Webull Review: What You Need To Know

Webull Review: What You Need To Know

Everyone should have an opportunity to build wealth. Learning the basics of investing and understanding the risks is an excellent way to pave your way to a successful financial future. It wasn’t easy to invest or trade stocks until recently without paying commissions to eat away at your profits.

The plethora of zero-commission brokers has leveled the playing field for more affordable investing. Webull can be a good choice for many and an alternative to Robinhood.

I should confess upfront that I tend to prefer investing rather than trading as the way to go in building wealth. That doesn’t mean holding onto long positions through thick and thin. No, leaving positions on autopilot can be risky. You should also know I am scornful of the practice of margin trading. I’ve watched friends go up in smoke from paying exorbitant interest that put them out of business.


What Is Webull?

As a relative newcomer, Webull is joining the competitive field of online trading that appeals to young traders. I applaud the rise in young retail investors participating in the markets. Webull offers commission-free online trading as a mobile-oriented broker. Like other mobile apps, Webull’s trading platform appeals to traders who have some financial markets’ experience and seek advanced features, including in-depth and real-time market data.

They are a legitimate player in online trading by constant improvement in the tools they offer to their subscribers,

Webull Background

Founded in 2017, Webull has about 15 million registered users in early 2021, gaining greater customer acceptance despite its lower profile than Robinhood. Comparisons to Robinhood are inevitable. When Robinhood halted trading temporarily in the GameStop frenzy, their users jumped ship to Webull, which had resumed trading more quickly.

Webull is growing its customer base quickly, which may account for the rocky beginning that I share with you below.

How To Get Started Opening A Webull Account

Setting up a Webull account is straightforward. You can sign up with your email address or your mobile number, and you will receive a verification code. Make sure you select your preferred brokerage account. You can choose a cash account or a margin account. Next, add your personal information, your profile, and answer regulatory and security questions. You will need to upload your proof of identity using a passport or a state-issued ID card. Both sides of a driver’s license suffice for identification.

Webull promotes free stocks (from $5-$250), which require a $100 deposit. I received two free stocks. You will need to link to a bank to fund your WeBull account with an ACH bank transfer. Technically, there is no minimum amount required unless you set up a margin trading account that requires at least a $2,000 deposit.

Before they transfer money from your bank to your Webull account, they will deposit two tiny amounts (like $0.09 and $0.33) into your bank account. You confirm the deposit amounts to Webull. There is a 24-hour delay in the posting. The next day, I found the deposits and attempted many times to let Webull know.

My Experience – An Unnecessary Delay

At this point, I reached out to customer support with emails and calls. Each time I called, I was on hold for 45-60 minutes. Come on, guys! My customer support person was always the same, Doug, and I wondered if there was only one person. Doug was super friendly, apologetic, and similarly stumped as to why my deposit verification wasn’t working, which held up my trading account’s funding.

This setup didn’t take hours; it took days! Finally, tech support intervened, and they fixed my account. Signing up via an email account rather than a mobile version was the culprit, but that should not make a difference. I get that they are mobile-oriented, but some of us still prefer bigger screens.

The delay in customer support occurred as Webull was signing up many customers. During the GameStop frenzy, volumes soared, and some customers left Robinhood when trading halted in some stocks. I have since learned that Doug will have company as they are adding people to customer support now.

Payment For Order Flow And Retail Trading

The SEC requires that Webull disclose it engages in the practice of “payment for order flow.” Webull, Robinhood, and many small brokers receive compensation for directing orders to market makers for executing the equity and options trades. These brokers realize cost savings and enhance their ability to handle high order volumes to offer zero-commission trading.

Trading volumes for stocks and options have been exploding as more individuals open trading accounts. This activity overwhelmed many small brokers. The average daily volume in equities has grown from 7 billion in 2019 to 14.7 billion in early 2021. The higher proportion of routing to these market makers (i.e., specialists on both the buy and sell of a trade) indicates that retail trading accounts for tremendous volume growth.

2021 Pros of Using Webull

No Fees Or Minimum Deposit

Webull offers commission-free trading with no required minimum amount, except for $100 to receive your free stocks. Zero commissions extend to unlimited day trades and options trades (no charge per trade or contract) and other tradeable securities they offer. There are no annual fees or charges for inactivity.

They do charge $75 for either closing an account or if you want to transfer your Webull elsewhere.

Free Stocks

Webull runs continuous promotions offering free stocks valued from $5-$250 per share once you drop $100 in your account. It is improbable that you will receive a free high-priced stock. I received two stocks: an AMC share valued at $8 and a Southwestern Energy (SWN) share valued at $4.38.

Tradeable Securities

The company has expanded its offerings, but there are some limitations. You can choose among hundreds of ETFs for diversification purposes. Webull allows trading during extended hours during pre-market hours (4:00 am – 9:30 am) and after-hours (4:00 pm – 8:00 pm). That you can is not a reason that you should as markets have less liquidity and more volatility.

Webull’s Offerings

  • Stocks
  • Options
  • ETFs
  • Gold
  • Cryptocurrency
  • ADRs (i.e., American Depository Receipts)

You can open a traditional IRA, a Roth IRA, or Rollover IRAs on Webull, and “more IRAs are in the works,” according to their website. Currently, they do not offer mutual funds, money markets, or bonds, which are big holes for those who may want diversification.

Easy-To-Use Customizable Dashboard

Forty-five or more widgets populate the dashboard to satisfy simple to more complex needs. The company has continuously improved its dashboard to allow traders to analyze trends and market information for a better experience with faster load times. Clients can configure their trading panel to fit their investment strategy.

Stock Charts

There is a rich assortment of high-quality stock charts with technical indicators from the most simple to advanced trading. You can display prices using Moving Averages, line, bar, Candlesticks, Hollow Candle, Heiken Ashi, or Colored Bar. You can draw, manipulate, compare two charts. I focus on fundamentals more than charts, but I plan to work on this skill.

Stock Screens

Webull’s stock screens are the typical ones such as top gainers, most active, stock earnings actual and estimates, dividends, splits, and Advances/Declines. Clients can look at markets by location: US, Hong Kong, London, Toronto, and all major global markets. I found these screens easy to find and use and all on one page with some toggling.

You can screen by market, sector, and market capitalization. There is a nifty IPO center showing activity in the primary market. The dashboard doesn’t display a SPAC center, but I bet that may come soon if there is interest in such a display.

Fundamental Analysis Tools Could Better

Investors can use fundamental analysis tools that may seem rudimentary to many. I am dating myself, but my first view of the markets was on a Quotron. I recall a librarian snipping news off a teleprompter giving us earnings results, dividend hikes, management changes, and other information.

The current fundamental analysis tools available to Webull customers indicate financial statement highlights, cash from operations, earnings estimates per stock, analyst ratings, short interest, institutional holdings and by ETF, and order flows. I use this information when making purchase decisions, looking for market sentiment changes, and it is easy to find.

Fundamental investors need more tools, such as downloading SEC documents and research reports from Ned Davis and Thomson Reuters.

Technical Indicators

The site has several technical tools to satisfy more advanced traders. Webull offers capital flow analytics to show the inflow and outflow positions in the market. These indicators show money coming into a specific stock or sector. Among the technical indicators is Simple Moving Average, Exponential Moving Average, Bollinger Bands, MACD, Volume, and Relative Strength Index (RSI).

Level I And Level II Trading

Level I and Level II are two different trading screens used in stock trading. Traders use these screens for direct access to real-time market data, such as the last trading price, the current bid and ask price, daily high and low, and trading volumes. Webull provides Level 1 trading data that gives traders all buys and sellers with actual “bid and ask” orders currently in the market.

Level II trading is market data powered by NASDAQ’s TotalView and is essentially NASDAQ’s order book. It adds a substantial dimension by showing the number of buyers and sellers at different price levels. Webull offers Level II trading for free for three months and is $1.99 per month after the trial period when you sign up for a new account. Robinhood provides this service free only to its gold members who pay $5 per month for this and other extras.

Webull offers other paid plans for premium data from regional markets like Hong Kong Stock Exchange, Toronto Stock Exchange, and London Stock Exchange.

Trading Platform

Webull gets a lot of respect and credit for its trading platform, available on mobile and desktop formats. A browser-based and downloadable desktop platform is accessible with advanced or customizable charts, screeners, and many technical indicators.

The platform is attractive for traders who want advanced features. You can set up watch lists, price alerts, and voice commands.

Margin Trading Available

I am not a fan of margin trading, especially if young traders are inexperienced with the practice. For those who are more mature and capable of handling its risks, margin trading is available without requiring an additional subscription or membership fees. To qualify for margin trading, you need at least $2,000 in your account.

The stated margin rates on Webull’s site appear to be in line with other providers. Rates vary by the margin loan size. The highest level of 6.99% is for a small loan up to $25,000, declining to 3.99% for a $3+ million loan. Margin interest is calculated daily and paid monthly. Be aware that these are stated margin rates, and brokers often raise rates or change requirements when markets get volatile.

Short Selling

When investors or traders sell short, they take a short position instead of a long position when purchasing a stock. For a short position, you need to borrow the shares, paying margin interest for the loan. The cost associated with a short sale is the fee for borrowing that stock. Webull’s fee changes every day for every available stock and is charged daily.

I cannot stress the risks of short-selling and margin trading. When markets get volatile, brokers can raise their requirements regarding how much money traders have to put down using leverage or margin.

