When I was younger, I had a book called “They Went That Away…” that researched what happened to famous figures after their moments in the spotlight. It’s a book I still have (somewhere) and it makes for some interesting trivia information. 100 Minds That Made The Market, written by Ken Fisher, the CEO of Fisher Investments and a name you might recognize on Forbes; is a similar book but focused on people in the financial industry and their impacts. I am by no means an investing guru, I know very little about the history of the markets and its influential participants; so I learned a tremendous amount from this book.

The thing I like the most about this book is that the little biographies are usually only a few pages. I’d say you can get through a biography in approximately ten to fifteen minutes and you can flip to any one of them in any order. While it might be valuable to read through the categories in order, only to get a sense of how these personalities may have interacted, it’s certainly not required. This made it possible for me to read it when I wanted, have frequent break-away points, and skip past biographies of individuals I wasn’t particularly interested in.

One of my favorite stories was about Elias Jackson “Lucky” Baldwin (starts on page 116, the first bio in The Innovators category). Essentially what happened was that Lucky tried to get into the California Stock and Exchange Board floor to check on his mining stocks, which were particular hot and speculative at the time, but was denied entry because he forgot his membership card. At the time, there was some new ore discovery and a bunch of non-members were trying to get in to buy up some mining shares so they started checking IDs. When Lucky forgot his card, one that he never needed, and was denied entry, he was furious. So what did he do? He started his own exchange, the Pacific Stock Exchange, and got twenty local members away from the California Stock and Exchange Board. That’s right, when they wouldn’t let him in, he decided to start his own stock market! (Eventually the California Stock and Exchange Board acquired Lucky’s Exchange in 1904, five years before his death) To think, he just up and decided to start his own stock market, steal twenty members, and actually succeeded. Pretty ballsy!

So, is this book worked buying? I think so, but I’m a sucker for trivia and learning about history. I don’t think this book is really for someone who wants to learn how to invest or find the latest stock tip, this is for someone who enjoys history, enjoys reading about the stock markets and why it is the way it is today (even if there are stories about guys with Wild Wild West names like Lucky), or enjoys little vignettes about interesting characters from the past. If you’re a fan of crunching numbers and random walks, this isn’t going to be a good book for you.

Hahaha just kidding, I don’t have it and you know what? I never will. While it’s awesome to get personal concierge services and all the great bells and whistles of the card, the $2500 annual fee is just something I don’t ever see myself wanting to pay. Oh yeah, the minimum spending of $250,000 a year is also a bit of a stretch too but even if that were possible (hahaha), blowing $2500 on an annual fee just seems stupid. Oh yeah, there’s also a $5,000 initiation fee!

Now, for most people who have it, it’s more a status symbol than anything else and you can read more about it here.

(Click to continue reading…)

I’ll be taking a few days off as family comes into town to enjoy a nice juicy 16 lb. Thanksgiving day turkey, I’ll probably post a roundup or something this weekend and then start the blogging train back up on Monday. If you’re interested in reading some oldies but goodies from the past, I’ve pulled out a few from the archives:

25. A little over two years ago, I turned 25 and immediately prior to and after my birthday I requested quotes from a bunch of different auto insurance companies to see what the difference would be. Here’s the post from before I turned 25, I detailed the price I was paying to Geico before 25. In this post, I requested multiple auto insurance quotes after turning 25 to see the difference between my pre-25 quotes and the results were consistent with what most people say, you do get a discount.

123. That’s how many comments there are on a post I wrote in August of 2005 about the horrible experience we had with U-Haul in moving my fiancee and her roommate from New Jersey to the Baltimore/Washington D.C. area. What’s funny is that usually when you write an “I Hate XYZ Company” post, some people come to its defense – no one has done that with U-Haul.

114. That’s how comments are on my Rent Forever, Don’t Buy A Home post, the most popular of the Devil’s Advocate posts. If you aren’t familiar with Devil’s Advocate series, it’s where I try to argue the other side of conventional thinking and people seem to enjoy seeing someone take the unpopular side. I’m all about providing enjoyment here.

Happy Thanksgiving!

We live in a disposable society. We’ve gotten so used to everything being so cheap that we often think about replacement before we think about refurbishment, which is great for companies but bad for our budget and our environment. I experienced this first hand a month ago when I pulled out my coffeemaker to make a cup of coffee.

