During the past few weeks we have discussed charity donations, volunteering, as well as our banks philanthropic efforts. DINKs, I ask you…are you a socially responsible investor?
Are you green? Do you recycle? Do you use eco friendly materials? A new investment trend on the market is Socially Responsible Mutual Funds. When I refer to Socially Responsible Mutual Funds as a new investment trend, I don’t mean that it is a new investment concept. I am simply observing that it is starting to reach out to the masses.
Socially Responsible or Socially Savvy Mutual Funds invest in eco friendly companies or companies that pledge to maintain sustainability in sectors such as climate change. They don’t invest in companies that are considered to be harmful such as alcohol and tobacco companies.
Some examples of Socially Responsible Mutual Funds are as follows:
The TD Global Sustainability fund seeks “to achieve long-term capital appreciation by investing primarily in equity securities of companies around the globe, that are viewed as contributing to the world’s future sustainability.
The Alger Green Fund normally invests at least 80% of assets in equity securities of companies of any market capitalization that, in the opinion of the management, conduct businesses in a socially responsible manner. They consider Apple Inc., Wal-Mart Stores, Microsoft Corporation, and Google to be socially responsible, as they are listed in the funds Top Ten Holdings.
The Neuberger Berman Socially Responsive Mutual Fund claims to be “one of the world’s first socially responsive mutual funds”. It is an average risk fund with a higher than average historical rate of return, according to the fund profile. The Top Ten Holdings include the Washington Post Company, Yahoo Inc., and 3M Company. The Top Three Sector Investments are Information Technology, Industrials, and Energy.
Does your personal opinion affect the way you invest?
Everyone has their own investing strategy. Maybe Socially Responsible Mutual Funds are a good fit for your investment portfolio. But, on the other hand, maybe they aren’t. If you are considering adding a new mutual fund to your investment portfolio it is a good idea to track the fund’s performance, as well as do a little bit of research before investing.
Yahoo! Finance is a great resource to obtain information on Mutual Funds and Stocks including the current selling price as well as past performance. This is a free service and it is available to everyone.
Morningstar is the widely adapted Mutual Fund rating system. They are a non biased third party that rates and evaluates all Mutual Funds. Morningstar rates Mutual Funds on a star system according to past performance, volatility, and distributions (among other criteria). Five stars is the best rating, and 1 star is a poor rating. If you would like detailed information about a Mutual Fund as well as a third party opinion then Morningstar may be a great service for you. You can register with Morningstar for free, or you can subscribe to their Premium membership for a fee.
Choice is always good. But, what happens when our choices define our class? If there was only one type of checking account, and one type of banking account then we would all be equal. The elimination of different monthly bank account packages would eliminate the banking classes. It is bad enough that the amount of money we have determines the level of service we receive, but our monthly bank account package can also determine our banking class. If you don’t have enough money, you will be caste out of the bank world.
Just like most things in life, with banking, you get what you pay for. If you want a superior service then you must have a superior (more expensive) monthly banking package. This week I was standing behind the tellers to provide overrides for their clients. I was shocked to realize that tellers offer different levels of service to different clients.
The biggest client (most profitable) in my branch can walk in at any time on any day and he will bypass any line up in my branch. Everyone seems to stop what they are doing and take the time to say hello to him. He is very demanding, and at times he can be a very difficult client. He does hassle our tellers regarding his fees, and they quickly process a refund without hesitation. I found this weird because banks make money on charging our clients monthly fees, yet we waive fees for him no problem. This client is a millionaire many times over, and therefore he can afford to pay the fees. Should his amount of money give him the right to be demanding?
Clients with large amounts of money are generally professionals and therefore treat our bank employees with respect. However, if there is a problem with their account, clients do not hesitate to mention the amount of money in their accounts. “I have over a million dollars in this bank.” is a phrase often heard in my branch. I work in a residential area where there are a lot of homeowners, small independent businesses, as well as clients who own multi unit rental properties.
Is the Modern Day Banking System just another way for our society to separate into different classes? People with lower amounts of money are considered to be worth less as clients. Therefore, they are caste out onto an island where excellent customer service does not exist. A client who is cashing a cheque is considered to be less valuable than a client who is depositing money.
Our credit score can determine several important financial aspects of our lives such as whether or not we are offered a job, the daily withdrawal limits on our debit cards, the amount of our insurance premiums, and whether or not our mortgage is approved.
It is important to regularly order and review your credit report (and your score), because it allows us to keep up to date on all our open credit accounts and history.
