Less talk. More stock.
Posted by Mike
We've all had that moment when you look at the stock prices and think, "Why didn't I actually invest that money instead of buying another Tron motorcycle?" Well, maybe not that exact moment; I know some people went for the Batmobile replica.
In any case, if you've decided to avoid these moments in the future and to start investing, you'll need to find a stock broker. Brokers can range from a self-service stock trading service online to a full-service investment advisor and manager. Depending on your confidence - and experience - an online trading service may be right for you, and we'll look at some of these later. Right now, though, take a look at some articles that discuss how to make this decision and what to consider.
Plenty of websites have articles about picking a stock broker. You can check out those on moneyunder30.com, allbusiness.com, and ehow.com, for example. The biggest lesson, of course, is that when you hire someone you should make sure you know exactly what you're buying - both in terms of service and stock.
Time to go condo shopping?
Posted by Mike
Just a quick post today...
CNN Money today offers some advice to people looking to take advantage of today's condo market:
After falling 20% nationwide and 60% or more in the hardest-hit areas, median condo prices remained flat nationally in the first quarter vs. a year earlier. And sales in March were up 40% from the previous year, hinting that prices might be heading back up soon too.
Before you jump on any new development, though, you'll want to make sure you're making a smart purchase. Their advice? Only look at completed developments that are 80% occupied. Check out the article for more (same link as above).
I'll write a little more about condo mortgages in our next My First Mortgage, coming soon.
The cost of healthcare
Posted by Mike
Now don't get me wrong - I believe everyone has a right to medical care - and hence medical coverage. But then again I also believe in the ruthless destruction of newly obsolete hardware...
That said, I think it's important to know how healthcare is paid for - because it doesn't come cheap (fact sheet in PDF form). CNN's Money posted an article a few weeks ago that I neglected to talk about, and I think in light of all the reforms that are about to take place, it 's worthwhile mentioning it now.
The health-care bill that Congress passed in March contained two surprising new taxes to help pay for the changes: an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people (technically, people with "adjusted gross incomes" above those amounts).
So what does this mean to you? Well if you fall in the high-income bracket, it means that you should be budgeting for a tax hike. It also means that you should be proud to pay it. Your money is saving lives.
Keep on keepin’ on
Posted by Mike
A thought crossed my mind a few years ago - I could live relatively well off of interest accrued on a savings account with a $1,000,000 balance. Why not just make a million and then relax?
Well aside from the difficulties of the first step, there are some other things to consider about the logistics of living off interest. In fact, someone else asked a Money Magazine's "Expert" this very same question (albeit in relation to retirement savings), and Walter Updegrave, wrote a pretty good response. In essence, he notes that you have to consider things like inflation and how your money is saved. For example, if you account for an annual reduction of the buying power of the dollar, you may find that $40k just isn't quite enough to do what you want to do in a few years' time. To be honest, when I thought about this, $40k annually seemed pretty good. Now, about 5 years of inflation (and maturity?) later, I'm thinking I'd want to be bringing in more than that - especially if I have a million in the bank.
As mentioned, the linked article really discusses the question in terms of retirement funds, so extra factors - like higher tax rates - may change things a little for the working individual, but the principal is the same. (See what I just did there?)
More from Toronto
Posted by Mike
Big news comes today as the G20 summit closes and a number of participating nations promise to halve their deficits by 2013. There isn't too much to discuss on the issue - especially as this doesn't yet have direct impact on financial advising, but I thought it was worth a quick note.
Certain things
Posted by Mike
They say that two things are certain - death and taxes. I'd like to add a third: violent protests at G20 summits.
While protesters in Toronto are burning cars, breaking shop windows and even damaging media vehicles (you can read a real-time blog here), leaders from the world's richest nations are having some serious discussions about financial institutions.
Aside from the new regulations being imposed on US financial institutions regarding credit cards and debit card transaction fees, President Obama is expected to sign a bill in July that would impose a $19 billon tax on large banks and hedge funds. The bill may be largely due to pressure from G20 leaders, many of whom are instituting similar taxes in their respective countries.
While the taxes vary from country to country, the reasoning behind them is basically the same: to ensure that banks are responsible for the risks they take and not taxpayers.
"The failures of the banks imposed a huge cost on the rest of society," said George Osborne, the U.K. Chancellor of the Exchequer. "I believe it is fair and it is right that in the future banks should make a more appropriate contribution, which reflects the many risks they generate."
In addition, Congress is discussing another $90 billion Financial Crisis Responsibility Fee.
Interestingly, some G20 leaders suggested imposing a global bank tax, but this was rejected by leaders of countries whose banks didn't require any aid.
