Some energetic insight
Posted by Mike
I've been wondering recently about energy investments, and BP in particular. Not to undermine the tragedy of the oil spill, but it may have a number of immediate and long term effects in the energy market. My environmental side hopes this helps push alternative energy sources a little further into the mainstream.
In any case, Fortune magazine recently interviewed T. Boone Pickens, a successful financier and energy investor. Check out the interview - if nothing else, it offers some insight into the fact that even the most experienced investor still isn't sure what to do with your investments in the short run.
Some thoughts on banking
Posted by Mike
As promised, here's a short post inspired by BankSimple's blog:
A lot of people don't fully understand how banking works at the fundamental level - especially when it comes to the fees we see as consumers. The basics are spelled out in this blog entry, which, admittedly, is somewhat of an indirect advertisement for BankSimple. It explains that since deregulation in the 70's, transaction fees have been the key to profit for large banks. Things may be changing with the new regulations, but we'll have to wait a few months to see how it all pans out.
Allocate the future
Posted by Mike
I just came across a tool that seems pretty interesting (free registration required). It's a calculator that looks at the probability of getting a return over a period of time given your initial investments, monthly contributions, and the allocations of your investments. So, for example, if I have a $10,000 portfolio today, and invest $500 a month, then it tells me:
- if my portfolio is invested "moderately", I have a 71% chance of having $250,000 after 25 years
- if my portfolio is invested "aggressively", I have a 75% chance of the same
- if my portfolio is invested "conservatively", I have a 0% chance of having $500,000 after 25 years... oops...
"Modest", "aggressive" and "conservative" are pre-set asset allocations, but you can redefine these to match the allocation percentages in your portfolio, choosing from five asset types:
- cash holdings
- bond holdings
- large cap stocks
- small to medium cap stocks
- foreign stock
Try it out and see what you think.
Don’t want to bank on banks?
Posted by Mike
A few days ago, I posted about Mint.com, and I wanted to follow up with a few other online services that I've seen that may be useful. Most, if not all of these have been written up in a recent New York Times article, which has some useful information.
Now these aren't like mint.com in that they work as banks. Mint.com doesn't let you move any money - you can only see your accounts - but these services are online alternatives to your everyday checking and savings accounts. I'm not going to go into the deep details of each service, partially because I don't have first hand experience with each, and partially because Murphy's law states that any details will be changed as soon as I publish this, but here's a slightly annotated list.
SmartyPig: SmartyPig is meant to be a savings account replacement, offering relatively high interest rates (currently 2.15%) , as long as you keep a low balance. If you save more than $50 000 with them, your interest rate falls to 0.5%.
PerkStreet: PerkStreet offers you an alternative to your everyday checking account. They offer free checks and no-fee banking, and you can even get cash back on debit card purchases. Check out all the details though - and shop around. This may be one that looked good to me, but it also may not be the best one out there.
ING Direct: Perhaps the original online banking option, ING offers just about everything any other bank would, but with higher interest where you want and lower interest where you don't.
Bank Simple is an up-and-coming online bank option that seems to have the right philosophy - happy customers means loyal customers. They have a little info about how they'll work, as well as an interesting blog that may inspire a few future posting here. I'll let you know as soon as I see they're up and running.
That's it for me - do you have any other suggestions?
Save yourself from any flation…
Posted by Mike
Although a few months old, an article I just read offers some interesting tips to protect yourself against either inflation deflation. Now it's true that this was written a few months ago, but their points are still valid:
Basically, the market hasn't recovered from the financial crisis - we've seen in the news this past week that unemployment is a major concern, and that housing sales have dropped since the federal tax credit expired. As people continue to avoid spending, we may see prices drop, which would lead to a deflation of the American dollar. On the other hand,other's say that recent government spending (and a $13 trillion debt!) may cause just the opposite - a high inflation rate.
So the question is, how to avoid trouble in either circumstance. Their suggestions are to invest in:
- Stocks with pricing power
- Cash-rich blue chips
- Emerging-markets stocks
- Inflation-indexed bonds
- Foreign bonds
- And commodities and real estate
Check out the article for a more details on each (same link as above).
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.
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?)
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...