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School’s Out for Summer...But Not Your Small Business

Whether you’re more excited about firing up the grill, relaxing on the beach or being more active, the warm summer months can provide challenges for your small business — especially if you’re...

Starting a High-Tech Business? You May be Eligible for Government Funding

Looking to start or grow your high-tech entrepreneurial venture? Need financing to help fund research and development (R&D) efforts and realize your business potential? The U.S. federal...

6 Unwritten Rules Related To Business Etiquette

I’m sure many of you are familiar with etiquette when it comes to dining. However, did you know that there was a thing such as business etiquette? Similar to dining etiquette, these unwritten...

How to Grow Your Business with Referral Groups

Are you ready to take business networking to the next level? Then try a business referral group. Business referral groups, also called business referral networks or leads clubs, are networking...

4 Resources To Help You Create a Safe Workplace

When was the last time you’ve revisited your workplace safety plan? Not only is it the law, but it also can ensure that you and your employees are always safe.

In honor of National Safety...

How One Engineer Made His Hobby Pay Off

For years, Jacques Hopkins wanted to make money online with a flexible side gig. Now the former electrical engineer has found a niche that has become his career: teaching people to play modern songs on the piano in 21 days, all over the internet.

Hopkins didn’t make the transition overnight. He and his wife had been saving for years before he started his own business. Here’s how they did it — and how you can turn a hobby into your main hustle.

From engineer to entrepreneur

Piano teaching wasn’t Hopkins’s first entrepreneurial idea. He tried a few that didn’t take off, including an invention that turned regular desks into standing desks. He learned from that experience that he didn’t want to sell physical products.

But he could sell lessons online, from anywhere. So he developed a more accessible and efficient method of teaching piano than the formal lessons he took from ages 5 to 17.

And so began his side business, Piano In 21 Days. The company’s tagline says it all: “I help regular people learn to play modern songs on the piano in as little time as possible.” What started as YouTube videos of Hopkins playing pop songs became a 21-day online course.

Hopkins knew the project would be more successful if he could devote more time to it — so he quit his day job. “The website took off once I was focusing on it eight hours a day,” he says.

Saving for the jump

Before Hopkins quit his engineering job, he and his wife, Niki, prepared to lose that income. The first step: paying off their mortgage. Then, Hopkins says, “the money we were putting toward the mortgage started going to a savings account.” Niki also received a pension from a previous job, which helped them build savings.

The family amassed enough to live on for a year, frugally, without much support from the piano business. “We wanted to make sure we had enough savings so that if this failed miserably, we would still be able to have money to live on and time for me to find another job if I needed to,” Hopkins says.

Building a ‘security blanket’

In the event that Piano in 21 Days did fail miserably, and Hopkins couldn’t find work, the family had a backup: a $20,000 emergency fund. “That was sort of a security blanket that was just sitting there,” he says.

Hopkins had started the fund years before. He had very little debt and was able to contribute about $500 per month. After two years, he saved about $12,000. Once he and Niki got married, they gradually increased the fund to about $20,000.

“You just attack it,” he says of building the fund. “Five, six, seven hundred dollars a month — whatever you have.”

The benefits of working online

Hopkins, his wife, who is expecting, and their toddler daughter are based in Baton Rouge, Louisiana, but Hopkins can live and work from anywhere. Most of his work involves talking with prospective customers on the phone, as well as marketing and growing the business. He occasionally posts a new YouTube video, tweaks the website and posts on social media. He outsources other tasks.

Hopkins and his family take advantage of his flexibility by traveling often. For example, last summer they spent three months in France. “We’re having a blast,”  he says. But even when Hopkins is on vacation, he talks with prospective customers. “I’m not going to stop taking those phone calls,” he says.

Lucrative earnings and European vacations are far from the only benefits of Hopkins’s work. He loves that he’s helping people all over the world. “When I worked a real job I was hardly able to see my impact, but now I get feedback daily from people thanking me for helping them learn to play piano,” he says. “That’s really what keeps me going.”

Inspiration for others

Want to make money online like Hopkins? Start by exploring his favorite resources. He says he was most influenced by Tim Ferriss’s “The 4-Hour Work Week,” which inspired him to pursue a side gig when he was still in college. He also recommends Jeff Walker’s “Launch,” which is specific to building an online business.