Security and Safety

Being secure and safe investing your money on an online trading site is a primary concern. Webull is regulated by the SEC and FINRA. As a member, SIPC covers up to $500,000 per account per brokerage firm, and up to $250,000 may be in cash. Two-factor verification and encryption of your personal information and passwords are worthy safety features. They also require you to set up two different passwords for different functions.

That said, users should do their part in protecting their accounts to the greatest extent possible.

Virtual Trading and Competitions

When you initially have your account, you can do virtual or paper trading for free without depositing any money, using some or all of their tools. For the beginner, this feature is desirable for those who want to practice and feel comfortable with their website.

As far as I know, Robinhood does not have simulated trading. I use simulated stock market games to allow students to invest and trade stocks in my classroom, so I liked seeing this feature.

And there’s more. Webull has Paper Trading Competitions, encouraging participants with prizes up to $300 going to everyone who has a positive return at the end of each week.

There is a private Twitter feed where users can comment on individual stocks, creating a community vibe for those new to trading, starting with the simulation.

2021 Cons Of Using Webull

Investment Limitations

There are some gaps in Webull’s offerings, notably mutual funds, OTC stocks, and bonds. They have been steadily building their products since 2019, offering options and cryptocurrency trading currently. As of yet, they do not offer fractional shares or pink sheet stocks, and on the latter, I hope they never do.

The ability to have an IRA account on Webull is terrific. However, they will need to have mutual funds for such accounts for diversification.

Cash Management

Webull doesn’t pay interest on uninvested cash or have a partner bank to handle this option. Robinhood pays interest on idle money, and Reddit’s comments indicated that some users stay with them for that reason. Although interest rates are super low now and perhaps not as urgent, it will be a product Webull will need to have soon as interest rates rise.

Prefer Better Educational Support

With the influx of young individual investors who joined firms like WeBull to trade for the first time since the March lockdown, it is essential to have educational support. I find WeBull’s educational material sorely lacking for their clientele, especially in advanced trading. When it comes to academic support, more is better in the financial world.

When you are trading and investing, you may run across many financial concepts and jargon you need to know.

Needs Better Customer Support

It may be just my personal experience that I had so much trouble reaching customer support, but I doubt it. When I called customer support, the minimum wait was 45 minutes to as long as 109 minutes. (Yes, I was counting!) That is unacceptable, especially when I tried to move the money into my account that had left my bank. I was persistent, but other potential users may give up.

On one of the long waits, I perused Webull’s name on the web and found they have an “F” rating on Better Business Bureau (BBB), with numerous complaints. So I looked at several brokers’ ratings on BBB and was not surprised that many have F’s, including Robinhood or low grades (C minus) for Fidelity and Ally Invest. TD Ameritrade appears to be an outlier with an A-minus.

I will say that when you do get a live person on WeBull’s customer service, they are patient and helpful. They need to add more live customer support.

What Can Webull Do Better

Webull seems to continue to broaden their products to their credit, and they should add mutual funds, bonds, and fractional shares.

They should partner with a bank to offer interest on idle cash.

Webull needs to strengthen customer support for kinks that are inexplicable, like my experience and educational materials.

Who Is Webull Best For

Webull’s paper trading option can benefit beginners who aren’t quite ready to pay for their trades. Their platform is best suitable for those in the intermediate level who want simplicity or desire more advanced trading. I use my Webull as an alternative broker to do some trading and investing separate from my financial advisor and other accounts.

Full-time day traders who require far more advanced systems would probably find WeBull’s platform lacking in some areas.

Final Thoughts

Webull is emerging as a legitimate competitor and alternative to Robinhood, growing its customer base to a potential number two spot among online brokers serving retail traders. This relative newcomer in the zero-commission online trading world continuously broadens its products to satisfy its customers and leverage its trading platform.

This article originally appeared on Your Money Geek and has been republished with permission.

Getting Stimulus Money? Spend This Money Wisely

Getting Stimulus Money? Spend This Money Wisely

The third and possibly final stimulus check from the federal government is on its way. Most people will get their stimulus money via direct deposit to tens of millions of bank accounts. If you and your family qualify for the most extensive distribution, you likely have some immediate or future needs. Whatever you decide to do, strategize to spend this money wisely.

Stimulus Checks And Extended Unemployment Benefits

Did you get your stimulus check yet? The maximum tax-free amount is $1,400 per individual ($2,800 per married couple if jointly filing), and $1,400 per dependent, including those ages 17 and up. The federal government extended unemployment benefits with a $300 additional supplement to state benefits through September 6, 2021.

Typically, unemployment benefits are fully taxable. However, the IRS gave a tax break by allowing taxpayers to exclude up to $10,200 ($20,400 for married couples filing jointly) benefits on their 2020 taxes for those who made less than $150,000 in adjusted gross income (AGI). As stimulus checks were going out to households, the IRS announced tax returns are now due on May 17 this year instead of April 15.

How To Use Your Money Depends On Your Needs

Every household varies as to their need for this money. For instance, lower-income families are more likely to devote much of their spending to living necessities.

In a June 2020  US Census study,  adults in households with income between $75,000 and $99,999 were more likely to use their stimulus money to pay off debt or add to savings compared to households overall. In contrast, 87.6% of adults earning $25,000 or below planned to use their stimulus payments to meet their expenses.

The stimulus money is part of more considerable fiscal support targeted to boost consumer and business spending. As the economy grows, more people will work.

The Fed has accommodated our weak economy with low-interest rates and continued liquidity. These efforts will stimulate our economy and help our financial markets, but they may cause higher inflation. Fears of higher inflation have added volatility in the stock market.

Some believe higher economic growth and inflation may be transient, causing some stock market opportunities ahead. Chair Powell seems to be staying on course of a stimulative monetary policy and will tolerate higher inflation over the 2% target. 

Is This A Financial Windfall?

Merriam Webster  defines windfall as “an unexpected, unearned, or sudden gain or advantage.” A windfall can range from being a sum of $1,000 to something far more significant. This money may result from an inheritance, legal settlement win, salary bonus, or a winning lottery ticket.

A small windfall, newfound money, or stimulus money can serve a similar function by bringing you a step closer to your financial goals. That is a win for you whether you direct the money to help you with your day-to-day expenses or cushion your retirement nest egg.

Strategize What You Need Now And For Your Future

Strategize before spending your additional money by paying what is most urgently needed now.  The funds should improve your financial situation. Most people receiving checks have had a difficult time making ends meet. They may have lost their jobs, had their hours cut, or their job remains in jeopardy.

You may need to shore up your finances now. Are there holes in your budget that need mending that you can take care of first?   Pay your bills, reduce your debt to manageable levels, eliminating high-interest credit card debt. Should you have money left over, save for emergencies.

On the other hand, if you have little to no debt, devote your extra money to where you can catch up on retirement savings and investing.  Allocate where you can boost your financial future–replenish your emergency fund, retirement, investing– by adding to where the money can potentially grow.

Our Recommendations For Spending The Money Wisely  


1. Prioritize Your Everyday Bills

If you have outstanding household bills for your rent, mortgage, or utilities that need attention, consider negotiating with your providers. Ask if lower rates are possible or stretch out due dates. You want to avoid being late paying bills and affecting your credit score. It never hurts to try to do that at a time when people are most understanding.

Staying current on your bills can relieve the angst. And you don’t want to pile on late charges and add to your debt load.

2. Paying Off Your High-Cost Debt First

When you carry a lot of debt–credit cards, car, mortgage, student loans, or personal loans–can be overwhelming. Your stimulus money may not stretch that far. Interest rates are low for mortgages, car, and student loans, so your best bet is to reduce your credit card balances. Card issuers typically charge 15%-16% interest rates, and the compounding effect makes that balance grow faster.

It may be tempting to spread the cash proceeds around to all of your loans but target the most detrimental cost first.

3. Neglecting Any Car Repairs?

During COVID, you may be using your car less. If you are not following through with tune-ups, you can damage your vehicle in the long run. Do you have any car repairs you postponed but now can bring into the shop? Your repair guy will likely welcome you back.

4. Replenish Your Emergency Funds Or Start One

Many people have withdrawn money during the past year. They may have had to close businesses, leave jobs to take care of their family, or lost their jobs. It is time to reassess your emergency savings. Refill this fund so you can cover six months of your basic living needs should something unforeseen happen. A job loss, pet surgery, an unexpected illness, or car accident can mean higher costs beyond your budget.

Replenishing these savings can give you peace of mind. Those unexpected events do happen, as many of us learned the hard way last year.

Make sure to keep this money in liquid assets such as a higher-yielding savings account that is readily accessible. These days there is very little income to earn from low yields. But, economists are expecting higher interest rates as the economy strengthens. Therefore, use short-term securities like CDs so you can roll this money into higher yields when they are available.  

5. Add To Your Retirement Savings

Whenever you have extra money from a bonus, overtime, or raise, consider adding some of this money to your retirement savings. Notably, a 401K employer-sponsored plan or an IRA and Roth IRA makes sense. If you don’t have a retirement account, this is a good time to do so. 

Technically, your tax-free stimulus payment is unearned income. As such, it may be tricky to deposit money into your Roth IRA directly. Therefore, you may want to substitute earned money from other accounts, replacing those dollars with your stimulus money.

It is worth the effort to do so. Putting some money into a Roth IRA makes it a triple tax-free win. You aren’t paying taxes upfront. The contributed amount grows tax-free, and when you withdraw money after your turn 59.5 years.

