One of the great paradoxes of our nation is that we spend far more, by a great margin, than any other country on healthcare yet we don’t live the longest. According to a report from the NCHC [PDF], which was based on other research, we spent $2.3 trillion on health care in 2007 or about $7600 per person. (that article lists a lot of other sobering statistics).

Part of the reason is because the system is so complicated and convoluted. When a doctor orders a battery of exams, it he or she motivated by expertise, fear, or greed? Is the test what is actually needed because the doctor needs to rule out a particular condition, or does the doctor fear malpractice suits so he orders every possible exam, or does the doctor need to up his pay this month because he has a vacation soon? While I’d say that most medical practitioners operate out of expertise, there is a subset that operates, if only sometimes, in the other two groups too.

That’s where Stay Healthy, Live Longer, Spend Wisely by Davis Liu comes in. It’s a guide to help you navigate the complexities and vagaries of the American healthcare system.

About Dr. Liu

Who is Dr. Davis Liu? He’s a board-certified family physician with the Permanente Medical Group in Northern California, graduate summa cum laude and Phi Beta Kappa from the Wharton School of Business and the University of Connecticut School of Medicine and has written several opinion pieces that have appear in the San Francisco Chronicle and the Sacramento Bee.

Do Your Homework, Question Everything, Pay Nothing (At First)

That’s the subheading of a section in which Dr. Liu explains how you can be a smarter consumer of medical care, specifically with respect to the billing process. He tells one story about his brother who saw a general practitioner and specialist for a throat issue. His brother confirmed with the insurance company that the visits would be covered yet was billed anyway. Fortunately, due to diligent note taking which included which representatives they spoke to, the issue was resolved and the brother didn’t have to pay anything.

The lesson here is that you should question everything, since most medical bills contain errors, and confirm with the insurance company as to whether something is covered (unless it’s a true medical emergency).

The book has a lot more in it than I explained so here’s a listing of what’s included in each of the eight parts:

1. The Most Important Policy You Will Ever Own: This part discusses health insurance in general from how much coverage you need to what an HSA is, from COBRA to health care costs.
2. Mastering the Ten-Minute Doctor Office Visit: Every aspect of a typical visit with a physician is covered including how to be a “wise patient,” versus a typical one. It stresses the importance of knowing your medical history and making each visit count.
3. Do the Right Thing Regularly and Repeatedly: This part stresses the importance of routine checkups and preventative medicine, such as routine screening, immunizations, and age specific checks.
4. Meet Your Medical Team: Any and every medical professional you’ll meet is discussed in this chapter along with anything you may need to know about their profession. Do you know what a Rheumatologist or a Nephrologist or a Ophthalmologist is? If you said you did and you’re not one, you’re probably lying.
5. The Truth About Medications: It’s hardly a hard hitting expose on branded medicines but he discusses branded vs. generic (and points out studies of the placebo effect, a topic discussed in Predictably Irrational too) and even goes through over the counter drugs.
6. Caveat Emptor, Or “Let the Buyer Beware”: This section talks about all the unproven, untested remedies from body scans to herbal remedies. He’s a little apprehensive about them but does recognize that some provide benefits.
7. Twenty-First Century Medical Care: Dr. Liu is looking forward in this chapter, looking at new and different techniques that may play a larger role in medicine in the future.
8. Take Control: Excellent Health Pays: In this last part, he talks about how you can be proactive about your health such as using the internet for research (which can be counter productive, depending on your mentality) and being active.

Stay Healthy, Live Longer, Spend Wisely is far more comprehensive than I gave it credit for when I first opened it. I expected a book that discusses health insurance, government plans like HSAs and FSAs, and medical expense related ideas but this one really went above and beyond that. The sections discussing all the specialists, the various medications, and even looking to the future of medicine was a nice bonus. Another nice bonus was Dr. Liu’s style, I can see why he would be asked to write opinion pieces in the newspaper because he has a very easy style that likely translates into a comforting bedside manner.

If the whole world of medicine intimidates you, this book can help by giving you a good basic understanding of the whole breadth of the medical world.