A client with a credit score of less than 600 is considered to be a high risk client. A credit score of over 800 is considered to be a very good, and it could allow us to receive the best credit products, a superior service, as well as lower interest rates. A low credit score doesn’t necessarily mean that we are financially irresponsible. It could mean that we have more debt than we can afford compared to our annual income, even though our payments are always made on time. A lower credit score could also mean that we have a lot of recent inquiries from creditors on our credit report.
In general it takes 6-12 months for a person to start rebuilding their credit history. Coincidentally, this is exactly how often we should order a copy of our credit report. It is good to order our credit report once or twice a year to view all credit accounts in our name and make sure our personal information is up to date. If someone is declined for credit, we advise them to reapply within 6 to 12 months.
Younger couples who are saving for a mortgage, or who have a lot of outstanding debts should view their credit report twice a year to make sure their information is reported correctly. Older people who may already be financially stable, and don’t often apply for credit or use their credit cards, should order their credit report once a year just for information purposes.
Personally, I order my credit report once a year because I don’t often apply for anything that requires a credit inquiry. I already have a stable job (knock on wood) that I love, as well as two credit cards. However, if I decide to open a new bank account, or change jobs, or apply for another credit product I would definitely order my credit report beforehand. I like to keep up to date on my credit report because I’m organized. However, my boyfriend Nick thinks that I’m just being a control freak.
Our credit report shows all credit applications, inquiries, as well as all open credit accounts. It is important to pay our bills on time and always make at least the minimum monthly payments on our credit cards. Whether we make the minimum monthly payment, or we pay more, it doesn’t matter. For our credit score all that matters is that we make the payments on time.
It is not only credit card companies that report our payment history, utility companies also report to the credit bureau. That’s why it is important to always keep our bills up to date. Technically, we have almost 60 days to make payments before it affects our credit. Creditors report our payment history on a monthly basis, usually at the end of the month.
As an example we receive our VISA bill on September 1. The payment is due on September 21. It doesn’t affect our credit until it is past 30 days late, which would be approximately October 21. Therefore, we have from the date we received the bill on September 1 until October 21 to make the payment until it is reported to the credit bureau at the end of the month, even though the payment is due on September 21.
I wouldn’t suggest that we take advantage of this though. Late payments often incur a late payment fee as well as additional interest. Remember that credit card interest is charged on our average daily balance.
If you’ve never pulled your credit before, start today! In the U.S. you can get an honest to goodness report from all 3 major credit reporting companies (Experian, Equifax, and TransUnion) for FREE once a year through Annual Credit Report.com. It’s the official site in accordance with the Fair and Accurate Credit Transactions Act (FACT Act). It doesn’t give you your credit score (that, you have to pay for), but you can at least get full transcripts of your record. And that’s one of the most important things to watch.
Everyone wants the hottest new investments, preferably investments with the least amount of risk but that offer the highest rates of return. The reality of the financial world is that this type of product does not exist. High risk investments may offer the highest potential return, but nothing is guaranteed.
In a bear market when investments are declining in value, these types of investments will probably have the greatest losses. However, during a bull market when the values of investments are rising, these same investments may offer the highest return. It is a question of risk vs. reward. Are you willing to take a certain amount of risk for a potential (but not guaranteed) reward?
One of the latest investment trends, and the most requested by clients, is Emerging Market Mutual Funds. These are usually Equity Funds that purchase stocks of companies in particular sectors, or corporate and government bonds of a particular geographic area.
Emerging Market Mutual Funds focus on developing countries that usually produce or manufacture goods. Emerging Markets are not quite yet the leaders of the financial pack. They are rising stars who are about to jump onto the financial map. The current focus is on countries such as Mexico, China, Brazil, and India.
To provide some examples, here are 4 different Emerging Market Mutual Funds:
Manulife Emerging Markets Fund focuses on Brazil as well as the Financial Sector.
JP Morgan invests in China, India, and Brazil with their 4-Star Emerging Markets Fund. Financials, Consumer Staples, and Information Technology are the top 3 sectors in this fund. JP Morgan Funds also offer a Russia Fund, an India Fund, as well as a China Region Fund.
Fidelity Emerging Markets Fund invests in Russia, Brazil, and South Korea. This fund has been around for a while, and has a positive return over a long 10 year period.
RBC takes a different approach with their Emerging Markets Bond Fund. They decided not to focus on growth, and to buy bonds rather than stocks. I hold this fund in my portfolio because fixed income is considered to be less risk than equity mutual funds. Investing in Emerging Markets is already a high risk investment, so I decided to gain foreign exposure through fixed income in hopes of lowering my potential losses.