Be Aware of Contribution Limits

You can have both a 401K and an IRA, but there are IRS contribution and income limits you need to be aware of so you can get the full deduction. Be mindful of those income limits for traditional IRA and Roth IRA for 2020 and 2021. They vary according to whether you are the single or head of the household, married, filing jointly, a retirement plan at work covers one or both spouses.

Contribute generously up to the maximum amount allowed:

The 2020 and 2021 limits are $19,500 for 401K and most 400 plans, and with a catch-up limit, $26,000 for employees aged 50 or over.

Total contributions for 2020 and 2021 are limited for all traditional IRAs and Roth IRAs to $6,000 or $7,000 if you’re age 50 or older.

6. 529 Savings For College

These accounts have federal tax benefits, like retirement accounts. Open a 529 savings account to set aside some money for your children’s college fund. Earnings on investments grow on a tax-deferred basis and tax-free when you withdraw money for educational costs. Generally, there are no contribution limits except for the $15,000 cap to qualify for the annual gift tax exclusion.

Each state has its own plan, and you don’t need to reside in the state to use their program. You may think that they are young and it is too early to think about their future, let alone college, if they are still at the crawling stage. The truth is that time goes by quickly, and before you know it, they are in high school. Don’t let this valuable time slip away without putting money into this fund. It will help your children to avoid borrowing heavily for college tuition.

7. Allocate Your  Savings To Investing

In a perfect world, all of your extra money should go toward investing. If you have a strong financial foundation with manageable debt, you should invest the money. Add to your investments or opening up an investment account for you or your kids.

Any savings you have from stimulus checks to a significant financial windfall should go to your investment accounts. That is if you have taken care of other needs. Invest early and have a plan in mind which considers your risk tolerance, timeframe, and diversification. 

When you are beginning to invest, you may not know where to start. Buying individual stocks can be very rewarding but can be risky. Consider low-cost index mutual funds or exchange-traded funds (ETFs) if you are uneasy purchasing individual stocks. Buying a pool of stocks is a popular way to own securities with diversification, avoiding concentration risk.

Professional portfolio managers actively manage mutual funds. They are constantly evaluating and choosing securities for the fund’s specific investment approach. Mutual funds are available for stocks, bonds, precious metals, other securities, varying risks,  and varying geographic markets. 

Active managers earn annual fees or expense ratios of your investment and are responsible for the fund’s performance. If you invest $1,000 in a mutual fund with a 1% expense ratio, you pay $10 per year towards the fund’s expenses.

Active Versus Passive Investing

Investors who buy actively managed funds pay higher expense ratios than passively managed index mutual funds that track a market-weighted portfolio. The latter index fund replicates the S&P 500 index via computers for a fraction of the fees, averaging 0.20%-0.50% expense ratios, below the typical 1%-2.5% costs of active managers.

You can buy a low-cost index mutual fund or an ETF consisting of a basket of securities, such as money markets, stocks, or bonds depending on your risk appetite. ETFs are similar to mutual funds but tend to be cheaper and more liquid. If both are available, I usually buy the ETF version. There are many funds with terrific choices, such as Vanguard, who pioneered indexed funds.

8. Give To Others

It is always a good time to give charitable donations to others. We always target giving 10% of our income to charitable contributions, but we have done more to offset the time we couldn’t do so. Everyone has their reasons for giving what they can and may stem from religious or ethical sources.

The minimum of one-tenth of one’s income belongs to God per measure handed down from the Patriarchs. As Jacob himself said to God, “Of all that You give, I will set aside a tenth to You” (Genesis 28:22). Giving 10% of your net income every year is a desirable goal—those who can do that.

Giving, like expressing gratitude, is among the most worthwhile healthy emotions to feel. Being grateful can even help us with our finances.

As part of 2021 $1.9 trillion American Rescue Plan, Biden extended the favorable tax deduction treatment in 2021 that was available last year. Taxpayers who take the standard deduction rather than itemize their tax deductions may set aside $300 (or $600 if you are married and filing jointly). The IRS suspended the typical limit of 60% of adjusted gross income for the amount of the charitable deduction made in a year.

The IRS has temporarily suspended limits on charitable contributions for those who itemize deductions on Schedule A. Check with your accountant whenever it relates to your taxes. 


Final Thoughts

Use your stimulus payment or windfall by spending the money wisely to improve your financial situation. It’s a personal decision based on your needs now or in your financial future. Strategize before spending this additional money so you can get the most of it. Hopefully, you are turning the corner to better times.










10 Steps Women Should Take Negotiating Salary Compensation

10 Steps Women Should Take Negotiating Salary Compensation

” No wonder women don’t negotiate as often as men. It’s like trying to cross a minefield backward in high heels.”

 Sheryl Sandberg, “Lean In: Women, Work, and the Will To Lead”

The gender gap remains in the usual places for women–less pay, work fewer years in the workplace with time out for children and other dependents, lower savings for retirement–but women are gaining ground.

More women are graduating college and hold more graduate degrees than men. They are reaching higher corporate levels, and there are more women-owned or founded businesses. They are making progress, as women are primary breadwinners in 41% of US homes but still carry the additional caregiving and household duties.  

Women Need To Be Assertive But Find It Hard To Negotiate

When it comes to women achieving success in their careers, moving from entry levels to ever-higher corporate levels, they need to understand how to negotiate compensation packages better. Women tend to be less assertive and more accommodative than men. That may leave significant money on the table, starting with their first job’s salary.

When women get a lower salary than men for the same job and experience, we should not dismiss that difference even for just one year. It becomes cumulative. She starts with a lower base. Even if she and her male counterpart get identical raises and promotions over the same years worked, the impact of compounding interest leaves a sizable gap in her comparable net worth.

Women Pay A Greater Social Cost

Studies have pointed to the “social cost of negotiating” which negatively impacts those who are self-advocating for a salary raise. It shows that the hit was significantly worse for women than men.

“Aggressive and hard-charging women violate unwritten rules about acceptable social conduct. Men are continually applauded for ambitious and powerful and successful, but women who display these same traits often pay a social penalty paid by women who display these traits. Female accomplishments come at a cost.”    Sheryl Sandberg

Research shows women make better advocates when they represent others than for themselves. Women fear backlash when it is for themselves but are better when they negotiate for others.

10 Steps Women Should Take When Negotiating


1. When You Limit Yourself To The Offer 

Before you go gangbusters, know that specific jobs may not be negotiable. Entry-level positions may be less negotiable, especially when you have little to no experience in the field.

Typically, teaching, union, hourly positions, government, and civil jobs have stated pay scales. Increasingly, companies are being more transparent with structured compensation schemes easier to understand.

2. Do Your Research First

Be aware of the typical salary ranges for jobs in your field and your geographic area. It may be difficult for you to negotiate when it’s your first job. However, you can inquire what the high and low salaries reflect.

Glassdoor, Payscale, and Salary.com are good places to start to find average salaries. Their sites may provide you information for your first job offer and be a source as your role expands at the firm. A search can provide you with relevant documentation when you seek a raise.

Speak to people who you know are working in jobs of interest to you. Ask them about the drivers of success and challenges and companies that may have opportunities. Another place to learn from is Linkedin, an excellent professional networking website source to use. Job boards are helpful when you begin the interviewing process, and reach out to human resources representatives in your field.

You should learn what the industry norms are for your field and how it relates to your education and experience.

Always be prepared to reflect on successes thus far, especially when asking for raises and promotions.

3. Build your Negotiation Skills

It is not unusual to be uncomfortable to ask for higher pay, bonuses, benefits, or promotions. Take a class to develop your negotiating skills,  or find a good negotiation coach.

I strongly recommend articles and YouTubes by Stanford Graduate School of Business Professor Margaret Neale. Her videos focus on strengthening negotiation skills for women. She is a negotiation expert and author of “Getting (More of) What You Want.”

Negotiation Is A Lifelong Skill

Lifelong skills are core in many aspects of your career and life overall. Specifically, negotiation skills require the ability to communicate, take on a challenge, critical thinking, and problem-solving. Being able to negotiate for yourself is essential  These skills will help build your confidence the right way, prepare thoroughly on the key issues, and listening to the other side’s perspective. 

Don’t be afraid to practice by doing a video of yourself. Listen to your voice and tone. Watch your demeanor and body language. Ask someone to critique you. Stay positive, sit straight, and sound confident.

Practice for real by calling your cable company, asking for a reduced bill, negotiating your interest rate on your credit card, asking for a reduced price for a used or new car, for example. Be armed with information before you make the call. Imagine the power of reducing costs by practicing your negotiation!

4. Getting A Job

If you have completed the interview process for a job you desire, show your enthusiasm but not discuss salary. Wait for the offer, and the position is firmly in your pocket before you discuss compensation. Don’t be the first to provide a definitive dollar amount or a range you are seeking. You should find out the typical salary range by doing your research ahead of time (see below). 

If offered a job but not yet the salary terms, ask for the range. Don’t accept on the spot. Be thoughtful, understand the package, and be ready to negotiate. Your goal is to exceed the high end of the range because you are their best candidate.

A  2019 Glassdoor survey found 40% of employees–39% of men and 42% of women–accepted their salary offer and did not negotiate in their current or most recent job. These statistics reflect better gender parity, a significant change from the March 2016 survey when 59% of employees–52% of men and 68% of women– accepted their salary without negotiation. Women have further to go and should be able to say “No.”

