An Overview on the S&P 500 and Why You Should Pay Attention to It

The Standard and Poor 500(S&P) is a market index that is derived from the 500 most sought-after stocks in the NASDAQ and NYSE in the US stock market. It is designed to reflect the risk and return aspects of various stocks in the stated market. The S&P 500 high-low Index, on the other hand, depicts the new highs and new lows encountered on the S&P 500 stocks within the past 52 week period. The index is obtained by dividing the high and low stock values with the total trade volumes within the same interval. Many investors use this indicator on CMC Markets to determine the value of a given stock and to predict its future performance.

Relevance of the S&P Index

While there are several indices that characterize the country’s economic status, the S&P 500 is among the most popular seeing as it offers a broad outlook of the stock market. Finance professionals and traders search for index tools such as the S&P 500 to enable them to control their investments. It is important to note that indexes are interconnected though and because of this, they often move in a similar direction.

Companies in the S&P 500 index for instance move in the same manner as those in the DJIA seeing as both indices cover bigger and lower risk companies. The same applies to the smaller, high-risk companies covered under AMEX and NASDAQ. Note however, since S&P covers close to 70 percent of the total value of the market, it gives a more precise gauge of the market than the Dow Jones does. Nonetheless, if you are looking to invest in the S&P 500, it is important to first evaluate your portfolio and then pick a something that matches it.

Other than giving direction on performance of the market, the S&P also helps in identifying trends and reflecting fluctuations. Despite the fact that the index does not depict the real performance of the total market, it shows the associated risks, and this certainly plays a significant role in increasing or decreasing investor trust.

Application of the S&P 500 in trading

The S&P 500 index gives investors a clear perspective on how the stocks have performed within a particular time frame and with this, they are able to make better investment decisions .This denotes that even an investor who is uncertain about where to invest can apply the indices in selecting the specific stocks to buy. This also gives them a better chance to perform on the same level with the market and avoid underperforming.

On top of that, the index offers a yardstick through which any stock trader can evaluate the performance of their portfolios. This makes it possible for them to find out how well or not their managers are performing with reference to managing of their portfolio, hence their money. The issue of forecasting also comes into play here; by getting to learn the past performance of the index, it becomes easier to predict market trends. All the same, the numbers themselves are not important, what matters is the change in percentage over the prolonged 52 week period as this is what gives an actual indication of whether the market is climbing or falling.

S&P 500 Index: The Bottom Line

The highest and lowest values that a stock trades at in a given year go a long way into providing solid information on the movement of the market after that, and this essentially reinstates the relevance of indexes such as S&P 500 in stock trading. The S&P 500 index indicates how much investors are ready to put in to acquire particular stock based on the expected trends. In general, however, the index goes up when there’s stability and decreases when the economy fluctuates. In connection with this, high low index values above 50 are linked to low levels of volatility while figures below 50 indicate volatility.

Most investors prefer to invest when the price of a stock surpasses the 52 week high and to sell when this figure goes below the 52 week low. By investing at such points, stock traders trust they will have adequate momentum to maintain price movement in a positive direction. On the contrary, other investors sell once the price peaks within the 52 weeks with the hope that it will reduce, or buy at a 52 week low based on the assumption that the value will climb.
Regardless of the case, the most important thing for an investor to do is to understand not just the weightings for the S&P 500, but the selection of stocks as well. It is also essential to be flexible with regard to the changes that may crop up in the stock market as it is only then that funds can be invested and reinvested within reasonable periods.

The Implications of Social Security Decisions

There are few investments that guarantee a good annual growth. One that does is the Social Security System where deferring benefits from the youngest age they can be taken, 62, to the latest, 70, ensures monthly benefits are much higher. There is therefore a strong case for that deferment where possible. People who have made little in the way of providing for retirement may be desperate and forced into claiming. What are the facts?

Look at the Figures

The official retirement age for those born from 1960 onwards is 67, although benefits are available at 62. If you need to draw at 62, your benefits will reduce by 30%. If you can delay until 70, the increase is 30%. Quite an increase and surely a compelling reason for deferment?