The main point of Daniel Solin’s The Smartest 401(k) Book You’ll Ever Read is that your 401(k), or 403(b) or 457(b), and it’s employer match may not be a no-brainer investment because it could be filled with funds that fat on fees and poor on investment selections. His answer? It’s to model the Thrift Savings Plan, the retirement plan available to government employees that consists entirely of low-cost index funds (the expense ratio is around 0.03%), and use low cost index funds for your retirement options. Look inside your mutual fund options to find the ones that most closely model index funds and go with them.

I think The Smartest 401(k) Book You’ll Ever Read by Daniel Solin does a very good job of opening your eyes to the fee-ladened landscape of retirement investing. He takes specific aim at 401(k) because those “captive audience” type programs are more deceitful than you can imagine. Many companies use plan administrators that offer 401(k) plans for free because they know they can make a killing on the back end with expensive fund choices. If they really had the employee’s interests in mind, then they’d simply offer cheap index funds. In fact, some companies actually pay kickbacks to company HR departments to use them. The plan administrators pay companies for the opportunity to offer their fee fattened funds! It’s pretty ridiculous.

Unfortunately, this means that if you mainly invest in low cost index funds, you won’t get much value out of the first few sections of the book (it could spur you to rollover your 401(k) when the time comes!). The book continues to talk about other retirement investments such as IRAs, both Traditional and Roth, and annuities.

One characteristic I like about the book is that the chapters are short. Many are under three or four pages long, which is exactly how long it should take to explain many of the fundamentals about investing. For example, Chapter 14 is called Simple Investing Is Smart Investing is about three pages long and explains why a simple allocation of basic mutual and index funds will be sufficient for most. Chapter 22 is called “Why Fifteen Is Your Magic Number” and uses three pages to explain why you need to save 15% of your income if you want to expect to have a successful retirement. That, coupled with a applicable quote (usually from some important successful investor such as John Bogle), makes this book an easy read. There aren’t large chapters to digest, there aren’t huge concepts to wrap your head around, this book makes everything nice and simple.

Several years ago, ING Direct made a name for themselves when they introduced the Orange Savings Account. At the time, the concept of an online savings account was as foreign as its owners, Dutch-owned ING Group, and many folks wondered if the offer was a scam. At the time, I know my credit union’s savings account APY was sub-1% and here ING was offering 2.60%! It was unheard of!

I had my reservations though. First, the company was Dutch so I didn’t know if that had any implications (it doesn’t). I was new to managing my own money so I was always wary of doing something stupid (I still do stupid things). Lastly, I didn’t want to jump too quickly even with the $25 referral bonus dangling out there. Fortunately, my comfort with all things online coupled with my inexperience pushed me towards opening an account at ING Direct and I’m glad I did.

Since then, many banks have begun offering high yield savings accounts and ING Direct has ceased to be one of the top interest rates out there… but it still has some merits and a warm place in my heart.

Account Signup

Signing up for an account takes mere minutes and is actually one of the strengths of ING Direct when ING first started. Back then, opening an account online was practically unheard of. You always had to visit a physical branch so that a teller or account representative could go through the screens themselves. Now, a quick account signup process is the norm.

Account Features

One feature that is noticeably absent from many other online banks is the ability to add new accounts as quickly. Once your first account is opened, subsequent accounts can be added in mere seconds. Everything managed through the same login, which recently benefited from a face lift, and it really does help you save more.

For example, opening new savings accounts are trivial and, given the ability to name them whatever you’d like, you can easily open an account for the purposes of a saving goal. If you have a big expense, such as a vacation, coming up in the future you can set up an account specifically for that. Once you set up an account, you can establish automatic transfers between all of your linked accounts (ING Direct accounts are automatically linked). So, you could set up a monthly transfer from your checking account to your ING Direct savings account and then intra-ING Direct transfer from your main ING Direct account to your vacation savings account. This transferring feature isn’t unique to ING Direct but the ability to add new accounts so easily is.

ING offers a CD laddering form that makes CD laddering a cinch. While the interest rates aren’t especially competitive, the 12 month CD is 3.40% APY and the 60 month CD is 4.00% APY (compared to FNBO Direct’s 3.50% APY high yield savings account), this feature is the only one of its kind I’ve seen available anywhere. When their CD rates become more competitive, I can see this form getting a lot more use.

