A former security engineer, who stole digital assets valued at more than $12 million from two decentralized exchanges, has received a three-year prison sentence. In what has been characterized as the “first-ever” conviction for a smart contract hack, the U.S. Judge also ordered the ex-engineer to forfeit roughly $12.3 million. Ex-Engineer Sentenced to Three Years […]
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Elvira Nabiullina, head of the Russian central bank, has stated that the mass launch of the digital ruble will take five to seven years. This appears to contradict recent suggestions by the chairman of the State Duma Committee on the Financial Market that the launch will begin next year. No Decision Before 2025 Elvira Nabiullina, […]
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Ripple’s chief legal officer has urged the U.S. Securities and Exchange Commission (SEC) to own up to its multiple missteps in enforcement actions against the crypto industry. He referenced court rulings that criticized the SEC for “gross abuse of power,” lack of “faithful allegiance to the law,” and being “arbitrary and capricious.” Ripple’s Legal Chief […]
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Over the last 30 years, no next-big-thing trend or innovation has come close to rivaling the advent of the internet. However, artificial intelligence (AI) has the potential to do for businesses in this generation what the internet did for corporate America three decades ago.
By the turn of the decade, analysts at PwC foresee AI, which relies on software and systems in place of human oversight, increasing global gross domestic product by $15.7 trillion. No company has more directly benefited from the AI revolution than semiconductor stock Nvidia (NASDAQ: NVDA).
Over the span of 15 months, Nvidia’s valuation has soared by $1.9 trillion to $2.26 trillion, which ranks behind only Microsoft and Apple among publicly traded companies in the U.S.
Nvidia’s outperformance is a reflection of the overwhelming demand for its high-powered A100 and H100 graphics processing units (GPUs). Some analysts believe Nvidia’s top-tier chips could account for more than 90% of the GPUs deployed in AI-accelerated data centers this year. The early stage scarcity associated with these chips has afforded Nvidia exceptional pricing power.
But there are also plenty of reasons to believe Nvidia is in a bubble.
For example, every next-big-thing trend and innovation over the last three decades has worked its way through an early stage bubble. Investors have a habit of overestimating the adoption of new technology, and I don’t anticipate AI being the exception.
Nvidia is also likely to see its pricing power wane in the quarters to come as new competitors enter the space and the company’s own production reduces the scarcity of AI-GPUs. The bulk of Nvidia’s 217% data-center sales growth in fiscal 2024 (ended Jan. 28, 2024) can be traced to its pricing power.
The chief concern might just be that its top four customers, which are “Magnificent Seven” constituents and comprise roughly 40% of its sales, are all developing in-house AI chips for their data centers. One way or another, Nvidia’s orders from its top customers are liable to taper off in the quarters to come.
If history rhymes, once more, and the AI bubble bursts, Nvidia’s market cap could crater (in context to where it is now) and allow other companies to leapfrog it.
Here are five companies — not including Microsoft and Apple, which are already ahead of Nvidia — which have the tools and intangibles to be worth more than Nvidia three years from now.
The first industry titan that shouldn’t have any trouble surpassing Nvidia’s market cap over the coming three years is Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), the parent company of internet search engine Google, streaming platform YouTube, and autonomous-driving company Waymo, among other ventures.
The reason Alphabet would hold up substantially better than Nvidia if the AI bubble bursts is because it’s a veritable monopoly in internet search. In March, Google accounted for more than 91% of worldwide internet search share. Looking back through nine years of monthly data from GlobalStats, Google hasn’t ceded more than 10% of global internet search share to all other companies, combined. It’s the clear-and-obvious choice for advertisers looking to get their message in front of users, and it’s going to benefit immensely from long periods of domestic and international growth.
Google Cloud can also thrive if Nvidia stumbles. Enterprise cloud spending is still in its early innings, and Google Cloud has gobbled up a 10% share of worldwide cloud infrastructure service share, as of September 2023. Since cloud margins are traditionally juicier than advertising margins, Alphabet’s cash flow growth may accelerate in the latter-half of the decade.
