Author Archives: Team Dinks
More Shareholders Rights? YES!!!
Hi All,
Its rare when there is an financial policy coming out of Washington DC that I am happy about. Well, recently, Barney Frank and others have been promoting the idea of strengthening shareholders rights as a way to curb excessive financial compensation.
For what its worth, this idea merits consideration. Two years ago, John Bogle gave a speech titled the Battle for the Soul of Capitalism. In it, Bogle argued that America had switched from Ownership Capitalism to Managerial Capitalism. The wealth is not going to the owners. Evidence for this shift was the fact that the rewards of capitalism have gone increasingly to managers and not to owners. – Witness the increasingly obscene executive compensation packages and declining dividend yields of major US companies.
Here is an interview with Congressman Frank on CNBC. As usual the CNBC guys are being jerks. My apologies to all who are reading this via RSS, you might not be able to view the video.
Click here for more.
Beware Incomplete Mutual Fund Information
Despite the recession, some of you may be looking to buy mutual funds. Provided you can scrape up the cash and are willing to brave the market, you may be wondering about the quality of the information thats available to you. Well, here are some thought to keep in mind when reading the financial media.
1) Pay to Play: Its a despicable practice, but many of the major finance news organizations do “pay to play”. This means that financial companies who want to promote funds will pay publications to feature their products. Sometimes a substandard mutual fund makes it into mainstream publications because somebody is being paid, not because the fund is good. So if you see a fund in a publication that otherwise is a poor value, it might be because of pay to play.
2) Not Enough Information: Very often in advertisements in financial media you’ll see one year or three year return rankings. This is a problem because the performance of funds can fluctuate wildly between years. For example, if you looked at how well a fund has done over the past three years only using the 3 year info, you might get a distorted picture of the funds performance. For example, there might have been a recent stock market bust – or boom, thus distorting the performance of management. Really you need the annualized return over the life of the fund to get a sense of how well its actually performing.
The Kiplinger chart below is better because you can see the 1 year, 3 year and longer than 3 year returns. This gives you a better long term sense of the fund’s performance.
3) Most Fund Information Ignores Taxes: The vast majority of mutual fund information available ignores the impact of your tax situation. This is a problem because of portfolio turnover. Fund managers are forever chasing performance, this means when they sell to lock in a profit you might occur some taxable gains. For most investors, this isn’t such a big issue. It’s not the best play to help you build and preserve your wealth. Not taking taxation into consideration always will affect your ability to preserve wealth. But, when looking at a fund’s statistics, you should get at least a sense of the portfolio turnover, lest you unexpectedly get hit with capital gains.
So, a couple of major reasons mutual fund information gets confused in the mainstream press is that the information is complete or is confused with advertising. Shoppers should adjust accordingly.
Thanks,
James
Reputation
It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do thinks differently.
– Warren Buffet, Investor
Roth IRAs Maxed Out, Exploring Our Options
Hi All,
Just a quick follow up on our financial goals for this year. A few months back, we set a goal of having our 2008 and 2009 Roth Individual Retirement Accounts (IRAs) maxed out. Well, our tax returns finally deposited last night. After a couple of transfers go through then we’ll have maxed out our IRA contributions.
So, over the next couple of days we are likely going to be selecting one or two stocks or mutual funds to put the money into. We’ve got about $6,000 to invest in both accounts. Its nice to have our nest egg taken care of for this year, but it does leave us with the challenge of properly investing the money.
Here’s some commentary.
1) The World Isn’t Going to End. There has been a lot of pessimistic news coverage about the long term health of the U.S. economy. In spite of many obvious challenges to the nations economic well being we are probably still going to be making a long term investment in equities. The reasoning is that America is still a really wonderful place to make money and create wealth, in spite of current economic and policy conditions.
2) Less Risk. This buy will probably be less speculative than our investments in the past. Right now, we’re looking at larger firms, or some sort of bond or stock mutual funds. We’re probably not going to sell everything and buy a block of shares in one particular stock like we did with Hansens Natural a couple of years ago.
3) Our watch list. We’re still mulling things over, but here are the investments we’re looking at:
1) Vanguard’s Total Bond Market Index Fund (VBMFX)
2) Vanguard’s S&P 500 Index Fund (VFINX)
3) Dodge and Cox Stock Fund (DODGX)
4) Nike Corporation (NKE)
5) Apple (AAPL)
6) Target Corp. (TGT)
7) Dell Computer (DELL)
8) Monsanto (MON)
9) Johnson and Johnson (JNJ)
10) General Electric (GE)
Thanks,
James
US Deficit Explained
Good Morning,
At the gym this morning I got a tip off on a couple of pieces in the New York Times about the US deficit; a Sea of Perilous Red Ink, Years in the Making and How We Crunched the Deficit Numbers, by David Leonhardt.
The first article goes in to depth about how the US went from an anticipated $800 billion annual surplus from in between 2009 and 2012, to what now has turned out to be a $1.2 trillion annual deficit during that same period. The reps in Washington definitely are not taking the frugal approach when it comes to managing their(our?) money.
