• Podcast,  Real Estate

    Face The Fear Podcast – Real Estate Mavens: Leslie Ferguson, Heather Regan, and Tiffany McIntosh

    To Rent or To Buy? Millennials wrestle with this decision more than any past generation, especially as student loans and stagnant wages have delayed the home-buying process substantially. In this episode, we tackle this question and many others with the help of three Real Estate Mavens: Leslie Ferguson, Heather Regan, and Tiffany McIntosh.

    • What differences have you seen between Millennials looking for housing vs. Gen X or Baby Boomers looking for housing when they were in their 20s-30s? How has the housing market changed over time?
    • How does your credit score play into the home buying or apartment renting process?
    • Where should a Millennial start when it comes to purchasing a home? What are a few key first steps and pitfalls to avoid?
    • How do taxes factor in to owning a home? 
    • What are hidden costs/fees that a first-time home buyer might not know about?
    • What questions should someone ask a real estate agent to make sure they’ll be a good fit?

    Don’t forget to subscribe and leave a review! XOXO

    Face The Fear Website: https://www.facethefearfw.com

    Contact Us: facethefearfw@gmail.com

    Our Guests:

    LESLIE FERGUSON
    REALTOR®
    260.312.8294
    leslieferguson@kw.com

    HEATHER REGAN
    REALTOR®
    260.615.2570
    heatherregan@kw.com

    reganfergusongroup.com

    TIFFANY MCINTOSH
    Mortage Loan Officer 
    260.497.8685

    Tiffany.McIntosh@53.com

    https://secure.53.com/mlo/app/mlosite/tiffanymcintosh

  • Credit Cards

    Credit Cards: The Good, The Bad, The Ugly

    Credit cards. A number of different images may flash through your head when you hear those two little words. Do you picture yourself freezing your card in a block of ice? Putting it through a shredder? Lighting it on fire?

    Or do you see yourself casually strolling out of a store, shopping bags in hand, feeling elated about all the fabulous things you just bought and didn’t have to pay for…(yet)?

    Either way, credit cards are a polarizing topic that seems to divide people faster than Donald Trump’s tweets. Some people equate credit cards with financial disaster and endless debt. Others view them as a way to build credit and save money through cash back and perks. Personally, I fall somewhere in the middle of the spectrum. Here’s a few of my own pros and cons of credit cards that will (hopefully) help you decide if owning a credit card is a good financial decision for you.

    Let’s start with the bad news first.

                Con #1: CREDIT CARDS CHARGE INTEREST – LOTS OF IT!

                You’re probably thinking, “DUH.” But, let’s just say it like it is. The #1 reason why credit cards have a bad reputation is the high interest charged on unpaid balances. Even though most people know credit cards can charge high interest, many overlook the details. For example, exactly how much interest is your credit card charging? When does interest begin to accrue? On what amount does the interest apply? Does your credit card offer a grace period? All of these details can be found in the fine print, usually in confusing legalese than can make you feel like a chimpanzee trying to do calculus. In summary, the best way to avoid interest altogether is pay your full credit card balance on time every month. If you don’t, you’ll be that chimpanzee trying to do calculus to figure out how in the world your $200 new TV (it was such a great deal!) ended up costing you $500 (OUCH). 

    (Also, side note, there is a myth floating around out there that you need to carry a balance on your credit card and pay interest in order to earn good credit. This is absolutely false. Carrying a balance may hurt you, not help you. That’s all. Carry on).

                Con #2: Credit Cards Can Be The Gateway Into A Deep Dark Debt Hole

                Credit cards can be the gateway drug into a seriously dangerous debt problem. Why? Because they are so easy to obtain and so easy to use. Here’s a personal example for you. When I started my first job out of college as a social worker, I was making about $32,000 per year. I signed up for my first credit card and was given a credit limit of $4,000. Wow – $4,000! That’s a lot of cash! My credit card company must think I’m really responsible…

    HOLD UP. Let’s do some math: Say my hypothetical take-home pay (after tax) was $28,000 annually. $28,000 / 12 months = $2,333 net monthly income. With a credit card limit of $4,000, I could choose to max out the credit card in the first month, buying a $4,000 all-inclusive vacation to Hawaii. Aloha to me!