As Emerging Market Mutual Funds are a relevantly new investment trend, the historical rates of return usually do not expand beyond 3 years (of course there are always exceptions). Historical rates of return are never an indicator of future performance. But, it can give us an idea of how the fund performs during different market cycles.
When choosing a Mutual Fund I always look at the Investment Holdings, the Sector Allocation, as well as the Rate of Return Since Inception. Emerging Market Mutual Funds are considered to be high risk investments and should always be invested for the long term.
If you are considering investing in an Emerging Market Mutual Fund (or any other Mutual Fund) but you aren’t quite sure; please send us your questions and we would be happy to provide some information.
You may remember my friend Rosemary from my previous post called Funding Our Parents Retirement. She is a lawyer who recently left DINK-hood to become a mother. Before Rose became a successful lawyer, she was a successful banker. When we worked together on the same team we had a co-worker named Matthew.
His weight was excessive and his organization was nonexistent. Depending on the day, the season, and the temperature we could smell something “not quite right” coming out of his office. The one time that Rose went to his apartment she saw several stacks of papers all over his living room, kitchen, and hallway. Any type of newspaper, magazine, or flyer she could think of, he had piled up in his one bedroom apartment.
I always attributed his disorganization to the fact that he was a bachelor and a bit of a pack rat. I attributed his extra weight to the fact that he was always eating out; which again, I thought was because he was a bachelor. One day Rose mentioned to me that people rarely have only one aspect of their life out of control. People who don’t control their weight, or their clutter, may also not control their finances. If someone is financially irresponsible they are often irresponsible in general. It is not a financial fault; it is a personal trait that needs some correcting.
One day we could have it all…a great job, an expensive home, and a lovely family. But, with one single mistake it could all come crashing down. When we lose control of one thing, if we don’t regain control of it, we could lose everything we have. We witnessed this with the dot com crash as well as the current economic financial crisis. If any of us have ever experienced a run of bad luck, we know how hard it can be to regain control over an uncontrollable situation.
I would like us to all think about our personal life, and how our personality controls our financial situation. Maybe your good (or poor) financial habits are just an overflow of our personality traits.
Are you a “neat freak” who always has to control everything? Do you keep impeccable financial records?
Are you a “go with the flow” person who never plans anything? Is your definition of a budget…Spend it if you have it?
If we want to make financial changes in our lives, we should try to make a general macro change. The individual micros will all fall into place. Organize your closet, and then your checkbook.
With the entire world going green, banks have also jumped on the green train. It appears that our banks are now publicly supporting a good cause. Not only does our bank charge us monthly fees, they also want to hit us up for monthly donations towards their charity of choice.
Last Friday I was away from my bank branch for a conference. I forgot my debit card at home, and therefore, I went into a branch with two pieces of identification to withdraw money. My employer is not my primary financial institution, and I haven’t been to a bank branch as a client in almost 4 years.
I was pleasantly surprised to see posters for my banks charity and environmental fund beside the advertising posters for a new travel credit card and their new cash-back mortgage promotion. Has hell really frozen over? Are the tin-men of financial institutions starting to grow hearts, or it is just all for good publicity? Maybe the heartless bank feels that if they show a bit of compassion their clients will show them more money.
If your bank supports a charity, do you make monthly donations to support your banks good cause?
Here are the charities supported and founded by some of our financial institutions:
RBC is concerned about The Environment and their Carbon Footprint. They discuss Climate Change Solutions in detail on their website. Their Canadian website focuses on their founded Blue Water Fund and that they were named as one of Canada’s Top 100 Greenest Employers. Those of you who are familiar with RBC their colours are blue and yellow. They created The Blue Water Fund. Is the blue significant of clean water or is it representing the RBC brand?
HSBC is The World’s Local Bank and their brand color is red. What environmental or social cause could be supported by the color red? The red hot equator, of course! As a large international company and the world’s biggest bank HSBC focuses on global issues such as climate control through their HSBC Climate Partnership with organizations such as The Climate Group, Earth Watch, the World Wildlife Fund, and the Smithsonian Tropical Research Institute.
I was pleased to learn that HSBC also supports several Children’s Education funds. They founded Future First in 2006, which “provides access to education and teaches life skills to deprived and excluded children.” They also recently launched the HSBC Eco Schools Climate Initiative which aims “to inspire action on climate change by improving schools’ environmental efficiency.”