Like Alphabet, e-commerce juggernaut Amazon (NASDAQ: AMZN) can jump back ahead of Nvidia at some point over the next three years if the AI bubble deflates.
Most people are familiar with Amazon because of its world-leading online marketplace. In 2023, an estimated 38% of online retail spending in the U.S. was traced to its e-commerce site. But the real benefit of having more than 2 billion people visit Amazon’s website each month is the advertising revenue it can generate, and the subscription revenue brought in via Prime. Amazon topped 200 million Prime users in April 2021, and has almost certainly added to this figure since becoming the exclusive streaming partner of Thursday Night Football.
However, Amazon’s premier cash flow driver is its cloud infrastructure service platform. Despite accounting for a sixth of the company’s net sales, Amazon Web Services (AWS) consistently generates 50% to 100% of Amazon’s operating income. AWS is the world’s top cloud infrastructure service platform by spend, per Canalys.
Even though social media company Meta Platforms (NASDAQ: META) is betting on a future fueled by AI and augmented/virtual reality, the company’s core operations should sustain double-digit earnings growth and help lift its valuation well past Nvidia come 2027.
Meta’s “secret sauce” is no secret at all. Despite its metaverse ambitions and big spending at Reality Labs, the company’s bread-and-butter continues to be its social media empire. It’s the parent of the most-visited social site on the planet (Facebook), and collectively attracted just shy of 4 billion monthly active users during the December-ended quarter with its family of apps. Just as advertisers willingly pay a premium to Alphabet’s Google because of its dominance in internet search, Meta’s ad-pricing power tends to be superior in most economic climates.
The other reason Meta can shine and completely close the roughly $1 trillion valuation gap between it and Nvidia over the coming three years is its balance sheet. Meta is a cash-flow machine. It generated more than $71 billion in net cash from operations last year and closed out 2023 with $65.4 billion in cash, cash equivalents, and marketable securities. Not only does this cash provide a buffer to the downside, but it affords Meta the luxury of taking chances that few other companies can match.
A fourth company that can surpass AI stock Nvidia’s market cap over the course of the next three years is conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Since Warren Buffett took the reins at Berkshire Hathaway in the mid-1960s, he’s overseen an annualized average return on his company’s Class A shares that’s approaching 20%!
One of the primary reasons Berkshire Hathaway has been such a moneymaker for investors is the “Oracle of Omaha’s” love of dividend stocks. Berkshire is on track to collect in the neighborhood of $6 billion in payouts this year, with just five core holdings accounting for almost $4.4 billion in aggregate dividend income. Since dividend-paying companies are often profitable on a recurring basis and time-tested, they’re just the type of businesses we’d expect to grow in lockstep with the U.S. economy over long periods.
Warren Buffett and his investment team also gravitate to brand-name businesses with trusted management teams. For instance, the $155 billion invested in Apple adds up to almost 42% of Berkshire Hathaway’s invested assets. Apple is one of the world’s most-valuable brands, and CEO Tim Cook has done a masterful job of leading ongoing physical product innovation while also pivoting the company to a subscription services-driven future.
The fifth stock that’ll be worth more than artificial intelligence stock Nvidia three years from now is payment-processing behemoth Visa (NYSE: V). As things stand now, Visa will have to close a nearly $1.7 trillion valuation gap. But if the AI bubble pops and Visa keeps doing what it’s been doing for decades, it can happen.
What makes Visa tick is the company’s long runway of opportunity. It’s the undisputed market share leader in credit card network purchase volume in the U.S. (the largest market for consumption globally), and has a multidecade opportunity to organically or acquisitively push its payment infrastructure into underbanked regions, such as the Middle East, Africa, and Southeastern Asia. Visa should be able to sustain a double-digit earnings growth rate throughout the remainder of the decade, if not well beyond.
Visa’s other source of success is its relatively conservative management team. Although it would probably be wildly successful as a lender, its leaders have chosen to keep the company solely focused on payment facilitation. The advantage of this approach is that Visa doesn’t have to set aside capital to cover loan losses during economic downturns since it’s not a lender. The result is a profit margin that’s consistently hovered at or above 50%!
