The Motley Fool Take
If you want to invest in a company that's good at adapting to shifting trends over decades, consider Amazon.com. Best known for its dominance in e-commerce, it's expected to account for about 38% of all online sales in the U.S. this year. Wow.
Amazon isn't finished expanded this business, either. Its recent shift toward one-day shipping for Prime members is aimed squarely at keeping its e-commerce rivals at bay. Additionally, its recent Prime Day was a smashing success, with 175 million items sold in just two days. Amazon's early lead in e-commerce means that as its worldwide market grows to $4.9 trillion by 2021, the company will continue to benefit.
But it's not just e-commerce that will keep Amazon humming. Its lucrative Amazon Web Services cloud computing platform will help, as well. Most of Amazon's profit already comes from AWS, and as the leading public cloud computing company, with market share recently at 32%, Amazon is positioned to stay ahead of rivals such as Microsoft and Google. Considering that cloud computing is expected to be worth $331 billion by 2022, Amazon is just getting started in this massive market.
If you're keen to pick a stock and keep it for decades, consider giving Amazon a berth in your portfolio. (The Motley Fool owns shares of and has recommended Amazon.com. And John Mackey, Amazon subsidiary Whole Foods Market's CEO, is on The Motley Fool's board of directors.)
Ask the Fool
From R.Y., online: What does "split-adjusted" mean?
The Fool responds: A split-adjusted stock price is one that has been modified to account for past stock splits.
Consider Coca-Cola Co. It went public in 1919 at $40 per share and has split its stock 11 times since then. Shares have recently been trading for around $52 apiece, but that doesn't mean that they have risen by only $12 (30%) over the last century. That's because the $40 price from 1919 hasn't been split-adjusted.
When a company executes a regular stock split, shareholders end up with more shares that are worth proportionately less. A 2-for-1 split will leave them with twice as many shares that trade at half the prior price.
Via those 11 splits (which were mostly 2-for-1, but occasionally 3-for-1 or 4-for-1), a single original share of Coca-Cola has become 9,216 shares today. If the company had never split its stock, the value of the shares would never have been reduced — and each share would now be worth around $479,000! Few people could afford to buy even one share.
Most historical stock prices you run across are split-adjusted (if there have been any splits). In a list of historical stock prices, you may see some very low old prices; those have been adjusted retroactively to reflect splits and dividends, so we can see the stock's real change in value over time.
From T.F. in Kinston, N.C.: How many mutual funds are there?
The Fool responds: There were 8,078 mutual funds at the end of 2018, according to the Investment Company Institute. Consider that there were only about 4,400 companies listed on U.S. stock exchanges in 2018, per the World Bank.
Fool's School
If you want to be financially secure and have a comfortable retirement, you'd do well to have a budget — and to stick to it.
Here's how to build a budget:
Step 1: Jot down any fixed payment you make each month, including rent or a mortgage, loan repayments, cable bills, cellphone plan charges, prescription drugs and gym membership fees.
Step 2: List your variable monthly expenses. Comb through your credit card and bank statements, figure out how much you spent on various categories over the last year, and then divide by 12 for a monthly average. Categories might include electricity, groceries, restaurant meals, clothing, recreation, transportation, travel, gifts and donations.
Step 3: List infrequent expenses. Look for once-a-year and other infrequent payments, such as insurance, dental work, vacation travel, tuition payments and so on. Divide each category's annual total by 12 to get a monthly cost.
Step 4: Subtract your total spending from your total income. Compare what you're actually spending each month with what you bring home via paychecks or other sources (such as a side gig or rental property income). If your spending exceeds your income, you have a real problem on your hands. Ideally, you'll want to be able to cover all your expenses and still manage to sock away 10% or more of your income into savings and investments. If your retirement savings are woefully inadequate, saving 15% or more is wise.
Step 5: Find ways to shrink spending. You'll probably need (or want) to spend less overall. So take a close look at your spending habits and see what changes you can make. You might slash one major expense, such as your rent payment. Or try a series of smaller changes, like spending less on a hobby, cutting the cable cord and being more frugal at the supermarket.
Review your budget occasionally, and make changes when necessary. But keep saving what you need to save, and you can achieve lots of financial goals.
My Dumbest Investment
From A.C., online: My dumbest investment has been wasted time.
The Fool responds: That's a profound observation. The time we waste can have terrible ramifications in both our personal and financial lives.
There are many examples: If you don't like your job, for example, you might stay in it far too long before jumping into some training for a better job. If you have a crush on someone, you might end up regretting that it took you several years to ask them out — especially if you end up marrying them. If you put off seeing your doctor about some symptom, it could turn into a much bigger problem.
Procrastination can be costly when it comes to retirement savings, too. Imagine that at age 45, you start socking away $5,000 each year, earning an average annual return of 8%. By the time you retire at age 65, that account will have grown to about $247,000. But if you'd started saving and investing that $5,000 annually beginning at age 35, you'd have ended up with roughly $612,000 — more than twice as much money!
Meanwhile, any years in which you don't pay off high-interest-rate debt (such as that from credit cards) will cost you a lot in interest paid. Paying 20% on a $20,000 balance will cost you around $4,000 each year just for interest. Waste less time, and you'll also waste less money.
Who am I?
I trace my roots back to a guy who started an electrical and mechanical business in 1884 and built a car in 1904. Soon after, he formed me with a partner, and they debuted my six-cylinder "Silver Ghost," considered the best car in the world. I built many airplane engines during wars, and I now make high-speed engines and propulsion systems for ships and power generation, among other things. BMW now makes cars bearing my name, such as the Phantom. My cars' interiors contain up to 46 pieces of wood, and their hood ornament is the Spirit of Ecstasy. Who am I?
Last week's trivia answer: Regis