Overall, I was very pleased with ING Direct. While their rates have lagged their competitors lately, I think the intuitive and friendly interface really puts new online banking customers at ease. I have accounts at Emigrant Direct and HSBC Direct and their banking screens look very antiseptic and austere. While you can’t judge a book by its cover, ING Direct does a great job putting the softer elements into its interface that puts someone at easy.

50 Prosperity Classics by Tom Butler-Bowdon is an assimilation of fifty great financial classics that will help you “attract it, create it, manage it, and share it,” with “it” being prosperity. It’s part of the “50 Classics Series,” a series I’d never heard about until this edition, but it’s a clever distillation of many great works down into something shorter than Cliff Notes. For each of the fifty classics, there’s a brief salient quote, followed by a box of important facts (think: executive summary), then a few pages of commentary that reads like a book report. The book reads like a Who’s Who of important financial and business individuals from Warren Buffett to John Bogle, from Bill Gates to Guy Kawasaki, from Adam Smith to Peter Lynch. The books span the ages going as far back as 1778 with Adam Smith (the ones after that are P.T. Barnum in 1880 and Andrew Carnegie in 1889) and as recently as Suze Orman (2007).

I chose to take a look at Andrew Carnegie’s The Gospel of Wealth first, since it was the namesake and founder of my alma mater Carnegie Mellon University. How’s this for a quote to capture the message of the book:

“The man who dies rich thus dies disgraced.”

And the “In a nutshell” summery, written by the author, was:

The wealth creator has a moral obligation to enrich the lives of others in whatever way they can.

Then the author launches into three page book report of The Gospel of Wealth followed by a brief biography of Andrew Carnegie.

I’m a big fan of books where you get little stories and vignettes, something I mentioned in my review of Ken Fisher’s 100 Minds That Made The Market. This book is in that same vein, offering little stories about each author, summarizing their books into a one sentence and a “book report” that makes it easy and quick to digest. To be honest, it makes a great bathroom book if you’re into reading a lot about personal finance, wealth creation and management!

A reader emailed me, after reading my post about best online banks, asking whether Emigrant Direct should even belong on the list. She recommended her number one choice, FNBO Direct, because it crushes Emigrant’s 3% APY interest rate. I think I was always partial to Emigrant Direct because they’ve been around for so long, but, she had a point. There are plenty of banks on the north side of 3% and Emigrant doesn’t offer any particularly innovative features that would justify it being in the top five with that rate, so I sought to review her number one choice. (Another name that appeared a couple times in the comments and emails was Provident Direct, the online bank of Provident Bank).

Application Process

Last week, I opened an account at FNBO Direct, a process that took less than five minutes. There were all the obligatory personal information fields, a quick credit verification (where they ask three questions from your credit report), and my online savings account was “opened.” A few more screens later (login credentials, funding the account) and I was done.

One nice feature in the process, one that HSBC Direct also uses, was online bank account verification. You enter in your online access credentials and they try to login to verify you are who you say you are. While it worked at HSBC Direct, it didn’t at FNBO Direct and I had to wait for the two trial deposits. Those arrived the very next day (the ETA was 3 business days). I went back to the FNBO application, entered my two trial deposits, and my application was complete. Within an hour, FNBO sent me an email indicating the initial transfer was being initiated. The next day, I was told my account activated and I could log in.

Here’s where I ran into problems, all of my own doing. I tried to login and was prompted with two security questions - two questions I had never answered. Turns out that at the end of the application, on the page that said “Done,” there was an Activate button. That’s where I was supposed to setup all the security information, select the personal message, etc. After that brief three page process I was set up.

If you were like me and somehow missed that, you can always return to the application, view the confirmation page, and then hit the “Activate” button on that screen.

Account Features

The features of the FNBO Direct account are your standard options for a high yield online savings account. To the right I included a screenshot but it’s very plain looking - which is exactly what I like in a bank website. I want a bank website to be fast loading, simple to navigate, and FNBO delivers on both points. You won’t find a fancy CD laddering form like you can on ING Direct (they’re the only ones, as of this writing, that offer it) but I’ll take a fast loading site over a fancy form any day (ING loads fast too). Plus, the less time they put towards their website, while still giving you the basic functionality, the better. It means they can offer a higher yield.