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 1, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Alphabet, Amazon, Meta Platforms, and Visa. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Visa. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Prediction: 5 Stocks That’ll Be Worth More Than Artificial Intelligence (AI) Stock Nvidia 3 Years From Now was originally published by The Motley Fool
Sam Bankman-Fried, the former CEO of FTX, was sentenced to 25 years in jail today in a packed courtroom, marking a significant moment in the legal scrutiny of the crypto industry. He will be 57 years old when he is released. The sentencing, as detailed by Inner City Press, comes after a series of legal proceedings that shed light on the complexities and potential vulnerabilities within the digital asset space.
Bankman-Fried, dressed in a light brown jail uniform from MDC-Brooklyn, faced the judgment of Judge Lewis A. Kaplan, who, after considering the pre-sentence report and the guidelines disputes, delivered a sentence that reflects the gravity of the crimes committed. The courtroom, filled with prosecutors, defense lawyers, and an FBI agent, bore witness to the culmination of a case that has been closely followed by both the crypto community and the general public.
The legal proceedings highlighted the extensive financial losses incurred by investors, lenders, and customers, with Judge Kaplan rejecting the defense’s argument about the loss amount. The court found that investors lost $1.7 billion, lenders lost $1.3 billion, and customers faced an $8 billion shortfall. These figures underscore the scale of the fraud and the impact on the victims involved.
The defense had previously sought leniency, citing Bankman-Fried’s autism diagnosis and arguing for a reduced sentence of 63 to 78 months. However, the prosecution argued for a substantial prison term of 50 years.
Judge Kaplan’s decision to vary downward from the Guidelines range while still acknowledging the significant number of victims and the use of sophisticated means emphasizes the complexity of sentencing in cases involving emerging technologies and financial structures. The finding of obstruction of justice, including attempted witness tampering and perjury, further emphasized the deliberate actions taken by Bankman-Fried to mislead and defraud.
During the sentencing hearing, a poignant moment unfolded as victims were given the opportunity to address the court. One such victim, Sunil Kavuri, who traveled from London specifically for this purpose, shared his experiences and the impact of the FTX collapse on him and others. Kavuri highlighted the ongoing struggles faced by victims, challenging the narrative that the loss was zero and criticizing the handling of the bankruptcy estate. He pointed out the significant discrepancies in the valuation and sale of assets, including a token that significantly appreciated in value after being sold at a discount and the sale of Solana tokens at a 70% discount.
Kavuri’s testimony underscored the real and continuing harm suffered by those affected, including the tragic note that at least three individuals had committed suicide as a result of the fraud. Judge Kaplan acknowledged Kavuri’s points, reinforcing the gravity of the situation and the inaccuracies in claims that customers would be made whole. This victim’s statement added a deeply personal dimension to the proceedings, emphasizing the human cost of financial crimes and the need for accountability beyond the sentencing of Bankman-Fried.
In a heartfelt defense of his client, Sam Bankman-Fried’s attorney, Mark Mukasey, presented a contrasting image of the former FTX CEO to the court. Mukasey argued that Bankman-Fried’s actions, while resulting in significant financial fallout, were not driven by the same malice or predatory intent that characterized other high-profile financial criminals, such as those who stole from Holocaust survivors. He emphasized that Bankman-Fried was not a “ruthless financial serial killer” but rather someone who made decisions based on mathematical calculations, not with the intention to cause personal pain.
Mukasey also relayed personal insights from Bankman-Fried’s mother, who described her son as misunderstood and not fitting the mold of a “greedy swindler.” According to Mukasey, Bankman-Fried did not abscond with funds but remained engaged until the end, with a genuine desire to see people repaid. This narrative was allowed to be presented in court partly due to Judge Kaplan’s decision to depart from the usual practice of enumerating the papers considered for sentencing, acknowledging the overwhelming volume of last-minute submissions from both the defense and the prosecution.
