Do you invest in stocks? Most people would say no; they say, “we only invest in mutual funds.” And for most people that answer is wrong. Or at the very least, dangerously misguided.

That’s because the mutual funds and ETFs that we invest in usually have most, or  sometimes all, of their assets in stocks. It means that, while you personally may not be actively picking stocks, someone or some computer is. Those choices and how (un)diversified they are can give you an unexpected wallop when you can least afford it.

The good news is that by law, any single mutual fund (or a hedge fund, or anyone else for that matter) can’t own more than 5% of the stock of a single company without at least making a filing with the SEC.  So, for example, your mutual fund is prohibited from owning more than 5% of the outstanding shares of, say, Lululemon. That means in the worst-case scenario, you won’t have more the 5% of your money in any one company. While even that concentration may be too much for some, for most of us that is adequate protection from an individual company imploding.

However, if you mix investments in individual stocks with owning mutual funds, or if you own a handful of similar mutual funds, you may not be as diversified as you think you are.  And this could have dire consequences. For example, if you were unwittingly concentrated in the financial services industry in 2008 or the auto industry in 2009, your portfolio would have taken a wallop – even though you thought you were diversified by holding mutual funds.

The mutual fund companies have to file reports with the SEC’s EDGAR database that show their top holdings on a quarterly basis. However, instead of looking around in EDGAR, you can use Yahoo! Finance to input a mutual fund ticker and find out the top ten holdings, and the fund’s total assets across various industries. For example, you can see this data for the Fidelity Magellan fund. You can input other mutual fund tickers in the upper-right of the page.

You can collect this data for all of your mutual funds and put it into a spreadsheet program (like Microsoft Excel) to calculate your overall exposure for your portfolio – just remember that you must weight each fund by the percentage of your total assets that are in each fund. That way you can find out if you’re concentrated in a particular industry, or even a particular stock, even though you may own many different mutual funds.

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We just figured, why waste time and money writing a million posts when we can just use our powers of selectivity and link you to all the right places? We’ve got to spend the time making our product spectacular. We leave the rest to the pros.

This week @blueleafcom, we posted the following articles. “Barriers To Earning More Money” is my personal favorite.

How Much House Can You Afford – Money Smart Life

Saving America’s Middle Class – The Return of Frugality – Frugal Dad

Barriers To Earning More Money – Studenomics

The High Cost of Being Single - Five Cent Nickel

P/E Ratios – Consumerism Commentary

Effects On The Recession On America’s Personal Finances – My Dollar Plan

The Mental Anchor Of Money Mistakes – NYT Bucks

The Future of Social Security – Five Cent Nickel

The Spill May Be Over, But BP Sports Nasty Wounds – Motley Fool

The Five Minute Rule – Bargaineering

Need A Mortgage? Don’t Get Pregnant – New York Times

Developing Multiple Streams Of Income – The Digitari Life

Senate Is Set To Extend Aid To The Jobless – New York Times

A New Age In The History of Energy – Money Morning

Wealth Preservation Strategies Of The Rich – Monevator

Watch The Clock Of Investment Cycles – Financial Times

The New Financial Regulation Law And Your Money – Consumerism Commentary

Got Company Stock Options? Here’s How They Work - The Digitari Life

How Banks Make Money – Cash Money Life

Test Your Investment Instincts – Kiplinger

Have a great weekend!

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We’ve been really well-behaved, just like this kid. No joke links, no pranks. We’ve gotten down to business. The links below have awesome advice and novel ways to think about financial freedom and how to take control of your finances. Enjoy.

The Uses and Abuses of Economic Ideology – Project Syndicate

A Roosevelt Moment for American Banks – Project Syndicate

Four Fund Metrics That Hurt Your Returns – Amateur Asset Allocator

How Much Can I Afford For a House? – Wealth Pilgrim

Buffet Doesn’t See Double Dip – The Guru Investor

What Are The Leading Economic Indicators – Good Financial Cents

Bank Error In Your Favor? No Such Thing – Bargaineering

The New Doom – New York Observor

How Do You Define Financial Freedom? – Get Rich Slowly

What’s Going On With The Estate Tax? – Good Financial Cents

Are Big Banks Doomed? Look At These Survey Results - I Will Teach You To Be Rich

Dear China: You’re Making Me Nervous… - Wall Street Oasis

The Economics of A College Degree – Reuters

The Maes & Macs; Freddie Mac, Fannie Mae, Ginnie Mae, Sally Mae – Bargaineering

Learn To Live With Conflicts of Interest - Bucks

Why Mortgage Rates Vary So Much – Bucks

Ignore Generic Financial Advice - Bucks

Calculating Real Estate Investor Return – Oblivious Investor

Coverdell Savings Account Tax Break Expiring – Bargaineering

The Myth That Risk Goes Away Over Time – Felix Salmon

Have a great weekend!

