What to Do When the Stock Market Crashes

Stock market crashes have happened several times throughout history, and crashes in the future are all but guaranteed. These sharp declines in share prices are a scary concept for most investors.

The good news is that although market downturns can be painful, thoughtful planning and execution of investments — even during these times — can yield positive results.

What Is a Stock Market Crash?

Market crashes and market corrections are often viewed as the same thing, but in reality, they’re very different, and that difference is important to understand when planning your moves. Market corrections are periods of downward movement of 10% or greater that happen over a series of days, weeks, months, or even longer.

Market crashes, on the other hand, are rapid, widespread declines in stock prices, marked by high volatility. While there is no official percentage decline that defines a crash, the declines are painful and dramatic — often 30% or more.

Market crashes generally take place when signs of a bear market are on the horizon, there’s a general feeling of overvaluation in equities, and economic conditions are questionable or in all-out financial crises. At these points, panic selling hits the market, and major indexes like the S&P 500 and the Dow Jones Industrial Average take dives.

Crashes were seen during the Great Depression and the bursting of the real estate bubble, but that’s in the general sense. Market crashes can also come out of nowhere, as was the case on Black Monday, October 19, 1987, when the U.S. market took the biggest single-day hit in history, and it happened out of nowhere.


What to Do if the Stock Market Crashes

While there’s no way to accurately time when the next stock market crash will be, there are some troubling warning signs for 2021 or 2022.

What should you do the next time Wall Street seems to go into an all-out panic? Follow the eight steps below:

1. Keep Your Cool

The first thing to remember when the floor falls out of the stock market is that it’s important to keep your cool. Emotion is the enemy of the investor, and emotional decisions can lead to significant losses far beyond what you should have to accept.

History tells us that market crashes are, for the most part, short-term movements that happen over the course of days, weeks, or months — or in severe crashes, maybe a year. Once the market reaches what investors perceive to be the bottom, stock prices begin to rebound, often leading to a long, drawn-out recovery filled with opportunity.

Some of the best examples of this are:

  • COVID-19 Crash. The coronavirus pandemic led to sharp declines from February through March of 2020, but by the end of March, prices were already beginning to rebound. Investors who stayed the course enjoyed a swift, V-shaped recovery, and the S&P 500 began recording all-time highs again by August 2020.
  • The Great Recession. The Great Recession was one of the worst market crashes in history. However, even during this drawn-out stock market crash, prices only declined for about six months, from August 2008 to March 2009. The bottom in 2009 was followed by the longest bull market in history, which spanned more than a decade.
  • Black Monday. The Black Monday stock market crash led to the worst single-day losses in U.S. stock market history, but stock prices reached the bottom in less than a month.

The fact of the matter is that the market is known for upward and downward fluctuations, and some are better or worse than others. Seasoned long-term investors have learned to ignore these fluctuations because longer periods of bull market activity more than make up for the declines in the vast majority of cases.

That means a market crash isn’t a time to panic — it’s a time to think strategically.

2. Don’t Run From Opportunity

It may seem counterintuitive, but a market crash is one of the best times to find long-term opportunities in the market. Stock market declines will happen, but as the great value investor Warren Buffett would point out to you, it’s best to buy when the market is fearful and sell when the market is greedy. That’s the basis of Buffett’s favorite investment strategy, value investing.

There are tons of investment strategies to use during bear markets. Rather than turning and running from the market, pay close attention to what’s going on within it. When opportunity comes knocking, be ready to answer the door.

3. Assess Your Asset Allocation Strategy

One of the reasons long-term investors don’t fret about a market crash is because when they put their portfolios together, they do so following an asset allocation strategy based on their risk tolerance.

Asset allocation strategies outline how much of your investment portfolio should be invested in asset classes like stocks, mutual funds, index funds, and exchange-traded funds (ETFs) and how much of your portfolio value should be nested in safer assets like bonds and other fixed-income securities.

When the market is crashing, it’s the perfect time to assess your allocation strategy and determine whether it falls in line with your risk tolerance. If your portfolio isn’t quite as protected as you thought it was, it’s time to mix it up and bring more fixed-income investments into the picture. On the other hand, if your portfolio is too conservative, consider looking for opportunities to add undervalued stocks to your portfolio.

If you haven’t paid attention to asset allocation at all, it’s time to start. A great way to adjust your allocation for the first time is to use your age as a guide.

For example, if you’re 25 years old, consider investing 25% of your portfolio in low-risk fixed income securities and the remaining 75% in stocks and similar vehicles. As you age, more of your portfolio should be allocated to safer investments because you have more time to wait out and recover from declines should they happen when you’re younger.

4. Assess Your Diversification Strategy

You likely grew up hearing the old adage, “don’t put all your eggs in one basket.” This adage is an important one to remember in various aspects of life, including investing. In fact, diversification is key in any long-term investment portfolio.

To diversify means to spread your investing dollars over a variety of investment opportunities. That way if one or more investments falter, gains among other investments in your portfolio limit the impact of the blow.

When the stock market crashes, it’s a great time to assess whether your diversification strategy is working in your favor or against you. When looking at your portfolio, ask yourself the following questions:

Am I Investing Too Much Money Into a Single Asset?

Properly diversified portfolios have 20 or more separate investments, with no more than 5% in any single asset and no more than 5% total in the entire group of high-risk assets like penny stocks and Bitcoin.

If more than 5% of your asset value is invested in any single stock, it’s best to divest your holdings until the 5% cap is reached. You can use the money you gain from the divestment to invest in other opportunities.

Am I Investing Across Sectors?

Investors tend to invest in sectors they’re comfortable with. This is especially true for beginner investors.

However, if all of your investments are in the tech sector, and that sector crashes, you’ll be left with significant losses. A well diversified portfolio includes investments across various sectors, especially those that are not highly correlated with one another.

Am I Mixing In Safe Assets?

Growth stocks tend to be the biggest gainers in bull markets and the biggest losers in market crashes. On the other hand, income investments generate slow, steady growth and tend to hold their ground in bear markets.

Assess your portfolio to see whether your money is diversified between different styles of assets to protect you during rough times.

5. Look for Undervalued Opportunities

During a stock market crash, prices fall dramatically — that’s a given. But, as mentioned above, value investors like Warren Buffett will tell you that it’s best to buy when the market is fearful and sell when the market is greedy, and for good reason.

When buying during or shortly after a crash, you’ll enjoy lower prices than you would when the bulls are running on Wall Street. Considering that investing, at its core, is about buying low and selling high, a crash is the best time to buy, but it’s important not to go crazy and start buying everything you see.

Instead, make a calculated effort to find the stocks that are enjoying the largest undervaluations, as they will become the stocks with the biggest potential for gains when the crash is over.

Finding undervalued stocks is as simple as paying close attention to value metrics like the price-to-earnings (P/E) ratio or the price-to-book-value ratio.

Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Stock Rover can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.

6. Practice Dollar-Cost Averaging

Dollar-cost averaging is the process of spreading large investments out equally over a period of time. For example, if you wanted to buy $5,000 worth of ABC stock, you could decide to make five investments of $1,000 in ABC every day, week, or month.

Spacing out your investments following a crash protects you from sharp declines should the crash not yet be over.

Let’s say you decided to make five $1,000 weekly investments in ABC, which traded at $20 per share on week one, $15 per share on week two, $17.50 per share on week three, $20 per share on week four, and $15 per share on week five.

In this case, your $1,000 each week would purchase 50 shares, 66 shares, 57 shares, 50 shares, and 66 shares on weeks one through five, respectively. At the end of the five week run, you would end up with 289 shares of ABC stock.

If you had invested all $5,000 in ABC shares on the first week, you would have purchased 250 shares. By dollar-cost-averaging, you ended up with 39 additional shares for your money.

Looking at this example from a gain/loss perspective, either investment would have declined because ABC stock dropped from $20 per share at the beginning to $15 per share at the end. But the $5,000 one-time investment would be worth $3,750 at the end of the five-week period, while the separate investments would be worth $4,335, giving you less ground to make up when the market starts to rebound.