The defense’s portrayal of Bankman-Fried aimed to humanize him and differentiate his case from other financial frauds, suggesting that while the consequences of his actions were severe, his motivations were not inherently malicious. Mukasey’s statement also served as an acknowledgment of the victims’ suffering, expressing an understanding of their pain and a commitment to appeal, while maintaining respect for the jury’s verdict.
In a plea to the court, speaking directly Bankman-Fried admitted,
“I made a lot of mistakes. But that’s not how the story ended. Customers weren’t paid back. FTX didn’t survive that. Yeah, customers have been given conflicting claims. That’s caused a lot of damage. They could have been paid back.”
In a moment of candor, Sam Bankman-Fried expressed a somber reflection on his future, acknowledging the likelihood that his ability to contribute meaningfully to society may be irreparably diminished. He admitted to the court that his capacity to make an impact is severely limited by incarceration and that the length of his sentence, whether it be 5 or 40 years, is beyond his control. He stated,
“My useful life is probably over. I’ve long since given what I had to give. I can’t do it from prison.”
Bankman-Fried also addressed the perception of his actions, recognizing the stark contrast between his alleged intentions and how prosecutors, the court, and the media interpreted them. He also said he now expects customers to be repaid. He commented, “I think I failed at that. I’m not sure why, but I do think I did.” He also referred to a specific instance involving a text to the general counsel, which he claimed was an attempt to assist, though it was not viewed as such by others. Even on the day of his sentencing, Bankman-Fried continues to assert that he did not steal user funds maliciously.
However, in his judgment, Judge Kaplan asserted that he believed much of Bankman-Fried’s public rhetoric “was an act” designed to obtain power and influence.
According to Inner City Press, before the sentence was issued, the government argued,
“The defendant is not a monster but he committed gravely serious crimes that harmed many people – and he would consider doing it again. So, 40 to 50 years.”
In announcing the sentence, Judge Kaplan proclaimed that Bankman-Fried was nothing short of a “performer.”
“When not lying, he was evasive, hair splitting, trying to get the prosecutors to rephrase questions for him. I’ve been doing this job for close for 30 years. I’ve never seen a performance like that.”
His sentencing was reported by Inner City Press as follows,
“It is the judgment of the court that you are sentenced to 240 months then consecutive 60 [etc] for a total of 300 months [25 years].”
The implications of today’s sentencing extend beyond the immediate legal consequences for Bankman-Fried. They touch on broader questions about the regulation of digital assets, the protection of investors, and the future of digital asset markets. As the industry grapples with these challenges, the outcome of this case will likely influence discussions and decisions on how best to navigate the complex intersection of technology, finance, and law.
This article will be updated with additional details as they become available.
This week, blockchain observers noticed that the “37X” wallet, once holding the title of the fifth-largest bitcoin wallet, was activated for the first time since 2019. This significant move involved the transfer of 94,504.03 bitcoin into three distinct addresses. One of these recipient wallets has now risen to become the sixth-largest bitcoin holder, showcasing a […]
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Stock splits can help investors identify exceptional companies. Specifically, splits are necessary only after substantial and sustained price appreciation, which rarely happens to mediocre companies. The split itself is somewhat irrelevant. It’s the share price appreciation that tells investors a company is doing something right.
CrowdStrike (NASDAQ: CRWD) and MercadoLibre (NASDAQ: MELI) are good examples. Their shares soared 710% and 185%, respectively, over the last four years. That means both stocks trounced the S&P 500, which returned 90% during the same period. That outperformance can be attributed to strong financial results and promising growth prospects in both cases.
While CrowdStrike and MercadoLibre are certainly stock split candidates at their current prices, both stocks are worthwhile investments, whether those splits happen or not. Here’s why.
CrowdStrike provides cybersecurity software. Its platform integrates more than two dozen modules that address several security markets, and the company has a strong presence in many of them. Most notably, CrowdStrike is the market leader in endpoint security and continued to gain share faster than its peers last year. The company is also a recognized leader in cloud security and threat intelligence services.