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One of the reasons we founded Blueleaf is that it’s simply too much work to really understand your money and manage it properly. We’re not talking about your day to day spending, though that’s not easy. We’re talking about the long-term, about how small things today make a big difference down the road and about how seemingly big things today may not be so important as the media hype machine may lead you to believe.

We’re setting out to change that by making money obvious, by telling you “this means that” in plain language, and providing complex information in simple visualizations so that you can really understand where you’re headed and what you need to do at a glance.

Allocation – teaching the lowly pie graph a new language

Allocation – How much money do you have in stocks, bonds and cash across all your accounts? It tells you more than most people expect or understand. That’s because all most people have ever seen is a pie graph without any context. That is all that most systems show you. Yet, that humble pie chart is the Rosetta Stone for your financial future.

Your allocation is the biggest driver of your financial returns, much more important than picking any particular stock or mutual fund. Your allocation determines what kinds of returns you can expect over the long run and what you shouldn’t expect. It determines how much risk you’re taking, answering the question “How much money could I lose this year (or over the next 5 years)?” Along with just a few other key pieces of information, your allocation will help tell you if you’re going to be able to retire, or send your kids to the college of their choice, or buy that boat before you’re 50. To us at Blueleaf, that “Can I retire?” question seems kind of important, and yet, why hasn’t someone, somewhere made it obvious what that lowly pie chart means?

The truth is that many have tried. There has been more written on asset allocation by well meaning academics and financial planners that any investor could read in a lifetime. And that is part of the problem. There are millions of words written about allocation in general but there is precious little about how to apply the academic work on asset allocation to our personal portfolios, our personal risk tolerances, and our personal goals.

And that is what matters to us at Blueleaf. Who wants to make our money a hobby or part-time job? That’s what it seems like it will take to sift through all that information, learn what is relevant for us then do the math manually to figure get the answers for ourselves.

So we thought, “Why not just let money speak for itself?” Why not give your money a voice and put it on stage so it speaks to you with power and clarity? Let Blueleaf do the work to learn your language so you can understand what your money is saying to you about your financial future. And that’s what we’re working to do. Blueleaf is working to teach your money to speak your language, not the other way around. We think you’ve got enough to do already.

Interested in what we’re building? Request an invitation to our free preview. And follow this blog for more to come.

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We threw in the fourth link just for fun. Maybe the third, too.

This week on @blueleafcom, we posted links to articles with advice on how to behave (financial speaking) in a losing market. We like to keep you motivated, with articles that give specific advice on both personal and market situations. Making too little money? Check out “How To Make a Profit From a Market Loss”. Making too much money? Check out “Federal Taxes on Bonus Pay”. Want general life advice and cool doodles? Check out “Three Keys To Motivation And It Has Little To Do With Money”.

We’ve got you covered.

Rich Homeowners More Likely To Walk Away From Mortgages - Consumerism Commentary

Federal Taxes on Bonus Pay – Consumerism Commentary

How to Use Fear to Manipulate People – Invest It Wisely

Even Lebron Doesn’t Listen To President Obama – Financial Samurai

Annuities Draw New Look in Time of Uncertainty – Yahoo Finance

Contrarian Statistic: Credit Card Delinquencies Drop to 8 Year Low?! – Periodot Capitalist

British Companies Becoming Take-Over Target for Cash-Rich U.S Companies – Money Morning

Treasury versus Progressives on the Financial Reform Bill – RortyBomb

3 Things You Must Know About Inheriting An IRA – Good Financial Cents

Financial Services Companies Get Ready for Boomers – Consumerism Commentary

Morality on Wall Street – Wall Street Oasis

Companies Holding Cash, Delong and Cramdowns and Stimulus? – RortyBomb

Yikes: Long Siege Ahead for U.S. Economy, Says Paul Krugman – Investment News

Towards a Google Bank - Reuters

Beware of Cheap Stocks – Motley Fool

Backing Great Management Teams – Motley Fool

Why Alternative Energy Will Never Pencil Out – Seeking Alpha

Making a Profit From a Market Loss – Money Watch

Can Uncle Sam Take Your Land? – Money Watch

How To Get Your Spouse On Your Financial Team – Consumerism Commentary

Three Keys To Motivation And It Has Little To Do With Money – Financial Samurai

Have a great weekend!