In the screenshot you’ll see the standard Account Detail, Account Services, Transfer Funds, and BillPay buttons. They all lead to your standard screens with all the expected functionality. I won’t go into those.

Overall, FNBO Direct is as I expected it to be. A functional high yield savings account with a 3.50% APY yield with no minimum balance requirements. I’m going to try to link up other high yield savings accounts to this one, to expedite any transfers, but otherwise this matches up with every other bank.

It’s not easy thinking about Wills because doing so forces you to confront your mortality and that one day you will die. However, if you do not take care of this very important piece of business, the State will take care of it for you. In every state there are rules that dictate what will happen to your assets in the event of your death. Unfortunately, they may not match what you’d choose to do with it (chances are they don’t). Creating a Will is one of the most important and significant actions you can do for your finances and shouldn’t be put off. The preparation of Wills is big business too and can cost quite a large sum in lawyer fees, but there’s a way to significantly cut your costs - Suze Orman’s Will & Trust Kit.

My tentative plan is to create a Will with Suze Orman’s system and then get it reviewed by a lawyer. By having at least a draft, you save a ton of money on the hours that would’ve been spent preparing it. What makes this even better is that the kit is free for a limited time (meaning I have no idea how long it’ll last).

Suze Orman recently gave away her Will & Trust Kit to viewers of her show and you can get it by following these instructions:

1. Go to SuzeOrman.com
2. Click on Will & Trust Kit in the left sidebar menu
3. Click on the orange Gift Code button and enter “people first“

And now you have access to the Suze Orman Will & Trust Kit absolutely free.

Account Signup

Account signup was a cinch and took about ten minutes (but I type fast). You’ll have to put in a bunch of information such as your name, SSN, DOB, gender, address, phone, marital status, spousal/partner information (if necessary), value of assets, and answer a few questions about trusts. The system is very TurboTax-like in how it asks you questions rather than simply listing choices.

Throughout the screens, there is audio that you can listen to for additional information and guidance. There each only a few minutes long and I found them very informative. If you’re not in the mood to listen (or you can’t), you can also read a transcript of the audio underneath it.

Handling Personal Information:
With respect to personal information, you have three options to choose from when you first setup your accountL

Complete Save & Protect: All information you enter will be automatically saved.

Limited Save & Protect: The program will not save Social Security numbers or Dates of Birth; all other information will be saved.

No Save & Protect: None of the information you enter will be saved. Each time you use the Kit you will need to re-enter all information.

I chose the second option, Limited Save & Protect simply because I don’t know how secure Suze Orman’s site is. I trust companies like H&R Block and Intuit with that information when I prepare my taxes because they’ve been around longer but I don’t know about Suze Orman (her site does appear secure and I honestly have no doubts about it). Plus, it saves everything except Social Security and Date of Birth, those are easy enough to enter as needed.

Revocable Trust or Only a Will?

Here’s where the “TurboTax” like walkthrough during account signup comes in handy. About 80% through, there’s a question as to whether you want a Revocable Trust or Only a Will? Knowing nothing else and had I been given no guidance, I probably would’ve chosen Only a Will because I don’t know what a Revocable Trust is. However, based on net estate value and guidelines for my state (and other factors), I’ll want a revocable trust in addition to a Will (anyone with over $30,000 of assets in Maryland is recommended to use a revocable trust).

Documents

Following the account signup, I was presented with a list of four documents I’ll need to produce:

• Advanced Directive & Durable Power of Attorney for Health Care
• Revocable Trust
• Will
• Financial Power of Attorney

I don’t know how many documents there are in total but I suspect Advanced Directive & Durable Power of Attorney for Health Care, Financial Power of Attorney, and Will are shown to everyone; Revocable Trust is shown to those who feel their individual characteristics warrant it. (plus, there’s a menu up top and there isn’t much room for any other documents to be listed!)

