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What is a fractional share?

Normally when you buy a stock, you have to buy an entire share. So if you wanted to buy Tesla trading today at $736.27, you had to have at least $736.27. With fractional shares, you can buy a smaller sliver for as little as a dollar.

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What is mortgage insurance?

If you put down less than a 20% down payment when buying a home, the lender will require you to have mortgage insurance to protect them in case you end up not paying your mortgage. If you bought a $500,000 home, you would have to pay around $7,500 for mortgage insurance.

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What is an annuity?

Usually, a ripoff. You hand over a giant lump sum of cash and they’ll guaranty payments for life when you retire. But annuity companies need to make money too, so they’ll keep those payments to a minimum.

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What is a stock?

A stock is an ownership slice of a company. When you own part of a company, you can earn money when the company shares some of its profits and you can sell your ownership for more money if the company has been successful.

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What is compounding?

It’s as if your money was like a pair of bunnies, who have babies, who have babies, who have babies …. Your money grows fast because the money it makes, makes more money. A giant, green, money snowball.

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What is an expense ratio?

It’s the fee that a mutual fund charges you, every year, and you never even see the bill – they just take it directly out of your account. It’s shown as a small percentage, but it adds up to big bucks. If you have $100,000 in a mutual fund with 0.8% expense ratio, you pay $800 dollars per year.

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What is dollar-cost averaging?

It’s a way to reduce your risk by adding your money to your investments over time. Rather than putting all your money in your account at once and risking that your investment drops the next day, you could invest a portion of your money every week or month.

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What is a mutual fund?

A collection of stocks, bonds, or both. A mutual fund can have anywhere from a few stocks/bonds or thousands. A target date index fund might have thousands of stocks that represent nearly all companies in the world and thousands of bonds issued by companies and governments. Mutual funds make it is to invest and reap the rewards of the global economy.

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What is an HSA?

An investment account from your employer that lets you save for health costs – no taxes for money that goes in, no taxes on money it makes, and no taxes when you take it out. You should only consider it if you and your family generally have low health expenses.

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