7. Rebalance When the Storm Passes

Volatility is commonplace during crashes. Wide fluctuations in value will ultimately throw your portfolio’s balance out of whack as some asset prices change more than others. Once prices start to rebound, it’s time to rebalance your portfolio and make sure it still aligns with your investment strategy.

Rebalancing a portfolio is a relatively simple process. Start by making a note of what percentage of your investment dollars are invested in stocks and similar assets and what percentage of your portfolio is invested in fixed-income investments. Doing so will let you know if your allocation is still in line.

Next, look at each individual investment and determine what percentage of your overall portfolio value is invested in each one. If those percentages are higher than you’d like them to be, divest the assets until your allocation has reached a comfortable level. Use the money you’ve divested from these investments to buy other assets that are underallocated according to your strategy.

8. Consider Hiring a Financial Advisor

Most people have a drive to do what they can for themselves, avoiding costs associated with hiring professionals. However, showing up to the stock market during a market crash without knowledge of the inner workings of the system or without a financial expert is like showing up to court without an attorney.

There’s no harm in seeking professional help when you’re not sure about something, especially when that something is your hard-earned money. If you’re still nervous about investing during a crash after reading this guide, it’s wise to seek the assistance of an expert. SmartAsset has a service that helps you locate fiduciary advisors in your area or you could use a service like Vanguard Personal Adviser Services.


Final Word

Stock market crashes will happen from time to time; it’s the nature of the beast. However, by keeping your cool, adjusting your allocation and diversification strategies, and making wise decisions, these market declines can prove to be major opportunities.

As is always the case, whether the bulls or bears are running, it’s important to do your research and get a thorough understanding of what you’re investing in prior to making any investment decisions.

Source: moneycrashers.com

Margin Call Meaning – What It Is, Causes & How to Handle One

Margins are a commonly used tool among investors, especially those who take part in day trading. Margins allow traders to increase their buying power with borrowed funds using a mix of their own money and loans from their brokers in a process known as margin trading.

Although margin loans provide an opportunity for substantially larger gains, there’s also potential for substantially larger losses should things go in the wrong direction.

Margin traders also have to worry about the dreaded margin call, which takes place when their account value falls below minimum margin requirements, which could ultimately lead to forced liquidation within their portfolios.

What is a margin call and how does it work? Read on to learn about margin calls and your options should one happen to you.

What Is a Margin Call?

Traders who use margins must maintain a minimum margin requirement, or a minimum amount of value in unborrowed cash and equities in their accounts. This requirement ensures the brokers aren’t left holding the bag on bad trades should things go wrong.

Maintenance margin requirements vary from one brokerage to another, but the minimum requirement will be at least 25% — a requirement set by both the New York Stock Exchange and the Financial Industry Regulatory Authority (FINRA). However, some brokers charge as much as 40% of the amount you borrow.

What’s all of this mean?

When trading on margins, traders take out margin loans to cover a percentage of the value of the securities they are purchasing. For example, you might use $5,000 of your own money and $5,000 of the broker’s money through a margin loan to purchase stock, giving you a total of $10,000 in stock.

In this example, $5,000 of the investment is not your money — it’s borrowed from your broker.

Now imagine your $10,000 investment dropped to $6,250. At this price, after subtracting the $5,000 you borrowed, your personal equity in the investment is down to $1,250.

Because $1,250 represents 25% of the $5,000 margin loan, if the price falls below this point, a margin call would be triggered because the trader’s equity in the investment would fall below the 25% margin requirement threshold.

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Types of Margin Calls

There are two different types of margin calls traders should consider before trading on margins. They include:

Maintenance Margin Calls

Maintenance margin calls take place when the account value falls below the minimum margin requirement with the broker. This is the type of margin call that’s described above. Each broker has a different minimum margin requirement, but the floor for this requirement is 25% of the borrowed amount that you must maintain in your account.

Federal Margin Calls

Federal margin calls are a bit different. While a maintenance-related call has to do with an investment that has already been placed, a federal margin call — often referred to as a fed call — takes place when a margin trade is being initiated.

According to the United States Federal Reserve’s regulation T, margin trades can be placed using a maximum of 50% borrowed money. This is known as the initial margin requirement. For example, if you’re planning on buying $10,000 worth of stock in a margin trade, you’ll have to have at least $5,000 of your own money to put up for that trade.

If you attempt to make a margin trade without having the 50% required to appease the Federal Reserve, a federal margin call will take place, which will lead to one of two outcomes:

  1. The Trade Will Be Blocked. With most brokers, if you attempt to make a margin trade without meeting the initial margin requirement, the trade will be blocked and cancelled, and you’ll have to set up another trade within the parameters set forth by regulation T.
  2. Other Securities Liquidated. In some cases, your broker may force the liquidation of other securities in your portfolio to free up the cash needed to make the trade viable.

Either way, the outcome isn’t what investors want.


How to Calculate at What Price a Margin Call Takes Place

Most traders would prefer taking a loss to triggering a margin call. After all, when a margin call is triggered, it means the loss on the investment was so large that it made the trade fall below the minimum requirements.

Most traders calculate at what price a margin call would take place, giving them a baseline of where to close the trade before prices decline to that point.

To determine at what price a margin would happen, follow this formula:

((Margin Loan Amount X Minimum Margin Requirement) + Margin Loan Amount) ÷ Number of Shares = Call Price

For example, let’s say your brokerage firm has a maintenance margin requirement of 30%. You want to buy $10,000 worth of stock with $5,000 of your own money and a $5,000 loan. The stock is worth $50 per share at the moment, meaning that you’ll purchase 200 shares.

Plugging these figures into the formula above would result in the following:

(($5,000 X 0.30) + $5,000) / 200 = $32.50

In this example, if the price of the stock you purchased for $50 per share fell to a market value of $32.50 per share, a call would be triggered, forcing the trader to respond.

Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Trade Ideas can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.


What Are Your Options When You Get a Margin Call?

When you log into your brokerage account and see that a call has taken place, it may be a bit overwhelming. The good news is that you have three options to consider to remedy the situation before a forced liquidation takes place:

  1. Deposit Additional Funds. The best option is to deposit additional cash into your margin account to bring the cash and equity value of the account up to the minimum requirements. Of course, this only works if you have additional money outside the account that you can afford to add.
  2. Deposit Securities. The minimum requirements take both cash and the value of securities into account. If you have securities held elsewhere, you can deposit those securities into your margin account to bring the total value of the account up to the minimum requirement.
  3. Liquidate Stock. Finally, you have the option to liquidate shares of stock within your account, using the funds generated through the liquidation to bring your account value back up to par with minimum requirements.

How to Respond to a Margin Call

Returning to the example above, you know that a margin call will be triggered if the price of the stock falls below $32.50. For this example, let’s say the value of the stock fell to $30 per share. That means the current value of your 200 shares works out to $6,000. However, a call triggers as soon as the value of the investment falls below $6,500, meaning that the margin call is for $500.

At this point, you can choose one of three options:

Deposit Funds

First, you can choose to deposit at least $500 into your account to bring the account’s value after the margin loan back up to $1,500, or 30% of the total value of the margin loan. This requires adding $500 of new cash into your account, but you don’t need to move or sell any shares.

Deposit Shares of Stock

You also have the option to deposit shares of stock into your account. Say you have another brokerage account where you own $500 worth of stock. By transferring those shares into your margin account, you’ll bring its total value above the minimum margin requirement, bringing your account back into good standing.

Liquidate

Finally, you have the option to liquidate a portion or all of your holdings in the margin trade. Through the liquidation of a portion of your holdings in the investment, you can balance out the minimum requirement and eradicate the issue altogether.

For example, you could choose to liquidate 100 of your 200 shares, the sale of which would result in $3,000 cash at the current share price. These funds would be used to pay back $3,000 of the $5,000 margin loan.

You’re left with $3,000 worth of stock — $1,000 of your own money and $2,000 left of the margin loan — still invested. Your remaining $1,000 holdings are 50% of the remaining $2,000 loan — more than enough to cover your minimum requirement. However, you’ll have realized a substantial loss.


