Personal Finance 
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BVC #2 – Sitting On The Sidelines Is OK [VIDEO]

Thank you everyone who left a comment on my first Bargaineering VideoCast about Filtering Personal Finance experts, I took your advice to heart and made some changes. I still have to work on a LOT of things, like being videotaped, but at least you won’t get sick watching it!

This video talks about how there seems to be an aversion to “sitting on the sidelines.” You have money burning a hole in your pocket and you want to invest it so it can grow right? Well, when the rules of the game are changing, sitting on the sidelines may be the smartest thing you can do. Remember Rule #1 – don’t lose money!

The next video will be a product review, something where video adds value over an audio-only podcast.

I’d love to hear what you all thought, please give me more tips! (and my next video won’t have quite so much crap in the background, my wife made sure of that!)


 Banking 
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LendingClub Video: How Peer to Peer Loans Helps Others

On a recent trip home, my Dad told me about how he sent a co-worker to my website a few months ago. It turns out that that his co-worker had taken one of those 0% financing offers from a major electronics retailer for twelve months. What they didn’t know was that if they didn’t pay off the entire bill in full, they would be subject to all the interest due from the 0% period. I warn against this common fine print “gotcha” in my warning on 0% financing offers.

Anyway, the period was about to expire, his co-worker was about to get socked with a big interest payment and a higher rate, and they didn’t know what to do. My dad told them about 0% balance transfers and they were able to secure a twelve month reprieve, now paying it off regularly as they should’ve done in the first place. My dad told me that he had no idea how my site was popular until that point because he saw it help someone and how happy they were to find a five-minute solution to a problem they’ve had for weeks.

I had the same experience in watching a video about peer to peer lending service, LendingClub:

The video really opened my eyes to peer to peer lending the same way my dad’s experience with his co-worker opened his eyes to my website. This is a site that is helping people when they have no where else to turn to. The two minute video profiles an Army medic who found himself owing his employer four years in pension payments in one lump sum payment (not sure how that works but that’s how they described it, awfully nice of his employer!), and he needed to find $16,000! Through LendingClub, he was able to get a loan.

The amazing part about the entire story was the graph charting online lending’s progress. In 2005, online lending was a $118 million market. In 2008, it’s 1.55 billion. Yes, BILLION. They believe it will go to six BILLION by 2010. Regardless of what it gets to in 2010, it’s clear that this isn’t some fad that will fizzle away in a few years.

I want to start lending but it turns out Maryland isn’t on the list of places eligible to invest in notes. Shucks!


 Reviews 
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comments

Put Your Money Where Your Heart Is by Natalie Pace

Put Your Money Where Your Heart Is by Natalie PacePut Your Money Where Your Heart Is by Natalie Pace is a two hundred and fifty page book on, among other topics, the framework she follows when she picks stocks. If you recognize her name, it’s because she’s is the founder and CEO of her own financial news organization and it has partnered with Forbes.com. She’s also appeared on numerous television news programs like Fox News, Good Morning America, Time Magazine, More Magazine, USA Today, NPR and Kiplinger’s Personal Finance. However, she didn’t get her start as a financial guru, she’s only ten or fifteen years removed from a time when her primary concerns were credit card bills and the mortgage payment.

(Click to continue reading…)


 Reviews 
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The Shortest Investment Book Ever by James O’Donnell

The Shortest Investment Book Ever: Wall Street Secrets for Making Every Dollar Count by James O'DonnellI really liked The Shortest Investment Book Ever: Wall Street Secrets for Making Every Dollar Count by James O’Donnell because it was concise and to the point, not overly wordy. The book isn’t a thick tome designed to overwhelm you into thinking you are getting your money’s worth, it’s about a hundred and fifty five pages broken up into eighteen chapters, each of which probably take about 10 minutes to read. You would think it’s impossible to cover everything in investing in 155 pages and you’re right, he covers all the basics 99% of investors will need. He writes about various account types like 401(k)s and IRAs, he writes about diversification, he writes about the importance of time, he writes about life cycle funds, he writes about investing with a conscience, he writes about re-balancing, he writes about annuities, etc. He doesn’t discuss more advanced topics like investing in commodities or buying options and futures, but for 99% of individuals that stuff won’t matter.