    The problem is, in order to pay the balance off, I would have to use my entire $2,333 paycheck over the next few months to pay off the full credit card balance. This is nearly impossible, because I would have no extra cash left over to pay for rent, food, transportation, clothes, or anything else for that matter. As a result, that remaining unpaid balance gets carried over from month to month – and is charged interest in the meantime. And that, ladies and gentlemen, is why credit cards can be a gateway drug. Easy to obtain. Easy to use. Easy to spiral out of control.

                Thankfully, I didn’t fall into this debt trap. I never used more than 25% of my credit limit and made sure I could pay the balance in full at the end of every month. Ironically, because I was using my credit responsibly, I received about five credit card offers in the mail every week and was offered a credit limit increase. All of this is great until too much of a good thing becomes a bad thing. It can be easy to become addicted to borrowing money – even if you are responsible with paying it back. Having $10,000 in debt and a great credit score is still not as good as having no debt at all. 

                Con #3: Credit Cards Aren’t Necessary

                That’s right. You don’t need ‘em. In today’s culture, having a credit card is equivalent to having a cell phone. If you don’t have one, you’re living in the dark ages. But in reality, you really don’t need a credit card – especially if you’re able to build up credit through other sources, like student loan payments. Side note: credit cards + social media = disaster waiting to happen. Why? When we constantly see posts of people taking luxurious vacations, buying a new home, getting their dream car, or wearing designer clothes, we often (even subconsciously) feel like we’re missing out. In order to “keep up with the Jones’,” we swipe our credit cards to pay for a lifestyle we can’t afford. Guess what. A lot of people who appear to have it all on social media may actually be drowning in debt to keep up with the image they want to portray. Don’t fall into that trap. (Okay, I’ll get off my soapbox now. Thank you for coming to my TedTalk). 

    And now for the good news:

    Pro #1: Credit Cards Help Build a Good Credit Score

                This is true – IF (and that’s a big IF) you diligently pay your full balance each pay period. And, as stated in Con #3, you really don’t need a credit card to build up your credit score. Other methods of building credit include paying off student loans, getting a secured loan or secured credit card (backed by your own pre-deposited money), or becoming an authorized user on someone else’s credit card (ideally someone with good credit history). In fact, I would argue that building credit through one of these methods is a much safer option than diving head first into an unsecured credit card. 

                As a disclaimer, here is my personal story. I graduated college without any student loans, and I will remain eternally grateful to my parents for their sacrifice to make that happen. As a result, I vowed to never put myself into unnecessary debt, since my family worked so hard to keep me out of it. But, this also meant I had no credit to my name. I started with one universal credit card with no annual fee and some small perks. I only used this card for a few designated expenses, like rent and gas, so my spending wouldn’t get out of hand. Over the next couple years, I paid this card on time each month and also added a couple store cards as well. I was able to build a solid credit score in a relatively short period by consistently paying the full balance, using different lines of credit, and keeping my credit limit usage under 25% at all times. BUT, this is my personal story. It is not the universal solution to building credit. Find a method that works best for your personal financial situation. 

                Pro #2: Credit Cards Provide Points and Perks

                If I’m being honest, this Pro could also be a Con. Here’s why: while most credit cards offer some incentive for use (like cash back or airline miles), the benefits may not outweigh the expenses. For example, if you have an airline credit card with a $100 annual fee, but you only take 2 flights per year to earn $50 in airline miles, then you really lost money by using the card (especially if you were charged interest on unpaid balances from month to month). Make sure if you’re purchasing a card with an annual fee, you calculate whether or not the annual fee will produce enough benefits to justify the cost.