Will

For the sake of brevity, I’ll only discuss how the Will part works but the creation of the other documents works in the same way. When you click on the Will tab you’re directed to a page that lists all the pieces of a Will. The will consists of the following five parts:

1. Will - “A will is a legal document that states where you want your assets to go after your death and what you want done with your remains.”
2. Letter to Your Executor - “If you want certain items of personal property to be given to specific people, you can simply write a letter to the Executor of your will about your wishes.”
3. Final Instructions Form - “Use this form to let your loved ones know your wishes regarding your funeral, burial, or cremation.”
4. What to Do When Someone Dies Checklist - “Review this checklist now and when the unexpected occurs you’ll know the necessary steps to take to make the proper final arrangements for your loved one.”
5. Funeral Cost Worksheet - “Funerals and burials are among the most expensive purchase older people make. When the time comes to make funeral arrangements, if you only contact on funeral home you may pay too much for services. To help you compare the costs of up to three different funeral homes, we have provided this calculator.”

As you can see, some of the documents are documents you need to create while others are simply useful tools. The will creation menus were quite thorough in what it asked from whether you wanted a traditional Will or a blended family will, how you wanted your remains treated (cremation/burial/donation? embalming?), selecting an executor & an alternate, cash gifts, personal property gifts, contingent beneficiaries, and a few other questions.

After about a dozen questions and ten minutes, I had a draft version of my will. The draft was slick and took advantage of the fact that I was viewing it in a browser because all the important parts were hyperlinked. I could click on it and change information as needed.

But you’re not done… for it to be valid, you need to print it, sign it, notarize it with a witness, and do all the legal legwork involved in making it a valid legal instrument. However, I bet you it’s a lot cheaper to start with this draft than it would be to sit with an estate lawyer and have them ask you these questions. Here’s the first paragraph of the product’s disclaimer (emphasis theirs):

This product provides information and general advice about the law, but laws and procedures change frequently and they can be interpreted differently by different people. For specific advice geared to your specific situation, consult an expert. No book or form of other published material is a substitute for personalized advice from a knowledgeable lawyer licensed to practice law in your state. THEREFORE, CONSULT YOUR ATTORNEY.

So, I would start with this and then talk to an estate attorney to finalize. Heck, it’s free and lawyers are never free.

When can a stock rating of Buy be a bad thing? When the stock market analyst’s firm has a rating higher than a Buy. Analyst don’t like rating things a sell, which is essentially the kiss of death, and so oftentimes you’ll see a Hold or a Neutral rating when the analyst really means sell. Have you heard of this before? Yeah me too, it’s like some big joke. Analysts are just like you and me, many of them are terrible at picking stocks, like their jobs, and don’t want their boss or their customers breathing down their throat. They don’t rate stocks a hold because the company will start hassling them and institutional investors will start asking why, they can easily just put down a Hold or Neutral, indicate the negative outlook, and no one gets all hot and bothered. That’s just one nugget in Stephen McClellan’s Full of Bull.

Who is Stephen T. McClellan? He is a CFA and former Wall Street investment analyst with thirty-two years of experience covering technology stocks. He wasn’t just any old investment analyst, he spent 18 years as First VP at Merrill Lynch and eight years as VP at Solomon Brothers, two huge names in the investment banking industry. The man knows his stuff and has distilled much of it in this book.

This book cuts through the hand waving, smoke, and other financial hocus pocus and explains how things really work. Some of the ideas in this book aren’t huge surprises (Wall Street is extremely short term, Analysts with a lot of flair are all show, Wall Street has a big company bias - all those are gems in Chapter 1 alone) but many of them really start getting your brain going. When you couple it with some of the insights of other “behind the scenes” books (I like Trading with the Enemy), you start the realize that it’s just like any other business.

After a few chapters on how things really work, McClellan starts putting on his CFA hat and offers up some advice that I would’ve done well to know several years ago. Here are a few section headings from Chapter 3: Strategies in Quest of the Ideal Investment:

• Turnarounds Almost Never Work
• Don’t Try to Catch a Falling Safe
• Avoid Participating in Initial Public Offerings
• Don’t Buy or Sell in Reaction to Press Articles or Media Information
• Give Stock to Your Kids

One of the best gems in the book appears in the Afterword: “You should use the Street the same way you would employ The Wall Street Journal, a friend’s investment suggestion, or any investment idea that comes to mind. That is, view the Street as just one among many sources of information pertaining to potential investment strategies and opportunities. Like any input, the information it offers is only a starting point - not a final conclusion.” That’s right, those hundred thousand dollar and million dollar suits in the Ivory Towers of Wall Street aren’t soothsayers… they’re just like you, me, and Bob in Accounting. It’s just information.