Investors can attribute that success to superior artificial intelligence (AI) and its ability to simplify security operations through workload consolidation. To quote CEO George Kurtz, “Our AI trained on cybersecurity’s richest dataset drives the industry’s most comprehensive protection and automation.” Additionally, while most businesses use dozens of point products to meet their security needs, CrowdStrike can improve efficiency by unifying security operations on a single platform.
CrowdStrike reported strong financial results in the fourth quarter. Revenue increased 33% to $845 million as the company added new customers and existing customers bought more modules. On the bottom line, non-GAAP (generally accepted accounting principles) net income more than doubled to $236 million. Management also reported a gross retention rate of 98%, meaning the company keeps most of its customers. Investors can expect similar results in the future.
Cybersecurity spending is forecasted to increase at 12% annually through 2030, but CrowdStrike should outpace the industry as it continues to gain share. Indeed, in 2023, the company took third place on the Fortune Future 50 list, an annual ranking of the world’s largest companies based on long-term growth prospects. Wall Street expects CrowdStrike to grow sales at 28% annually over the next five years.
In that context, its current valuation of 25.4 times sales is tolerable, though certainly not cheap. Investors comfortable with volatility should consider buying a small position in this growth stock today, provided they plan to hold their shares for at least three to five years.
MercadoLibre is the e-commerce market leader in Latin America. It not only operates the most-visited online marketplace in the region but also reinforces its strength with adjacent services through various subsidiaries. That includes payment processing and credit products (Mercado Pago and Mercado Crédito), logistics support (Mercado Envíos), and ad tech solutions (Mercado Ads).
MercadoLibre already benefits from a powerful network effect. Merchants naturally gravitate toward the most popular marketplace, which results in greater product selection. That incentivizes consumers to shop on the platform, creating a virtuous cycle.
However, adjacent services make MercadoLibre an even more compelling option for merchants and consumers while creating additional monetization opportunities for the company. Notably, management says it has the fastest and most extensive delivery network in its core geographies.
MercadoLibre reported solid financial results in the fourth quarter. Revenue increased 42% to $4.2 billion, representing 48% growth in the commerce segment and 38% in the fintech segment, both of which represent a sequential acceleration. GAAP net income was flat at $165 million, but that was due to one-time expenses related to tax disputes from 2014 and 2022. Excluding those one-time expenses, net income increased 166% year over year to $383 million.
Going forward, MercadoLibre has several tailwinds at its back as e-commerce, digital payments, and digital advertising become more prevalent across Latin America. Wall Street expects sales to increase at 19% annually over the next five years, but I think that estimate leaves room for upside, given the tremendous pace at which MercadoLibre is currently growing. Additionally, the company does not currently charge for fulfillment services, meaning it has a big monetization lever it has yet to pull.
In any case, the current valuation of 5.4 times sales looks very reasonable. Patient investors should feel comfortable buying a small position in this growth stock today.
Should you invest $1,000 in CrowdStrike right now?
Before you buy stock in CrowdStrike, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CrowdStrike wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 20, 2024
Trevor Jennewine has positions in CrowdStrike and MercadoLibre. The Motley Fool has positions in and recommends CrowdStrike and MercadoLibre. The Motley Fool has a disclosure policy.
Possible Stock Splits in 2024: 2 Top Growth Stocks Up 710% and 185% in 4 Years to Buy Now and Hold Long Term was originally published by The Motley Fool
I’m 68 and recently retired and have about $1.4 million in accounts intended for retirement ($1.2 million in a Traditional IRA and $110K in a Roth). I also am receiving about $47,000 annually in Social Security benefits. My RMDs are scheduled to start in 2027, and as a result, my financial advisor and I are considering doing some annual Roth conversions prior to 2027. It all sounds like a good plan to me, however, I am getting some conflicting information on when I will be able to make withdrawals from the Roth.