5. Take Time To Mull Offer And Show You Are Serious

If you are unsure of the offer, ask for a little time to contemplate it. Even if you are silently jumping for joy, ask the hiring manager for extra time to decide. They will appreciate your seriousness. If you do want to accept the offer, give it orally and follow up immediately in writing. Ask for a letter confirming your acceptance and agreed-upon salary, your title, incentives, and benefits

If there is a gap between the figure you had in mind and their offer, you may want to open the door to negotiate. You can say you are excited about the offer and the organization. Ask if there is any leeway in the compensation. You want to be genuinely motivated, especially if you are confident in your skills and experience.

Consider Trade-Offs

If the salary gap is too large, it may be too hard to overcome unless other parts of the package, like bonuses or stock options, can bridge the salary difference.  Benefits that accompany your package may be up for negotiation between you and the employer. Make sure that this is possible ahead of time by speaking to HR.

Some companies have extra money set aside with expectations that prospective employees may ask for better compensation packages, but a lower percentage of women negotiate than men.

Salary History Bans Are Growing

By the way, if asked about salary history, change the topic to the position. Discussion of your salary history may be illegal in your state.  Massachusetts was among the first states to make it illegal to ask for that confidential information on an interview in 2016. As of 2021, 29 states now have salary history bans. 

Related Post: Challenges Women Entrepreneurs Face And Overcome

6. Keep Track of Your Accomplishments

As you move up the corporate ladder, keep a personal journal of what you have done, not hours worked. You need to build your list of selling points with real achievements like successful presentations. Examples of these are landing a lucrative contract, strong customer sales or satisfaction, or training new employees. It will strengthen your conversations when you pitch for more money and benefits.

Women often undervalue their worth and, as a result, have lower expectations for themselves. Confidence-building is just as important as your hard work, diligence, and skills. It took time for me to strengthen my self-assurance to take stands when necessary and to be able to convince others.

7. Solicit Manager Support

It is always a good idea to have management in your corner who can provide you support and feedback. Your manager can provide you with advice on how to advance in your career or get desirable assignments. Take the initiative to talk to your managers about how things are going. Look for mentors.

Ask your supervisor for suggestions on professional development or online course opportunities. Showing your engagement as a long-term player is a  positive reflection of your motivation.

Ask your boss for constructive criticism over coffee or lunch. Be professional, loyal, and supportive.

I was fortunate to have had good support from my research director, Charlie. He was often a good-sounding board, providing advice and valuable feedback in a complex environment, particularly for women. He treated people professionally and equally.


8. Getting A Raise

You always want to be paid what you are worth, whether you are changing jobs or moving up the ladder. If you remain in your organization, you have a record of accomplishments, your ability to work with or manage others, and a reputation. You can use internal and external sources to find out what people are making in the field.

When I was an equity analyst at a major global investment bank, I was happy with my package and not looking to leave. I ignored recruiter calls. That was a mistake. When I finally decided to talk to a recruiter, I found out that I had been underpaid (despite making big bucks!) relative to my male counterparts.

It is always good to listen to what you may be worth externally. Of course, there are “switching costs,” adjusting to different firms, management, and colleagues, having to maintain or rebuild your reputation for a new audience, other demands, and culture.

9. Know Your Worth

Often, talking to outsiders validate that you are in the right place. Nevertheless, use information like higher salaries or compensation packages to get what you want and need. Arrange to meet with your boss and speak honestly. Provide your accomplishments, share your continued enthusiasm to work with the firm, and specifically her/him and team.

Ask for the money you believe you deserve. If you cannot get to the exact dollar, consider your package and what upgrades you may want. As you move up in your firm to more senior positions, and there are specific times to discuss your annual package, it is not unusual to have an attorney with employment law expertise to assist you in negotiations.

Related Post: Ten Ways For Women To Achieve Their Financial Independence

10. Compensation, Incentives, And Benefits

Your salary is not the only part of the compensation package to consider.  Other incentives, benefits, and perks can be a big part of your compensation package. Some companies have been quite progressive and innovative. Investigate what these companies offer. In 2021, as hopefully the pandemic fades as bad memory for all of us, working from home may be in greater demand and more acceptable to more employers

Important features of a compensation package are:

Incentives such as bonuses and equity options are essential to your total compensation and may dwarf salaries. You want to know if there is a signing bonus, annual bonuses, and how you may earn equity options. Sometimes your title and position may dictate increased access to sweeteners to your compensation package. 

Learn about the company benefits such as Insurance and amounts (flexible spending or health spending plans, health, medical, disability, life, dental, and vision), 401K retirement plans and its employer-matching program, vacation, sick, and comprehensive family paid leave, college/graduate school tuition reimbursement, and other benefits.

Increasingly, companies offer other benefits and perks specific to your family situation, or you can negotiate for them to be in your package:

Flextime or work from home;

professional development opportunities;

commuter offerings like access to a car on weekdays;

Gym pass or discounts;

Severance packages in the event of a merger & acquisition of your company or elimination of your job;

An extra vacation to match the 4-5 weeks you had at your previous employer; and

Work-life balance offerings like working from home, flexible hours, child care cost reimbursements, extended parental leave.

The Corner Office

Sometimes there are perks for certain levels of attaining specific corporate levels. Years after I became the first managing director or MD (male or female) in my department after our Research Director, I was abruptly told to pack my stuff and moved to a huge corner office by a moving company. Frankly, I thought I was being let go, and no one came to talk to me.

Closing the door, I put my head down to do some work. A knock on my door, my boss walked in, asking, “Don’t you like your new digs?” He then told me he was embarrassed to tell me that managing directors get corner offices. However, I never asked for it and he was going to promote one of the men to MD’s, and already that person asked for the other corner office.

So I was entitled to a large office with space for a couch, I just didn’t know to ask. Don’t make my mistake!

Related Post: A Guide For College Grads On Your Company Benefits Plan

Final Thoughts

As women progress in their careers, compensation packages may become more complex.  Attorneys may do your bidding for you in negotiations. However, you need to understand what you deserve. Women are not getting what they are worth yet. Positive changes are happening for women in the workplace and elsewhere.

How has your experience been in getting a new job, a salary raise, and better benefits? Please share the post with others. If you found this article of value, please visit The Cents of Money and find others you may like. Give us your thoughts.  We are happy to hear from you!












Overcome The Challenges Of Being A Woman Breadwinner

Overcome The Challenges Of Being A Woman Breadwinner

“Above all, be the heroine of your life, not the victim.”

Nora Ephron

Men are still the predominant breadwinners, though, in recent years, more women are earning the mantle in their families. Nowadays, women are more likely to have more education, a career and make more than men, but still take the lead in caring for children and the home. These challenges can be overcome.

Women face societal norms that cause the workplace, friends, and family to judge them, sometimes harshly, for making more than their spouse. Yet, expectations are for this higher-paid person to take off time from work to pick up her sick child from school.

Let’s face reality. Women carry more burdens than their male counterparts. They face more trade-offs than men, even when they may be the higher paid of dual earners in their household.

This truth became more pronounced when husbands and wives began remote working during the pandemic. The family lost professional support to take care of children home from school, providing a harsh predicament in which women became caregivers while working. As a result, many women left the workforce.

We should be celebrating women as primary earners. They should be proud of their accomplishments worthy of celebration, rather than facing conflict in the home, their workplace, and society. I say, “Congratulations!” It is time for women to achieve greater financial independence.

Statistics On Women

Increasingly, women are the primary breadwinners in their household. Nearly 30% of heterosexual married women are primary earners, excluding women who are sole earners. 41% of mothers are breadwinners, up from 15.9% in 1967.

In educational attainment, 46.6% of women have a bachelor’s or higher compared to 40.3% of men.

Women hold more than half (51.8%) of the American jobs in management, professional, and related occupations.

The gender pay gap stubbornly remains, with women earning about 80.5 cents of every dollar earned by men. However, women’s compensation is moving closer to parity (up to 98%) with men in many professional fields. Pay gaps can result in significant retirement gaps, especially when women leave the workforce for caregiving.

40% of all American businesses are women-owned.

When it comes to buying power and influence, women drive most (70-80%) of all consumer purchasing.

Challenges Women Breadwinners Face


1. Traditional Gender Norms

It may be 2021, but traditional gender norms are slow to change. As the primary earner in our household for most of our marriage, I can tell you that there were unpleasant surprises along the way. We faced more adversity outside of our home than in it from family and friends.

Friends often asked if Craig was upset or angry about my earning status or did it bother me. I would explain that Craig had earned more for many years. We had different professions (Craig is self-employed, I was an equity analyst), and I worked more hours in a riskier environment.

Both of us had mothers who worked independently and jointly with their husbands in businesses and were significant contributors. Still, they looked at my success in an investment banking firm as temporary until we would have children and focused on Craig’s career path more than mine.

Our Family Was Uncomfortable About Breaking Norms

My mother and mother-in-law had been older parents for their generation, and they didn’t want us to wait too long. I was surprised and upset by my mother’s reaction to my career as I always felt she had a deep belief that I, as a woman, should not be central to our family’s financial security. She didn’t live to see our kids, a regret I will always have.

As it turned out, we have two beautiful kids, now in high school. They tell me they are proud of me when they are not yelling at me. And yes, we are older parents and were out of sync with many of our friends who had kids earlier than us, and we have many younger friends.

