experience when visiting a bank branch, compared with the 57% of global consumers who say the same; and it’s significantly less than the 74% of US customers who report having a positive experience, per an Accenture survey seen by Business Insider Intelligence. Increased competition ushered in by the new license holders should force the old guard to up their game and ultimately improve these customer satisfaction numbers.
The bigger picture: Hong Kong’s efforts to remedy financial services competition and customer satisfaction may hurt established players, but it could also further entrench the position of some.
Although Hong Kong’s big four could be the biggest losers, the likes of Standard Chartered appear to be getting ahead of the curve. The chronic dissatisfaction of the territory’s digitally savvy consumers is a boon for the newly licensed firms, giving them an opportunity to scoop up customers at pace: 68% of customers use digital channels to check their bank accounts at least once a week, per Accenture. Moreover, while the likes of Ant Financial and Tencent haven’t yet received approval, their potential entry into the market could give the old guard a run for their money. However, the fact that Standard Chartered and Bank of China are among the players to be permitted first suggests established players are already in front of the trend. Given their vast resources and existing reach, the newly approved licensing could be an opportunity to maintain the status quo. So, while the licensing is generally good news for consumers, its business impacts for established and new entrants remain to be seen.
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Here comes Lyft… (LYFT)
John Sciulli/Getty Images for Lyft Lyft , the first ride-hailing company to hit the public market, began trading Friday on the Nasdaq stock exchange. Its shares opened at $87.24, jumping 21% from the $72 where they priced Thursday evening. That brought its valuation to just over $29 billion. Lyft shares gave back some gains in…
John Sciulli/Getty Images for Lyft
Lyft , the first ride-hailing company to hit the public market, began trading Friday on the Nasdaq stock exchange. Its shares opened at $87.24, jumping 21% from the $72 where they priced Thursday evening. That brought its valuation to just over $29 billion.
Lyft shares gave back some gains in the afternoon, but the company still carries a market value of roughly $27 billion. Several Wall Street analysts are already bullish on the world’s second-largest ride-share company.
Watch Lyft trade live .
Lyft , the first ride-hailing company to launch on a US public market, began trading Friday morning under the ticker ” LYFT .” Shares jumped 21% to $87.24 apiece as they opened, bringing the valuation to just over $29 billion.
The company priced its initial public offering at $72 per share the evening prior, at the upper-end of its expected range.
But the newly minted stock’s rally was fading by midday, as shares had given up around half of their opening gains by 1 P.
Lyft was trading just above $81 a share, below where they’d opened earlier in the session.
Lyft’s offering raised about $2.69 billion, which it plans to spend on “working capital, operating expenses, and capital expenditures,” as well as acquiring or investing in businesses, according to its S-1 filing with the Securities and Exchange and Commission.
While potential investors will have a chance to buy into one of the largest US-listed technology IPOs in recent years, one thing they won’t have is equal say in how the company is run.
That’s because Lyft will have a dual-class structure consisting of Class A and Class B shares. That means outside investors of the former are entitled to one vote per share while shareholders in the latter are entitled to 20 votes per share.
Investor appetite for Lyft’s publicly traded shares was strong heading into Friday’s debut despite the company providing no clear timeline for reaching profitability .
Lyft earlier this week raised its expected IPO range from between $62 and $68 a share to $70 to $72 after its offering was oversubscribed . In other words, demand for its IPO exceeded the number of shares issued.
Read more: READY FOR LYFT OFF: Lyft to IPO today at whopping $21 billion valuation
In the race to go public during what’s expected to be a banner year for high-profile IPOs — with Airbnb, Slack, and Peloton all expected to debut — Lyft is set to beat out rival Uber to the public markets.
“In our opinion while Lyft has clearly benefited from some of the negative PR issues that Uber faced in 2017/early 2018, going forward the battle for market share will be a bit more balanced,” Wedbush analyst Dan Ives said in a note to clients earlier this week.
Ives initiated coverage with a “neutral” investment rating and a 12-month price target of $80.
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