Investing Column

I am not an investing expert but that doesn’t stop me from writing about it! :) In these posts I’ll discuss investing principles, ideas, and comment on current events as they happen. The investments themselves could be in the stock market, real estate, or potential small businesses or franchises… basically anything that could help increase one’s cash flow.


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 Investing 
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Stock Market Soaring, Many Americans Missing the Boat

NASDAQ Bear ReaperStatistics are tricky whenever people try to guess their underlying cause but it doesn’t make it less fun. A recent Gallup poll results showed stock market investment by U.S. adults is at its lowest percentage since Gallup has started asking (1998). It’s been on a steady decline since 2007 (65%) and this year it stands at 52%.

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 Investing 
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How to Calculate Your Investment Returns

Calculating ReturnsI was playing around in my Vanguard account over the weekend (I know, thrilling weekend fun!) when I saw that Vanguard makes it easy for you to see how your specific spread of investments have been doing on a 5, 3, and 1 year basis (there’s also a Custom period too). It’s under the My Accounts menu tab and is called Personal Performance.

After playing with it for a little bit, I wanted to combine my returns from TradeKing, where I did most of my individual stock investments, with my returns from Vanguard, where it’s mostly funds (and a few stocks). Percentage-wise the TradeKing account is small, just 13.3% of total invested assets, but I still wanted to see how it performed.

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 Investing 
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OptionsHouse Free Electronics Promotions (Amazon Kindle Fire, Dell Monitor)

OptionsHouse TradingRemember when a brokerage would give you a hundred free trades if you opened up an account with them? I never did any of those because a hundred trades was useless to me, especially since the offer expired a month after you opened the account (or some other super short time period). Well it turns out that brokerages are wising up to what consumers want and instead of a bazillion free trades, they’re now offering cold hard electronics (or cash). This time, the promotion is from OptionsHouse and it’s for:

If none of those strike your fancy, you can still get the 100 commission-free trades (Promocode FREE100) too.

To get the free electronics or trades, you simply have to open an OptionsHouse account with at least $10,000 in a cash or margin account and make 15 commissionable trades within 90 days after funding your new account. OptionsHouse trades cost $3.95 a trade so if you make 15 trades, that’s $59.25 in commissions. Also, based on what you do trade, you may lose money from your investments.

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 Investing 
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Will Opening Multiple Brokerage Accounts Hurt My Credit Score?

I don’t know if you’ve been paying much attention to the stock market but it’s been on a tear recently. Up until last week’s Cyprus news, the stock market has been going up up up and brokerages have taken note. They see the money flowing back into the market, now that the fear and uncertainty have largely left the market (until Cyprus), and brokerages have been offering some pretty rich bonuses when you sign up.

Whenever you have big bonuses, you know there are big bonus hunters out there churning through accounts and trying to claim as much of that free money as possible. It’s fairly easy, just deposit the requisite amount, wait, and collect your bonus money. It usually will be better than what you get in a savings account, even after you factor in the commissions.

The next question you have to ask yourself is whether doing this will hurt your credit (or anything else)?

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 Investing 
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Help a Reader: Inheriting a Financial Adviser

This week’s Help a Reader strikes me as a sticky issue that happens a lot. What happens when a loved one passes away and your inheritance includes a financial adviser you may or may not need (or want)? This situation happened to reader Cindy when her father passed away and she’s not sure if she should keep the adviser or not.

Here’s her dilemma in her words:

My dad passed away last year, and as a result, I have inherited some of his investments. I now have my own account at the same investment business and I have apparently inherited my dad’s investment manager, also. I’ll call him Jack. The thing is, I have no clue what to do now. I’m not crazy about paying for Jack and the big-time services of a business like Morgan Stanley, but I’m most definitely not qualified to jump into this on my own. My dad trusted this guy completely and Jack has also helped me a lot since my father got sick a couple years ago and I stepped in as PoA. But at the same time, my father used to be very active about buying, selling, researching, etc. All things I’m not really into.

So I now have these investments that were tuned to my dad’s age (85) and retirement goals, meaning a lot of municipal bonds, just a few stocks, and a few index funds. What the heck do I do next? Just let this guy keep doing whatever it is he does that results in a pretty big chunk of money being deducted each year (and maybe more, he may get commissions, too)? Do I try to find a new “guy” of my own? I’m really stumped.

Thanks!
– Cindy


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 Investing 
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ShareBuilder to Lower Commissions March 1st

Sharebuilder LogoI just received an email from Sharebuilder, now owned by Capital One, and it seems one benefit of the ING Direct acquisition by Capital One is that commissions on trades at Sharebuilder will be going down on March 1st. A bit.

Before the change, Sharebuilder Basic customers were paying $9.95 a trade while Sharebuilder Advantage customers paid $7.95 a trade. While not expensive from an absolute perspective, there are plenty of brokers who charge more, it’s a lot compared to many discount brokers. I use TradeKing and they’ve only charged $4.95 a trade for quite some time now. You can get even cheaper trades from OptionsHouse at $3.95 a trade.

On March 1st, online trades will go to $6.95 for real time online trades. For Basic customers, it’s a $3 drop; only $1 for Advantage customers. This is still higher than the $4 they charge for automatic investments.

If you’re looking for a discount broker, Sharebuilder, even with the lowered rates, wouldn’t be on my list. I’ve never used OptionsHouse so I can’t say much about them but TradeKing has always treated me well. If you qualify for Vanguard’s Voyager Select ($500k-$1mm in invested assets) or Flagship ($1mm+), you get $2 trades (Flagship customers get 25 commission free) – but that’s not exactly a fair comparison.

 Investing 
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Is Your Portfolio Truly Diversified?

Difference Between Stocks and BondsOne of the basic tenets of portfolio creation is that you should diversify. This is good advice — as long as you are truly diversified.

Unfortunately, it’s too easy to misconstrue what constitutes diversity. In many cases, investors divide up their portfolios between stocks and bonds, and call it good. While this can provide some basic diversity, you might not end up with true diversity.

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 Investing 
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3 Biases That Mess Up Your Finances

blind spotWe all have biases. From politics to the way we view our own upbringing as “normal,” there are biases in our lives. And they affect more than just what they believe. They can also affect our behavior, and how we handle our finances.

Recognizing your biases is the first step toward overcoming them. This is particularly important if you want to keep your own biases from messing up your finances. If you aren’t careful, the things that you think are true can mess you over big time:

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