We didn’t follow gender norms and took a different path. I loved my job as an equity analyst and love teaching college students and writing about money, earning far less than I did when I worked significant hours.

We delayed having kids frankly because I didn’t want to leave a lucrative job and one that provided little flexibility to do it on a part-time basis. I am fortunate that Craig has always been incredibly supportive of my decision, and I could not easily compromise my workaholic nature.

Our family and friends are not alone in their discomfort with women as primary earners. In a Pew Research survey, 71% of people believe men should support their family financially.

Gender norms are changing. Men spend more time with their family than in the past. In a Pew Research analysis of US Census Bureau data, 17% of all stay-at-home parents in 2016 were fathers, up from 10% in 1989. The data exclude unemployed fathers.

 2. Communicate What You Earn

When the female is the primary earner in the family, couples lie about their earnings to others and potentially to each other. The latter is especially dangerous as it could lead to financial infidelity that I wrote about and caused some issues.

A study shows when couples lie, women will lower their earnings and men inflate theirs when she earns more.  People believe it is more socially desirable for men to make more. The study found “fudging the number conscious or unconscious” is called “manning up or womaning down.” This behavior may reflect insecure men or women who are guilty. It robs someone of acknowledging their success which is bound to lead to resentment.

3. Breadwinning Women Have Lower Family-Life Satisfaction

According to the Institute For Family Studies with Wheatley Institute in a 2018 survey of US adults ages 18-50, higher-earning women report lower satisfaction than their peers. They found 56% of women outearn their husbands than nearly 70% of women who were not primary earners. The study is called “The Happiness Penalty.”

Women who earn more sometimes feel awkward, recognizing it is unnatural for their husbands to underearn their wives. In the study, women provided 80%-100% of the family income, but 38% of women and their husbands acknowledged their primary provider.

Female breadwinners score lower on marital satisfaction. This study indicates women are uncomfortable with their new role as breadwinners. There was no difference reported for married men whether they were the primary earner or not.

4. Resentment in Relationships

Craig and I have different attitudes towards work. He is more laid back while I still exhibit a Type A personality. Craig works as an attorney in his practice and enjoys flexibility for many years. As such, he has some control over his schedule, though when he gets fairly swamped. For a time, after I went to law school, I worked with Craig for a short time. We have very different work ethics.

Many couples may face conflicts when one person is earning more than the other. Resentment often rises when that person is female. Women may feel guilty they are doing well, especially if their partner has a fragile ego. Couples need two-way communications. Support and sharing are essential traits.

Guilt Over Success

I felt guilt over my success. Friends would often ask how Craig felt about it early in our marriage. They opined that Craig has to be resentful and I should ask him how he thinks about it. We would talk about it, but I believed then that he and I felt we were the beneficiaries of our combined compensation. If Craig was resentful, it was usually because we rarely took vacations, and when we did, I invariably had to work.

Craig was often proud of my accomplishments and let me know. However, I know that I missed cues when he was finalizing a complicated commercial real estate deal and could have been more supportive in times of his stress. Working better hours now, I am more aware of his many successes. As I overshare, he is less open than I am, and his nature is sometimes less forthcoming.

There is bound to be friction between spouses or partners when there are unequal successes. The point is that couples need to be sensitive to each other’s needs and recognize their accomplishments. When resentments are too hard to deal with consider going to a marriage therapist.

Overcoming These Challenges


1. Share Household Chores

When there are dual earners in the household, sharing responsibilities should be the norm. Even if they are breadwinners, women are looked upon to take the lead in housework and caregiving. It is a gender norm ripe for change. During the pandemic, many households lost professional support for caregiving because of social distancing. Women faced more of the burden despite having to work remotely like their husbands.

Yet, during the pandemic, more women left jobs in droves than men. In September 2020, 865,000 left the workforce, compared to 216,000 men. The pandemic may widen the gender gap.

Division of Labor

Couples should talk about the division of labor and how they should split chores. It makes sense that people may be better at paying bills, making meals, or childcare. Some of the duties may require both parties to work together, mostly when making decisions.

Men have made progress in washing dishes and doing laundry, but there is so much more to do. My old-fashioned father, a chauvinist, did the dishes and laundry, too, so you need to stretch your imagination.

Craig does more than his fair share of household responsibilities except for cooking. I have always been appreciative. According to Pew Research, sharing household chores is one of the top three factors associated with a successful marriage. 

2. Honest Communications

The more you communicate, the better your relationship. Money conflicts have long been a source of friction in relationships and a leading cause of divorce.

Honest communication is essential in a marriage. Conversations about finances, goals, careers, having children, or other crucial areas should begin when your relationship moves to a serious nature. Understand what your expectations are of each other. You both deserve to know more about each other’s life plans. You and your significant other must communicate your individual and joint goals.

Don’t lie about your compensation to each other or hide what you earn. It leads to hurt feelings that snowball. Embrace each other’s successes, and if your wife makes more than you, celebrate her stature. If one person works longer hours while the other has more freedom, you need to talk about that before you get resentful.

Consider yourselves as a power couple. If your spouse is making more money, it may motivate you to change jobs or even careers. At the very least, work on your finances to pay down debt, save money that you can invest, build an emergency fund, and put aside for your retirement. Being in control of your finances is powerful.

3. Remote Working

Women typically seek jobs with flexibility, have to work part-time or shorter work hours compared to men. Remote working may be an excellent option with greater flexibility and increased employer support during the pandemic. Many consider remote working as an additional skill. Although working from home has benefits, there may be concern among women that the flexibility may not fully outweigh the negatives of having to do more domestic work when at home.

4. Have Your Own Financial Accounts

Whether women are the primary earner in their homes or not, they should have their own financial accounts. Married couples tend to have joint accounts and that makes sense to pay joint expenses such as your rent or mortgage, insurance, college tuition, or groceries.

However, financial independence is essential for women. Women should be saving for their own retirement, investing, and have their own financial accounts. As their financial clout rises, they need access to their own funds and not just pocket change. Men have their separate accounts for their convenience. Hello? Women need autonomy, convenience, and their own assets.

I have a friend who is a managing partner at an elite management consulting firm. Her husband is a stay-at-home Dad. They only have joint accounts. He monitors her spending though she is not a spendthrift. The only account she has that is separate from her husband’s is her business account for travel and entertainment. This situation is not as uncommon as you think. You can read our post on women’s financial accounts here.

5.  Update Workplace Policies

Working women tend to do most of the caregiving in their household despite more effort from men. Many believe that greater women in the workforce will lead to higher GDP. To do so, more barriers to women’s employment can be lifted by enhancing work-family policies to support working caregivers. Greater access to paid family leave and paid short leave when someone needs to take care of a sick family member.

Final Thoughts

It is good news that there are more women who are primary earners in their household. But they may carry more burdens despite success in their careers. Sharing household duties is essential for a successful marriage and to alleviate stress. Talk to your partner about your needs and theirs is a great way to be able to feel greater satisfaction in your family and your life.

Thank you for reading! If you find this post of value, please visit us at The Cents of Money! Please share any comments or experiences you have had.












Money Lessons From Warren Buffett’s 2021 Letter To Shareholders

Money Lessons From Warren Buffett’s 2021 Letter To Shareholders

In his latest annual letter to shareholders, Warren Buffett, CEO of Berkshire Hathaway, wants you, the investor, to understand Berkshire Hathaway, the company he has steered since 1965. As in past years, I anxiously await Warren’s annual letter (he writes his letter as if he is addressing you personally, so hence my liberal use of “Warren”)  to learn or refresh my knowledge with his numerous golden nuggets.

Here is Warren Buffett’s letter that is a review of 2019

My Thoughts At First Glance

There aren’t any huge surprises though Buffett admitted to an error in overpaying for Precision Castparts in 2016. One of the best sections was his tribute to the founders of companies he purchased that show “success stories abound throughout America” as entrepreneurs without capital but with a strong work ethic. Look for “Mrs. B”  as a highlight that I embraced.

The letter is disappointing for what Buffett omitted. He mentions COVID-19 only once, alluding to it when he commented on the furniture company’s temporary closing. Yet, the pandemic destroyed small businesses and caused significant unemployment.

Another topic Buffett should be upfront about was the lack of making any acquisitions and his poor timing of selling stakes in banks and airlines during 2020. Buffett did talk about repurchasing more Berkshire Hathaway shares which may contribute to higher earnings with lower outstanding share count.

Labor Of Love

I read the letters and search for Warren Buffett money lessons, a task I enjoy since graduate school for business. It is my labor of love. My goal is to share his wisdom with others, notably with my college students and, of course, my readers. It is an exercise of enjoyable reading for American history buffs and those who are in finance.  

Buffett letters to Berkshire Hathaway shareholders go back to 1965 and chronicle the growth and challenges of the company’s businesses. I always uncover Warren Buffett’s money lessons as I did in the current letter on investing, diversification, overspending, debt reduction, entrepreneurism, ethics, and more.

Many of Buffett’s iconic quotes come from these letters filled with honesty, integrity, sardonic humor, and corniness when it comes to America. He and Vice Chairman Charlie Munger share their intellect, and at ages 90 and 97, respectively, it is no small feat. Longevity may just be one of the benefits of being a longtime Berkshire shareholder, as Buffett shares in this letter. 

The Letter At A Glance

There aren’t any huge surprises though Buffett admitted to an error in overpaying for Precision Castparts in 2016. One of the best sections was his tribute to the founders of companies he purchased that show “success stories abound throughout America” as entrepreneurs without capital but with a strong work ethic. Look for “Mrs. B”  as a highlight that I embraced. 