TD Bank is known as Americas Most Convenient Bank. “Learn what we are doing to help the environment” is posted on their homepage; and it declares that TD Bank is Now Carbon Neutral. Their webpage discusses how TD Bank will save energy and how they will help their clients save energy.
The Canadian equivalent of this initiative is TD’s Friends of the Environment Fund. They actively solicit their clients for donations. On both the American and Canadian sites the homepage is smothered in green leaves and flowers. TD Bank’s brand colour is also coincidently green. Branding opportunity or honestly a good effort?
As consumers in North America continue to live on credit, identity theft has become an ever concerning problem.
According to Word Net the definition of Identity Theft is “The co-option of another person’s personal information (e.g. name, Social Security number, credit card number, and passport) without that person’s knowledge and the fraudulent use of such knowledge.”
Financial Institutions are helping their clients be aware of Identity Theft, as well as the damage it can cause. Citibank has launched a number of television commercials to make clients aware of the services available to us to protect ourselves from fraud. Credit card companies also have several prevention methods which help protect clients from potential fraudulent activity.
Our credit card purchases are monitored by a system that detects unusual activity in our spending habits. I recently bought a new television with my MasterCard to take advantage of the extended warranty. Within 24 hours of my purchase, I was contacted by my Financial Institution to ensure that I processed this transaction.
As you know from previous posts, I am not a huge fan of living on credit. This large transaction at Best Buy was flagged by MasterCard because usually I only buy groceries and gas with my credit card. The transactions on my MasterCard are usually under $125, and then all of a sudden there was a $2000 purchase on the card.
Identity Theft can happen in several different ways such as a stolen credit card, a fraudulent application and a credit takeover. The most common type of identity theft is when our credit cards are stolen. The person pretends to be the cardholder and uses the card to make purchases as if it was theirs. There is no change of personal information or new credit application. The person steals our credit card and makes purchases with it until we report it lost and stolen. This type of fraud does not affect our credit bureau, but it does affect our monthly bill and our minimum payments.
A fraudulent application is when someone steals your personal information and makes a credit application in your name. The information is true, but the person who is filing the application is fraudulent.
A credit takeover is when someone assumes your identity. They claim to be you and then change your contact information and other personal information to their own. They maintain your name and credit score, but they change the address and phone number so that everything is delivered to their name.
Here are 5 ways that we can keep our credit safe:
1) Know your credit score. Order your credit bureau 1-2 times a year to make sure that all information is accurate.
2) Get your bills e-delivered to your inbox. When my MasterCard or Cell Phone bill is ready I receive an email alert. Afterward, I log into the site with my user name and password to view my monthly statement. This prevents someone from stealing your personal information via mail.
3) Keep your Social Security Card and Passport at home. Don’t carry important documents around in your wallet or purse, just in case they are lost or stolen.
4) Enroll in a service that monitors your credit bureau. Flag your credit bureau so that you are contacted each time an inquiry is made or an application is processed. You will receive a phone call or text message to confirm your identity before any new applications are approved. You can inquire about this service with your financial institution, or directly with the credit bureau companies.
5) Advise your Financial Institution when you are traveling. Unusual spending patterns are flagged and often declined by credit card companies, this includes spending outside our geographic location. Contact your financial institution and let them know when and where you will be traveling.
It seems like we have rules for everything in finance. We have a rule regarding the maximum that we can contribute towards our retirement savings plans each year, and we have a rule about how much annual tax we should pay. What about life’s uncertain financial situations that don’t come with a rule book. Who determines the rules for life’s unplanned events?
This past week my clients, my family, and even our DINKs friends discussed several different life events such as selling an investment property, searching for a job in this tough market, and dipping into our rainy day accounts. The question at the end of these conversations was always the same…Normally, what should people do in this situation?
Regarding personal finance, there is really no normal because everyone’s personal situation is different. However, we have the unwritten Rule of Three. I am not sure how, or why the number 3 became a norm in finance world, but this past week I referred to it at least three times.
Two years ago, when the market was taking a turn for the worst, people kept asking “when is it going to get better?” My standard reply was always the same…If it takes one year for the market to hit rock bottom, it will take three years to fully recover. The truth is, no one really knows exactly when the market will fully recover.
Three years ago my friend Taylor bought a triplex as an investment with two other girlfriends. I told Taylor from the beginning that three single girls investing together in a triplex property was a bad idea. However, Taylor was sure that she was making the best financial decision. Now, the three girls are not talking to each other after a huge falling out, and two of the three units are currently not rented. The bank, of course, still wants their mortgage payment every month. Needless to say, this is adding unnecessary stress to an already stressful situation.