    NerdWallet has an excellent credit card comparison tool to help narrow down which credit card will be the best fit for your lifestyle. (#NotSponsored). In fact, I used this tool to find my first two credit cards, based on my spending habits, credit score, and desired benefits. One of the cards I decided upon is the Amazon Prime Visa card (Again, #NotSponsored. But, Amazon, if you wanna slide in my DMs…)

     I already buy the majority of my essentials on Amazon, everything from dish soap, to cat food, to breakfast bars. By using the Amazon Prime credit card to make these purchases, I also earn 5% cash back on these transactions and 1% back on everything else. What makes this really valuable is, nearly every time I go to order some of these essentials Amazon, I have anywhere from $5-$25 cash back to use toward my purchase. Again, this is what works best for me, but it may not be the best fit for you. Try out the NerdWallet calculator to find your best credit card fit. 

                Pro #3: Credit Cards Teach Financial Discipline

                Just because you could eat a whole box of donuts in one sitting doesn’t necessarily mean you should.

    Similarly, just because you could spend your full credit limit in one month doesn’t mean you should. Using credit cards effectively requires discipline and discernment. Many people get themselves in deep debt trouble when they begin to disassociate their actual cash money from the motion of swiping their credit card. In other words, it’s easy to forget about the pain of paying for purchases when you have the ability to enjoy something instantly without paying a single penny upfront. Credit cards themselves are not the enemy. It’s the emotional and psychological response of purchase without pain that gets us in trouble. The good news is, we have the ability to acknowledge the mental pitfalls of credit card usage and shift our mindset to avoid them. Here’s a rule I personally follow to keep my finances in perspective: I never make a credit card purchase if I don’t have enough money in my checking account to cover it immediately. Credit cards make it easy to spend money we don’t have, but they don’t need to lead to financial ruin. A shift in mindset and a healthy dose of discipline is all you need to make sure your credit cards are working for you, not against you.

    **P.S. If you read this and thought, “Well, shitake mushrooms. I’m already up to my eyeballs in credit card debt. Now what?” No fear! We will be tackling debt reduction planning in our future content very soon!

    Written By: Kaitlyn Duchien

    Contact Us: facethefearfw@gmail.com

  • Podcast

    Face The Fear Podcast – John Redmaster, CFP – Where should Millennials put their money first?

    John Redmaster, Certified Financial Planner and fellow Millennial, joins us to break down where Millennials should focus their money first. Should we pay down student loans or credit card debt? Save for a home? Invest in a 401(k)? Build up an emergency fund? John helps us find answers to these questions and more on this week’s episode:

    • What tips would you give to Millennials who just graduated college (or are several years into the workforce) who feel like their student loan debt is unmanageable?
    • Since you have the CFP designation, can you explain a little bit about what exactly that designation means and why it may be important to consider when seeking a financial advisor?
    • What can Millennials do TODAY to get their finances on track?

    Financial Focus Website:
    https://www.financialfocusonline.com/

    Don’t forget to subscribe and leave a review! XOXO

    Face The Fear Website: https://www.facethefearfw.com

    Contact Us: facethefearfw@gmail.com

    YouTube: Face The Fear

    Instagram: Face.The.Fear

    Facebook: Facebook.com/FaceTheFearFW

    Twitter: Face_The_Fear

    Advisory Services offered through Investment Advisors, a Registered Investment Advisor and Division of ProEquities, Inc. Securities offered through ProEquities, Inc., a registered Broker/Dealer and member FINRA/SIPC.  Financial Focus is independent of ProEquities, Inc. Ash Brokerage and its affiliates are not associated with ProEquities.

  • Podcast

    Face The Fear Podcast – Chad Tallman, Financial Advisor

    In this episode, we chat with Chad Tallman, Financial Advisor*, about everything from investing, to budgeting, to retirement planning – all from a Millennial point-of-view. Chad debunks some common myths about financial advisors and provides tips for finding the right advisor who will best meet your needs. 

    Here are a few of the questions uncover in this episode:

    • How does someone start investing? 
    • What does “risk tolerance” mean?
    • Why is it important for Millennials to have a financial advisor and to develop a financial plan?
    • What does a holistic financial plan look like for a Millennial?
    • What questions should someone ask a financial advisor to make sure they are the right fit for them?
    • What is one thing you wish you know about finances when you were in your early 20s?