One argument of taking benefits at 62 is that recipients get 12 checks extra per year for each year until someone deferring actually starts to receive anything. Something else to consider however is once someone starts to claim, that sets the amount any dependents will subsequently receive on the death of that person.

Life Expectancy

Life expectancy is a major factor to consider. People in good health are increasingly living past 80 and beyond. Potentially many can expect to be drawing benefits for 20 years. Likewise dependents will perhaps need benefits for a longer period than in the past.

It is a matter of personal choice whether you believe that the total amount you will receive as an individual will amount to about the same whether you take the smaller sum early but benefit for those extra years. In the end no one can predict how long they will live and whether the extra 96 checks at the lower rate, and future ones at that rate will total the amount of the increased monthly amount multiplied by an indeterminate number of years.

There may be a case if parents and grandparents lived a long and healthy life then you can reasonably expect to do likewise. That being the case, do your calculations and decide based on what the figures show. Those who expect to reach 80 will probably receive more by deferring.

Will Money be Tight?

A long life is great as long as you are relatively healthy. The problem comes when money becomes tighter. The figures of average retirement funds held by individuals are surprising low, and frankly disappointing. The average fund of those within 10 years of retirement is less than $80,000. That represents only about $3,000 per year to add to the Social Security payment. That is rarely enough to live on, and certainly not comfortably.

There are several adjustments to be made in retirement and many are no-financial. Social interaction is perhaps an umbrella description of some because the work environment no longer exists; routine has to change. It is an argument for delaying retirement as long as you enjoy your job and are healthy enough to do it. If you do your benefits can be deferred anyway.

Create the Right Environment

Retirement is a reality; a bit like death and taxes! What does not have to be a reality is a struggle in retirement. Statistics on saving, retirement provision and on the other side the level of domestic debt in society are quite disturbing. Whatever your age you should spend some time thinking about your personal financial situation. If you have significant debt then you need to devise a way to pay it off. Mortgages are generally excluded from this because they should be working positively for you. They most certainly include debts on credit cards because balances incur a high level of interest each month.

realistic loans are cheaper and can actually be categorized as positive debt if they are used to pay off credit card problems. You will be taking positive action which will actually save you money.

Only when you are in control of your finances will you be able to make positive moves to save for the future in whatever form you decide. Whatever the subjective decision on when to take benefits in the future, wouldn’t it be great to be able to decide without the factor of desperation coming into it? It can be done as long as you remain employed with a regular income.


Under New Management ;-)

Hi!  My name is Crystal Stemberger.  I’m probably the best know for my personal finance blog, Budgeting in the Fun Stuff, but now I’m the proud new owner and operator of Carnival of Money Stories too!!!

Please bear with me as I get my feet wet here.  I’m aiming to make this site as fun and as informative as its name would suggest.  :-)  My first piece of business will be to round up some money stories for you to enjoy.  See you in the comments soon!

When Youngsters Fly the Coop

Bird in NestRemember back to the time of your life when you were ready to fly out of the nest?  When you were living with mom and dad it was probably simple to get a fast little loan but once you move out on your own it’s not so easy.  Mom and dad might be willing to help you out, but that’s not the adult thing to do.  When you move out on your own, you no longer rely on your parents to the best of your ability.

When I got out on my own it wasn’t even a consideration to ask my parents for money as they were poorer than I was, plus I had not been in contact with my family for over five years.  I could not afford a car when I got out on my own, so I made sure my new digs were on a bus line which would take me to my job.  As it happens, one of my coworkers drove the same route so we carpooled, and I paid her some money for gasoline each week.   If she happened to be out sick, I would take the bus.  I also had a bicycle which was nice for taking small trips to the grocery store.  In the city I lived there was a transportation system available to everyone and all you had to do was call the number to be picked up.  That was very convenient.