The letter is disappointing for what Buffett omitted. He mentions COVID-19 only once, alluding to it when he commented on the furniture company’s temporary closing. Yet, the pandemic destroyed small businesses and caused significant unemployment which remains high.

Another topic Buffett should be upfront about his lack of making any acquisitions, even after the market downturn. He also divested his bank or airline holdings in 2020, presumably due to COVID-19, but he didn’t explain his actions in the letter. 

Buffett Remained On The Sidelines

Most importantly, why was he uncharacteristically quiet in 2020?

If investors were hoping the 2020 letter would fill in some of the gaps in understanding Buffett’s uncharacteristic silence much of last year, they are going to be disappointed. What was going on that Warren Buffett did not take advantage of the dramatic stock market downturn in March 2020 to buy bargain stocks? 

He often is a voice of calm and reason when markets are extremely volatile. Typically, Buffett uses this scenario as an opportunity to pick up some bargains, either by purchasing equity stakes or making acquisitions. He remains healthy, and the letter does not cause us to worry about him, at least as far as being a 90-year-old man.

Uncovering Money Lessons From Warren Buffett’s Letter To Shareholders


Misses And Mistakes

Warren Buffett addressed the company’s two primary goals: increasing earnings and acquiring large and favorably situated businesses. Management met neither goal. However, they repurchased 5% of Berkshire Hathaway’s shares, which reduces the share count, raising EPS potential. 

Admits To An Error On Overspending

The Precision Castparts acquisition made in 2016 has not lived up to its profit potential. Berkshire took an $11 billion write-down. Buffett’s mistake of overpaying for this asset took him only four years to acknowledge compared to his 20-year famed struggle with the textile business he inherited at Berkshire. That is a big step in the right direction to acknowledge a mistake, Warren!

Berkshire Is A Conglomerate

Buffett describes Berkshire as a conglomerate,” but only in part.”  It differs from the prototype of “aspiring conglomerateurs” who will buy up for mediocre businesses.  Many conglomerates overpay for companies with overvalued stock. Tools to foster overvaluation involve “promotional techniques and ‘imaginative’ accounting maneuvers that were, at best, deceptive and sometimes crossed the line into fraud.”

“Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts, and investment bankers, but whose creations ended up as business junkyards.” I knew several candidates professionally he may have in mind.

Buffett is not a fan of Wall Street, particularly in this letter, as we discuss later.

Controlled and Non-Controlled Businesses 

Berkshire Hathaway is a holding company with controlled and non-controlled businesses. Their controlled businesses are typically those they own at least a 50% interest in and manage operations. Berkshire owns equity stakes or holdings of marketable stocks in non-controlled businesses they do not operate. 

 Buffett and Munger view Berkshire’s holdings of marketable stocks as a collection of businesses. These holdings had a year-end market value of over $281 billion in 16 company equity stakes, up from its $108.6 billion costs. For GAAP purposes, Berkshire can only book the dividend income from these companies, not their marketable (but unrealized) gains.

Four Family Jewels

#1 Property And Casualty Operations And Its Insurance “Float”

Berkshire’s insurance companies are its valuable businesses. They have unique characteristics that allow them to enjoy  $138 billion of insurance “float.” Like other insurers, premiums paid by customers can be invested in securities when customers pay premiums for policies and the time they make insurance claims that are liquidated.

The float is money that doesn’t belong to Berkshire and will go to intended parties in the future. It is free money in the meantime for investments.

Unlike its competitors, Berkshire follows an equity-heavy investment strategy not feasible for most of its insurer competitors with regulatory and credit-rating restrictions.

Instead, these competitors invest their premium proceeds in bonds that have to generate low-interest income from the likes of 10-year US Treasury bonds, yielding 0.93% at the end of 2020. Buffett worries that some insurers and bond investors may turn to increase their returns by buying more risky loans, which are “not the answer to inadequate interest rates.” It is hard to find income in a low-interest environment without adding risk as we discuss here.

However, the 10-year yields rose to 1.54% in late February 2021, above the year-end rate. 

Berkshire’s #2 And #3 Most Valuable Assets

Buffett’s points to the company’s second and third most valuable assets that appear to be a tie, and frankly, seems surprising.  The tie in Berkshire Hathaway’s most valuable assets is between Berkshire’s 100% ownership of BNSF, America’s largest railroad based on freight volume, and its 5.4% interest in Apple.

A 5.4% Interest In Apple, Helped By Share Buybacks

Roughly 42% of the marketable gain comes from its now 5.4% in Apple due to share buybacks.  Berkshire began investing in Apple in 2016 and mid-2018, representing an initial 5.2% stake, and realizing regular dividends of $775 million annually. They had an $11 billion gain from selling a small portion of their stake.

Through the math of Apple’s share buybacks and Berkshire’s repurchases, Buffett told investors that they “own a full 10% more of Apple’s assets and future earnings” than they did in July 2018. Q to Buffett Does he think that Wall Street analysts give proper credit to this non-controlled interest in their price targets in Berkshire.

 BSNF – Its Railroad Business

Tied with the Apple interest is its 100% ownership of BNSF, acquired in early 2010. It has been operating since 1850. It has required substantial investments since Berkshire’s purchase.  BNSF paid significant dividends of $41.8 billion in total to Berkshire after it fulfills its business commitments and maintains a $2 billion cash balance, reflecting a conservative policy.

Railroads are a fascinating industry for any Americana history buff. Their challenges are well documented from their early start and are in a more mature stage.

#4 Jewel – Berkshire Hathaway Energy

Berkshire’s fourth family jewel is Berkshire Hathaway Energy (BHE), owned for 21 years. Unlike BNSF and most electric utilities, it pays no dividends to Berkshire. BHE is amid a long-term $18 billion project to rework and expand a substantial portion of its outdated electricity grid throughout the West. The project began in 2006 with a  2030 competition date. This project is complex and essential to be able to deliver clean energy.

Berkshire Hathaway Ranked #1 As Largest Owner Fixed Assets

Berkshire is the largest owner of American-based property, plant, and equipment with fixed assets of $154 billion, followed by AT&T, at $127 billion. That Berkshire fact alone means it is an asset-heavy company that invests a lot of capital, not necessarily generating the best-earning results or even a good investment.

As most business college students learn in school, good returns can come from companies with minimal assets in high-margin businesses that have expanding topline growth. Simply being asset-heavy is not a reflection of a beauty contest.

Underperformance In Berkshire Shares

Indeed, Berkshire’s stock performance in 2020 was poor, up 2.4% compared to the 18.4% terrific climb for the S&P 500. Relative stock performance in 2019 was also weak, with 21% underperformance.

Investors would have done better with a passively managed Vanguard S&P 500 index fund paying an expense ratio of 0.14%. That means an investor would be paying about $14 fee annually for a $10,000 investment in the fund. Actively managed funds have higher expense ratios of 1% or higher, costing a $100 management fee for a $10,000 investment.

American Prosperity Fuels Business Creation And Entrepreneurship

Despite his age, Buffett is still playing for the long term with high confidence in Berkshire’s businesses, management, and employees. He is proud of his extensive property and casualty business and his smaller companies. They remain treasures within the Berkshire family, and he shared their beginnings as business creations by individuals that are American success stories.

One reason Warren Buffett may have less of need for Wall Street bankers is that he does his research, making purchases for Berkshire, even on a handshake after getting to know the founders and its business potential.

Berkshire’s Gems:

  • See’s Candy, a West Coast company acquired in 1972. Mary See began the business a century ago, reinventing age-old candy with new recipes such as Buffett’s favorite peanut brittle.
  • GEICO (Washington D.C.) began as an auto insurance company by the Goodwins in 1936. It became Buffett’s first love when he bought shares in 1951 as a Columbia Business student, purchasing GEICO for Berkshire in 1996.
  • National Indemnity (Omaha) began in 1940 by the Ringwalts to compete against well-funded giant insurers. It was purchased in 1967 and is Berkshire’s largest business.
  • Tennessee-based Clayton Homes and Pilot Travel Centers (38% interest but 80% in 2023) were each begun by young men, continued by their sons under Berkshire’s umbrella.

A Young Immigrant’s Story Seems Familiar

“One question I always ask myself in appraising a business is how I would like, assuming I had ample cash and skilled personnel, to compete with it. I’d rather wrestle grizzlies than compete with Mrs. B and her progeny. They buy brilliantly, they operate at expense ratios competitors don’t even dream about, and they then pass on to their customers much of the savings.”

Warren Buffett, from Wikipedia

Buffett continued to buy Omaha businesses. Among those was the Nebraska Furniture Mart (NFM), with an enchanting story told in Buffett’s letter. The founder of NFM was Rose Blumkin (Mrs. B), who arrived in Seattle in 1915 as a Russian emigrant, unable to speak or read English. She settled in Omaha and used her $ 2,500 savings to start a furniture store in 1936.

By 1946, her business stalled, and she was down to $50. Louie, her only son, rejoined the store after four years in the Army. He earned a Purple Heart, having fought at Normandy on Omaha Beach on D-Day and sustained injuries in the Battle of the Bulge. He joined his mom, renewing the business, and by 1983, their business worth $60 million.

Buffett purchased the furniture business, leaving the Blumkins to manage the place. Mrs. Blumkin worked every day until she was 103, and Buffett wrote, “…a ridiculously premature retirement age as judged by Charlie and me.” The business still run by the third and fourth generation of the Blumkin’s and now has the three largest home furnishings stores in the US today.

