As promised I am going to go through the pictures and stories of all the contest entrants for the credit card cut up contest that sent pictures in.
Stephen from VA writes:
The only thing I discovered with my Discover card is how easy it is to get in over my head in debt.
So as everyone knows by now, my main retirement fund is as well as my main investment fund are both funds that follow the S&P 500 index. But the truth is, I have money in other kinds of index funds as well. Thats why I refer to it plurally as “index funds” not “THE INDEX FUND.” Though if I say the index fund I probably do mean the S&P500. If I refer to it like that, someone throw something at me (like a nasty email).
So now you are probably wondering: other index funds? But hey 11% interest over the past 10 billion years, S&P thou art my only love! Well, the truth is there are other funds that not only are just hanging around, they actually have great historical records as well. So now I’m betting you want to know what a few of them are eh?
Here are a few index funds:
Small-Cap Index Fund
-This is an index of small companies. This one is risky as hell, but its also got a ton of potential for huge growth.
Mid-Cap Index Fund.
-This is mid size companies. I tend to like this fund because it is for companies that have managed to survive long enough to become mid size but have not yet crossed the line into huge corporation. The advantage here is that mid size companies generally have a lot less dead weight than big companies, but with less risk than small companies.
Bond Market Index fund
-I dont invest in this one. Why? Bonds are for people who are either 1) not confident in the market, 2) Love stability hate taking any risks 3) old. Ok thats a bit extreme but for people that want to invest in bonds, you don’t have to pick just one, you actually get an index.
Real estate Index Fund
-You would have made massive returns years ago, now you can sink your teeth into massive losses.
European companies Index Fund
-All european companies. This can be good or bad, its really similar to the S&P500 but keep in mind, Europe is a little less business/stock owner friendly than the US.
International Stock Index Fund
-This is a great part of a diversified portfolio. Why? Unless there is a massive worldwide collapse of all markets, this one should grow consistently. Its returns have been pretty dang good.
As you can see, there are lots of different opportunities outside of the S&P500. Go forth and invest.
There was a character in Shakespeare named Polonius, for those of you that remember who said, in modern day terms “no credit needed.” America today runs on credit and unfortunately it has taken on a terrible terrible life of its own.
The first and most obvious piece of this Pandora’s puzzle is consumer debt, the debt that you and I and Bob your next door neighbor have racked up. The average American household now owes over $20,000 and $8000 in credit card debt…and that doesn’t even include mortgage debt. Half of all American families spend more than they earn every year.
That all pretty bad, but its no where near as bad as the worst spender on credit…the United States government. Right now the government owes $9,391,477,965,650 which, when you look at the population of the US 303,654,870 this means that each citizen’s share of the national debt is $30,928 and growing. Of course by the time you read this, that will have increased. Ouch.
We as a nation have been gorging ourselves on credit and our debt waistlines show it. Do yourself a favor, balance your budget; do the country a favor, write your representatives.
I write my articles for the weekend during the week, so when I wrote my article on Jim Cramer little did I know that later that day he would talk about Bear Stearns on his program. It went a little bit like this:
Peter writes: “Should I be worried about Bear Stearns in terns of liquidity and get my money out of there?”
(Cramer’s response): “No! No! No! Bear Stearns is fine. Do not take your money out….Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear. That’s just being silly! Don’t be silly!”
This was while Bear was trading at about $60/share. Well Jim, thanks for proving me right.
Bear Stearns employees 401k’s were literally loaded with Bear Stearns stock apparently. Here is one blurb about it from Report on Business:
Hot on their heels will likely come lawsuits on behalf of Bear Stearns’ employees. What makes this case interesting is the unusually high level of stock ownership by staff, who hold more than a third of the company’s shares, said Ross Intelisano, a partner at Rich & Intelisano LLP, which specializes in securities litigation.
“We’ve been getting a lot of calls,” said Mr. Intelisano, whose firm has represented employees in other cases against Bear Stearns. “The question would be whether or not Bear, as the administrator of the 401(k) plan, breached its fiduciary duties to the employees.”
A 401(k) in the United States is an employer-sponsored, defined-contribution retirement plan, and many Bear Stearns employees have company stock in their plans.
After doing a little more digging it seems that the major default investment for Bear Stearn’s employees 401k’s was Bear Stearns stock itself. Does that scare anyone else a little bit? Honestly, is this Deja Vu? Enron anyone?
As of right now 14,000+ Bear Stearns employees not only are out of a job, but have worthless 401ks as well… Lets just lay it out there: your livelihood is already tied to your employer, do not tie your retirement funds to it as well, at least, not in great quantity.
Always diversify my friends, ALWAYS.
Visa Stock. Thats right, right now you can own it. Visa stock went on sales today for $44/share which is more than the expected $35-$42/share that was expected but you can hardly blame them for starting it a bit higher considering the hype that has surrounded the IPO.
So far Visa has raised a record 18 billion dollars in its stock market flotation. The previous record was the amount raised when telecom giant AT&T went public eight years ago, raising 10 billion dollars.
Not only that but Visa still has over 40 million shares in reserve, which could bring the final figure for the sale to nearly 20 billion dollars.
This is Visa’s first time being registered on the New York Stock Exchange. The successful launch comes despite the international credit crisis… Visa is entering a jittery market, considering the shaky consumer confidence. How many people do you know right now going out and making big purchases? Many companies cancelled stock market floatations planned for the past few months because of the poor financial climate but Visa decided to go ahead anyway.
Visa Stock ups
-Visa is something that everyone (well most everyone) uses and there is a good chance that Visa Stock will go up considerably in the next year since this is their initial public offering.