Due to personal differences, the three girls have no choice but to put their property up for sale. But, in all honesty, who wants to buy an investment property that has no revenue coming in? I know that I wouldn’t.
Taylor is expecting to put the property up for sale this week, and have it sold by the end of the month. She is not expecting to pay the October mortgage payment out of her pocket. I told Taylor that it is unrealistic to list a property and sell it, within 30 days. In general, I advise my clients to stick to The Rule of Three when listing a property. People should plan for three months of expenses including utilities, taxes, and mortgage payments; because it could take up to three months to sell a property. It is unrealistic to expect to sell a house within a few weeks.
The most widely known Rule of Three in Finance may be the savings rule for our rainy day accounts. Some financial planners advise people to have 3 full months of their annual salary saved away for a rainy day. Other financial planners say that we should save three months of total monthly expenses. Regardless of whether we base it on our annual salary, or on our monthly expenses, the general rule is to have three months of security saved away.
The reason we say that we should have 3 months of savings is because generally it takes 3 months to find a new job. In the post titled What To Do When Your Nest Egg Cracks our reader Hope to Prosper commented that he has survived 2 layoffs thanks to his rainy day account.
The next time we are faced with a difficult financial decision, we should remember the solution may be The Rule of Three.
It’s a well-known fact that money issues are often the root of marital distress. Finances can be a difficult subject in general, especially in today’s economy. So when a spouse spends with reckless abandon and shows no sign of slowing down, what can you do to put a stop to it and save your marriage?
For anyone who has seen Inception, establishing the notion that saving is important in your spouse’s mind could actually work quite well. However, until it’s actually possible to enter another person’s dream, rummage through his or her subconscious and plant an idea, here’s how you can use the principles of inception to trick your spouse into saving more money.
(Warning: You may want to see the movie first.)
The Concept Has to Be Simple
If there is a specific item or event you need your spouse to help save for, like a vacation or new car, you can’t come right out and say it. The concept must be simple to stick. It has to seem organic.
For instance, if you attempt to convince your spouse that he or she needs to save money for plane tickets so you can visit your family next Christmas, they can easily ignore this advice because it’s contrary to what they really believe. Your spouse thinks you will have enough money when the time comes. Your spouse thinks that right now, your DVD collection should be bigger.
Instead, plant a thought that is much broader and isn’t obviously from you. It should play on emotions as well, creating a sense of urgency. Something like, “I don’t want to be poor,” is vague, but powerful, and saving money is the action that would naturally emerge as a response to the thought.
They Must Believe the Idea is Their Own
Inception doesn’t work if the person thinks you gave him the idea. He must have his own “eureka” moment with a thought that seemingly resulted from his own line of reasoning. This is why, once again, a simple suggestion is not enough. You must trick your spouse into thinking he came up with a great idea all on his own.
How to Plant the Seed – A Dream Within a Dream
In order for inception to happen successfully, the idea must be planted deep down in the subconscious so the target never suspects it came from an external source. You must go down many levels and create “dreams within dreams.”
If you want the desire to save money to really sink into your spouse’s mind, you’re going to have to drop a lot of hints. Here are a few ways you can do it:
Leave the morning newspaper lying open on the kitchen table with the glaring story about rising foreclosure rates face up. Later that day, comment on how expensive your mortgage is.
Crank Phil Collins’ “Another Day in Paradise” on the car stereo when the two of you are out running errands.
When your husband or wife wants to go out on Saturday night, explain you have to stay home and clip coupons so you can have the brand name cereal for breakfast.
Leave a job board listing open on the family computer. When your spouse asks about it, explain you’re considering a second job “just in case.”
Potential Drawbacks of Using Inception
Remember that the fundamental problem with inception is that the planted idea becomes an obsession. It grows in the target’s mind until it takes over every thought.
You might wish for a financially savvy spouse and end up with a penny-pinching miser. Your husband or wife could develop an irrational fear of losing wealth and stop at nothing to protect every cent you earn. This is the risk you take.
If that sounds like too great a chance, you can always try to solve the problem by expressing your concerns in a calm matter and seek some sort of financial counseling.
————- This guest post was written by Go Banking Rates, bringing you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide.
Our credit score can determine several important financial aspects of our lives such as whether or not we are offered a job, the daily withdrawal limits on our debit cards, the amount of our insurance premiums, and whether or not our mortgage is approved.
You may remember my friend Rosemary from my previous post called 
As consumers in North America continue to live on credit, identity theft has become an ever concerning problem.