When I first ventured out on my own it was not the best of situations; in fact, I made the decision one morning to not return and basically left with the clothes on my back.  I had been living with a foster family for several years, and was being manipulated into giving them all of my earnings, except for a few dollars which I managed to hold out which they didn’t know about; my employer cashed my check, and as I got miniscule raises I continued to give the foster family the same amount until I was actually able to keep $2.50 for myself each week!!

My boss and his wife were sympathetic to my situation and kind enough to allow me to stay with them for a couple of months until I was able to save enough money for first and last month’s rent to get my own place.  My father, who had abandoned my mother when I was five, had a pang of guilt and offered me a car.  But it would have cost me so much money to have it transported across several states that he decided to offer me $500 instead.  That is how I established a savings accounts.

One of the most important things you  can do to maintain your independence is to establish a savings account with at least $500 which you do not touch except for emergency situations.  And when I say emergency, I mean a true emergency – needing a new Wii game or a new pair of shoes is not an emergency.  You shouldn’t even consider being out of food an emergency because you should have at least a week’s worth of canned goods stocked up in case you should run out of money.

Another important factor is to create and stick to a budget, ideally your rent should not exceed 25% of your gross income.  This can be difficult in some cities so take your time and look around for a place you can afford.  When I was first on my own I was making $800 per month, and I found a small trailer and my rent was $194.  I had to pay my own electricity, gas and water.  I was careful with my usage and the more conservative I was, the more money I had left over.

If you can, get a part-time job.  I sold Avon two nights a week and this helped me to have a little bit of spending money.  Now with the Internet it’s a lot easier to make a little bit of income without a lot of effort if you have something interesting to talk about, start a blog. Who knows, you could become famous one day!

We all fly the coop eventually, and it can be a bittersweet time in our lives. Hopefully you are leaving under friendly terms, and the whole family probably has mixed feelings. Mom and Dad are experiencing the feeling of one of the youngsters leaving the nest, siblings will miss you, and you are going on your own to face the big world all alone.  It should be an exciting time, as it is the beginning of the rest of your life.  You can do it, just put one foot in front of the other and do what’s right and you’ll have some great memories of your first home all on your own.

This story contributed by Mrs. Accountability who writes at Out of Debt Again. If you would like to submit a story to the Carnival of Money Stories, please feel free to contact us.  Your story should be unique (not posted elsewhere) and should focus on money experiences.


How Not to Handle Paying Off Your Debt

Abandoned Home by Erix on FlickrSome time ago I encouraged my friend Susan (not her real name) to look into debt consolidation as a way to get out of debt and break the vicious cycle of using credit cards.

Susan is disabled, but works part time to supplement her disability income. In spite of having low income she managed to build a great credit rating buying items on a time plan from local businesses. When she applied for a credit card she was thrilled to learn she was approved. After the one, she applied for others.  Susan loved to lavish gifts on her many nieces and nephews, but the fact of the matter is it also helped to alleviate some of the guilt she felt that she owned the family home, free and clear.

Her siblings had never uttered a word of complaint, but still Susan felt uneasy that her parents had left the home to her. She secretly felt the home should have been sold and the money divided up between the siblings, but on the other hand her siblings were all well off and had nice homes and none of them begrudged Susan for one minute. Unfortunately, the old home was beginning to need repairs and attention, so this helped to increase the credit cards quite a bit.

After some time it got to be that she was making only the minimum payments and her credit cards were all maxed. As I said earlier, I mentioned she should look into debt consolidation but she chose a different route. She decided she would rather take out a mortgage on the family home. She applied for $15,000 and the person handling her loan talked her into taking $20,000. Susan only needed $15,000 to cover the credit card debt, but she had had her eye on a California King bedroom set, and a Tiered Roof Hexagon Gazebo the two of which cost right about $5,000 so she decided to take the $20,000.

The mortgage was for thirty years, so Susan’s payments were very affordable. I suggested she make double or triple payments since that was about what she was paying for the minimums on her credit cards. She wasn’t too excited about that idea, and worst of all she started using her credit cards again! The last I heard she was pushing $6000 in credit card debt and getting to the point where she was unable to make much more than the minimums.