Finally, and I’ve said it in book reviews in the past, I’m a sucker for books that give you an inside look at an industry. This is one of those types of books so I thoroughly enjoyed reading it, definitely a more entertaining read than your standard investment advice book (this isn’t really an investment advice book, persay).

Here’s a video clip from Fox Business News:

Financial Infidelity by Bonnie Eaker Weil is a book all couples should review. When I first saw the title, I immediately thought to myself - “Awesomedude (yes, I call myself Awesomedude in my brain), you and your wife communicate openly about everything so probably won’t get much out of this book.” So I let it sit for a couple weeks before I took a look at it, however I’m glad I did. Financial Infidelity isn’t a book for people dealing with financial infidelity, it’s a book for people in relationships and establishing a framework for open communication about everything (but focusing on the effect of money). If you have problems (and you’re not alone, financial infidelity is rampant), this book can help. If you don’t have problems, this book will uncover what you don’t know or simply confirm all is well going forward.

First off, this is not your typical “personal finance” book. Dr. Weil is a therapist, has been for over thirty years, and was named one of New York City’s top therapists by New York Magazine and one of America’s best therapists by Psychology Today (her credentials and appearances read like a laundry list of famousness). Financial Infidelity is a book about relationships and its effects on money. That’s right, it’s about relationships’ effect on money, not money’s effect on relationships.

What we do with money is merely a symptom of the problems we have be facing in our relationships. When you hide your spending from your significant other or spouse, it’s a symptom of a deeper problem. When you play games with money, either withholding it or using it as a weapon, it’s not about the money, it’s about the relationship.

The book begins with a discussion of the term Financial Infidelity. It may be an innocuous as participating in an office pool for the NCAA tournament or as deceptive as hiding your spending from your spouse, but it’s any sort of financial dishonesty. In the case of the office pool, it’s deception by perhaps accidental omission or lack of recognition (it’s just a pool, no big deal right?). In the case of hiding your spending, it’s flat out active deception with total recognition of the intent. In either case, it’s not being faithful to the team. A recent Harris pool showed that 82% of respondents have hidden purchases from their partners.

However, the important part of financial infidelity isn’t the dollar cost. It’s the underlying reason or reasons and the effect those will have on a relationship as the years pass. Just because you don’t talk about it, doesn’t make it untrue! If there is no other lesson in the book, it’s that you need to be open in your communication and tackle all subjects, especially the difficult and uncomfortable ones.

The second part of the book covers the seven steps that will “strengthen the trust and intimacy in your relationship” by identifying and tackling financial infidelity. These seven steps were created through Dr. Weil’s experiences as a therapist for the last thirty years.

• Step 1: Calculate the Cost - What the Balance Sheet of Your Relationship Reveals
• Step 2: Examine Your Power Dynamic - If Money Is Power, Is There a Balance in Your Relationships
• Step 3: Divest Yourself of the Past - Understanding Your Inherited Money History
• Step 4: Break Up with Your Money - Letting Go of Money’s Emotional Hold
• Step 5: Define the Currency of Your Relationship - Working Toward a “Free” Exchange of Love and Intimacy
• Step 6: Refinance Your Relationship - Reorganizing Your Priorities to Reclaim Lasting Love
• Step 7: Invest in Your Future - The ongoing Work of Maintaining Your Relationship

The book finishes up with a look at the biochemical component of financial infidelity. It’s a section that focuses on the more “dramatic forms of financial infidelity,” like compulsive gambling and binge shopping. It goes into topics like neurological imbalances and hormones and the like, it’s for when reason alone cannot explain the decisions some make with regards to money.

Lastly, one point a friend of mine, who had read the book, made was that this book differs from many other money and relationship books in that it didn’t blame anyone. She said that many books about relationships frame the woman as the crazy spender and the man as the one who uses money as a weapon. She said it was refreshing for her to read a book where those stereotypes weren’t used.

When HSBC Direct raised their savings account interest rate to 3.50%, I opened an account. I didn’t open it because I was planning on moving funds from a 3.00% ING Direct account, I did it because the cost of opening an online savings account was near zero and because I could then start funneling income deposited into a 0% Bank of America checking account into the new HSBC Direct account. It doesn’t make much sense to move funds from ING or Emigrant to HSBC, but it does make sense to change the destination of funds from Bank of America.