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Its July 4th weekend! Hope everyone’s bbq’s and pool parties turn out awesome!

This week on @blueleafcom, the articles we posted took on a serious tone. We posted a good few on retirement planning, but also some on the recent decline in the economy and what this means for the long run. We also had a very surprising one on U.S. bank involvement in money laundering. If you’ve missed them, see below:

Should I Invest or Prepay My Mortgage? – Get Rich Slowly

S&P Index Soon To Be Cheapest Since 1989 – Peridot Capitalist

10 Questions You Should Ask When Considering Retirement – Tech Republic

I Lost A Lot of Money In The Market: Should I Get Out? - Generation X Finance

Why Auto-Enroll 410(k)s May Reduce Retirement Savings – Tax Policy Center

What Happens to Your Stuff When You Die? – Get Rich Slowly

Greenspan: Recent Decline ‘Typical’ Of Recovery – Yahoo Finance

Reverse Mortgages Now A Less Costly Lifeline – Yahoo Finance

30 vs 15 year Mortgage. Which is Best for First Time Homebuyers? – Wealth Pligrim

IRA Beneficiary Rules: The “Stretch” IRA – Oblivious Investor

How to Create a CD Ladder - Frugal Dad

With Rates This Low, Should You Be Borrowing to Invest? – Darwin’s Finance

Volatility On No News – Reuters

U.S. Banks Still Very Involved in Money Laundering – Reuters

What is Goldman Sachs Thinking? – Baseline Scenario

Yet Another Sign of a Shaky Economy - Motley Fool

Personal Income Edges Higher - CNN Money

Who to Blame for The National Debt – Motley Fool

The U.S. Economy Is Headed for A Second-Half Slowdown – Money Morning

Banks Worth a Second Look – Investment News

Have a great weekend!

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It’s rarer than ever to hear someone say “I worked my way through college.” With  tuition rates rising at nearly double the rate of general inflation, a student working under the Federal Work Study Program cannot realistically make a substantial dent in the tuition bill, let alone have money left over to pay the sum of room and board, books, a laptop, and minimal spending cash.

The federal minimum wage is $7.25/hour effective July 24,2009. Let’s assume the student gets paid the relatively generous amount of $11/hour for a library job, and works 20 hours a week term-time (a difficult amount to guarantee, given the student’s need to, well, study during the term). That’s $187 a week given a tax rate of 15% (yes, work study is subject to federal and state income taxes). There are roughly 40 school weeks in a year. The student can make up to $7480 a year, and that’s by working 20 hours a week in addition to being a full-time student. The student can cover 28% of  tuition, room and board at an average private four year university (averaging $26,273 in 2009) or 15.3% of the tuition, room and board at Harvard ($48868 in 2009).

In 1980, the average annual cost of tuition, room and board at an average private 4-year institution was $3499 and $11000 at Harvard. The federal minimum wage was $3.10.hour, and lets again assume the student gets paid a proportionally generous amount of $4.55/hour for the library job. That’s $77.35 a week given a tax rate of 15%, and after 40 school weeks of 20 hours a week of library work, the student could have made a total of $3094. The student could have covered 88% of the annual  private 4-year college bill or 28% of the Harvard bill.

The proportion of college tuition, room and board that a student can pay by working is not what it used to be and it will only get worse at the current rate of tuition inflation. For this reason, I have personally never bothered taking on a work-study job to help with tuition bills. It’s mathematically impossible to make an real impact by doing so.

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This week on @blueleafcom we posted links on portfolio allocation, the implications of the BP oil spill, and the replacement of Peter Orzag as the Director of the OMB. Also a few things on the new financial reform bill, credit card regulations, and the extension of the first homebuyer tax credit. The Senate’s been working hard.

Rebalancing and Asset Allocation: Critical For Investing – I Will Teach You To Be Rich

What the Financial Reform Bill means For Financial Advisers – Investment News

Will Elections and a Resignation Open the Door For U.S. Budget Changes? – Money Morning

Making Your Nest Egg Last a Lifetime – CNN Money

Fannie Mae Demonizes the Victims of the Housing Bust – Felix Salmon

High Interest: How to Choose Between Checking, Savings, and CDs – Get Rich Slowly

The Hidden Danger in Your Portfolio – Motely Fool

Why Stock Spills Are Nothing Special – Motley Fool

16 Business Lessons I Learned From Poker - US News: Money

The Wrong Way to Protect Your Portfolio – Motley Fool

Does Income Change Who You Are As a Spender? – My Journey to Millions

Paul Krugman For OMB – Baseline Scenario

Credit Card Regulations: A Win to Customers? Or the End of Credit? – Get Rich Slowly