Let this story be a lesson to you.  Don’t let yourself fall into the same trap.

Mrs. Accountability writes at Out of Debt Again.  If you are interested in submitting a personal finance story to the Carnival of Money Stories, please use the contact form.

My Debt Consolidation Story

Image courtesy of Alan Cleaver

Debt consolidation helped me get out of debt and it was a very positive experience. The first time I ever heard about credit card debt was as a teenager. The mother was determined to keep up with The Jones’ even though the family was living from paycheck to paycheck.  “The Jones'” were people at the mega church she attended. In order to keep up she applied for more and more credit cards. Things went from bad to worse and eventually bankruptcy was filed. Even back then I felt it was the wrong thing to do. It felt like stealing, to me. I decided I would do my best to never have to file bankruptcy.

About ten years later, I was a young divorcée with two small children, on welfare.  But since I’d been employed for years prior to losing my job, I had great credit.  And an old car.  That kept breaking down.  Again and again. And again.  And sometimes we’d run short on groceries, so I charged a few dollars here and there.  Or maybe one of my children needed a new (second hand) shirt or pair of shorts from Goodwill or Savers.  I have always been frugal, but after a few years of car repairs and this and that, here and there, my credit card debt had risen to $6000.  I felt in a panic because I was on such a tight budget being on welfare with food stamps, and I felt like I couldn’t stop myself from using the credit cards for “emergencies”.

I decided to check into debt consolidation.  More than a decade ago there were not too many places to choose from, and they were mostly non-profit organizations.

The debt consolidation company asked me to write down all my bills, and how much I spent on groceries, sundries, clothing, etc.  As it turned out, with a budget that was so tight it squeaked, I could manage $150 every month.  This company preferred repayment within four years, but since I couldn’t afford even a dollar more they extended my payment plan to 52 months.   As with most debt consolidation companies, there was a fee charged each month to process the various payments.  However, taking my budget into consideration they lowered their standard fee to $6 each month.

I was asked to cut up all my credit cards, and signed a contract stating I would not sign up for any more credit cards until my debt was paid in full.

It was difficult, especially after my car broke down yet again. The repair was going to cost close to $2000 and since I did not have credit cards to get it fixed we simply had to do without.  We lived in the city and used public transit and our bikes to get to the store for grocery shopping and anywhere we needed to go.  In fact, I look back at that time in my life with fond memories.  Life was slower then, and I had a lot more time.

After 52 months, my debt was finally paid in full.  It was an awesome feeling to be debt free.

Have you had an experience with debt consolidation?  I’d like to hear your story.

Mrs. Accountability writes at Out of Debt Again.  If you are interested in submitting a personal finance story to the Carnival of Money Stories, please use the contact form.

The Balance Transfer Saga

Most of us have played the balance transfer game at one time or another, with some of us being more skilled than others. I myself have only played the game once, and here is my story.

A couple of years ago I began researching making balance transfers and purchases card comparison with intent to replace two cards to one card with 0% interest. I had hoped to follow a plan to apply for the card, once the card arrives make a request to increase my limit to $10,000, then transfer the highest rate card at 9% and transfer the second card at 3%. I needed to pay off two cards which came to a total of $10,808.81. I was warned by one of my readers to read the fine print because I might be charged for back interest if I didn’t get the card paid off in full within one year. Thankfully that was not the case with this card but it sent shivers up my spine just thinking about the possibility of that happening.

I began the process of applying for the card on February 9th and it took until March 15th to complete the entire transaction. I was pleased as punch with myself.

Unfortunately with the very first payment to my new 0% interest card I forgot to make the payment! I had been gone all day long without Internet access and working with my husband. I finally remembered on the drive home and I logged in as soon as I got into the house. Actually, let me back up. I did get the payment made on the day it was due but since it had to be paid by 5pm Eastern time and I’m in Pacific time, I was too late. As you can imagine, I was very worried that this would cause the interest rate to be raised. In fact, I was sure that I would be punished so I decided to face the music and put in a call to the credit card company right away.