(Click to continue reading…)

Ever wonder why people quote the Dow performance each and every day? The Dow was up today, the Dow was down today, why does it matter? I mean the Dow is made up of 30 stocks! What about the Nasdaq Composite or the S&P 500? At least with the Nasdaq Composite you get a hundred companies and with the S&P 500 you get, well, 500 companies. Ever wonder the origins of these indicies and who decides what companies get in? Well I did and it has nothing to do with showing off your stack underneath the buttonwood tree.

(Click to continue reading…)

Racking your brain for the perfect gift for your little personal finance nerd? Don’t want to give them a gift card because they suck and you think cash is ugly? Why not consider giving someone something that they can enjoy in thirty years? That’s right, I’m talking about a US Savings Bond! (and the crowd goes wild!) Buying a savings bond is remarkably easy but don’t try going to TreasuryDirect because you can’t get paper certificates there. For a paper certificate, you’ll have to go to your local financial institution.

Once you get there, simply walk up to the teller and ask for a purchase application. Fill it out, pay the bank, and wait eagerly for three weeks – that’s how long it takes. Now, for the application you’ll have to provide a social security number to link to the certificate. That’s to help the Fed track you wherever you go. Just kidding, that’s just so they can look it up if you ever lose the certificate (it’s all electronic anyway). The social security number you submit will appear on the certificate. Your best bet is to use the social of the recipient so they can handle the recovery if they ever set it on fire. The government promises that the number won’t be used for calculating tax liability or anything like that.

Lastly, they can’t print anything special on the bond (of course!) so Treasury Direct offers some nice PDF gift certificates for you to use! I haven’t done this as I don’t have a pfnerd to give it to but if you have done this in the past, let me know how it went.

Interested in learning what a Sales Load is on a mutual fund? What about 12b-1 fee? Well, all of them are outlined in this SEC document on mutual fund fees. What? You don’t really want to read that huge thing and you would prefer that I just give you a quick one or two sentence synopsis of each fee? Well it’s your lucky day because I’ve done just that. Ultimately, it’s a pretty straightforward list. It’s broken up into two types of fees, shareholder fees and fund fees. Shareholder fees are those fees that you pay out, fund fees are those fees or expenses that the fund pays out to stay in operation.

First things first, the list below is just a general description of what each fee is and what it generally covers in terms of the mutual fund operation. For the actual fees related to your mutual fund, you will want to get a copy of your prospectus and look for a fee table for the actual amounts you’re paying.

Shareholder Fees

These are all fees that the investor will see deducted from their accounts to go to the fund itself.

• Sales Load – This is the commission the fund pays to brokers for pimping out their funds. The SEC doesn’t limit what a fund can charge but the Financial Industry Regulatory Authority (used to be the NASD) limits its members to a maximum of 8.5%. Sales loads come in two types – front end and back end.
• Sales Charge on Purchases – This is a front end sales load and the fee is paid when you purchase and directly taken from your investment amount.
• Deferred Sales Charge – This is a back end sales load and the fee is paid when you redeem your shares. Generally the percentage is calculated on the lesser of the investment amount or the redemption amount. That means if your shares have appreciated, they will take a percentage of the initial invested amount. If your share shave fallen in value, they will take a percentage of the selling amount, which is good for you in either case.
• Contingent Deferred Sales Load – This is a sales load that decreases with time and is designed to entice investors to hold onto their investments. Generally they’re structured like this: The fee taken out is 4% if you redeem within one year, 2% within two years, 0% if redeemed after two years.
• Redemption Fee – This is a fee that’s charged when you redeem your shares, which kind of sounds like a back end sales load to the investor but technically isn’t. It’s not a sales load because the redemption fee is used to pay for the redemption and not paid out to a broker for securing the sale. The SEC limits the redemption fee to 2%.
• Exchange Fee – Want to trade in your shares for another mutual fund in the same class? That’s an exchange fee.
• Account Fee – This is an account maintenance fee.
• Purchase Fee – Again, this smells like a front end sales load to the investor but the funds don’t go to a broker, they go to the fund and not to a broker.

Annual Fund Operating Expenses

These are fees that the fund pays out to its management and these are also governed by the SEC rules. You’ll often see these values expressed in total as an expense ratio.