-Visa Stock should be fairly easy to get ahold of since they are releasing such a massive amount, in a weak market.
-MasterCard is up 300%-plus since its 2006 IPO.
Visa Stock downs
-Dont expect Visa stock to repeat Mastercard Stock. There were a lot of problems with Mastercard that were turned around fairly quickly.
-The economy is weak so people are spending less
-Visa stock volume is huge
Overall, I think I am going to pick up a few shares simply for the reason that this is a once in a lifetime kind of thing – an opportunity to buy the initial public offering of something that I use every day.
It may have seemed like a good idea at the time, but it you will pay for it long term.
Ah yes, the cancer that is Interest only ARMs. So for those of you who aren’t quite sure what it is:
An interest only ARM is an ARM (Adjustable Rate Mortgage) where for a set amount of time the borrower pays only the interest on the principal balance, with the principal not being paid down at all.
Several years ago banks went kind of crazy lending and started handing out ARMs like they were on a mission. Well, they were on a mission – lend to as many people as possible, regardless of whether those people could afford it or not. That in and of itself means big trouble but at least homeowners could build some equity in that time.
This is where the interest only ARM came in. Interest only ARMs are the same concept except that homeowners (and I use that word loosely) only pay interest on the principal – basically banking on their home appreciating. There is one major problem, housing prices were very inflated and so now we have people with houses they couldn’t afford in the first place with their interest rates resetting to high rates while they have effectively LOST equity in their houses.
I heard one guy call into talk radio and say he has three houses with interest only ARMs that he bought assuming he could flip them but now he cant even sell them below market value…and he is about to foreclose on all three.
Here is the lesson, I want all of you readers to make me this promise: “I reader hereby do solemnly swear that I will not get an interest only ARM or an ARM of any kind for that matter and I will tell my kids to never get an ARM too.”
Anyone try to buy some milk or gas in the past week? There is some bad news, and there is some worse news.
The bad news: you probably already know: its expensive as hell.
The worse news: its going to get more expensive.
The Fed is expected to announce another rate cut today to try to stop the housing and stock markets from sliding any more than they already have…there is one major problem: trying to deflate this bubble is inflating huge bubbles in precious metals (gold at 1000/ounce, really?) and commodities (I may as well be pouring filet minion on my cereal, except that now the filet is more expensive too). The long short of it is that the rise in energy and agricultural costs have led to a large increase in prices, the biggest gain in one year since 1980.
So what is going on with the rate cutting?
What happens is that as the Fed expands the money supply, money is worth less, and so it costs more to buy stuff. The good old “I” word, inflation.
I thought fed rate cuts were saving the mortgage market?
Thats the idea. The problem is that not only are the rate cuts not perculating down, but now we have hyper inflation.
Now I am by no means a hard liner on either side. Ron Paul is probably wringing his hands like a madman right now, and on the other side people are praying for the rate to go to zero. I definitely think that cutting rates needed to happen – probably sooner than they were but I am much more worried about inflation long term than anything else. Like it or not Fed, some people are going to foreclose and banks are going to have to write off a bunch of stuff…but lets not damage the dollar long term with getting crazy on this rate cutting. Don’t get me wrong, the fed has a hard job, but we have to pay the reaper sometime, so lets get it over with now.
You can do it, but its not the best idea.
I have had a few readers mention Jim Cramer. “Have you seen Jim Cramer?” “What do you think of Mad Money?”
Yes, I have seen him, and yes I have read Mad Money. Let me just say this straight out, Jim Cramer is garbage. The first time I saw him I was running on a treadmill at my health club, his TV show was on, and his voice was piercing through my music in my earphones. They ALWAYS have him on. I had to turn my ipod up to full volume, and If I go deaf, I am blaming Jim Cramer.
All joking aside, if you see it on TV, in a magazine, or in a newsletter chances are very good it is garbage. I like to review stocks and give my take about what I would do with a particular stock. I like to give both the upside and the downside to them which is just paramount to talking about it, I have never said to go out and buy any particular single stock. I treat individual stocks more like speculative fun gambling than anything.
Cramer has some good advice when it comes to money in general but his speculating on specific stocks is just that, guessing. I saw something that did an analysis of Cramers picks. They were roughly 50% correct. What really irks me is that he will tell people to
INVEST IN SOMETHING IMMEDIATELY.
Or you could take some time do your own analysis and then invest in whatever you would like, now doesn’t that sound like a much better idea?
I love setting goals. I have set all sorts of goals in my life, as I am sure you have too. I am talking about reasonable goals too…not “I am going to become a gigantic movie star, bodybuilder, and then become a governor of California and eventually run for president” kind of goals. Its simply not possible, unless you are Austrian and built like a wall. I am talking about “I am going to get in better shape.” or “I am going to save some extra money.” kind of goals.
The problem Ive had with goals is that I have not made them specific enough. This is a problem a lot of people have and it is the #1 reason that you do not achieve what you want to achieve. Goals have to be both realistic and trackable. If something isn’t tangible and trackable, you will not see any progress, and probably give up.
Example of a badly set goal:
“Im going to get ripped.”
Probably not.
Example of a well set goal:
“I am going to lose 5 lbs this month by eating chicken for dinner instead of frozen pizzas and by running at least 3 times a week.”
So lets apply this to personal finance. Lets say you want to start putting away money into a savings account.
Bad:
“I am going to start saving some money.”
Good:
“I am going to start transferring $25 per paycheck into my savings account.”
This is solid and accomplishable and you can track yourself. If you transfer the money into the account, you know you have succeeded.