Personally, I think these new taxes and fees are fair moves given the banks' roles in the crisis that we're still recovering from. That said, I'd like to add a fourth "certain thing": New bank taxes being paid from their customers' pockets instead of their profit.
Any thoughts?
Return of the living dividend
Posted by Mike
This chart, posted today by the Wall Street Journal, shows a few examples of a bunch of dividend payouts that are being increased, "just months removed from one of the worst years for corporate dividends on record".
This is good news for a lot of people, as dividend payouts on the S&P 500 were reduced by some $52.6 billion in 2009. What's a little interesting is that there were 78 dividend reductions last year, but 135 companies have already announced increases for 2010. This may be a sign of how good things are - or a sign that I'm missing the numbers for 2008 - I'll have to get back to you.
There's a lot more in the WSJ article (same link as above) about the implications of this - for example, tax rate caps that were made under the Bush administration are set to expire, which could double what you pay for your new dividend payouts. Take a look - and let us know how much better you'll be doing in 2010.
Credit where it’s due
Posted by Mike
More news today about the new financial legislation that's set to reform how Americans borrow:
You may remember our discussion a few days ago about the end of free checking accounts. The New York Times today reports on the proposed changes to debit card fees that I mentioned. Although nothing's been finalized yet, it's confirmed that the house and senate want the federal reserve to impose limits on the fees that are collected from merchants - which amounted to $19.7 billion last year...
A little more immediate are further changes that will be put into play on July 1. Essentially, the governement is making it very difficult to extend credit where it isn't 'due'.
The federal government... is for the first time requiring that lenders verify a borrower's income and assets before issuing a home loan. It has also slapped broad new rules on credit-card issuers, limiting their ability to boost interest rates and charge certain fees.
There are some interesting further changes, for example maximum interest rates on payday loans, that may be much better for the consumer, but will also reduce the credit available in the country. (I'm trying to remain unbiased...) Some states will be enforcing new regulations from July 1 as well.
I don't think I can have any idea what kind of impact these new laws might have on your personal finances, but I can say that it's important you educate yourself about them. When a bunch of new regulations are enacted, there are a lot of changes to make in a lot of computers, and that can mean a lot of things going wrong. Making sure you know what banks and lenders are and aren't allowed to do is your best defense against glitches (and against "glitches", with quotation marks).
Don’t go with the flow
Posted by Mike
It's now official - we're biologically wired to go with the crowd. A recent experiment, discussed here by the Wall Street Journal, shows that people feel more than safety when they move with the crowd - we feel pleasure:
In the experiment, researchers from University College London and Aarhus University in Denmark asked 28 people to submit a list of songs they wanted to buy online and then to decide which they would most like to own.... The brain scans showed that as soon as people learned they had chosen the same song as the experts, cells in the ventral striatum—a reward center wired with dopamine neurons that respond to pleasures like sugar and sex—fired intensely.
Jason Zweig, in his article, claims that this explains why investors move together - and rightly so, I think. They buy what everyone else is buying, and they sell when everyone else is running away, because it keeps them happy.
So how does this help your investing? Zweig claims this is a good reason to move against the herd. He suggests using a list of new 52 week lows, and finding within it a company that you think is worth investing in - "while ignoring the current price of its stock." In essence - check out the cheap stocks prices, and find a good deal.
Sounds like a good idea to me, but of course, that might be because he's already said it...
My First Mortgage: Part Three
Posted by Mike
We've discussed a little bit about how mortgages work, and what kind of options are out there. Now we're going to take a few minutes about the hard part: negotiating.
Negotiating your first mortgage can be tricky - it involves researching, budgeting, shopping around, and planning or weighing possibilities about where you want to be for up to 30 years into your future. Oh yeah, and negotiating. Now I'm not sure what I can do about your negotiating skills, but here are some resources to help with the rest of it:
To start, eHow has posted a list of the first moves you should make, from improving credit to talking to multiple brokers. You can also watch this interview with Doug Melville, Canada'a banking ombudsman (yes, Canadians get mortgages too, eh!).
Perhaps most important in the negotiation process, you should get an idea of what part of your quoted price is negotiable. Specifically, you should pay attention to when you can negotiate interest rates, and what fees you can reduce. (That last one isn't fantastically well written, but might be helpful.)
Next, you should keep up to date with interest rates so that when you walk into your broker's office you know how what kind of offer you're getting. Check out the mortgage rates posted on CNNMoney, which can be specified to your zip code.
Finally, although I'm not sure I totally agree with these tactics, if you want some advice with how to negotiate, you can check out this article that suggests you resort to a "higher power" to do your bidding...