• Management Fees – This is how much the investment adviser, managers, and their affiliates get paid out as well as any administrative fees that don’t happen to fall under “other expenses” below.
• Distribution [and/or Service] (12b-1) Fees – This little guy gets all the press, or at least it used to get all the press, back in the day. Distribution fees are governed by the 12b-1 SEC rule and was sticky because its this fee that the fund can use to pay out commissions to brokers, which essentially is hiding a sales load inside an otherwise innocuous looking marketing charge (distribution also covers the printing of prospectuses, advertising, etc.). While the SEC doesn’t regulate how much a fund can charge, the FINRA does – it’s limited to 0.75% of the fund’s assets. Another part of this is the shareholder service fees and those are fees paid out to people to have them respond to shareholder inquiries and provide investors with information. Again, another way to hide some sales loads and again the SEC doesn’t regular the max but FINRA says 0.25% tops.
• Other Expenses – This is the catch-all category of expenses for “everything else” like legal fees.

Why Index Funds Rock

See all those fees? Check out the Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and tell me what it says next to the 12b-1 Fee, Account Service Fee, Purchase Fee, and Redemption Fee? Right, it says none with the exception of a $20/year account service fee for balances under $10,000. If you crack open the Prospectus, on page 9 you’ll see that there are no sales loads whatsoever. Management expenses clock in at 0.16% and other expenses at 0.03%, the total expense ratio is a mere 0.19%. Index funds kick butt!

I saw a tip on Consumerist that last Friday was the last day to use gift cards to Bombay because they were being liquidated/going out of business. So what are you supposed to do if you read that post today and find yourself with a Bombay gift card and no actual store to use it in?

Step 1: Determine the Type of Bankruptcy

In the land of second chances, the Chapter 11 bankruptcy is king. Chapter 11 is the reorganization type of bankruptcy (as opposed to the liquidation type, Chapter 7) and that’s good for someone with a gift card. Reorganization means the company wants to stay in business so they’ll usually ask the bankruptcy court for permission to still honor any gift cards and gift certificates. To leave those customers out to dry would not be a good way to conduct business. If you happen to be lucky and get a Chapter 11 banktupcy, I’d spend that gift card as soon as possible.

Step 2: Get In Line

If the judge says no to the request or the bankruptcy is of the Chapter 7 variety, gift card and gift certificate holders become unsecured creditors in the case – lumped in with vendors, shareholders, etc. If you’re familiar with being a creditor, there’s a listing of priorities as to who gets what. First comes the secured creditors, then the priority unsecured creditors, then the general unsecured creditors. Gift card holders are in the priority unsecured creditors group. So, first steps is to file a claim with the court and the place to find more information on that is your state’s Attorney General/Consumer Affairs department.

Another Scenario: Store Acquired

What if, sometimes this happens in bankruptcy and sometimes not, another store acquires your current store? Technically they only have to honor the gift cards if they purchased the obligations of the other store. That being said, with business it’s almost never about the dollars when it comes to customer satisfaction and most will honor the old store’s gift cards. What you figure is that you have a gift card so you’re likely a customer of the acquired store and since the acquiring store wants to continue the business, they probably want to keep existing companies happy. So… you’re probably okay as long as you bring it up quickly (don’t bring an old gift card from an store that was bought out two years ago).

More reasons why I think gift cards are stupid…

What do Suze Orman, Robert Kiyosaki, David Bach, and every other personal finance expert out there have in common? They don’t know you but they know exactly what’s wrong with you and how to fix it. Suze Orman thinks you’re a moron, that you need tough love, and that those 0% financing offers from Ford are awesome. Robert Kiyosaki says that you suck like his poor dad (who isn’t real), you should aspire to be like his rich dad (who also isn’t real), and that you should buy one of his books. David Bach thinks, without the indignation that comes with a Suze orman, that you should get out of your own way and make things automatic. I think you should ignore personal finance experts… all of them.

You might think this is a self-serving Devil’s Advocate post – and it is, because personal finance bloggers aren’t experts. Then again, bloggers don’t treat you like crap and tell you how you need a wake-up call (that’s Suze), bloggers just write about themselves and invite you to check out how normal and bad at personal finance we are. Experts? Heh, totally different animal… here’s why you should ignore them.