“I wish I would have known sooner that running your business purely on the internet was possible,” Hopkins says.

Laura McMullen is a staff writer at NerdWallet, a personal finance website. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen.

How to Gift Stock to a New Grad

Graduation season is in full swing and for many Americans that means one thing: It’s time to head to the ATM.

Cash is expected to be the go-to gift again this year for new grads, followed by greeting cards and gift cards, according to survey results released this month by the National Retail Federation. The appeal is obvious: The recipient can spend the money how she pleases, there’s no hassle with receipts or returns and minimal effort is required of the giver.

If you like the idea of giving cash but want something with more oomph, consider stock. It potentially has a longer shelf life and higher returns. A gift of stock also helps a recipient learn how to invest.

There are some considerations unique to gifting stock, however, including understanding the intended recipient’s immediate financial needs. Here are four questions to consider before you give stock.

1. Are stocks the right gift?

It’s generous to help someone invest for the future, but be cognizant of the recipient’s pressing needs. Does the new grad have high-interest credit card debt? Is he facing uncertain job prospects? Does she have forthcoming expenses (moving to a new city, for example) that could push her into debt?

If “yes” is the answer to any of the scenarios above, the gift of investments may not be practical. Even worse, a cash-strapped new grad could be tempted to sell the stocks and forgo the long-term benefits while also triggering taxes.

If the gift is for a minor, there are ways to limit when or how she’ll access that investment. By setting up a custodial account, you’ll manage the account on her behalf until she’s of age (generally 18 or 21 years old, though some states allow you to specify an older age). At that point, she’ll be free to do with it as she pleases.

» MORE: Give your child the gift of stocks

2. To transfer or to buy?

There are two basic ways to give stocks: transferring shares you already own or buying new ones. Deciding which is best will depend on your current holdings and the tax implications for the recipient.

Since the gift is being made with the recipient’s best interest in mind, you should know that transferring shares to them means you’re also transferring any capital gains tax burden for those shares. When it comes time to sell, they’ll face realized capital gains based on the stock’s value when you first bought it.

For example, if you’re gifting 100 shares of a company that you bought at $25 a share and the recipient sells when the stock’s trading at $40 a share, they’ll pay taxes on a capital gain of $1,500. If instead you were to buy and gift new shares of that same stock when it was trading at $35 per share and they sold it at $40, they would only pay capital gains on $500.

If you still want to transfer shares of an existing holding, the process varies depending on how you hold the stock — in a paper certificate, with a brokerage or through direct registration with the company. Contact the institution that oversees your holdings to find out what steps and paperwork are needed to complete the transfer.

In general, you’ll need the following: a description of the securities you’re gifting (company name, ticker symbol and number of shares), your account number and your contact information, as well as the recipient’s full name, Social Security number, contact information and the account where the investment should be transferred.

If the recipient is a newbie to the world of investing and doesn’t have a brokerage account, you may be able to transfer stocks through the Direct Registration System. This will put the recipient on the books as an investor with the company.

If you’re looking to give a stock you don’t currently own (or you don’t want to part with your own shares), you have choices. Much like a transfer, you’ll need to direct this purchase to an account in the recipient’s name by buying shares directly through the issuing company or a brokerage.

Several websites cater to people who want to give stock, including GiveAshare.com, SparkGift.com and Stockpile.com, but there can be a premium for novelty. Buying one share of a company and having the certificate framed could cost as much as twice the stock’s current trading price on GiveAshare, for example. For any of these sites, be sure to check fees, which may be higher than a traditional brokerage.

» MORE: How to buy stocks

3. How generous do you want to be?

Whether you’re transferring shares or buying new ones to kickstart a new grad’s investment portfolio, there are likely limits to your generosity. The IRS agrees.

You can give annual gifts up to $14,000 (which includes the value of stocks) to any number of recipients and you’ll be exempt from paying federal gift taxes. Go above that amount and you’ll owe.

Your altruism has other tax implications, as well. You get a tax benefit when transferring stock by avoiding capital gains taxes on that investment, but as noted above, the recipient assumes that burden. For new investments, there’s no capital-gains tax benefit for the giver and the cost basis for the recipient is the value of the investment at the time of purchase.