(Click to continue reading…)


 Investing 
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Exclusive Capital One Sharebuilder Promotion Bonus Code

Capital One Sharebuilder(Updated 10/5) If you’re looking for an exclusive Capital One Sharebuilder promotion code, you’ve come to the right place.

Capital One Sharebuilder is the buy-and-hold investor’s dream and we have some promotion codes that will help give you a head start. We have partnered with Capital One Sharebuilder to bring you an exclusive $25 promotion code that isn’t available anywhere else.

The exclusive code is: 25WO10

To use the Capital One Sharebuilder promotion code:

  • Click on the Apply Today! button,
  • You’ll be taken to an Capital One Sharebuilder page, click on the “Get started today” button.
  • On the next page, it says Account Type at the top, you’ll see a white box with the words “I’m responding to a promotion,” – check that box,
  • The page will reload and then a new box will appear – that’s where you enter in the code.

It sounds complicated but it’s pretty easy, it just takes a few words to explain it.

Do not open multiple accounts. You cannot get multiple bonuses for opening multiple accounts so don’t try to, readers have reported receiving this email:

“It has been noted that you recently opened multiple accounts with identical registration information.

We have restricted from activity all but the first of such identical accounts. ShareBuilder is closing these additional accounts under the provisions of Section 10 of the Account Agreement. Future identical accounts will be likewise restricted.

IMPORTANT: If you have already placed funds in your account, they will be returned to the bank of origin after the normal hold period. If you funded your account with a check, funds will be sent by check to the address of record on the account. If there were securities purchased, those trades will be cancelled.“

Terms & Conditions of the offer:

You must open a new account with ShareBuilder and deposit at least $25 to be eligible for this promotion. ShareBuilder will deposit a $25 bonus approximately 4-6 weeks after your first $25 deposit. The $25 bonus offer is available for Individual, Joint and Custodial accounts only. Offer not valid for IRAs or ESAs. The $25 bonus from ShareBuilder is not available for withdrawal for 90 days after it is awarded to your account. This offer is not valid with any other offers and is non-transferrable. Limit one ShareBuilder account bonus per unique customer or custodial beneficiary. ShareBuilder reserves the right to terminate this offer at any time and to refuse or recover any promotion award if ShareBuilder determines that it was obtained under wrongful or fraudulent circumstances, that inaccurate or incomplete information was provided in opening the account, or that any terms or ShareBuilder’s Account Agreement has been violated.


 Taxes 
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Tax Loss Harvesting

Tax Loss HarvestingHas the stock market decimated your portfolio too? Yeah, us too. Fortunately, there’s something called tax loss harvesting and it can help anyone get a little edge on the recovery. The idea behind tax loss harvesting is that you sell a particular holding, take the capital loss, and then immediately invest it in something similar but not the same as the original holding. By doing this, you “harvest” some of your losses to offset gains or ordinary income, and by investing in a similar but not a “substantially identical security,” you also benefit from the recovery. The key in this strategy is that you invest the tax savings, from the loss, back with the original sum.

Some words of advice on tax loss harvesting:

  • The reason why you can’t by something “substantially identical” has to do with the wash sale rule. If you want to deduct the loss, you have to follow wash sale rules.
  • Don’t do this in a retirement account. There is no capital gains or losses tax in retirement accounts. 401(k)’s and IRAs appreciate without taxes and taxes are only assessed at distribution time (with the exception of Roth IRAs, which are never taxed).
  • Substantially identical is a gray area because the IRS hasn’t clearly defined it but make sure it passes the sniff test. One interesting thing of note is this explanation on IRS Publication 564: “Substantially identical. In determining whether the shares are substantially identical, you must consider all the facts and circumstances. Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund.” The key word there is ordinarily. Just pass the sniff test, I’m sure your nose works well. :)
  • If your capital losses exceed your gains, you can deduct $3,000 of capital losses against your ordinary income. If your losses exceed that, you can carry those losses forward each year without limit.
  • You don’t have to wait until the end of the year to do this, in fact it’s probably better to give yourself the flexibility of doing this earlier in the year because of wash sale rules.