Cater To The Masses

This isn’t really their fault, it’s a product of the marketing machine that drives their popularity. On the web, you have folks who talk about themselves and by nature fall into a small niche. You have the family of six, you have the bloggers battling debt (or just finished), you have a fee-only certified financial planner (JLP has never ever written a post selling his services), you have the husband-wife tandem, and you have a whole host of other blogs that fall into one niche or another. None of those sites are trying to be everything, they’re only trying to be themselves and therein lies their popularity. When you graduate, you perhaps find the debt bloggers and the tandem bloggers to be your thing. As you get older, you might find the family of six or the CFP blog more your style. With so many options, you can find one that works for you.

Too General

Since they cater to the masses, usually their advice is too general to be of true value. I’m not saying that bloggers are better in this case, I’m just saying that experts aren’t going to give you the level of advice that you need. I’m also not saying you should run out to a financial planner and pay for advice, I’m recommending that you ignore the big names in the bright lights and read articles written by folks who aren’t so keen on hearing or reading themselves. Read from the perspective that you’re reading valuable information that may not be valuable for you. Don’t read from the perspective that you’re going to do the next thing that comes out of an expert’s mouth. Experts in any field are wrong often enough that listening to them 100% of the time will result in disappointment.

Accessibility

A product of their popularity is the fact that experts simply aren’t accessible. You can certainly try to ask them a question but the reality is that an answer won’t be thought out and personalized. If anything, you might get it read on-air and get a simple 30-second response (or a 5 minute chastizing). Why is accessibility important? It’s not tremendously important but if you have a specific problem and you want to hear an experts opinion, the likelihood of them happening to answer that problem is zero.

Was that a compelling enough argument against experts? Maybe, maybe not, please let me know. Think I was too harsh of Suze Orman? (I don’t think I was as harsh as she generally is) Think David Bach shouldn’t have been lumped in with the experts? Fire away!

I’m a huge fan of these colored “Little Books” published by Wiley (some other ones that I think are good are The Little Book That Beats The Market and The Little Book of Common Sense Investing, which arguably has the biggest name author in Vanguard’s John Bogle) and this one probably looks the coolest because it’s black and gold. The Little Book That Makes You Rich is penned by Louis Navellier, spans 185 pages, and focuses on growth investing. Now, what’s the difference between this book and the others? Each of them focuses on a different aspect of income generation with respect to the stock market and each one has an expert writing it. The ones I’m aware of are:

• Common sense (red), which is about getting what you deserve from the market (a lot of talk about index funds),
• Value investing (green) is about finding down and out stocks (think Buffett’s cigar butts and his mento Graham’s Intelligent Investor)
• Beating the Market (blue) is a wrinkle on value investing that focuses on earnings yield and the business’s return on capital

Who is Louis Navellier? According to the inside flap of the dust jacket, he “has one of the most exceptional long-term track records of any financial newsletter editor in America.” Check out the first paragraph of a MarketWatch article that asks some questions about a new newsletter – “Witness Louis Navellier’s Emerging Growth. It’s the number one performer among 32 surviving letters followed continuously by the Hulbert Financial Digest over the last 20 years. Its portfolios have achieved an average annualized return of 19.8% vs. a dividend-reinvested return of 12.5% for the Dow Jones Wilshire 5000.” I’d say that gives Navellier enough credibility to write this book.

So what’s in this little guy? First, I like Navellier’s writing style and his general approach in this book. The preface begins by addressing (but not answering, that will come later) the one skeptical question I had: “how the heck is this book, little or not, going to make me rich!? It’s not that easy!” He will applaud you, tell you that you shouldn’t believe everything you hear, and that the next 185 pages will enlighten you to his approach that has given excellent returns over a spectacular time period (in fact, the eight factors he looks for are on page 3 – not buried on page 216, not that there are even that many pages, after reading a lot of charts and being built up, his eight factors are on page three).

What are these eight factors? Ha – get the book, it’s only $14 from Amazon and before I go any further I already recommend the book if you’re looking to get into growth investing. The balance of the book goes into each of the eight factors and points out one derailer that I will share with you. Navellier’s derailer is human emotion. He doesn’t believe in the story, he doesn’t believe in falling into or out of love with stocks, he says that all that will cloud the reality that lives in the numbers. Believing the latest buzz on the street, hearing some “tip” at a cocktail party, or believing any number of questionable information sources, only hurts your ability to make a good decision. Steve Forbes, in the Foreword, did say that Navellier has picked a few “clunkers,” but the overall performance of Navellier’s picks and his returns have been “enviable.”

Sneak a peek at your local book store to see if it’s for you.