4. What lessons do you want to impart?

Cash may be king at graduation, but it’s also here today, gone tomorrow. Stock gifts can be memorable and meaningful beyond the potential for financial gains, as Alex Whitehouse’s story shows. As a toddler, he received 10 shares in a utility company from his grandfather.

“At first I was just excited to receive something in the mail with my name on it, but later on it sparked an interest in the stock market and an appreciation for the impact of reinvested dividends,” says Whitehouse, who is now president of Whitehouse Wealth Management in Vancouver, Washington. “That gift had a huge impact on me. It led me on the path to becoming a financial advisor.”

Now, Whitehouse helps his clients pay this forward, recommending grandparents gift stock to their grandchildren, particularly shares of companies that will resonate with the younger generation.

Stock gifts require more planning than stuffing money into a greeting card. But by making that effort, perhaps you’ll spark an early interest in investing or help the recipient plan for the future — and it’s impossible to predict where that may lead.

Anna-Louise Jackson is a staff writer at NerdWallet, a personal finance website. Email: ajackson@nerdwallet.com. Twitter: @aljax7.

If at First You Miss a Financial Goal, Try, Try Again

Setting a short-term financial goal is good, and achieving one is even better. But what should you do if you miss a goal you set for yourself?

Don’t get discouraged if your plan to buy a car, take a vacation or save money didn’t quite go as planned. Life happens. Here’s how to get back on track.

Embrace failure

Mindset is a huge part of financial health.

First, find the bright side. Even if you didn’t save as much money as you had hoped, imagine if you hadn’t set that goal at all. You’d still be back where you started — with the same amount in the bank. So kudos on making progress and getting serious about your finances.

Then, look at the setback as a learning opportunity. Rather than simply extending a goal’s deadline when the original timeline doesn’t pan out — or worse, taking on debt to finance the rest — diagnose where your savings plan went awry.

“Once you’ve reached that goal, or more importantly not reached that goal, I really think it’s important to look back at the spending habits and trends over the time and compare it to the budget you set up,” says Robert P. Finley, a chartered financial analyst, certified financial planner and the principal of Virtue Asset Management in Illinois.

You can do this by asking yourself a series of questions, Finley says, including:

The answers will help you determine if your goal was feasible. You can’t avoid paying a fixed amount for some things, like your mortgage or rent, but other spending categories, like eating out, have more wiggle room.

» MORE: Short-term or long-term, budget and save for your goals

Make adjustments

Based on your self-audit, make some adjustments to your savings strategy. If you’ve already cut your budget as much as possible, it might be time to find a way to make more money — at least until you reach your goal.

If you have your heart set on a vacation, for instance, you may be willing to take on a weekend job, babysit or work a side hustle to make ends meet, says Stephanie Genkin, CFP, the founder of My Financial Planner LLC in New York.

Or, you could make compromises to reach your goal sooner rather than later. “We’re looking at something that’s similar, yet maybe a little more affordable,” says Tony Madsen, CFP, the founder of NewLeaf Financial Guidance LLC in Minnesota. “Instead of going to Maui, is there a different trip that you can do altogether that becomes affordable for you?”

Whatever route you choose, avoid taking on debt to achieve a goal that’s not an absolute necessity. “The worst scenario is to charge it and then add 15% debt interest to your overall net worth,” says Finley.

Be your own cheerleader

As you pursue your goal for a second time, monitor your progress regularly. Madsen recommends setting check-ins at a cadence that’s comfortable for you. The goal is to analyze and adjust as you go.

Be sure to celebrate each milestone you hit along the way, too. Like most things in life, financial goals don’t have to be executed to perfection.

“If you ride a horse, you are sometimes going to fall off,” says Norman M. Boone, CFP, the founder and president of Mosaic Financial Partners Inc. in California, in an email. “The key to success is getting back on, resetting your goal and continuing to move forward.”

Courtney Jespersen is a staff writer at NerdWallet, a personal finance website. Email: courtney@nerdwallet.com. Twitter: @courtneynerd.

3 Reasons Most Stock Pickers Don’t Beat the Market

It’s always been tough to be a successful stock picker on Wall Street.