    Chad’s LinkedIn: https://www.linkedin.com/in/chadtallman/

    Contact Us: facethefearfw@gmail.com

    Don’t forget to subscribe and leave a review! XOXO

    *(Securities offered through Sigma Financial Corporation, Member FINRA/SIPC. Investment Advisory Services offered through Sigma Planning Corporation, A Registered Investment Advisor. CLN Financial is independent of Sigma Financial Corporation and Sigma Planning)

  • The Market: 101

    Compound Interest: How To Earn $ On Your Money

    Have you ever had a terrible day that just seemed to keep getting worse? You didn’t hear your alarm go off, so you woke up 20 minutes late. When you jumped out of bed in a panic, you stubbed your toe on the nightstand (who put that there?!). At least you still had time to make yourself a fresh, steaming-hot cup of coffee! Unfortunately, on your way to work, an idiot cut you off in traffic and that steaming-hot cup of coffee flew out of your hand and on to your favorite white shirt.

    Nice. Huffing and puffing, you barely make it into the office when a coworker stops you and says, “Are you ready for your presentation in the meeting this morning?” (Oh, sh*t. I thought that meeting was tomorrow!) Later on, you realized that you packed a can of cat food instead of chicken salad for your lunch (ew), gave your crush a fist bump in return to a high-five (awkward), dropped a stack of important documents everywhere, and ripped your pants when you bent down to pick them up (tragic). It’s 4:58pm. You’ve almost made it through the day (thank goodness), but you decide to send one last email before you head home. You need to send your coworker, Danielle, a spreadsheet she requested, and decide to mention how annoying your boss has been lately. Sent! Then your heart stops. That email didn’t go to Danielle. It went to Daniel…your boss.

    We’ve all had one of those days. But, what makes a day like this so bad? It’s not because just one little thing went wrong. Oh no. It’s because one bad experience seemed to lead to another, which led to another and another, compounding into a terrible day overall.

    While this example of a bad day demonstrates how compounding can work against you, compounding interest is a financial tool that can actually work for you in a very positive way, even on a crappy day. Holla!

    First of all, what is compound interest? Compound interest is a basic financial concept where interest is not only calculated on your initial investment (simple interest), but is calculated on your initial investment PLUS any interest you have earned previously. Your money is earning money on its money.

    *Mind blowing, I know*

    Let’s break it down:

    Say you put $1,000 into an account that is earning 5% simple interest for 10 years. At the end of the 10 years, you would have a total of $1,500. ($1,000 x .05 = $50 x 10 Years = $500). However, let’s also say that you put $1,000 into an account that is earning 5% compound interest for 10 years. In this case, at the end of 10 years, you would have a total of $1,628.89. How did you end up with more money using compounding interest vs. simple interest? Let’s break it down even further:

    For the DIY-ers out there, here’s the formula used to calculate compound interest:

    P [(1 + i)n – 1]

    P= Principal (Original Investment)

    i = Annual Interest

    n = Number of Compounding Periods

    So, to plug in the numbers from above:

    $1,000 [(1 + .05)10 – 1] = $628.89

    And here’s a comparison between simple and compound interest over time:

    If you’re like me, you probably just glazed over that last section like a Krispy Kreme donut. (I donut blame you). So, we see how the numbers work. Why does it matter?

    Compound interest could be the single most important factor either making or breaking your bank account over time. You could either be using compounding interest to your advantage by putting funds into a retirement or investment account and allowing it to compound (grow) more quickly over time. Or, compounding interest could be your worst nightmare if you’ve got high interest credit card or student loan debt, which would compound just as quickly, but in the wrong direction. (Yikes!)

    As we can see in the chart above, compounding interest produces a greater return (grows faster) than simple interest over the same period of time. And the key word here is TIME. The concept of compounding interest is pretty spectacular on its own. However, without the crucial ingredient of time (no, not thyme, sorry G’ma), your compound interest will produce very bland results. The longer you wait to withdrawal any of your funds, the more powerful – and flavorful – the compounding effect will be. (Can you tell I’m hungry? Did someone say pizza??)