Final Word

A margin call is nothing that any trader wants to deal with, but if you make the decision to use margins, it will always be a possibility. While margins can expand profitability, they can also result in larger losses, and investors who use them need to consider the extent of these potential losses before getting involved.

Nonetheless, if the risk is worth the reward for you, and you end up with a margin call, don’t panic. Instead, consider which of the three possible remedies to use to bring your account back in line with requirements.

Moreover, if you’re going to trade on margins, treat the trade like any other loan and make sure that you never borrow more money than you can afford to return. In doing so, if and when a margin call does take place, you’ll have the ability to cover the cost if you decide to stay in the investment and await a recovery.

Source: moneycrashers.com

How to Maintain a Good Credit Score in College

College life brings a host of new and exciting experiences in the various aspects of your life. Financial independence and responsibility also come to play. While your achievements are important in putting you in your right career path, a good credit score is paramount in bettering the deals you will get when renting or buying a home, purchasing a car, getting a cellphone plan, applying for a student loan or in some instances, getting employment.

This calls on your effort to not only build but also maintain a good credit. It may sound complicated and intimidating especially when you don’t know how to go about it. Below, is all you need to know on how to maintain a good credit score in college.

Good Credit in CollegeGood Credit in College

Taking Advantage of your Parent’s Good Credit

This is commonly referred to as ‘piggybacking’. It allows people with bad or no credit to enjoy a spillover of other people’s good credit. It is a great way of establishing and maintaining your credit especially if you need a little help in managing your budget. For you to qualify for this, you have to become an authorized user of your parents’ accounts.

This comes in handy especially if you can’t get your own credit card; according to Oct 1st 2013 Credit Act report, students and other persons below 21 years of age cannot get their own credit cards without proof of income or at least a co-signer. Apart from the credit boost you get from your parent’s account, your credit card use is forwarded to credit bureaus in your name.

Get the Most Suitable Credit Card

Your ability to qualify for a credit card opens you to the opportunity to choose from a variety of cards. You should research and shop around to find out what these cards have to offer before making your choice. Some of the benefits to look out for include low interest rate, no annual fees, convenient credit limits and other competitive incentives.

Better still, you can opt for student credit cards. These come with incentives such as cashback rewards, limited credit history requirement, no annual fees and 0% introductory APR among other benefits. Your own credit card comes with sole responsibility. This means that it’s up to you to stay on top of your billing statements so as to improve and maintain a good credit

Always Pay your Credit Balance

Your payment history accounts for 35% of your credit. Good credit of course depends on timely and full payment of your balance. Inability to pay or late payment may attract additional interest, accrue more debt and negatively affect your credit.

This can take a long time to repair. Besides this, it is also a sign that you are living beyond your means. Ideally, your credit balance should be about 30% of your credit limit or below.

Tip: The higher your credit balance in relation to your limit is, the worse your credit becomes.

Pay your Bills on Time

Late or failed payment of rent, utility bills, parking tickets, library or school fees and other payments can harm your credit; especially is if they are sent to collection agencies and reported to credit bureaus. Ways of beating this include setting up payment reminders and electronic billing. You can also organize for auto payments with your bank to ensure that timely payments are done.

If you live in an apartment, you might get credit for full and timely payments. You can take advantage of eRentPayment which transfers your payment reports to the three major credit bureaus; Experian, Equifax and TransUnion. This consequently improves your credit. However, your landlord needs to be registered and the lease needs to be in your name.

Limit Applications and Inquiries for New accounts

Numerous credit inquiries negatively impact your credit score. In the event that you need to make new credit applications that warrant hard inquiries, concentrate them into period of 14 days in which they will factor as one inquiry.

Once you decide to get a credit account, get all the facts right to avoid the urge to close and open others every now and then. Short credit histories with several new accounts are seen as riskier compared to a few accounts with long credit histories. When you close a credit card, you not only lower your available credit but also shorten your credit history both of which can reduce your score.

In a Nut Shell

Maintaining a good credit score in college is important if you are going to get any good deals in personal credit in the future. This requires vigilance on your part to ensure that you do not do anything that can have negative impact on it. When all is said and done, it all comes down to personal financial responsibility.

Source: creditabsolute.com

Retail Arbitrage Guide – Definition & How to Make Money Buying & Selling

The concept of arbitrage has been around since humans invented the concept of money. It’s best known by the adage “buy low, sell high.” Arbitrage involves buying a good or service for a certain price and then reselling it at a higher price to take advantage of market pricing discrepancies.

You might be familiar with the concept of arbitrage when you picture day trading stock brokers or people who flip houses. Or, perhaps you’re familiar with geoarbitrage, which involves taking advantage of your currency by moving to a country where your dollar has more power.

While these forms of arbitrage might seem extreme, there’s also a more accessible option: retail arbitrage.

If you want to make money by buying and reselling everyday merchandise, learning how to start your own retail arbitrage business is the perfect business model to try.

What Is Retail Arbitrage?

Retail arbitrage involves buying products and reselling them for profit. This sounds simple on paper, but like any flipping business, your success comes down to selecting products that sell quickly and knowing your margins so you can turn a profit.

Typically, people make money with retail arbitrage by buying products that are heavily discounted through clearance sales. Buying products on sale helps widen the price discrepancy between your initial purchase and your resale price.

For example, you might buy a pair of men’s swimming trunks on sale at Walmart for $12.99 and then resell it on websites like eBay or Amazon for $19.99, netting a $7 return on investment before any selling and shipping fees.

This is a basic example of making money with retail arbitrage, but swimming trunks are just one example. Popular product categories for retail arbitrage sellers include:

  • Apparel and shoes
  • Books
  • Baby toys and supplies
  • Electronics
  • Jewelry and accessories
  • Personal care products
  • Sports equipment and apparel

The key is to find products on sale that have consistently high demand.

At the end of the day, it doesn’t matter whether you’re reselling running shoes or makeup — successful retail arbitrage means selling your inventory for a profit, and it’s the math that matters.


Advantages and Disadvantages of Starting a Retail Arbitrage Business

If you’re considering making money with retail arbitrage but aren’t sure if it’s the right business model to pursue, consider these pros and cons.

Advantages of Retail Arbitrage

Some benefits of retail arbitrage worth considering include:

1. Existing Market

When you sell on marketplaces like Amazon and eBay, you’re accessing millions of global buyers. This is a faster route-to-market than starting your own online storefront or retail business where you have to attract customers yourself.

2. Easier Product Selection

Business models like dropshipping often have high failure rates because finding a product that catches people’s attention is critical.

By contrast, retail arbitrage sellers generally sell a variety of everyday products, like apparel and household essentials.

This means it’s the arbitrage math that matters for your profit margin, not finding the next trending product that sells well through Facebook ads like with a dropshipping store.

3. Consistent Demand

Because you mostly sell staple products with retail arbitrage, there’s consistent demand for your inventory.

4. Niche Variety

With retail arbitrage, you don’t have to brand your business or pick one niche to focus on. You can sell anything if you believe the buy price is low enough for you to turn a profit when reselling.

5. Scalability

It generally takes time to learn how to source inventory for retail arbitrage and what products sell quickly. But once your business is operational, the main growth constraint is how fast you can source cheap inventory.

Online sales channels like Amazon have practically endless demand, and retail arbitrage businesses can generate millions in revenue.

Disadvantages of Retail Arbitrage

Retail arbitrage is largely a case of getting the math right and leveraging demand on existing online marketplaces. But this side hustle still requires work and patience to scale.

Plus, there aren’t any guarantees you can make money, and there are several other downsides to consider:

1. Starting Costs

When you start a retail arbitrage business, it’s important to test several products so you learn what sells well and how to properly price your listings. But this also means spending money on inventory before making any sales.

If you want to try retail arbitrage, anticipate spending a few hundred dollars on initial inventory to test the waters.

2. Operational Expenses

Upfront inventory costs aren’t your only expenses for running a retail arbitrage business.