My advisor says I will have to wait the standard five years after each Roth conversion deposit before being able to make any withdrawal of those funds (the conversion amount itself and any earnings). However, I have also been told I could withdraw against the conversion amount with no waiting period since I am older than 59 ½. For example, my Roth was established in 2015 and has had a total of $60,000 in contributions and $50,000 in earnings. If I were to do a Roth conversion of $75,000 in 2024 would I then have available $135,000 for withdrawal without any penalty? My advisor says I would only have the original $60,000 available for withdrawal until the five years have passed for the conversion made in 2024. What is the proper withdrawal regulation and rules under those circumstances?
– Jeff
Hey Jeff, great question. This is unfortunately a very confusing topic that is easily jumbled up. It is not surprising that you’ve received or found conflicting information. Fortunately, once you sort through the rules and are able to keep them straight, the answer is very clear.
Because you are over 59 ½ and have had a Roth IRA for five years, you can withdraw any amount of money at any time from any Roth IRA balance you have (conversion or otherwise) without incurring a tax liability or penalty. Period.
Having said that, I am now just another guy that has given you information that conflicts with something else you’ve heard, right? Rather than leaving it at that, let’s walk through the rules and reference the specific information from the IRS. (And if you’re need financial advice or want to find a new advisor to work with, this free tool can help you connect with financial advisors who serve your area.)
While Roth IRAs are funded with after-tax money that can be withdrawn tax-free, there are specific rules surrounding how to take this money out of your account.
The IRS has three “five-year rules” for different types of Roth IRAs, but we’ll be discussing two of them here. The first five-year rule specifically applies to accounts that start off as Roth IRAs, while a separate five-year rule solely applies to accounts that are converted into Roth IRAs. Keep in mind that running afoul of either rule can trigger a 10% early withdrawal penalty and/or income taxes on investment earnings. You’ll obviously want to avoid these taxes and penalties as best as you can.
The first five-year rule dictates that you must wait five years after your initial contribution to a Roth IRA before you can make tax-free withdrawals of any investment earnings. However, the five-year period is retroactive to Jan. 1 of the year in which your first contributions were made.
For example, if you made your first contribution to a Roth IRA in November 2020, the five-year period officially began on Jan. 1, 2020. As a result, you could start withdrawing earnings after Jan. 1, 2025.
But waiting five years alone is only half of the equation. Withdrawals from your Roth IRA must be “qualified” in order for you to avoid taxes and penalties. Luckily, reaching age 59 ½ is the most common way to satisfy this particular requirement.
For instance, funding a Roth IRA at age 45 doesn’t mean someone can make tax- and penalty-free withdrawals from the account five years later. They’ll need to wait until age 59 ½, be disabled or meet one of the other requirements set by the IRS for qualified withdrawals. Likewise, if you open your first Roth IRA when you’re 58, the five years still need to pass before you can withdraw the earnings tax-free. Simply turning 59 ½ isn’t enough in this instance.
Failing to meet both the five-year rule and the rules governing qualified withdrawals may trigger income taxes on the earnings you withdraw, as well as a 10% tax penalty. Jeff, because you opened your Roth IRA in 2015 and you are over 59 ½ years old, you have already satisfied both rules. Plain and simple.
(And if you need help managing your Roth IRA, consider connecting with a financial advisor who serves your area.)
There is also a separate five-year rule for Roth conversions. If a person is under 59 ½ years old, they must wait five years before they can withdraw any money that’s converted from a traditional IRA into a Roth IRA. And unlike the first five-year rule that only needs to be satisfied once, this rule applies to each individual conversion.
Fortunately, you aren’t subject to early withdrawal penalties by virtue of your age, so this five-year rule also doesn’t apply to you. You’ll automatically avoid the 10% penalty on withdrawals from a converted Roth IRA.
However, here’s the context and rationale for this IRS rule:
Someone who’s under 59 ½ is generally subject to an additional 10% penalty on distributions from IRAs. Without this five-year rule, someone could simply convert a traditional IRA into a Roth IRA (paying the taxes on the conversion, of course) and then immediately withdraw the money from the Roth IRA, thereby sidestepping the 10% early withdrawal penalty. The five-year rule on Roth conversions closes this potential loophole.