    If you put $1,000 in a retirement account that grows through compounding interest, congratulations! You’re #winning at this game of life. But, if you become impatient and decide to take out $10 here or $20 there, you’ll quickly undermine all the positive benefits of compounding, while likely getting slapped with some hefty tax penalties as well (if you’re under 59 ½). Ouch – Game Over.

    If you’re someone who struggles with delayed gratification (aka ME), here’s a life hack to make you think twice about taking money out of your compounding accounts. It’s called the Rule of 72, and it’s a fast calculation to show how quickly your money can double inside a compounding account (without taking withdrawals – no touchy).

    Simply divide 72 by the annual interest percentage to see how many years it will take for your money to double. For example, if you’re earning an average of 8% annually in an investment account, your money will double in 9 years (72 / 8 = 9). You put in $1,000 today and you’ll have $2,000 in 9 years. Cha-ching! Obviously, the more money you can invest early on, and the longer you can let it grow, the better your outcome will be.

    This is exactly why the best time to start saving is today. Like, NOW. (Actually, the best time to start saving was yesterday…but there’s no time like the present!)
    If you want to see for yourself how compound interest works, check out this, this, and this. You’re welcome.

    Written By: Kaitlyn Duchien

    Contact Us: facethefearfw@gmail.com

  • Real Estate,  Videos

    First Time Home Buyer? What You NEED To Know!

    This week, the DeVisser Real Estate Group is our special guest on Face The Fear! Brendin DeVisser, a Millennial real estate agent, answers some of your most common questions about the home-buying process. Don’t forget to like, subscribe, and leave a comment! The DeVisser Group with Five Star Lakeshore is a hardworking team of real estate agents in West Michigan who work hard to inform and educate people on the home buying process, especially when it’s their first time buying a home! From credit scores to pre-approval, we can help you better understand these big transactions that can change your life. With helpful guidance and preparation, you’re on your way to owning your own property! If you have any questions, you can find us on social media (links below) or give us a call!

    DeVisser Group:

    Website: http://brendin.seewestmichiganhomes.com

    Facebook: https://www.facebook.com/brendinfives…

    Instagram: https://www.instagram.com/bd5starreal…

    Twitter: https://twitter.com/bdevissfivestar?l…

    LinkedIn: https://www.linkedin.com/in/brendin-d…

    Snapchat: @bdvrealestate

  • Real Estate

    First Time Home Buyer? What You NEED To Know!

    Feel free to watch the video here!

    Hey guys! For those of you who don’t know me, I’m Brendin DeVisser, a real estate agent in West Michigan! I’m 25 and I’m the founder of The DeVisser Group with Five Star Lakeshore which consists of other real estate agents and my marketer.

    My goal here is to quickly and simply, help you through the process of buying your first home! I know it can sound intimidating and stressful, however, if you surround yourself with professionals you can trust, that stress and intimidation will disappear

    I was 19 when I first invested in real estate. Crazy right? Was I scared? Nah. I’m a big tough man and I can handle all this stressful money stuff. I’m kidding. Of course, I was scared!I was putting a lot of money into something that would eventually be mine, but right now felt like it was burning a hole in my wallet. However, with the right guidance from experts I trusted, I was able to purchase a duplex, rent it out and start paying it off. 

    You’re buying your first home, or you’re thinking about it. Well, now is the time to do it! The real estate market is still hot but it won’t be forever. Interest rates will rise and so will the prices of homes. 

    So, where do you start? 

    You contact someone like us. A real estate team you can trust to guide you and prepare you for what is ahead. If they’re anything like us, they will be there to answer any questions you have, anytime. You want to prevent as many conflicts from arising as possible and that is the agent’s job. 

    They can refer you to a bank or lender they rely on to check your credit score to see if you’re capable of getting a loan and eventually approval to buy a home. 

    What’s a credit score?

    Ahh, the dreaded credit score. If you’re afraid of it, it’s for one of three reasons.

    1. You don’t know what it is, therefore you’re afraid of the unknown. 
    2. You don’t have one.
    3. You have a bad one.

     First of all, what is a credit score?