Depending on your selling platform, you’re potentially paying seller membership fees, listing fees, and shipping costs. Additionally, resupplying your store with products is an ongoing cost.

3. Inventory Risks

Putting money into a retail arbitrage business isn’t a safe investment. This is because the money you tie up in inventory isn’t very liquid. You can’t simply turn boxes of clearance merchandise back into cash if you need your money back.

Slow-moving inventory or products that simply never sell are an inevitable downside of this business model.

4. Not Passive

If you want to earn passive income, retail arbitrage isn’t the right business model. Between sourcing inventory and managing your listings, there’s a lot of work that goes into a retail arbitrage side hustle.

You can eventually outsource these tasks if you generate enough revenue, but expect a lot of shopping hours and administrative work unless your business takes off.


How To Make Money With Retail Arbitrage

Like other online business ideas, it’s helpful to follow a game plan when starting a retail arbitrage business. There’s a steep learning curve and it takes time to grow your inventory and monthly revenue.

But if you stick to a process, it’s possible to turn your retail arbitrage business into a significant side hustle or even full-time business.

1. Research Products to Sell

Before you spend money on your first batch of inventory, spend time researching products that sell well online. This provides a foundation of product knowledge you can refer to when shopping in-store for deals.

One useful resource for product research is Amazon’s best sellers list. This page highlights top-selling products based on sales volume across dozens of Amazon categories.

As you scour each category, make note of details like:

  • Price Points. Many retail arbitrage sellers stick in the $10 to $40 range for products. This price range lets sellers buy in bulk. Staying above $10 also means you’re making meaningful profit per sale and not selling cheap dollar store products for $0.25 in profit per sale. There are exceptions, but prioritize products with reasonable entry prices and profit potential of a few dollars per sale.
  • Product Ratings. Always check Amazon ratings for products you’re considering. Negative reviews and a low rating can turn away potential customers or mean more product returns, all of which hurt revenue. Ideally, look for four- to five-star ratings.
  • Size and Weight. Selling bulky, heavy products means expensive shipping. Shipping costs are a major, downward pressure on your profit margin, so review shipping rates for the platform you sell on. As an example, Amazon has a comprehensive shipping fees table that you can use to factor shipping costs into your profit margin before buying a product.
  • Seasonality. Christmas lights might be a top seller during the holidays, but this is a poor retail arbitrage buy unless you capitalize early on seasonal demand. As a general rule of thumb, don’t invest too much money into seasonal inventory to avoid holding products for a long time.
  • Expiration Dates. If you’re selling products with expiration dates like groceries or personal care products, factor this risk into your purchasing decisions. Marketplaces usually have rules for selling products with expiration dates. For example, Amazon has specific shelf-life requirements for different product categories, and eBay requires delivering orders to buyers before product expiration dates.
  • Durability. If your product breaks during shipping, it’s a complete loss for your business. Online marketplaces generally side with buyers in the event of damage or disputes, meaning they get a complete refund.

2. Source Products From the Right Retailers

Once you have an idea of top-selling products and product buying tips, you’re ready to source inventory.

Low everyday prices and clearance sales are your best bet to find products ripe for arbitrage. Some popular retailers for sourcing inventory include:

  • Best Buy
  • Bed Bath & Beyond
  • Big Lots
  • CVS
  • Home Depot
  • Kmart
  • Kohl’s
  • Lowe’s
  • Office Depot
  • Old Navy
  • Rite Aid
  • Target
  • T.J. Maxx
  • Walgreens
  • Walmart

You can also try flipping products from thrift stores, provided product condition is good enough to sell as used online. Similarly, garage sales can also have gems like clothing, toys, and books that are excellent resale candidates.

Local stores and bargain hunting at garage sales are in-person shopping options. You can also try sourcing products from online retailers with low prices. Popular online stores that resellers often use include wholesalers like Alibaba and AliExpress.

Wholesalers are beneficial for retail arbitrage because you typically get a lower per-unit price the more you buy.

For example, on Alibaba, a protein shaker bottle costs between $1.70 and $1.99 per unit. But to get the lowest price, you need to order over 1,000 units, which is obviously a lot of money you shouldn’t spend out of the gate when you’re learning.

Buying products online to resell is still viable. But as a beginner, focus on finding clearance items at local retailers that have a higher retail price online.

When you find a product you think you can flip for a profit, double-check what it’s selling for online. One quick way to do this is to use the Amazon seller app for Android or iOS. This app lets you manage your Amazon seller account if you decide to sell on Amazon.

You can also research a product’s current prices, Amazon sales rank, customer reviews, and profit estimates if you sell the same product. The app also lets you scan product barcodes or type in the product name to find data.

Other scanning apps that help you find profitable items include:

For starting out, Amazon’s seller app is more than enough to check potential profit margins for products you’re considering. If you want to dig deeper, Keepa lets you track Amazon prices over time, so you can check if a product you’re considering historically trends upwards or downwards in price in the coming months before buying.

As a final tip, anything you can do to get sale prices even lower helps your retail arbitrage efforts. For example, one popular retail arbitrage trick is to shop at Kohl’s to take advantage of Kohl’s Rewards.

This free loyalty program pays you 5% cash back in Kohl’s Cash for shopping, so you can use cash-back earnings to get even cheaper inventory on future purchases. If you spend $1,000 on inventory over the course of several months, it’s a free $50 discount.

Other stores like Target and Walgreens also have loyalty programs that let you save money, ultimately boosting your retail arbitrage profit margin.

If you can’t use a loyalty program to save, shop with a cash-back credit card. Retail arbitrage is a high-expense business, especially as you scale, so even earning 1% to 2% cash back on everyday spending could be hundreds or thousands of dollars in savings.

3. Resell Products Online

After purchasing inventory, you’re ready to start generating sales.

Many retail arbitrage businesses rely on the Fulfilment by Amazon program, or Amazon FBA, to power sales. This is because as an FBA seller, you’re not responsible for shipping and logistics. Rather, you send inventory to Amazon warehouses so Amazon handles order fulfillment when you make sales.

This lets you focus on sourcing more inventory and managing your listings instead of dealing with endless shipments.

Amazon FBA has various seller fees, warehouse storage costs, shipping expenses, and potential long-term storage fees. But for starters, you pick one of two plans to sell under:

  • Individual Plan: Pay a $0.99 fee for every sale
  • Professional Plan: Pay $39.99 per month regardless of sales volume

Amazon retail arbitrage has a steep learning curve. This is because Amazon has specific packaging requirements, variable fees depending on product categories, and numerous seller rules you have to comply with.

But despite these complexities, Amazon FBA is still one of the best ways to start a retail arbitrage business because it takes logistics off of your plate. Amazon also has comprehensive documentation on its Seller University portal to help you start your own Amazon business.

You can also find affordable Amazon FBA courses on Udemy that provide a step-by-step guide for starting a FBA store. You can also use a product like Jungle Scout to help get started.

Other marketplaces are also viable sales channels. Different platforms you can resell products on include:

Just avoid spreading yourself too thin. If you start with a batch of 10 to 20 products to resell, list everything on one marketplace.

Take multiple, high-quality product photos and write comprehensive product descriptions. Additionally, research competitor prices and price your listings to be the same or similar to the market average.

If you receive questions from potential buyers, answer them in a timely manner and provide the best customer service possible.

Ultimately, you want your seller profile to gain a positive reputation. Websites like Amazon and eBay have seller ratings. Over time, a high rating becomes a competitive advantage for you over beginner retail arbitrage sellers.

4. Use Profits to Replenish Inventory

To keep your retail arbitrage business running, it’s important to reinvest a portion of your profit into new inventory.

It’s often tempting to use extra income to pay off bills or put towards a vacation. But keeping your online listings stocked and growing your inventory is important to drive sales.

This is especially true if a particular listing is selling well and ranking on websites like Amazon when people search for that product. In this case, keep that listing as well-stocked as possible since you’re getting a steady stream of sales.