 Immigrant Stories Are America

Their story reminds me of my own mother’s immigrant story. She became a thriving retail owner after coming to America as a Holocaust survivor with $5 in her pocket. My husband’s account tells me of his two great grandmothers’ export-import and furrier businesses. Each story is unique but has parallels of strong immigrant women, who came to the US with little money, didn’t speak English, were primary breadwinners in their families, and loved America.

Buffett’s post-script to the Blumkin story could be my family’s or the many immigrants that landed in this country. When Mrs. Blumkin’s large family gathered for holiday meals, she always asked that they sing before eating. That song was Irving Berlin’s “God Bless America.” I promised you corniness!

Buffett And Munger’s  “Special Kinship” With Individual Investors

In business ethics, stakeholders of a company have interests in the outcome of the decisions made. Typical stakeholders are the board of directors, management, employees, customers, lenders, and stockholders.

The BH directors want the company to delight the customers, develop and reward the company’s 360,000 employees, called associates of the company. It is up to the board to determine dividends, strategic direction, CEO selection, acquisitions, or divestitures to act in the corporation’s best interests and its owners.

The owners are the stakeholders that most matter in the letter written by Warren Buffett and to whom he most directs his comments. 

Owner Constituents:

  1. Warren Buffett’s Berkshire shares ownership will eventually be annually distributed to various philanthropies as part of his estate plan
  2. Passive investing is a fund strategy that tracks a weighted index such as S&P 500 index funds.
  3. Actively investing refers to a portfolio management strategy where portfolio managers make investments. Both active and passive investing are institutional investors who may either have a long-term focus or use computers employing algorithms to trade with a short-term mentality.
  4. Individual investors are investors whose purchases are of smaller volume than institutional investors. They may buy Berkshire shares for long-term investment or use Berkshire shares as a source of funds. 
  5. Warren Buffett’s special kinship for the individual investor comes from his early roots as a money manager through partnerships. He and his family invested in the partnership with these individual investors of million-plus investors who line up with Berkshire’s philosophy favored by him and Charlie Munger. They are more likely to have long-term perspectives. 

Original partners were longstanding holders of Berkshire shares, many of whom are descendants of the original partners. They share a commonality with Buffett by being old-fashioned long-term investors who trust the management to do the right thing.

Stepping Down To Retire? Nope

“Could it be that Berkshire ownership fosters longevity?”

Warren Buffett

Would it surprise you that there were no announcements of Warren Buffett or Charlie Munger stepping down and moving over for Vice Chairmen Ajit Jain and Greg Abel? Me neither. In their 90’s, they remain energetic and love their jobs.

Instead, Buffett spoke of Pilot Travel Center founder “Big Jim” Haslam, who recently authored a book at age 90.

Buffett pointed to the earliest investors–a group of Omaha doctors who formed a partnership. One of those veterans just turned  100 years old, and he and all the doctors kept their original Berkshire shares they received from the partnership.

Wall Street And Speculators

Throughout the years of writing letters, Buffett and Munger together have shown there is no love lost for Wall Street, notably the investment bankers, analysts, and those of that ilk. As a former analyst, I take no offense, recognizing the culture of working on “The Street”  is often difficult to maneuver.

This letter was no exception. I thought there was more than the usual Buffett bite in this read. We use his quotes when he refers to Wall Street.

On conglomerates, Buffett refers to the overvaluation of an overvalued conglomerates’ stock to make acquisitions, he says, “Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, also, the soaring price of a promoted stock can itself become the “proof” that an illusion is reality.”

After his tribute to individual investors, Buffett refers to the tens of millions of other investors and speculators who have “a wide variety of equity choice to fit their tastes.” (His emphasis). According to Buffett, these investors will find CEOs, market gurus, price targets, managed earnings,  “stories,”  and “technicians” who will “instruct them as to what some wiggles on a chart portend for a stock’s move.”

The Monkey And Its Dartboard

Buffett believes many of these investors will do well, saying:

“Indeed, a patient and level-headed monkey, who constructs a portfolio by throwing 50 darts at a board listing of all the S&P 500, will–over time–enjoy dividends and capital gains, just as long as it never gets tempted to make changes in its original selections.”

His italicizing of “over time” reminds investors of the need for having a long-term perspective, something that may be lost in the world of computer algorithms and day trading.

Buffett’s Book Recommendation

Warren Buffett is well known to be an avid reader and shares many recommendations. In his letter, he recommends “Common Stocks And Uncommon Profits” written by Philip A. Fisher in 1958.

In the book, Fisher analogizes running a public company to managing a restaurant. He said, “If you are seeking diners, you can attract clientele featuring either hamburger served with a Coke or a French cuisine accompanied with exotic wines. But you must not capriciously switch from one to another.” You and your business’s message to potential customers must be consistent with what they find when going to your premises

Inflation Wasn’t Addressed In This Letter

Not surprisingly, Buffett did not comment on inflation as our economy is not yet near full employment. However, Buffett did comment in his 1980 letter when the inflation rate was 13.5%, giving us a glimpse into his thoughts on high inflation in the late 1970s and early 1980s:

“High rates of inflation create a tax on capital that makes much corporate investment unwise – at least if measured by the criterion of a positive real investment return to owners.

“This ‘hurdle rate’ the return on equity that must be achieved by a corporation in order to produce any real return for its individual owners – has increased dramatically in recent years. The average tax-paying investor is now running up a down escalator whose pace has accelerated to the point where his upward progress is nil.”

Our recent post on Inflation And How To Protect Yourself From Its Effects

Final Thoughts

I learn from Warren Buffett’s letters to Berkshire Hathaway’s shareholders. The letters contain golden nuggets of money and life lessons. That doesn’t mean Buffett is beyond criticism, especially in his account of  2020 where omissions did not address many questions I would have for him. Becky Quick of CNBC in her standard interviews of Warren Buffett will ask the questions I raised in this article.

May 1st in the Berkshire shareholder meeting, and for the first time will be held in Los Angeles instead of Omaha. Buffett and Munger will be answering questions.

Thank you for reading! If you found any value in this post, please visit The Cents of Money for more articles like this. Why not become a subscriber so you can get our free weekly newsletter! Love to see you there!











Benefits of Dividend Growth Investing

Benefits of Dividend Growth Investing

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

John D. Rockefeller

Dividend investing is a way of buying stocks that pay regular dividends on your investments. Those dividends represent a portion of the company’s profits paid to investors.

Some people might find investing in dividend stocks boring. That may be for some folks. However, I find it exciting, not tedious, to collect this income from high-quality companies as part of its total investment return. Returns can come from three potential investment sources:  income, dividend growth, and price appreciation.

Dividend growth investing is a great way to build wealth. Dividends grow through compounding, reinvesting, less volatility, and satisfying investors with current income. A considerable part of Warren Buffett’s investment strategy, Berkshire Hathaway earns significant dividend income over $4 billion associated with stock purchases of high-quality companies in their portfolio. As Warren Buffett said, “Above all, dividend policy should always be clear, consistent, and rational.” 

Growth Stocks Pay Dividends

Sure, it is always exciting to find the next Amazon to invest in on the ground floor. It is the ultimate prize for venture capitalists, investment bankers, and investors, but they are tough to find. Growth stocks have been great places to invest in recent years and through 2020. They are at high valuations. Don’t forget some growth stocks pay reasonable dividends, such as Apple, Microsoft, and other tech-oriented names.

Dividend growth investing offers investors a lot of benefits that can complement growth stocks in your portfolio. Add dividend stocks to your investments to provide essential diversification.

The market has been absorbing many IPOs in 2020 (550 to date), causing some market turbulence. When there are many new offerings, institutional investors need to sell some of their growth stocks to raise money to participate in these new issues. Dividend-paying stocks can provide less volatility. 

What Are Dividends?

Most stocks usually pay dividends. More than 80% of the S&P 500 pay dividends. The S&P 500 dividend yield is currently low at 1.67% based on the strong stock market. However, the average yield is around 2% over the past decade.

Typically, stockholders receive cash dividend payments. The corporation’s board of directors usually declares a dividend four times a year. Some companies may pay this income monthly or annually.  These dividend payouts are rewarding investors with a share of the company’s profits.

Some companies may pay special “non-recurring” dividends, such as Costco Wholesale, rewarding investors for a company milestone or robust earnings growth. You can’t count on these payments to pay for your living expenses. 

Dividend Cuts Are Historically Rare And The Last Resort

If the firm is experiencing unprofitable times, the money may come from money reserves. Occasionally, a company may borrow to pay dividends to maintain its reputation for consistency. The safety of the dividend is always on investors’ minds. Most companies view a dividend cut or suspension as a last resort impacting their reputation and investor confidence about the dividend’s sustainability. Dividend cuts or suspensions are relatively rare.

However, several companies quickly moved to reduce or suspend their dividends temporarily in 2020 as the pandemic caused a severe economic downturn as lockdowns occurred. In recent months, many dividends have been reinstated, increased, or for some companies, initiated for the first time.

Dividend Growth Investing

Even in challenging times, individual companies have grown their dividends. Find the highest quality companies with longstanding track records to increase their dividends and survive a range of market environments. These companies are particularly desirable to find as they are dividend-paying royalty.