Keep in mind that each five-year period starts on Jan. 1 of the year in which the conversion was made. (And if you need help doing a Roth conversion, consider speaking with a financial advisor who can guide you through the process.)
As they say, age has its privileges. Because you are over 59 ½ and have satisfied the Roth IRA contribution rule, you no longer have to worry about taxes or penalties on any withdrawals you take from your Roth IRA.
Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you’re working with a financial advisor but you’re unhappy with the results, you can always consider finding a new professional to work with. Here are some tips for navigating this transition, including how to notify your current advisor about your decision and what you should do before breaking off the professional relationship.
Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column. Questions may be edited for clarity or length.
Please note that Brandon is not a participant on the SmartAsset AMP platform, and he has been compensated for this article. Questions may be edited for clarity or length.
Photo credit: ©iStock.com/Kameleon007
The post Ask an Advisor: My RMDs Start Soon So I’m Converting $700k to a Roth, But I’m Getting Conflicting Info About Having to Wait Five Years appeared first on SmartReads by SmartAsset.
Given his remarkable track record of compounding capital for multiple decades at Berkshire Hathaway, it’s not surprising that individual investors like to look at the Warren Buffett conglomerate’s enormous portfolio to find winning stock ideas. Even small positions can be worthwhile investment candidates.
Among the dozens of Berkshire holdings, investors might want to take a closer look at Visa (V 0.99%) and Mastercard (MA 0.90%). Together, they make up just 1.1% of its portfolio. But that doesn’t mean they don’t have sizable upside.
In fact, these two financial stocks could turn $100,000 into $1 million over the next 20 years.
For a stock to rise 10-fold in 20 years, it would translate to a roughly 12.2% annualized increase. That would be a fantastic return that exceeds the S&P 500‘s long-run average of about 10%. Investors can gain confidence knowing that Visa’s and Mastercard’s shares have climbed 900% in just the past 12 or so years, give or take a few months. So, as we look ahead, investors are expecting the returns to slow a bit.
I think that’s a totally reasonable expectation. These two businesses are worth hundreds of billions of dollars each. Naturally, their future returns probably won’t match the past. But the gains will still be respectable.
Investors should have confidence that these two companies will be top performers in their portfolios. For starters, Visa and Mastercard both have stellar track records of financial performance. In the past five years, despite dealing with a global health crisis and macro headwinds, both companies were able to report double-digit percentage earnings per share growth on an average yearly basis. This points to their durability, which should give shareholders peace of mind.
There’s plenty of reason to believe that the growth will continue for the foreseeable future. Even though Visa handled a whopping $3.9 trillion in payment volume last quarter, and Mastercard processed $2.4 trillion, they continue to benefit from the growth of cashless transactions. There is a lot of opportunity to further penetrate less developed markets around the world, where a higher percentage of the population is underbanked, especially when compared to the U.S. or Western Europe.
Visa and Mastercard face minimal threat of disruption, in my opinion. And the presence of an economic moat raises the chances that both businesses will be thriving two decades from now.
With their massive global two-sided payments networks that connect consumers and merchants, both Visa and Mastercard benefit from powerful network effects. It’s virtually an impossible task for someone to come around and create a new payment platform from scratch that can compete with these two giants. Combined, Visa and Mastercard handle about 75% of all the card payment volume in the U.S.
When looking at stocks to buy, the last thing investors want to do is overpay. Paying too much lowers potential future returns. This doesn’t appear to be the case in this situation.
As of this, Visa and Mastercard trade at forward price-to-earnings ratios of about 29 and 33, respectively. Because of impressive underlying fundamental performance and network effects, it’s worth paying this premium valuation, in my opinion. Add in the fact that Visa and Mastercard post some of the highest operating margins you’ll ever see, and this looks like a no-brainer decision.
Buffett’s Berkshire Hathaway owns dozens of stocks. But if you’re looking to turn $100,000 into $1 million between now and 2044, you’d struggle to find two better choices than Visa and Mastercard.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Mastercard, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
Thanks to its drinkable appeal, the St. Patrick’s Day favorite has soared in popularity over the past couple of decades — and seems poised for more growth
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