Once you have a gauge on your monthly revenue, set a percentage of your profit aside specifically for buying more merchandise. After some practice, you can put more money into inventory if you’re confident it will sell quickly.

But for starters, grow your store slowly and avoid dipping into your savings account to continually fund your business.

5. Optimize Your Operation

If you get your retail arbitrage business off the ground and turn a profit, that’s already a significant achievement. But like any business, there’s always room for optimization that can save time and money.

The more time and money you save, the better. A retail arbitrage side hustle is like running a small business, and optimization is a never-ending process that you should always consider. With retail arbitrage, some operational areas you can improve include:

Shopping Speed

When you’re new to retail arbitrage, sourcing products is slow. But as you become better at identifying profitable products, shopping becomes faster.

You should also note which days certain stores in your area typically put products on clearance.

Additionally, get to know store managers and ask them for insight on upcoming sales. If a manager knows you’re going to buy out their clearance inventory, they might give you a heads-up or inside info on when you should swing by the store.

Seller Fees

Fees are often complex with retail arbitrage, especially if you sell through Amazon FBA. This is because there are seller membership fees, shipping and storage costs, and even fees for removing your inventory from Amazon warehouses.

As you get your first sales, pay attention to what fees eat up most of your profits. For example, switching to a professional Amazon seller plan for $39.99 per month is cheaper than an individual plan if you consistently sell more than 40 products per month.

Shipping

Like inventory sourcing, shipping has a learning curve, so you’re slow when you start selling. But shipping is also an area where you can save money.

For example, Amazon FBA offers a package preparation service that ensures products have compliant packaging and labels for shipment. But you pay a per-unit fee for the luxury depending on the product category. Apparel, for example, costs $0.50 to $0.80 per unit in preparation and labeling fees with this service.

As a beginner, rely on Amazon’s prepping services so you have fewer rules to worry about. As you gain experience, you can package and label inventory yourself for significant savings on large shipments.

eBay also has various shipping discounts you can take advantage of, like discounts on UPS, FedEx, and USPS shipping rates that help you cut costs.

Listing Performance

When you list a product on marketplaces like Amazon and eBay, you include images, a product title, and a description. Improving your listings helps get your products in front of more customers since your listings can appear when people search for specific products.

Including more high-quality photos and writing comprehensive product descriptions are two fast ways to optimize your listings. You can also spy on what successful sellers do for their product description writing and apply the same tactics.

6. Experiment With New Products

After several months of growing your retail arbitrage store, you should have a solid understanding of products that sell well. You might even find yourself gravitating toward a few niches you feel comfortable with, like apparel or beauty products.

Part of growing your sales means venturing into uncharted territory. You should still focus on resupplying your storefront with your top-selling products. But don’t be afraid to use some of your revenue to purchase new products you spot on clearance to test new opportunities.

Product diversification also helps mitigate risk. The last thing you want is to have most of your money tied up in inventory for a single product, only to find it stops selling quickly due to changes in consumer preferences or another seller stealing your business.


Considerations

Before jumping into retail arbitrage, there are several other business risks and requirements to consider.

1. Earning Guarantees

Many ways to make money online come with a reliable paycheck.

For example, working as an online English teacher or becoming a virtual assistant both pay an hourly wage. If you need to pay off bills or grow your savings, it’s comforting to know your side hustle efforts yield results.

By contrast, retail arbitrage doesn’t guarantee a paycheck.

Plus, earnings can be volatile even if you find success; you can be in the negative or barely break even some months and potentially make hundreds or thousands of dollars the next depending on sales.

The upside is that retail arbitrage can scale as a business whereas freelance income depends on how many hours you work. But if you absolutely need money today, stable online work or gig economy jobs are better choices.

2. No Brand Building

Because retail arbitrage involves reselling products, you don’t build your own brand in the process of building your business.

You can private label products to solve this issue, which involves selling products from manufacturers with your own packaging or slight product modifications to develop your own brand. But private labeling often requires negotiation with manufacturers, which takes time and effort.

If you don’t want to build a brand, this isn’t a downside. But if you like the idea of having an identifiable business that customers recognize and trust, retail arbitrage isn’t for you.

As an alternative, you can make your own products and sell on Etsy or create a storefront on platforms like Shopify.

This usually takes more time to find buyers because you’re offering something new under your own brand versus selling an already-familiar brand to consumers. But the trade-off is that you own everything, and seller fees are lower than Amazon FBA.

3. Competition

E-commerce is immensely competitive. According to Statista, 55% of goods sold on Amazon come from third-party sellers. Similarly, if you search for products on eBay, you often see hundreds of thousands or over a million listing results.

As a beginner in retail arbitrage, you’re competing with larger operations that can squeeze you on pricing because their scale creates better margins. This means it usually takes time to get your first sales and to grow your inventory using profit.

In short, don’t expect to start making thousands of dollars or even getting sales the moment you list your inventory.

4. Time Requirements

Running a retail arbitrage business is like having a part-time job.

Sourcing inventory and shipping can take hours out of your week. Plus, these tasks gradually take more time as your operation scales. When you add in listing optimization and dealing with customer service, the time commitment can become significant.

Successful retail arbitrage sellers use their revenue to outsource time-consuming tasks. But for smaller operations, this probably isn’t an option.

The bottom line is that you have to have enough time to try this side hustle. If you only have a few hours per week to spare, flexible business ideas like starting a blog or YouTube channel are more viable.


Final Word

With the growth of e-commerce, business ideas like retail arbitrage and dropshipping have grown rapidly in popularity. Thanks to technology and changes in shopping habits, new ways to make money online continue to become available.

However, retail arbitrage isn’t a get-rich-quick scheme or for the faint of heart. Immense competition and tight margins make it a tough business model. If you don’t have much free time, it’s also difficult to source products and manage your listings each week.

That said, with time and practice, you can make money with retail arbitrage, even while working a full-time job. The key is to slowly learn the ropes, use your profit to fund additional inventory, and continually optimize your business.

It might take weeks or months to get your first sale, but flipping is a viable business model with high earning potential if you’re willing to put in the work.

Source: moneycrashers.com

What Are Closed-End vs Open-End Mutual Funds – 5 Key Differences

Mutual funds gained popularity among the investing public in the 1980s and 1990s. They began as a way for large institutional investors to pool their money for a common purpose and spread the risk of losses inside a mutually-owned fund, hence the name mutual fund.

Today, mutual funds are a staple of most everyday Americans’ nest eggs and are considered a good way to diversify your retirement plan.

What you may not be aware of is that there are various types of mutual funds. The two main ones are open-end and closed-end. Understanding the differences between them can help you broaden and strengthen your investment portfolio asset allocation based on your investment risk tolerance.

What Are Open-End Mutual Funds?

Like all funds, open-end mutual funds — open-ended funds or OEFs — pool investments from a group of individual investors. The investment company, made up of a fund manager, professional traders, and analysts, will then invest the money pooled from the group of investors according to the prospectus for the fund.

Open-end funds are unique because they don’t have restrictions on the number of shares they can issue to new investors. Instead, when investors want in, these funds simply issue new shares and accept the investment directly.

There is a caveat.

These funds must buy shares back from investors who wish to exit their investment. As a result, the value of each share of these funds is based on the net asset value (NAV) of the fund, or the value of the fund’s assets, rather than on how much investors are willing to pay for it.


What Are Closed-End Mutual Funds?

Closed-end funds, also known as closed-ended funds or CEFs, and open-ended funds appear to be the same type of investment in many ways. They are built on the idea of diversification, pool investment dollars from a large group of individual investors, and are generally managed by a team of Wall Street pros.

But, when you dial into the details, you’ll find that OEFS and CEFS are actually quite different.

Closed-end funds trade on stock market exchanges, so buying and selling shares of these funds takes place in the same way that buying and selling shares of stock does.

Like any publicly traded company, closed-end funds have a fixed number of shares and can’t simply issue new shares because there’s demand. Moreover, closed-end funds don’t repurchase their own shares when an investor wants to exit his position.

From the date of its initial public offering (IPO), closed-end mutual funds trade just like stock for all intents and purposes.