NY Times breaks down that $2 trillion dollar swing into the following chunks:
37% comes from the general budget cycle made worse by the economic crisis
33% comes from Bush style taxcuts and medicare legislation
20% comes from policies put into place by Bush and continued by Obama, namely tax cuts for those under $250k and the continuation of the Iraq war
7% comes from the 2009 stimulus
3% Mr. Obama’s agenda on health care, education, energy and other areas
The second article explains the methodology behind this analysis. Both articles are well worth checking out.
Happy Reading,
Miel
Make it Happen!
Apply yourself. Get all the education you can, but then, by God, do something. Don’t just stand there, make it happen.
– Lee Iacocca, businessman
Guest Post: Throwing a Garage Sale
Hi All,
Well, its officially summer. That means its garage sale season again. For today’s posting, here are some tips from Richart, the CEO and founder of Garagesalestracker.com.
Garage sales are a great way to clean the clutter from your house and make some quick cash at the same time. In these tough economic times this summer will mark one of the biggest garage sale seasons in history because of the need of American families to save more from either shopping frugally at these weekend treasure hunting experiences or selling off their accumulated items to help pay off debt. It’s not a bad money making opportunity, since most of the stuff you are selling won’t be worth the cash you sell them for.
To hold a successful garage sale takes just a few easily manageable steps.
1) Decide what stays and what goes. The big ticket items for a sale that should go if you want to raise some money. These items usually consist of Clothes, Electronics, Furniture, Sports Equipment, Jewelry, Handbags, and Antiques.
2) Set a date for the sale. Depending on the area Friday through Sunday’s tend to be the most popular days for a sale simply because you can start preparing early in the week and by the time Friday rolls around you will be ready to go.
3) Advertise, because without traffic to your garage sale the items will just sit out in the sun and you will realize little to no gain. So put up signs around the neighborhood, put an ad in the local newspaper, pennysaver, and of course we are digital these days so try internet garage sale websites like www.garagesalestracker.com.
4) Make it Descriptive. Descriptions in your advertisement will relatively help entice visitors. The less vague your description the greater the traffic. Sometimes an item may catch a reader’s fancy and they’ll contact you to buy the item before the sale starts but if you want to keep away early birds who come to the sale before the start time to pick up all the hidden treasures before anybody else make sure to mention it in your ad.
5) Get change and labels. Before the big sale day(s) make sure to have proper change and labels for pricing the items. Any craft store or Wal-Mart will carry the tags or you can simply use stick it notes and a sharpie marker.
6) Organize! On the day of your sale make sure to properly place all of your items within eyesight in an organized matter so that everything can be easily found and expect hagglers. Garage sales are a bargain hunters dream so don’t be deterred if your $125.00 table goes for $60.00 – its all part of the adventure.
7) Count it up! The final step is to count your financial success pack up the items you wish to keep. Donate the rest (make sure to get a receipt) and smile.
For some families a garage sale is a life changing event selling off the toys, clothes, and furniture that the kids grew up with but it will bring financial relief when you have a few hundred dollars that otherwise would have gotten dusty around the house. Again, think of it as a money making opportunity!
Thanks,
Richart, CEO and Founder www.garagesalestracker.com.
Protect Yourself from Identity Theft
It is more essential than ever before to safeguard personal information. According to the Identity Theft Resource Center, last year there was a 47% increase in data breeches, affecting 35.7 million Americans.
Here are the top ways to protect yourself:
Don’t carry sensitive personal information. Top on this list is to keep your social security card filed safely at home or, better yet, in a safe deposit box.
Don’t give out your Social. If you live in the real world you’ve likely experienced several phishing attempts to know what these are like. Don’t give out any information on something that you didn’t initiate the call – even then you shouldn’t always be fully trusting.
Shred account statements. Make sure that your financial info doesn’t get out there from your own recycling bin. Another option to shreading are these scissors that I’ve been meaning to get.
Use Secure Websites. Make sure it starts with https instead of just http; it often also shows a padlock as well. Another reason not to steal wireless from your neighbors.
Anti-virus, anti-spam, and personal firewalls. Make sure that these are up to date so hackers aren’t coming through.
Keep your Alert Up. Make sure you pay attention to charges or anything suspicious.
Not all identity theft looks the same, here are a few examples from friends and self:
Private phone line. A good friend had her identity stolen and someone charged thousands of dollars to a private phone line in a city where she had never lived. Luckily she was out of the country so it was easier to prove that it wasn’t here. If that was your neighbor I bet it would be harder to manage.
Clothes Horde. Here in DC a colleague’s wife figured out that she had her identity stolen when she realized that clothing was being shipped to an address only a few blocks from her.
Wal-mart spree. While in Kabul I was alerted by my bank that there had been three identical charges at a Wal-mart in Florida that tipped them off. They were nice enough to alert me and then take it off right away. Thanks ING!
Good luck keeping your identity safe. Not only can it cost you a lot of time to restore, but there is always a risk of substantial financial loss. If you’ve got stories to share please feel free to leave comments.
Cheers,
Miel
The Best Online Tools For Personal Finance
Hi All,
Sometimes the Wall Street Journal’s blogs come up with some good stuff. Well, they’ve got a collection of the some of the webs better online tools for personal finance management. Check them out to better manage your wealth! Click here to check it out.