There were a few other non-financial reasons for opening the account. First, there’s no marginal cost to opening another savings account. HSBC has a well known international name and has consistently been among the leaders in interest rates. I would be hesitant to open an account at a lesser known bank. HSBC’s international presence is also a benefit. When we were in China and Taiwan, HSBC was everywhere (along with Citigroup) and that’s a side benefit. Lastly, my mom has an HSBC account, in part because of the China and Taiwan presence, and having that link is convenient as well.

Opening An HSBC Account

The HSBC account opening process is quick and painless (~10 minutes), though it requires more information than most banks because they try to set up everything in one pass. You start by giving the typical personal information all banks ask including social security number. They do a quick inquiry and ask you for three items from your credit history. Then, you get the option of linking a bank account right there.

They verify your bank account by requesting your login credentials and then login. My bank account was linked within seconds (and the transfer was initiated). No more waiting 3-5 business days for two small deposits, the verification process is done right there. Very nice touch.

After about two days, HSBC starts sending you emails (there are quite a few) about your registration, how to log on and set up your account for the first time. Specifically, they’ll email you a link to the Internet Banking Activation page and a registration code, but don’t bother going trying to activate until you get your temporary password by postal mail. Yeah, they mail your temporary password by pony express.

In all fairness, the letter got here pretty quickly. I opened my account on June 4th, received my temporary registration number by email on June 6th, and received the temporary password on June 7th (the letter was dated June 5th). However, because of the mail, any time that was shaved off in the bank linking portion is now definitely lost waiting for a password via mail (probably why they do that). It’s all done in the name of security but it strikes me as a bit unnecessary and overkill.

From here, you go to the activation page, enter in those codes, set up your account access credentials (which includes a username, password, and security key that must be entered by on-screen keyboard), enter two security questions, and you’re in! (whew!)

Bank to Bank Transfers

One of the features of online savings accounts that was once allowed but now stopped by many online banks was the ability to link online savings accounts. I used to have my Emigrant Direct and my ING Direct linked together so a transfer took only a handful of days, but about a year ago they severed the tie and began requiring paper checks to link accounts together.

Well, I was curious as to whether HSBC would let me link up with ING Direct and they did! I submitted a request through the Bank to Bank Transfer online form, HSBC made two trial deposits to my ING Derect account, I verified the transaction and the link was created. It’s important to remember that Federal Reserve Regulation D limits the number of transactions on a savings account to six a month, so I just expended two in the verification process.

Quicken & Money Data Support

Quicken and MS Money data addicts users will be happy to know that HSBC Direct offers support for both applications (for Quicken, you get Windows and Mac version support).

Thoughts

At the moment, I’ve been playing a little with my account and it seems pretty standard compared to other online savings accounts I’ve had. The one noticeable difference is that it’s not as sleek as the ING Direct interface and there doesn’t seem to be any way for me to easily create additional accounts. Of course, only ING Direct offers that option at the moment so it’s not like HSBC is really inferior to peers.

Overall I’m pleased with HSBC Direct so far.

Here’s another, incredibly comprehensive, HSBC Direct review written by your good friend and mine, Cap.

There are thousands of books on investing, a point highlighted in a back cover quote by Peter L. Bernstein: “Books on personal investing are a dime a dozen. But if we add them up, all those dimes come to plenty of money.” It was Bernstein’s contention that Christopher L. Jones’ The Intelligent Portfolio was a cut above the rest with its “strong foundation in theory, the depth of its insights, the power of its message, the clarity of its exposition, and the value of its examples.” That’s quite a laundry list, but does The Intelligent Portfolio deliver? That depends.

About The Author

First, a little about the author. Christopher L. Jones is the Chief Investment Officer and Executive VP of Investment Management for Financial Engines, a personalized investment advice and management service. One of the bonuses of the book is that you get a free yearly access pass to Financial Engines through a code written on a card in the book.

At this point you might think - hmmm, this sounds a little fishy. He’s the CIO and EVP at a generic sounding financial company, what’s the big deal? Hold on, Financial Engines, Inc. provides advisory services to 109 of the Fortune 500 companies and its services touch the assets of 6.8 million employees. As of the end of 2007, they were managing over $16 billion in defined contribution assets on a fee basis. They’re a pretty big deal.