Key Features

When deciding which type of fund is the best fit for your portfolio, there are several factors that need to be taken into account, with your financial goals being foremost.

It’s important to think about your time horizon, how your investing dollars will be used to achieve growth, and what factors play a role in the pricing of these assets.

1. Liquidity

Liquidity describes the amount of time it will take to turn an investment back into cash by selling it to another investor or back to the issuer.

If you’re looking to make short-term investments or think you may need access to your investing dollars from time to time, you’ll benefit from the ability to quickly turn your investments into cash.

If you have a long time horizon and use a buy-and-hold strategy, liquidity may be less of a concern for you.

Open-End Fund Liquidity

Open-end mutual funds are generally liquid assets because fund managers are required to hold a percentage of the fund’s assets in cash for any investors who want to redeem their investments.

As a result, if you want to exit an open-end investment, you’ll be able to do so at the end of each trading day by selling your shares back to the fund management company that issued them to begin with.

Closed-End Fund Liquidity

Closed-end funds aren’t always able to be redeemed at the end of the day. These are exchange-traded funds (ETFs) that are at the mercy of the levels of supply and demand among investors.

When a closed-end fund launches its IPO, it puts a prespecified number of shares up for sale, and it generally doesn’t issue new shares or redeem old shares. Instead, in order for one investor to sell a position in these funds, another investor needs to be willing to buy it.

If there are no buyers wanting into the fund when you’re ready to sell your shares, you won’t be able to sell. Instead, you’ll be forced to hold until a buyer comes along.

As a result, these funds have the potential to be less liquid than their open-end counterparts, especially if you invest in a smaller fund with low levels of trading volume.

2. Pricing

When investing, whether it be in stocks or investment-grade funds, share price is an important factor. After all, you don’t want to overpay and lose the opportunity to generate meaningful gains.

When it comes to closed-end and open-end mutual funds, it’s important to understand how prices are set for these investments and what that means for you if you have them in your portfolio.

Open-End Fund Pricing

The price per share of an open-end fund is based on its NAV at the end of each trading day. After the markets close, the fund’s NAV is divided by the total number of outstanding shares to get the share price of the fund.

For example, if a fund has a NAV of $100 million and there are currently 1 million shares issued, the price for each share will be $100 ($100 million divided by 1 million shares).

As a result of this pricing structure, open-end investments are known to experience lower levels of volatility, making them a safer investment when compared to closed-end opportunities.

Closed-End Fund Pricing

The pricing of closed-end investments works quite differently because they are exchange-traded assets. As with any other asset traded on stock market exchanges, the market price of these funds is determined by the law of supply and demand.

Supply is created by investors who want to sell shares of the fund, while demand is created by those who want to buy shares.

If the buying pressure outweighs the selling pressure, the law of supply and demand stipulates that the price of the asset must rise to curb demand. If supply outweighs demand, prices must fall to increase demand and create a balance.

Although the way closed-end investments are priced creates volatility and increased risk, it also creates opportunity.

There may be several reasons that supply outpaces demand. Sometimes it’s as simple as investors being unaware that the opportunity exists. In these cases, the price of shares of a closed-end fund can actually fall below its NAV — the value of the underlying assets it owns — meaning you’ll have the opportunity to buy in at a discount.

As a result, closed-end funds make it possible to boost capital appreciation by taking a value investing approach to mutual funds.

3. Capital Structure

The distribution of debt and equity within a publicly traded asset is known as its capital structure. One of the most important factors in this structure is how many shares are outstanding, which can either be a fixed or floating number, depending on the type of fund you invest in.

Open-End Fund Capital Structure

Open-end investments have no restrictions on the number of new shares that can be issued if a new investor or group of investors want to get involved. This means the number of outstanding shares will change on a daily basis as new investors purchase shares and prior investors redeem their shares.

This can create a challenge for fund managers that ultimately increases risk. If a fund becomes too large, the fund manager may decide the total assets have grown too unwieldy to make it possible to meet the fund’s objectives. This can result in the manager closing the fund to newcomers, leading to potentially lower prices and slower growth in the fund.

A fund growing too large can also increase the risk for investors if it means the team managing the investments may be stretched to their limits and more prone to mistakes.

Closed-End Fund Capital Structure

Closed-end investments trade on the open market with a specific number of shares available. Their capital structure is much easier to understand. Moreover, even as demand grows, the net asset value of the fund will remain manageable for the team at the helm.

On the other hand, the downside to this capital structure is that if demand for a fund is high, you’ll have to overpay in relation to the fund’s NAV in order to get involved in the investment.

4. Access

When deciding if you’ll invest in an open-end or closed-end investment, it’s also important to consider the accessibility of the investment. In some cases, funds can come with exorbitant minimum investments, resulting in less accessibility for everyday investors.

Buying and Selling Open-End Funds

The price of open-end shares is set by the fund manager at the end of the day, and you’ll often be required to meet minimum investment amounts to get involved.

Minimum investment amounts generally range from $500 to $5,000, with funds at the higher end of the spectrum being less accessible for new investors with relatively small investment portfolios.

Buying and Selling Closed-End Funds

Closed-end investments are priced based on supply and demand, with the minimum investment amount being no more than the cost of a single share of the fund.

The vast majority of these funds are priced from $10 per share to a couple of hundred dollars per share, making them far more accessible to newer investors with limited capital available.

5. Exposure

When you make an investment, you want 100% of your money to be put to work for you, exposed to the potential gains — or losses for that matter.

However, depending on which type of mutual fund you choose, the money you invest may not be 100% exposed to the assets you’re investing in.

Open-End Fund Investing Capital Exposure

To exit a position in an open-end fund, investors sell their shares back to the issuer. This means the company managing the fund has to hold a percentage of the fund’s assets in cash to the side so that it can afford to purchase shares back when an investor decides to exit their investment.

That cash set aside for redemptions can’t be put to work in the market.

Therefore, when investing in open-end mutual funds, a percentage of your investment will not be exposed to the underlying assets outlined in the fund’s prospectus, limiting your profitability.

Closed-End Fund Investing Capital Exposure

Closed-end investments provide 100% exposure to the underlying assets. That’s because these shares are bought and sold in the open market in transactions between investors, not between the issuer and investors.

Because there is no requirement for the issuer to buy shares back from the investing public, 100% of your investment dollars can be invested based on the objectives of the fund.


The Verdict: Should You Choose Open-End or Closed-End Funds?

Deciding whether you’ll invest in an open-end or closed-end fund is a decision that requires a bit of thought.

How comfortable are you with risk? Are you going to need access to your funds quickly? Do you find solace in being able to access those funds or would you rather enjoy a potential discount when you purchase shares?

You Should Invest in Open-End Assets If…

Consider open-end funds if you prefer investments that have high liquidity and, although growth may be slower, you’re more interested in assets that lack volatility. OEFs may be best for you if:

  • You Have a Shorter Time Horizon. If you aren’t planning on investing for the long haul or may need access to your investing dollars from time to time, open-end investments offer the perfect solution. They are generally redeemable at the end of each trading day, meaning you’ll have access to your money when you need it.
  • You Have Enough Capital to Get Started. Fund managers set minimum investment amounts for open-end funds ranging from $500 to $5,000. Investors in these funds need to have enough money to cover these minimum capital requirements.
  • You’re Risk-Averse. Volatility is exciting for some investors because it offers the opportunity for large gains over a short period of time. On the other hand, it also has a dark side because it increases the risk of sudden, significant losses. Investors with a relatively low appetite for risk will benefit from investing in open-end opportunities because they tend to experience far less volatility than their closed-end counterparts.

You Should Invest in Closed-End Assets If…

Consider closed-end funds if you enjoy doing the research to find undervalued opportunities and sitting on them until their values climb to more realistic levels. You might be a good fit for closed-end funds if you don’t mind moderate levels of risk in exchange for the potential to expand your gains.