“Dividend Aristocrats”

To be part of this elite group of the S&P 500, “Dividend Aristocrats,” a company must have raised its dividend consecutively for 25 years or more. They must also meet specific minimum size and required liquidity. Initially, only 26 companies fit high-quality dividend payers’ profiles based on their strong histories of revenue and earnings growth, solid business fundamentals, and strong company management. These stocks have attributes of both growth and value investing, which we discuss in this article.

As of December 2020, 65 companies are Dividend Aristocrats. Some companies have fallen off the list, replaced by others, particularly during the Great Recession. Dividend Aristocrats’ dividend yield is usually 50 basis points above that of the S&P500 dividend yield, or closer to 2.5%. Many of the stocks carry yields in the 3+% range.

To invest in dividend growth stocks, you don’t necessarily have to limit yourself to this elite group, although it is a great place to start. Look for securities that have similar attributes of dividend growth, above-average yields, and sustainability. As recently as November 2008, Dividend Aristocrats delivered an average of 4% yields.

8 Benefits of Dividend Growth Investing


1. Fits With A Long Term Perspective

When investing, use a long term strategy instead of short term trading. This strategy recognizes that stock values increase over the time horizon despite intermittent market volatility. When investing for dividends, you collect cash payments through your continued stock ownership, even if the company did poorly. A side benefit of holding stocks for more than a year may be the ability to pay lower taxes through capital gains and loss strategies if they are qualified dividends.

2. The Power of Compounding

Compounding, or earning interest on interest, is a powerful way to build wealth. As we already said, investors are encouraged to keep stocks longer when they collect regular dividend payments, aligning with a Buy/Hold mentality. By reinvesting your dividends, you can accelerate the compounding benefits in your investment and retirement accounts. We discuss compounding along with other financial concepts you should know in this article.

An automatic dividend reinvestment plan (DRIP) is a program offered by your brokerage firm, mutual funds it exchange-traded funds (ETFs)  that allow investors to have their dividends automatically used to purchase additional shares of the underlying security.

3. Dividend Stocks Are Less Volatile

Stocks that pay dividends tend to be less volatile. When markets undergo turbulence, stocks with yields tend to do better. While dividend payers are not as safe as Treasury yields sporting AAA ratings backed by the US government, they offer an alternative source of stable investment income. With lower risk-to-reward ratios, dividends provide an anchor to falling stock prices.

4. Investor Confidence In Corporate Financial Health

When companies pay dividends and increase their payouts, it gives investors confidence in the stocks they hold. Companies that consistently pay dividends tend to be well run, are transparent about their revenue and earnings growth, and reflect financial discipline. 

5. Creates Passive Income

Dividend stocks provide a great path to creating passive income. This kind of investing is particularly desirable for a range of investors–retirees or seeking to retire early–who want to supplement their income. Investors relying on fixed securities may find insufficient balances from interest income given the low-interest environment we have been experiencing in recent years. Dividend investing can play a substantial role in boosting returns based on higher dividend income.

The steady flow of dividend payments can be used for spending, funding living costs, or reinvesting the money into similar stocks. Generally, there are lower or no trading commissions to pay, and dividend income gets preferential tax treatment for dividends of stocks held more than 60 days.

An Example

How much dividend income do you need to support your lifestyle is dependent on your plans. If you are hoping to become financially independent, dividend investing can help you grow alternative income or help you pay your living expenses.  Back of the envelope calculations of annual dividend income can get you started. Let’s say, your portfolio consists of $1,000,000-$2,000,000 of dividend-paying stocks.

Assume your $1-2 million portfolio has an average dividend yield of 2%. Your annual dividend income would amount to $20,000 to $40,000. At a 3% dividend yield of a $1,000,000-$2,000,000 dividend investment portfolio, your annual dividend income would rise to $30,000 to $60,000. The greater your portfolio that consists of dividend stocks, the more you can count on this income.

Higher dividend yields of over 4% may grow dividends more slowly.  Don’t chase stocks carrying higher yields without doing some research.

6. Higher Return Potential

According to several studies, stocks that pay dividends tend to grow faster than those that don’t pay dividends. Dividend-paying equity has three sources to fuel total returns: dividend income, dividend growth, and price appreciation. Growth stocks without dividends are faster growers at higher valuations but tend to be more volatile without dividend income.

Dividend Growers Outpace Non-Payers

In a February 2020 study by Hartford Funds and Ned Davis,  average annual returns from March 1972 to the end of 2019 were 12.87% for dividend growers versus 8.57% for dividend nonpayers. Using these returns, a $10,000 investment in non-dividend paying stocks would have grown to $500,000, well below the $3.24 million in dividend growers over the 48-year timeframe.

Since 1926, over 40% of the US S&P 500 returns have come from dividends, with the rest contributed from price appreciation.

7. Portfolio Diversification

Investors should maintain a diversified investment portfolio among different asset classes. An investment portfolio with diverse growth stocks is not diverse. These stocks may provide higher returns, but they pose higher risks. Dividend-paying stocks are a welcome addition to diversifying your portfolio and can help balance non-dividend paying growth stocks. These stocks offer defensive protection in adverse market environments and generate income growth and long term price appreciation in profitable markets.

To diversify your investment portfolio, you need other asset classes–money markets, bonds, and real estate–besides stocks. However, in recent years, and especially in 2020, high yield savings accounts, treasury, municipal, and corporate bonds have been challenging places to find any income. Income generation is a priority for many investors.

Viable Alternative To Low Bond Yields

As such, we discussed dividend income as a viable alternative source to bond income. The Fed took aggressive action to expand the money supply due to the pandemic’s impact on our economy. These moves reduced already low-interest rates. We discussed these risks of extremely low-paying yields from debt securities for investors in this article. We consider dividend income from high-quality companies as a higher income potential compared to high-grade corporate bonds.

8. Provides Inflation Protection

Stock investments tend to outpace inflation. Inflation can dramatically reduce the purchasing power of your money over time. Saving money in bank accounts will do very little in protecting your money from inflation. The value of a bond may drop below what you paid for it if interest rates rise. Dividend investing provides better inflation protection than fixed bonds.

Many companies pay dividends above the rate of inflation.  Dividend growth stocks performed well in periods such as the 1970s when inflation was higher than currently.

We have had low inflation for such a long time that many investors forget the need to protect themselves from potential inflation in the future. The higher returns from dividend investing tend to outpace inflation reasonably well. They provide better inflation hedges than fixed-income investments unless you go to more risky high yielding bonds, which carry greater credit risk.

Seeking Dividend Growth Stocks

You want to find high-quality companies with vital track records in generating revenue and earnings. Companies carrying excess debt on the balance sheet may hamper the company’s ability to support or increase dividend payments.

New Dividend Payers

Some well-known growth companies offer dividends for the first time. Some companies initiate payments after a strategic achievement. Apple did not introduce its dividend until 2012 after CEO Steve Jobs passed away. The company had significant cash on its balance sheet, but Jobs didn’t favor distributions to shareholders. Other companies introduce dividends to compensate investors for slowing growth. High yields are a different kind of signal, not necessarily positive that you want to investigate further.

Free Cash Flow

Free cash flow reflects positive cash flow after capital expenditures point to a company that can handle sustainable dividend payouts. Companies in industries such as energy with high capital expenditures may have higher risks that can’t support dividends.

Some Ratios May Help Identify Good Companies With Dividend Safety


Is The Dividend Safe?

Dividend safety is essential if you are engaged in this kind of investing. However, a high dividend yield may be a red flag for a potential cut in the dividend rate. Review your stocks for these red flags. The calculation is straightforward: dividend yields are annual dividend per share divided by the current stock price. A dividend yield of over 8% would concern me. Like utilities or banks, may pay a higher dividend yield because there is less stock appreciation.

Reasonable Payout

A company’s payout ratio should be manageable for the long term. You can calculate the dividend payout ratio by dividing the annual dividend per share by the earnings per share. A 30%-40% payout is reasonable.

Healthy Dividend Coverage

The dividend coverage ratio (DCR) measures the number of times a company can pay its current dividend amount to shareholders. To calculate this ratio, divide a company’s annual EPS by its yearly dividend per share. A DCR over two is considered a healthy ratio.

How To Find Good Dividend Stocks

You can purchase dividend stocks individually. Do some research. You can buy select names that are part of Dividend Aristocrats, which is a great way to start investing. Alternatively, you can purchase low-cost index funds or exchange-traded funds that can readily provide a pool of high-quality dividend stocks. Buying mutual funds or ETFs would satisfy instant diversification, reducing the risk of potential dividend cuts or suspended dividends. If one or two companies do any paring of dividends in these vehicles, your pain would be minimal.

Here are a few ETFs and a Vanguard Mutual Fund to consider:

  • Proshares S&P 500 Dividend Aristocrats ETF, symbol NOBL
  • SPDR S&P Global Dividend ETF, symbol WDIV
  • ProShares S&P Midcap 400 Dividend Aristocrats ETF, symbol REGL
  • SPDR S&P Dividend ETF, symbol, SDY
  • CBOE Vest S&P 500 Aristocrats Target Income ETF,  symbol, KNG
  • Vanguard Dividend Growth Fund, symbol VDIGX


Final Thoughts

Investing is the best way to build wealth in the long term. There are many types of stocks to purchase and generate profitable growth. Dividend growth investing may provide three investment income sources –dividends, income growth, and price appreciation. To invest in these stocks, focus on high-quality companies with a transparent track record and financially disciplined management.

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