    Simply put, a credit score is something you receive and earn by making a payment on time and for a period of time. (Examples: Phone, car, rent etc.)

    Secondly, how do I improve my credit score?

    • Increase your points by paying in full and on time
    • 850 is a perfect score 
    • Earning a perfect score gives you the best possible interest rate for purchasing your home 
    • Accomplishing this proves to a lender/bank you’re responsible
    • If you have zero credit it will be very difficult in most instances to get an approved loan for a home
    • This process is similar to a car loan if you’ve had one, but we are generally talking a bigger loan, which means more requirements. 
    • Consistent payments for at least 6 months is what lenders are looking for

    Keeping this up and being responsible with your money and payments will offer an easier time buying a home later on.

    Do you have to be Pre-Approved to buy a home?

    Yes, unless you’re paying in cash. 

    The preapproval letter tells us you are ready to buy a home

    To Rent or to Buy? 

    This is the question I get all the time.

    If you plan on staying where you are for a short period of time, renting could be your best option. However, if you plan on settling down in the area for several years, investing in a home, in my opinion, is the best way to go. Then you can add equity (or real property value) instead of paying rent for something you don’t (and won’t) own.

     It’s different for everyone, so make sure you’re talking to a professional you trust to figure out what’s best for you and your situation!

    Some Challenges I Ran Into Buying My First Home

    As I mentioned before, I was 19 when I first bought my duplex. I was taught to use cash for everything so, if you were paying attention, you know what that means. My credit score was NOT perfect, which made it difficult to take out a loan and buy my first home. Learn from my uneducated 19-year-old self and start working on that credit score! Find people you trust and search for a worthy investment!

    These simple steps are crucial as a first time home buyer! I hope this was helpful and if you have any questions feel free to contact us. You can find us on almost every social media platform to learn more about real estate.

    Article Contributed By: Brendin DeVisser

    DeVisser Group:
    Website: http://brendin.seewestmichiganhomes.com
    Facebook: https://www.facebook.com/brendinfivestarealestate/?ref=settings
    Instagram: https://www.instagram.com/bd5starrealtor/
    Twitter: https://twitter.com/bdevissfivestar?lang=en
    LinkedIn: https://www.linkedin.com/in/brendin-devisser-877a09118/
    Snapchat: @bdvrealestate

  • Insurance

    Life Insurance: What Kind Is Best For Me?

    Welcome back! Hopefully you read my last article, where I discussed three reasons why considering life insurance should be a priority. If one of these reasons resonated with you, or you have one of your own, I want to give some thoughts as to the different types of life insurance. Broadly, there are two categories: term insurance and permanent insurance.

    Term insurance is simple – you pay an annual premium for the number of years in the term, and, other than a few exceptions, the insurance company will pay your beneficiary the death benefit if you were to die during the term of the policy. For example, I own a 20 year term policy, running from 2018 to 2038. If I were to die in 2030, my wife would receive the $1,000,000 death benefit, tax-free.

    Permanent insurance is a little more complex. Within the category of permanent insurance, there are several types, but we will focus on the two main “flavors.”

    First, there is “protection-based” permanent insurance. Protection-based permanent insurance is designed to provide a death benefit for your entire life. Instead of securing a death benefit for a 20 year period, this kind of policy can provide a death benefit to your beneficiary regardless of how long you live.

    Second, there is “accumulation-based” permanent insurance. It also has a death benefit, but is really designed to grow cash value within an account housed at the insurance company. A portion of the premium you pay goes to cover the cost of your death benefit, a portion goes to the insurance company’s operating expenses, and a portion goes into an account for you. As you pay premiums, the cash in the account grows. Depending on the strategy of distributions, you can leverage this cash value in tax-advantaged ways.

    So you are probably thinking…why wouldn’t I always buy permanent insurance over term, as it has much more benefit?

    You guessed it: permanent insurance is more (and can be much more) expensive than term insurance. But, most millennials are at a point in their financial journey where permanent insurance is not only too expensive, but is unnecessary. You are likely better off focusing on maximizing your contributions to tax-advantaged accounts like a 401(k) or IRA, but also securing term insurance to protect your finances. (And, if you remember from the last article, term insurance sometimes can be converted into permanent insurance!)