About The Book

It’s not every day you read a book written by an EVP of Investment Management of a financial advisory and management company that tells you question the advice of experts and to approach everything, especially investing, with a very healthy dose of skepticism. From the preface: “… many of the most important ideas from financial economics, promoted by popular media and advertised by financial services firms, are distorted or misused in order to sell more products and services.”

So, given that knowledge, what do we need to focus on, according to Mr. Jones? He lists the following ten basic concepts:

1. Recognize the linkage between risk and reward
2. Avoid being deceived by history
3. Leverage the wisdom of the market
4. Select an appropriate risk level
5. Avoid the perils of stock picking
6. Don’t spend too much on investment fees
7. Diversify intelligently
8. Select funds using relevant forward-looking criteria
9. Understand how to realistically fund financial goals
10. Invest tax-efficiently

At the 30,000 foot level, all those concepts seem pretty straight forward. “Avoid being deceived by history” likely refers to how you shouldn’t base investment decisions on historical returns. “Don’t spend too much on investment fees” probably talks about how you need to check expense and sales ratios on funds and manage advisor fees and such.

The chapter I’ll highlight below was the one about avoiding stock picking since I, like many others, can’t seem to avoid the perils of stock picking (I own shares of Yahoo FTW!).

Avoid picking individual stocks

The crux of the chapter is that for the last few decades, investing the stock market usually meant investing in individual stocks. Mutual funds, index funds (which are mutual funds), and ETFs are all fairly recent investment vehicles. The problem with investing in individual stocks is that it’s risky and investors underestimate the risk and return involved, thus making a disastrous combination. Jones contends that most investors think that the risk of an individual stock is comparable to a mutual fund, despite it being significantly riskier. Financial Engines calculated that, as of Jan 07, the risk level, or volatility level, of the Vanguard 5000 Index fund was 1.5 (a market portfolio has a risk level of 1.0), can you guess the risk level for Dell? How about Pfizer? Or Tivo? (Dell was 3.7, Pfizer was 2.6, Tivo was 5.5) This is expected, I think it’s how much they differ that surprises people.

The three risk types that affect individual stocks are market risk, company risk, and industry risk. With a mutual fund of many companies in numerous industries, company specific risk and industry risk are mitigated and often hedged by other holdings. Every domestic holding faces market risk, but the fact is that the company risk and industry risk effects on one stock are far more significant than on a basket of stocks in diversified markets.

Okay no big deal, we all know one stock is riskier than a fund of the five hundred stocks of the S&P 500. I think my stock pick is a winner and I’m comfortable putting that bet on the table. Jones then did a study where they randomly picked a single stock from each of the S&P 500, S&P 400, and S&P 600 (they represent large cap, mid cap and small cap US stocks), hold it for month and then buy something else, and then see if the stock would outperform its parent index over a 10 year period between 1995 and 2005.

They ran 100,000 hypothetical investors and the results were that the single stock monthly flipper lost. In fact, in the case of the S&P 600 small cap, the median cumulative return was 3.4% vs. the index’s 13.70% return, over 10% different. With the S&P500, 62.80% of the hypothetical investors lost out to the index itself. With the S&P400, 74.10% were losers and with the S&P600, $74.60% were losers. Do you think you’ll be in the top 30% each and every year?

Conclusion

I learned quite a bit about constructing a good portfolio and what the important factors are when selecting various investments. It was fun learning what alpha meant (manager alpha refers to how much a fund manager beats its underlying investment style) and get a few more factors to look at when comparing mutual funds. On the other, it did make a strong, indirect case for sticking to index funds because it mentioned the importance of managing fees very often and how it’s important not to let them eat into your returns.

I may give the Financial Engines a look over the next few months, as it was referenced very frequently in the book (you get a free annual membership with the purchase of the book, so it’s not like it’s a sales pitch or anything), and hopefully they have some more of the same type of interesting simulations and statistic analysis the book carried.

If you’re interested in what a more seasoned investor thinks of the book, here’s Seeking Alpha’s Geoff Considine’s review of The Intelligent Investor.