Is it Better to Buy or Rent? – Moolanomy

Why China’s Foxconn Will Hurt the Economy More Than The Global Oil Spill – Money Morning

Why a Bank Might Like Owning a Hedge Fund – Rortybomb

Four Factors to Consider Before Determining Your Long-Term View on U.S. Stocks – Money Morning

Senate Approves Extension of First Time Homebuyer Tax Credit – Think Your Way to Wealth

Morgan Stanley, JPMorgan Set to Lead GM IPO – Reuters

Dead On Arrival: Financial Reform Fails - Baseline Scenario

Have a great weekend!

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I’ve been learning so much about different financial products and investment strategies from blogs, articles, student groups, older investors, and, most recently, some willing mentors in the BetterInvesting community.  While it’s been great, I have realized that I probably shouldn’t go forward in investing more than a tiny training portfolio of my own money at this time, no matter how many brilliant ideas I have and how many new things I want to get familiar with. At risk of cognitive dissonance in comparison to the stories of my experiences, I will explain to you my particular reason: financial aid.

As a student going into my junior year of college at Harvard and a tad reliant on financial aid for continuing my education (70% of Harvard students receive some form of financial aid), it is both a fear and a reality that personal investment will compromise a percentage of my scholarship. How much is unclear; the way the government calculates the Expected Family Contribution (EFC) each year is undisclosed, though many websites host online calculators that should get you a (wide) ballpark number. The FAFSA website does address student investments in very general terms: “If the student is a dependent [as most students are], the accounts are reported as parental investments in question 90, including all accounts owned by the student and all accounts owned by the parents for any member of the household,” which tells us that student investments are equally weighted to parental investments but nothing really about specific numbers and percentages. Past the FAFSA, the formula that Harvard uses to calculate the values of its own need-based scholarships is a separate mystery.

I believe that the mystery of how financial aid credits are awarded is good: if more details were disclosed, enterprising individuals would try to find the loopholes in the formulas, gaming the system at the expense of families who may not have the time, familiarity, or language-skill to read all of the footnotes and small print.

And, of course, I also think that financial aid is great. Working on campus during reunion week at Harvard and noticing the uncomfortable lack of diversity of the alumni classes, I am proud that more and more colleges are making their programs more widely available. Even though it would benefit me personally to change the policy, I do not think that student investments should be weighted less than parental investments, again because of the loopholes that such will create.

But what I would like to do is highlight that this will delay my personal investments to many years ahead, especially as graduate schools provide financial aid awards and low-interest loans to students with financial needs.  Because the specific weightings of particular investments is undisclosed, I have to be patient in applying my newly-acquired investing knowledge into the markets. For me, it’s well worth the wait, and for other students, it’s a consideration to be aware of so they don’t unwittingly jeopardize their financial aid situation.

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I’m not only my parents’ only child, but also the only niece and granddaughter in my mother’s family.  As such, my first experience with family estate planning came early on, as my grandparents began making annual transfers of their assets to the next generation.  With each year’s gift, my grandfather provided specific guidelines on which equities to purchase, which my mother as my custodian followed explicitly, even keeping the same brokerage.  She trusted his years of investing experience more than her own judgment, and we felt that since it was ultimately his hard-earned money it should be his decision anyway.

Though I was aware of the account, as a minor I paid little attention to it.  When I joined an NASD-regulated firm after college and moved to open my retirement accounts, I took a look at the list of permitted brokerage firms and opened my account with Fidelity (I can’t really give a thoughtful reason why).   It wasn’t until I came of age to take custody of my grandparents’ gifts a couple years later that I realized I was holding accounts with two separate firms and no clear way to view my overall portfolio.

I could have consolidated the accounts, but fortunately my grandfather’s brokerage was also on the allowed list.  I didn’t intend to trade the account very actively, and wasn’t sure what fees would be involved with rolling the account over, so I opted to keep them separate.  I also reasoned that maintaining multiple accounts would give me more flexibility to make different types of trades, and benefit from the strengths of the different brokerages.

When an aunt passed away more recently, I was the beneficiary of her IRA – of course, maintained at a third firm.  Using the same logic, for now I’ve opted to leave the account where it is.  My active trading runs through my personal Fidelity account, so the inconvenience of checking positions and updating my records in separate accounts is pretty infrequent.  Of course, if I start to trade the family accounts, or just can’t keep my passwords straight, I may reconsider the whole strategy.