    Remember: the cheapest day to buy life insurance was yesterday. If you just need term coverage, you are in good company. If you can afford permanent coverage, that may be a better fit. Either way, make sure you are protecting the financial plan you work so hard to build.

    Want more information on life insurance? Let’s talk! Face The Fear is here to help millennials make smart financial decisions that fit their lifestyle.

    Article Contributed By: Xavier Serrani

    Contact Us: facethefearfw@gmail.com.

  • The Market: 101

    Drop It Dow Low: What is the Dow Jones?

    You may (or may not) have heard that the Dow Jones has been dropping it like it’s hot lately, dipping 1,150 points just last week. World events and uncertain economic conditions can result in market volatility — when the stock market changes moods faster than your teenage sister. But, what exactly is the Dow Jones? And why has it been making major money moves recently?

    The Dow Jones Industrial Average (DJIA) is a stock market index that includes 30 large, U.S. publicly-traded companies and acts as a thermometer, testing the overall health of the U.S. marketplace. Sounds a lot like the S&P 500 index, right? 

    Here are several key differences between the S&P 500 and the DJIA:

    S&P 500Dow Jones (DJIA)
    Founded in 1957Founded in 1896
    500 of the largest U.S.-based publicly-traded companies across all industries 30 of the largest U.S.-based publicly-traded companies across all industries (originated with just 12 companies solely in the industrial sector)
    Companies selected by S&P Committee (owned by McGraw Hill Financial)Companies selected by Dow Jones & Co. Averages Committee
    Companies selected based upon specific qualification criteria No defined criteria for how a company is selected — generally, must be a large leader in their industry
    Stocks within the index are weighted by market capitalization (market cap = # of outstanding shares x market price)Stocks within the index are price-weighted (the higher the stock’s market price, the more influence it will have on the index’s performance)
    Often considered the “single best indicator” of stock market performance, because of its broad and diverse collection of companies across all industriesMost well-known stock market index. But, because if its exclusivity (only represents 30 of over 3,000 US public companies), it is more an indicator of blue-chip stocks than the market overall

    OK, now that we’ve got a grasp on what the Dow Jones Index is, let’s talk about why it’s been dropping faster than your bank account after a trip to Target.

    The stock market can be affected by many factors, such as political changes, natural disasters, inflation, interest and exchange rates, and unexpected world events — just to name a few. Most recently, when the Dow Jones stumbled and fell by 4 percent in early October, it was likely due to sipping a cocktail of rising Treasury yields, the increased Federal Funds rate, and the China-U.S. trade war. Just like how you get a little wobbly after drinking one too many cocktails, the stock market also gets shaky (see: volatile) when too many uncertain events are mixed together at the same time. The stock market: it’s just like us.

    But, not to fear. Similarly to how you will drink lots of water, take an Advil, and eat greasy food to bounce back after a night out, the stock market bounces back, too. Usually, the severity of the market fall will determine how long it will take to rebound. Small corrections can be overcome in just a few days, whereas a full-blown financial crisis may take years to recover from (think: the 2008 Great Recession).

    To recap: the Dow Jones is the most well-known market index, comprised of only 30 companies across various industries, and is used to evaluate general trends in the stock market. Recently, the Dow Jones took a big tumble due to a woozy cocktail of world events and interest rate changes. But, don’t worry. Analysts remind us that the market often panics over everything and can sometimes be a bit overdramatic…#Relatable. So, for now, be prepared to ride the roller coaster of market volatility, because over the long-term, the market always trends upward. Ask Warren Buffett.

    Congratulations! You now know what the Dow Jones is and why it’s been in the headlines lately. But, this article was not meant to be an in-depth analysis of the Dow Jones (because ain’t nobody got time for dat). If you’d like to dig in a little deeper to the topics covered above, feel free to click on any of the hyperlinks (including that one) to become a Dow Jones expert. You’re welcome.

    Written By: Kaitlyn Duchien (@ktaylor1395)

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