I was in a panic as I dialed the number. I took several deep breaths, willing myself to remain calm. After all you get more flies with honey than vinegar I told myself. The account representative that answered the phone explained that since I’d made the payment after 5pm Eastern time on Friday it would not hit the bank until Monday! I told her how worried I was about the rate being raised and she was so kind to me. She said, “I’d like to share a secret with you. We really want our customers to be happy and we work with our customers. If you find that they have raised your interest rate you just call back here and ask them to lower it. Furthermore, if they charge you a late fee, simply ask them to remove it.” I was so relieved. I got off the phone and explained what had happened to my husband. He’s so mellow he doesn’t let much affect him and he told me don’t stress, he said we’ll deal with it but let’s wait and see if it even happens.

Good advice.

As it turns out they did indeed charge a late fee, and I put in a call and they graciously removed it. At that time I was told they didn’t think my interest rate would increase but they advised me to call back in about a week.

I called a few days later and was assured that my interest rate would not be increased. Whew! Close call!!

I relaxed and didn’t give it another thought until I received my statement a month later when they informed me that my APR HAD been raised! Oh no! I remembered the advice of the very pleasant woman I’d spoken to initially and called the credit card company right away.

I explained my situation to the lady who answered the phone and she was not willing to budge an inch. She told me I was late on my payment and that is what happens. I began to feel sick to my stomach but I decided to go with a trick I’ve learned over the years. If at first you don’t succeed, try try again. This extends to customer service representatives as well! I hung and redialed the number immediately.

Again I explained my situation, crossing fingers and toes. The representative said to me, “Let me see what I can do to help you. The rate was zero, is that correct?” I nearly broke into tears but bit my lip to keep my composure. Within a minute she was back on the line and said she had taken care of it and she wished me a lovely day.

After all that excitement I wasn’t too keen on doing anymore balance transfers, so this is the only one that I’ve done.

Mrs. Accountability writes at Out of Debt Again.  If you are interested in submitting a personal finance story to the Carnival of Money Stories, please use the contact form.

Carnival of Money Stories #100 – Retire Gracefully Edition

Fireman's Carnival by Anna Fischer

This week’s edition of the Carnival of Money Stories #100 is up at Out of DebtAgain! Make sure you head over there and check out all of the great submissions.

Editor’s Picks

This is the last edition of the carnival because there is little interest in hosting. Thank you to all the esteemed hosts who were kind enough to host the carnival in the past.

Carnival of Money Stories #99

Fair Food by brent_nashville
This week’s edition of the Carnival of Money Stories #99 is up at Funny About Money! Make sure you head over there and check out all of the great submissions.

Editor’s Picks

Thinking about starting an eBay business? Think again! Before you jump off that cliff, go to Mom’s Plan and read Melissa’s hair-raising story of her misadventures with eBay.

The Financial Blogger considers what life would be like without a business partner.

Any of us who have been moms or dads will get a kick out of Melissa’s story of the kids and the furniture over at Parenting Family Money. LOL! One of the great joys of old age is being able to gaze fondly at other people’s cute little kids and think, “Ahhh! We’ll never have to do that again!

Wanna feel the hair stand up on your head? Tool on over to Money Thinking and contemplate Money Thinker’s The Plague of the Pre-existing Condition. Yipe!

Thanks to all of this week’s participants and especially our great host! Next week’s edition will be held at Out of Debt Again. Make sure you head over to the submissions page to learn how to get your post in!

Carnival of Money Stories #98 – St. Patrick’s Day Edition

Ferris Wheel from Amber Kennedy
This week’s edition of the Carnival of Money Stories #98. St. Patrick’s Day Edition is up at Money Thinking! Make sure you head over there and check out all of the great submissions.

Editor’s Picks

Thanks to all of this week’s participants and especially our great host! Next week’s edition will be held at Funny About Money. Make sure you head over to the submissions page to learn how to get your post in!

The Carnival is in need of hosts.  Please sign up today!