Closed-end funds are best if:

  • You Enjoy Volatility. Although fast-paced fluctuations in the price of an asset will result in risk, it also gives you the opportunity to take advantage of discounts when funds are undervalued and cash in on big gains when investors push the values of the funds too high.
  • You Invest With a Long Time Horizon. Closed-end assets are riskier than open-end assets, which is fine for those with a long time horizon. The longer you plan on staying invested, the longer you have to make up for declines should something go wrong.
  • You Aren’t Worried About Liquidity. Closed-end assets are only able to be sold when another investor is interested in purchasing them. If there’s no buyer, you’ll be stuck in the investment until one comes along, making closed-end funds — especially lesser-known funds that are thinly traded — less liquid.
  • You Don’t Have a Large Portfolio. While open-end assets generally come with high minimum investment amounts, closed-end assets only require you to invest as much as a single share of the fund costs, which is often minimal. This makes closed-end funds well-suited for investors with relatively small portfolios.

Both Are Great If…

Some investors own a mix of the two types of mutual funds. These investors usually have relatively large investing portfolios and want access to the potentially market-beating returns of closed-end funds while hedging those bets with the safer open-end funds.

You might consider a mix of the two types if:

  • You Have a Mild Tolerance for Risk. If you want to get your hands on the increased profitability offered by the higher volatility closed-end funds, but aren’t willing to take this higher level of risk across your portfolio, a mix of both closed- and open-end funds will provide balance.
  • You Have a Relatively Large Investing Portfolio. In order to mix closed-end and open-end funds within your portfolio, you’ll have to have enough capital to do so. In general, you’ll need a portfolio with a minimum of $10,000 to properly diversify between the two.
  • You Want Some Liquidity. Say you believe you might need fast access to your money in some cases, but chances are you won’t need to access it all at once. In this case, open-end opportunities can make up the most liquid portion of your portfolio, while the rest of your portfolio can be invested in closed-end assets with a higher earnings potential.

Final Word

By now, you should have everything you need to decide whether an open-end mutual fund, closed-end mutual fund, or a mix of the two is best for your investing portfolio. Now, it’s time to act.

Keep in mind that mutual funds are each unique, offering different rates of return, expense ratios, and investment strategies. As a result, it’s important to do your due diligence by researching every investment opportunity prior to investing your hard-earned money.

Source: moneycrashers.com

How to Save Money on Wedding Photographers & Videographers

According to The Knot, the average cost of an American wedding was about $28,000 in 2019. Wedding photography and videography account for $2,400 and $1,800, respectively, or about 15% of the total.

Professional-grade wedding memories are expensive. If you’re fretting about how you’re going to pay for them, use these tips for getting cheap (or at least cheaper) professional wedding photography and videography to help save money on your wedding.

How to Save on Wedding Photographers and Videographers

Use these tips and tricks to reduce the cost of a professional wedding photographer or videographer without sacrificing the quality of the finished product.

1. Set Up a Photography and Videography Registry or Fund

You’ve heard of a wedding gift registry. Why not open a separate wedding media registry through which guests and apologetic no-shows can chip in toward your photography and videography costs? Some high-end photography and videography studios offer this service directly, or you can go the DIY route and launch a crowdfunding campaign on a crowdfunding site like GoFundMe.

DIY registries or funds offer more control over contributions. For instance, you can expand them to include general wedding and post-wedding expenses. They’re a straightforward option if an affordable honeymoon is a top priority.

Plus, if guests contribute to your media registry or fund in lieu of gifts, you don’t have to devote as much energy to regifting, returning, or selling unwanted gifts online after the big day.

2. Tap Your Personal Network

If you want your official wedding photos and videos to look truly amazing, you don’t want to give the job to a random guest whose top qualification is an above-average Instagram account. But you may know or know someone who knows professional or qualified amateur photographers and videographers capable of producing professional-grade material.

Depending on the strength of your connection, you may be able to secure a friend or family discount for those services, even if they’re already established as professionals in your area. The depth of this discount is sure to vary, but in my experience, 5% or even 10% off full price isn’t unreasonable. For instance, we worked with my wife’s former classmate, who’d recently established a professional photography business with her husband. They gave us a small discount and didn’t charge for travel to and from the reception site, as was apparently customary for other jobs in their rural hometown.

Qualified nonprofessionals or rising professionals, such as recent film or visual arts school graduates without practices of their own, may be willing to work for even less, especially if they’re able to build their profile or meet new prospects as a result. Just make sure they have adequate equipment, enough help, and enough prior experience to pull off a big job. As with anyone you hire, check out their previous work first.

3. Get Multiple Quotes to Compare Pricing and Service

When buying a car, you don’t jump at the first offer you see. You compare multiple offers for comparable vehicles, weighing the relative pros and cons until you arrive at an informed decision you’re reasonably confident you won’t regret.

The scale of your wedding media investment might be smaller, but your decision’s consequences echo even further into the future. Spend as long as it takes thoroughly researching photographers in your area and requesting quotes (if they don’t provide pricing upfront) from all who seem in line with your general tastes and budget.

You can jump-start the research process by attending a wedding fair near the area you plan to get married. They typically occur before the wedding season begins and can attract hundreds of service providers (including photographers and videographers) from miles around.

4. Check References

Once you’ve narrowed your choices to a few finalists, thoroughly check them out, just as you’d run a Carfax report on a used car before buying it from a random person (or a sketchy dealership, for that matter). Read online reviews, evaluate their posted work, and connect with people who’ve recently used their services. And don’t be afraid to ask them directly for references.

Though checking references can’t reduce the final cost of your wedding photography and videography, it can increase the chances of satisfaction. You can’t do your wedding over. Paying a bit more for wedding media you love is an investment in the fond memory of what’s hopefully one of the happiest days of your life.

5. Get a Personal Use Release

Your wedding photographer and videographer is almost certain to keep the copyright to your media, meaning you can’t use your wedding photos or videos for your own commercial purposes. But most photographers and videographers readily agree to personal use releases that allow clients to reproduce photos and videos for personal use, sharing among friends, and posting on social media.

If your provider’s contract doesn’t explicitly spell that out, ask them to add it. And think twice about working with any provider who says no. A personal use release removes any doubt about your ability to order reprints or copies in the future, ideally from a discount merchant (such as a drugstore) that charges much less than your photography or videography studio.

6. Stick to a Lower-Priced Package

Most wedding photographers and videographers offer basic packages like ceremony coverage plus pre-reception wedding party shots. These packages include fewer add-ons and frills, such as gratuitous shots of the bride in their wedding dress and personal shoots for bridesmaids. In some cases, their standard arrangement covers just the shoot itself plus an online gallery or image DVD.

By providing just the bare essentials and giving you the flexibility to choose how (and whether) to order additional products, such as bound albums or wall prints, the basic package gives you greater control over your total photography and videography costs. It also allows you to spread your investment over a longer period.

And if you choose to order additional products later, you can likely do so at a lower cost online or at a brick-and-mortar photo shop provided you have a personal use release.

Photography and videography package costs vary tremendously by factors such as provider quality and reputation and geography. Louisiana’s Love Photography is an excellent example of the often vast discrepancy between basic and deluxe photography packages. Its basic package costs $999. The next-highest package costs $1,320, and the most expensive package costs $2,945.

7. Look for Professional (but Less Established) Independents

If your wedding media’s quality is even a remote concern, resist the temptation to source an unvetted amateur from Craigslist or your wedding guest list, no matter how tight your budget. You’re more likely to be disappointed with the results.

But it is possible to find professional-grade work at nonprofessional prices. Up-and-coming photography and videography professionals are often willing to work for less than what more established professionals charge. They’re frequently just out of school or ready to move up from assistant roles and launch their own independent businesses. The best place to find them and verify their credentials is on reputable job boards like Indeed and freelance job websites like Upwork.

8. Book Early

Not all wedding photographers and videographers offer early-bird discounts, but it never hurts to ask. Just be realistic about what early means in the world of wedding planning, which is probably no later than six months before the big day. Make a point to reserve your wedding photography and videography around the same time you book your wedding venue if you’re not arranging them through the same vendor.