Why Tax Loss Harvesting Works

Let’s consider the scenario where a fund has dropped 10%, the investor opts to harvest losses and immediately invests in a fund that closely mimics the original fund. Both the original fund and the new fund appreciate by 11.1%. The investor invested $10,000 and is in the 25% tax bracket. Who wins?

Does not tax loss harvest: This scenario is simple, the investor has effectively had no change because the original fund has return to its original value. He sells and has no capital gains or losses.
Does tax loss harvest: The fund fell in value from $10,000 to $9,000 and the investor does some tax loss harvesting to extract the $1,000 in loss. The $1,000, come tax time, will yield him $250 in tax savings. He reinvests the $9,250 into a similar but not “substantially similar” fund and it appreciates by 11.1% to $10,276.75. When he sells, he pays taxes on $1026.75 of capital gains – or $256.69. Subtract that from his $10,276.75 and he’s left with $10,020.06, which is $20.06 ahead of what he had if he hadn’t harvested losses.

Tax Loss Harvesting with Placeholders

Let’s say that you really like a particular mutual fund, your brokerage doesn’t offer anything similar, and you aren’t about to open up another account at another brokerage just to do this tax loss harvest. A potential option is to use exchange traded funds (ETFs) as a placeholder for the wash rule period. Sell your loss, buy into an ETF, wait 31 days, then sell the ETF and get back into your fund. By selecting a similar ETF, you can catch any rises in the industry without sitting on the sidelines.

Please consult with an accountant to clarify your particular situation before doing anything I’ve talked about here.

(Photo: tonivc)


 Reviews 
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Sharebuilder Review

ShareBuilder - Welcome page Sharebuilder built its reputation buy having low commissions ($4 a trade) and completely buy-in into the dollar cost averaging mantra. Much like how you have regular retirement account contributions, Sharebuilder helps you cheaply buy into positions with individual companies (back then, ETFs didn’t exist) on a regular monthly schedule. They made a good name for themselves doing this in an era when trades cost at least twice that.

(Click to continue reading…)


 Taxes 
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$3,000 Capital Loss Deduction

At the end of last year I wrote a few articles about stocks and taxes, the most important of which was the concept of deducting capital losses against capital gains. One sentence in the article talked about when you have an excess of capital losses, an idea I wanted to expand upon given the recent blood letting in the capital markets. Given the combination of a slowing economy and some unrealized losses sitting on the books, consumers might want to realize the loss and take the $3,000 deduction from their regular income.

For example, if I bought $10,000 of stock in Company ABC and that stock was now worth $7,000 – I would be realizing a $3,000 loss. I record the loss on my tax return (Form 1040, Schedule D) and then transfer it to my regular form to deduct from my income. That limit is reduced to $1,500 for those married filing separately. If your losses exceed $3,000, then you can keep carrying that over year to year indefinitely.

Why would you want to do this? Your tax refund will be larger because you’ve reduced your income by $3,000. If you’re in the 25% tax bracket, your tax return would increase by $750. You’ve already lost the money, you simply haven’t realized it yet. :)

Why WOULDN’T you want to do this? The wash rule states that you can’t claim a capital loss if you buy back into the investment within 30 days. You can buy back in after the 31st day but anytime before that and you’ve realized a loss without the tax deduction.

It’s neither a smart move or a dumb move, just a move that is made smart or dumb based on your situation.


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