What's Bitcoin?

Q. What's bitcoin? -- B.P., Cranston, Rhode Island

A. Launched in 2009, bitcoin is the first and most well-known cryptocurrency. (There were recently more than 12,000 cryptocurrencies. In contrast, there are only around 6,000 stocks listed on the New York Stock Exchange and the Nasdaq.)

A virtual and digital currency, bitcoin is not backed by the U.S. government or any other entity, and no central organization regulates it. Its value is based on what people think it's worth, and that value has soared over the past decade or so -- with much volatility. The price of each token peaked above $67,000 in late 2021 and was recently around $47,100. It's meant to be used as a currency, but many view it as an investment.

If you're interested in bitcoin or other cryptocurrencies, read a lot about them, pro and con, as there are more than a few risks. It's perfectly sensible to just stick with stocks or other conventional investments for long-term wealth building.

Q. Are bank accounts insured? -- I.N., Kaysville, Utah

A. Most bank accounts are insured by the Federal Deposit Insurance Corp. (FDIC), and credit union accounts by the National Credit Union Administration. The FDIC insures checking, savings, money market accounts and CDs for up to $250,000 per depositor -- at each bank, for each account ownership category. Some entities offer more coverage than that, while some don't offer FDIC protection at all, so make sure your bank is among those covered.

The FDIC does not protect stocks, bonds, mutual funds, crypto assets, safe deposit boxes (and their contents), life insurance policies and annuities, among other things. Learn more at FDIC.gov. And visit SIPC.org to learn about the Securities Investor Protection Corp., which protects most brokerage accounts.

Fool's School

Control Your Financial Life

It can be hard to get ahead financially when you don't have a handle on where all your household income is going. So consider setting up a budget. It might sound excruciatingly boring, but it will be rather exciting when it starts delivering results. Budgeting can help you achieve your financial goals, such as a comfortable retirement. Here's how to build a good budget:

Start by listing your total annual income -- including all paychecks, along with any other income, such as from side gigs or rental properties.

Next, track where all your dollars go. Jot down every regular (e.g., weekly, monthly, annual) expense you can think of. These might include rent or mortgage payments, debt repayments, utility and telecom bills, insurance premiums, taxes and so on. Then go through your credit card statements and bank statements to find any you missed. Those statements can help note most of your other spending -- such as restaurant meals, concert tickets, clothing or gifts. Try to categorize and total these expenses; you might find that your household spent, say, $5,000 at restaurants last year. (Spreadsheets help here.)

Now think of all your financial goals, and how much you will need to sock away each month to reach them. For example, you might determine that in order to amass the nest egg you think you'll need, you will have to save and invest $1,200 per month.

Putting it all together, you'll see how much money is coming in and out each month -- or year. (It can be helpful to use monthly figures for income and expenses, so adjust various figures as needed, such as dividing your annual home insurance bill by 12.) Take your income and subtract all mandatory and high-priority expenses, such as food and retirement savings. With what's left, you can plan your discretionary spending. If there isn't enough, see what spending can be trimmed -- perhaps some streaming services or a lightly used gym membership.

My Dumbest Investment

Sold Toyota Too Soon

My most regrettable investment happened decades ago. In 1968, I bought 200 shares of Toyota Motors. I later heard that there might be a reverse split coming up. My broker said the company was doing well and not to worry, but I didn't listen. I sold in 1970 for a profit of a few pennies per share. I know that had I hung on, I'd have profited very well. -- C. J., online

The Fool responds: Reverse splits are indeed red flags, often executed to prop up a stock's price. (Whereas a regular stock split multiplies your number of shares while reducing their price proportionately, a reverse split shrinks your number of shares while increasing their price. Both leave the total value of your shares unchanged.) But trading on mere rumors can lead to regrets, as you learned.

It's true that hanging on to shares of great and growing companies for decades can lead to tremendous gains, but don't kick yourself too much, because it's not always easy to see which companies will be dominant decades from now.

Toyota began selling cars in the U.S. in the 1950s. By 1967, it was the third-bestselling import brand in the U.S., and by 1975, it was No. 1. As of 2021, it had built more than 30 million vehicles in America.

(Do you have a smart or regrettable investment move to share with us? Email it to [email protected].)

Foolish Trivia

Name That Company

I trace my roots back to 1976, when a store called Price Club began in a converted airplane hangar in San Diego. Another company bearing my current name opened its first warehouse in Seattle in 1983, and it was the first company to grow from zero to $3 billion in sales in less than six years. Those companies merged in 1993, and today, I'm a retail powerhouse, with a recent market value topping $320 billion and 872 warehouses around the world (including 600 in the U.S.). On average, I only mark up products by 11% to 13%. Who am I?

Last Week's Trivia Answer

I trace my roots back to 1948, when two brothers devised a streamlined system that let them offer hamburgers for 15 cents at their self-service drive-in restaurant. In 1961, a milkshake-mixing machine salesman bought their business for $2.7 million in order to franchise it widely. Today, based in Chicago, I'm one of the biggest quick-serve food retailers in the world, with more than 40,000 locations. I serve close to 70 million customers per day, and it's been estimated that 1 out of every 8 workers in America has at some point worked at one of my locations. Who am I? (Answer: McDonald's)

The Motley Fool Take

Calling AT&T

AT&T (NYSE: T) is facing challenges and may not grow briskly, but investors seeking income might want to consider it: The stock recently sported a hefty dividend yield of 6.6%.

Burdened with long-term debt, AT&T cut its dividend nearly in half in 2022 and has kept it steady since then. Future dividend cuts are always a possibility, but the payout seems sustainable at the moment: AT&T generated $16.8 billion in free cash flow in 2023, and paid shareholders about $8.1 billion.

The company is growing, albeit slowly. In its recently reported fourth quarter, revenue was up 2.2% year over year, and full-year adjusted operating income increased 5%, topping $23 billion. Management boasted that it "continued to enhance the largest wireless network in North America and expand the most reliable 5G network," which covers more than 210 million people, and that it's growing "the nation's largest fiber network, which now passes 26 million+ consumer and business locations."

CEO John Stankey has noted, "In addition to delivering high-margin revenue growth, fiber is more energy efficient, requires less maintenance and customers keep the service longer."

With a recent price-to-earnings (P/E) ratio below 9, and well below the five-year average of 26, AT&T's stock appears undervalued, and its dividend yield is quite attractive. Income seekers might want to buy some shares -- but monitor the company's progress, as a golden future is not guaranteed.

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