Focusing on your cammodel savings and investing now for future prospects is a great way to kill a lot of birds with one stone. And one of the single most important steps to securing a financially stable plan is by creating your very own IRA account. Cammodels frequently face a unique set of issues during tax season, primarily because many of the write-offs available to self-employed professionals are hard to come by. Well instead you can become more proactive and prepared by creating your own write-off by opening an IRA account for up to $5500 a year per adult within your household.
The Benefits Of Creating An IRA As A Cammodel Are:
- Your money is locked up pretty tight. Therefore you won’t be tempted to take it back out. You can use it without penalty in 3 cases:
- You’ll receive a full tax deduction – The previously mentioned $5500 a year will no longer count towards your income. Depending on your tax bracket, that can amount to almost $1000 in tax savings.
- It will give you something to spend your spare cash on. Collecting stocks is a lot like Pokemon once you get started. Most stocks you like will increase in value over time. 1. You retire. 2.You buy a home and 3. You go to school. Taking it out for any other reason will result in that money becoming taxable with an additional 10% penalty.
- Tax free is tax free while its inside the IRA bubble. Unlike a regular brokerage account, anything you do inside it incurs no crazy paperwork or taxes until you retire and take out the money.
- In absolute emergencies you can borrow from your IRA what you put into it for up to 60 days. You pay no penalty if you repay it before them, but if don’t, you’re liable for a 10% penalty on top of paying all taxes for the money you borrowed. You can do this once every 365 days from the last time you borrowed.
Where do I open an IRA?
I’ve opened accounts to try out 10 different brokerages in the last year and these are my two favorites for IRAs for different reasons:
Schwab.com – Has full integrated banking and mortgage services and allows you to do more complex maneuvers inside your investment portfolio if you’re an advanced player. Transaction fees are minimal, but you have to follow the standard brokerage rules regarding buying whole shares of stocks and ETFs (you don’t want anything else). The key advantage over the next choice is that you have “options” fully available to play with, letting you goose your earnings with “covered calls”. If you don’t know what these things are, then the next brokerage is probably a far better choice.
MotifInvesting.com – This is one of just two brokerages that allow you to invest in partial shares. This means that you don’t need $1800 to buy a share of Amazon (AMZN) if you want, you can just put $50 on it and they’ll sell you a fraction of a share. Further, you can pre-build an entire diversified portfolio, called a “motif”, based on various themes. They have professionally built or community-built motifs to pick from also. Buying into that portfolio at the price you choose ($250 minimum) gives you fractional shares in up to 30 selected stocks or ETFs as one single instrument and for a single fee. (click link for the affiliate bonus of 3 months of free trading.)
Bonus Tips for Cammodel IRA’s And Investing (Completely Stolen And Summarized From The Words Of Warren Buffet And Jim Cramer)
What Is QQQ & SPY Mean?
QQQ and SPY are broad market ETFs that track the companies with the largest market cap. QQQ is skewed heavily toward growth companies like Apple, Google, and Amazon. SPY is skewed more towards solid blue-chip companies. Both are packages of large amounts of the same stocks but the spread is weighed differently.
These funds track indexes (NASDAQ and S&P 500), so they’re constantly being kept up to date and re-adjusted as new stocks grow and old stinkers fall off the index. This is also cheaply done compared to mutual funds except you can buy them just like you would any stock without the load fees.
How much can I expect to make?
When you buy stocks and ETFs for your IRA, you are “fundamental investing”. This means you plan to hold that particular stock for a long time. You can continually buy and sell stocks inside your portfolio, but the brokerage fees add up quickly at $5 per transaction. A good diversified and low risk portfolio can deliver easily 10% or more in today’s market. For the lazy, the best thing to buy is a simple “total stock market” index fund called QQQ. Last year, this fund gave you an annual interest rate of about 23%. Investing in a portfolio of popular tech stocks, carefully chosen, would have probably gotten around 15% average. Even the best hedge fund managers can’t beat the market over a long enough time.
You’ll want to avoid mutual funds and bonds at all costs, as the return on these is generally pathetic compared to the QQQ benchmark, yet they’re equally risky. They do have their place when in a recession like the post-2000 tech bubble. Likewise you’ll want to avoid CEFs and REIT funds that offer high interest payouts, yet usually have negative growth over the long term. If you compare anything to QQQ or SPY and it doesn’t beat it for the last 1, 5, and 10 years then you don’t want it – just buy QQQ instead.
If you were to put $500 in your IRA for 11 months of the year, only buying QQQ, and started in 1998 (20 years), you would have close to $500,000 today, and that’s despite a tech bubble burst, dog market in the Bush years, major crash in 2008, and this year’s “corrections”. The next 20 years won’t likely be near as destructive due to new safeguards but Trump is making things very choppy. Half a million also gives you a capital appreciation where you can retire with $60-80,000/year and your money keeps working for you.
Just for fun allow me to make a comparison, if you had done the same thing with Netflix (NFLX) and started buying when they first appeared in 2002, you’d be worth $6.5 million right now. Good luck picking the next Netflix 😊 Oh, and with the absolute best performing mutual fund, you’d only have $200,000 in the bank today . Steer clear of the latter.
If you’re in your 20’s, it gets even better due to compounding. You’ll retire a multimillionaire if you get started now. Unfortunately, in your 20’s most people don’t have a spare $500 lying around each month (we sure didn’t), but it is what it is. Every little bit helps though, there’s no rule saying you have to max it out.
- Pay your credit cards first!
- If it doesn’t beat the QQQ index fund, you don’t want it.
- The younger you are, the more risks you can take.
- Buy 50% At A Time, then wait a day or two.
- Buy Stock You Believe In. Do you like the product or service?
- Never sell as a result of price weakness…without good reason.
- Just like Camworld, diversification is the key to peace of mind.
That’s pretty much all you need to know for now. If you do nothing else but open an IRA, max it out over the year with $5500 invested, and only buy QQQ, you’re 10 steps ahead of half the population and you can stop here and sleep well.
If any of the cammodels within the BoleynModels network would like more information and basic help getting setup with their own IRA, I’m available via Skype @ “BoleynModels”. In the future I will have follow up information for those who have maxed out their IRA and would still like to dabble in the stock market.
Suggested Reading: Cammodel Banking And How To Get Paid