9 Ask for an Off-Peak Discount

Many people get married on Saturdays. If you’re willing to buck the crowd and organize a weekday (Monday through Thursday) wedding, ask photographer and videographer candidates for an off-peak discount. Depending on local customs and the providers’ whims, it’s not unreasonable to expect a 10% or 15% discount off the final bill for a midweek shindig. For example, our engagement photographer, who also did weddings, cut 15% off her bill for Monday-through-Thursday weddings.

The same principle applies to off-season weddings in regions with sharply defined wedding seasons. If you’re scheduling a February wedding in Boston or Chicago, it never hurts to ask for a discount. But winter weddings are increasingly popular, so don’t be surprised by a refusal. There are other potential financial benefits to weekday and off-season weddings too, such as venue and catering discounts.

10. Ask for Referral Discounts or Credits

Don’t be shy about asking your photographer or videographer for referral discounts or credits. Many professionals readily offer kickbacks, either as a discount to the final service bill or credits for future orders, to current or prior customers who refer new business.

You don’t have to shill for them at your wedding, but if you know anyone who’s planning their wedding, you can suggest your photographer or videographer.

It works in the other direction too. If friends refer you to their wedding media provider, you may qualify for a discount. Discounts and credits vary by factors such as vendor and location, but $25, $50, or even $100 isn’t outside the realm of possibility. For example, our engagement photographer offered $50 off for referrals who purchased photography packages.

11. Look for Custom Packages

In the rush to get ready for the big day, it’s easy to surrender to the simplicity of preset photo or video packages, which tell you precisely what you’re getting and how much it’s going to cost. However, preset packages often include unnecessary services or add-ons, and providers aren’t always willing to customize on the spot.

To avoid paying more than you should, look for providers that offer custom packages. These packages typically have minimal conditions. For example, you can choose how many hours the provider works on your wedding day, and you get all your images in electronic format. But beyond that, the services rendered and deliverables (such as albums) are up to you.

Larger custom packages sometimes qualify for discounts. For instance, Atlanta-based Amanda Summerlin Photography, a high-end photography studio, knocks 5% off custom packages of $3,900 or more, 10% off custom packages of $4,600 or more, and 15% off custom packages of $5,700 or more.

12. Book Photography and Videography With the Same Provider

Not all photography studios offer videography services, nor vice versa. But if you choose a provider capable of shooting professional-grade photo and video, look into combined photography and videography packages, which can cost hundreds of dollars less than separate photography and videography jobs.

13. Avoid Nonlocal Photographers and Videographers

Unless you’re having a destination wedding in a remote area, avoid working with nonlocal providers. Out-of-area photographers and videographers often add mileage or airfare to the cost of their services, potentially raising the final bill by hundreds of dollars.

Even if your provider doesn’t explicitly add travel costs to your final bill, they’re likely built into its margins, and your total cost is therefore likely to be higher than what a comparable local provider would charge.

14. Work With Venue-Preferred and Recommended Providers

If you’re planning your nuptials at a wedding venue that’s accustomed to hosting weddings, inquire about preferred or recommended photographers and videographers.

Some venues have a de facto referral system. The venue drives business to favored vendors, who then offer discounted services or special packages. Some larger venues even have staff photographers and videographers that work closely with onsite wedding planners and build their fees into the total cost of the event. Further, such providers are likely familiar with the specific venue and already know the best sites for shots.

15. Limit Your Photographer’s and Videographer’s Hours

Some photographer and videographer packages include a specific number of hours of coverage, usually four to seven. Before hiring your provider and choosing your package, determine how long you need them to be present.

You probably want to capture high points like the walk down the aisle, exchange of vows, post-ceremony procession, and cake cutting, but do you really need professional shots of the rehearsal dinner, the bride getting ready, distant family members, or the later stages of your reception party?

Choose your package accordingly, and don’t be afraid to ask for modifications. For example, if you don’t need reception photos or videos at all, your provider may be willing to bail right after the customary post-ceremony wedding party shots.

16. Limit Your Photography and Videography Staff Size at Smaller Weddings

It isn’t always possible with larger or logistically complex weddings with multiple shooting sites or challenging conditions. But if you expect fewer than 75 guests at your wedding and plan a relatively traditional ceremony and reception, your provider may be willing to send only a lead photographer or videographer, forgoing the assistants and interns who often help with setup, shooting, and equipment-ferrying at larger events. Depending on the provider, that could reduce your service bill by a few hundred dollars.

17. Order Fewer, Smaller Finished Photos

Because they’re easier to frame and look better on display, larger wedding pictures typically cost a lot more than wallet-size or small frame-size (4-inch-by-6-inch or 5-inch-by-7-inch).

If you place a finished photo order with your photography studio, stick to the smaller sizes or purchase only a few larger photos for display in your home. Resist the temptation to send a large framed photo to every member of your wedding party or aunt and uncle who made it to the ceremony.

If you do want larger photos down the line, you can use your online proofs to place an order with a discounted service or buy from your provider when your budget has recovered from the trauma of the wedding.

18. Lose the Leather Binding and Hard Pages

Wedding photo albums are pricey — really pricey. When purchased a la carte, high-end wedding albums (think bound leather albums with rigid pages) can cost up to $1,000, according to Zola. Larger sizes are especially pricey.

While it’s nice to have a weighty tome of wedding memories to pull out for your houseguests and future kids, it’s possible to achieve similar results at a lower cost. Opt for a simpler magazine-style album with glossy, flexible pages. The quality of the quality is similar, as is the durability of the paper, which is critical if you plan to share your wedding memories with your children and grandchildren.

19. Don’t Order a Proof Book

Many photographers offer proof books, which allow you to review the photos they’ve taken and select your favorites before ordering your final prints.

The catch is that you often pay for the proof book too. Our wedding photographer advised us we’d pay an extra $100 if we wanted a proof book. We told her to skip it and send us a selection of digital files to review (for free). Unless you wish to keep the book in lieu of a bound album, you can do the same.

20. Crowdsource Photos and Videos From Your Guests to Create an Album or Folio

If you want a professional-grade memento of your big day, cutting out the photographer or videographer altogether isn’t a viable option. But you can still pair a less extravagant professional wedding package and fewer pro photos with a free or low-cost crowdsourced photo campaign.

Before the ceremony, either on your invitations or in your wedding program, invite your guests to snap photos or take videos with their smartphones and post them to social media or an online space.

Brides magazine has a comprehensive list of useful wedding photo-sharing apps, some more expensive than others. If you tell your guests to post photos to social media, give them a unique wedding hashtag to make it easy to find the photos. It’s usually some variation on the wedding couple’s names plus the year.

Make it clear they can be as creative as they please as long as they don’t disrupt the service. Or let the pros handle the wedding and invite the guests to get artistic at the reception.

If you worry about phones or photos getting lost in the shuffle, place disposable cameras on each table and ask patrons to place them in a designated box or bowl when the festivities are over. The results won’t win any awards, but they’re sure to be entertaining — and as time goes on, even poignant.

21. Pay With a Cash-Back or Rewards Credit Card

No matter what your final wedding media bill comes to, you can marginally reduce the sticker shock (and budgetary carnage) by paying with a cash-back credit card. Though wedding photography and videography rarely fall into favored spending categories, such as grocery store or gas purchases, they’re still good for the baseline earning rate.

For example, by paying your photographer and videographer with Chase Freedom Unlimited (unlimited 1.5% cash back on most purchases, including wedding photography and videography) or Citi Double Cash (unlimited 2% cash back) card, you can knock the final cost of a $2,000 bill down to $1,970 and $1,960, respectively.


Final Word

Professional photo and video services aren’t cheap. The Knot’s survey showed the average American couple spends more than $4,000 to document their special day when they opt for both.

Fortunately, your wedding day is probably going to be the high point of your professional media-buying career. Even if you and your spouse spring for newborn baby photos, periodic family portraits, and high school graduation photos for your kids, you won’t ever spend as much on photo and video as you do on your wedding day.

Source: moneycrashers.com