It’s not that mutual fund managers can’t beat the market, but it’s very difficult to do so year in and year out: Large-cap stocks have delivered long-term, annual realized returns of about 7% after inflation during the past 100-plus years. For the 15-year stretch through December 2016, 92% of U.S. large-cap, actively managed equity funds underperformed the S&P 500, according to data collected by S&P Dow Indices.

Even during April, the 25th best month of performance in the past 26 years for such large-cap managers, only 63% of mutual funds beat their respective benchmarks, according to Bank of America Merrill Lynch.

And the pressure on stock pickers is mounting because of exchange-traded funds, which feature lower trading costs and returns that are often competitive with or better than those of professionally managed funds.

Debating investing in individual equities or actively managed funds versus passive vehicles, such as ETFs? Here’s why it’s so difficult to pick a winner.

The fee hurdle

Before ETFs became so popular, mutual fund managers faced a simpler task: Pick stocks that performed better than the overall market, ideally better than the stocks their competitors picked. But with more investment choices comes more pressure. Active managers must now outperform by enough to make up for their funds’ higher costs relative to ETFs.

That additional burden can be significant. Equity mutual funds charged an average of 1.28% in annual administrative expenses — or what’s called an expense ratio — in 2016, compared with the 0.52% charged by the average equity ETF, according to data from the Investment Company Institute.

To match investors’ expectations from ETF returns, some portfolio managers create funds that mimic an index without completely duplicating it — what’s known as closet indexing. That can result in bloated or overly diversified portfolios that get dragged down by less-than-stellar picks. In addition, mutual fund managers often impose high redemption fees to discourage short-term trading, typically defined as holding shares for less than a year.

But costs alone don’t explain why stock pickers face such a challenge. Dynamics within the market also are partly to blame.

» MORE: Investing in ETFs vs. mutual funds

Market correlation

When unrelated assets move in lock-step — what’s known as correlation — it’s that much harder for stock pickers to find the ones that will go up even more than the average.

The past seven years have been tough in this regard. Among the 11 sectors of the S&P 500, the average correlation to the broader index ranged from 70% to 95% between 2009 and 2016, before dipping to as low as 57% in February and March, according to figures compiled by Convergex, a U.S. brokerage firm.

This has provided “some oxygen for active managers to outperform,” wrote Nicholas Colas, chief market strategist at Convergex, in an April report. Even Goldman Sachs has proclaimed the current market conditions —  notably rising return dispersion — as a potential boon to skillful stock pickers.

The problem is, if analysts are right, these dynamics are likely temporary, which puts the longer-term fate of stock picking at peril. And remember, in addition to beating the market, active managers must also provide better returns than a comparable ETF to make up for their higher fees.

» MORE: How to buy stocks

‘An inherent disadvantage’

One theory got some buzz earlier this year: The odds are stacked in favor of indexes, and it’s not a fair fight for stock pickers.

Returns for a particular index are heavily skewed to a few of its biggest winners, so a portfolio manager generally must invest in these stocks just to keep up with the index’s performance. Picking a subset of stocks increases the odds those picks will underperform versus the index, according to a 2015 paper written by J.B. Heaton, Nick Polson and Jan Hendrik Witte, with a February update by Hendrik Bessembinder of Arizona State University.

“Active managers do not start out on an even playing field with passive investing. Rather, active managers must overcome an inherent disadvantage,” the authors concluded. And Bessembinder notes that compounding only increases that disadvantage over time.

» MORE: What is an ETF?

What’s an investor to do?

There are many advantages of index-based funds and ETFs for individual investors. But that doesn’t mean you should dump all of your individual equities or actively managed funds and convert to just any passive vehicle. Not all index funds and ETFs are created alike. There are even some actively managed ETFs which come with higher fees.

Still, the explosion of these assets has given investors more options. If you’re dissatisfied with the longer-term performance of your mutual funds, consider making the switch. Do your homework first, paying attention to fees, commissions and the assets included in the ETFs you’re considering.

If you think you can beat the odds stacked against professional stock pickers, tread with caution. Don’t invest with money you’ll need for short-term expenses or put your entire retirement nest egg at stake.

Anna-Louise Jackson is a staff writer at NerdWallet, a personal finance website. Email: ajackson@nerdwallet.com. Twitter: @aljax7.

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