You may not know the name Heather Peters, but perhaps you soon will.  Peters sued Honda because her hybrid car did not get the 50 mgp it advertised it would get.  Surprisingly, the judge awarded her $10,000, the estimated amount she paid in additional gas since buying her car in 2006.  Honda is appealing, but they could be looking at future payouts for other Honda owners if Honda loses its appeal.

Here is what I am reading this weekend:

Facebook Is a Miracle of Capitalism:  Business Insider  Now that Facebook has gone public, many of those who work there will become millionaires, and perhaps try to start their own companies.  The ripple down effect will be felt for quite some time.

Well, Now We Know What Facebook’s Worth – And It’s Not $100 Billion:  Business Insider  Here is how much the social media site that is now used by 1/7th of the world’s population is worth.

Experiment: Buying on a Dip:  The Finance Buff  How much can you gain by waiting to invest your money for two days?  For this writer, $100 and 4 shares.

Peter Schiff Favors Ron Paul, Says Settle for Romney:  Yahoo! Finance  Schiff favors Romney because he can do less damage to the economy than Newt Gingrich.

Adam Corolla on Occupy Wall Street: The Rich and Poor Are More Similar than You Think:  Yahoo! Finance  On a lighter note, hope you enjoy Corolla’s take on how the rich and the poor are actually quite similar.

• Weekend Reading for February 28, 2010
• Weekend Reading, January 20, 2012
• Weekend Reading for February 6, 2010
• Weekend Reading for February 6th 2011
• Weekend Reading for February 13th 2011

Weekend Reading for February 3, 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

The Internet has made it easy for just about anyone to begin investing. An online broker can provide you with the ability to trade stocks and funds, as well as open some types of retirement accounts and even engage in options trading.

Before you sign up for an online broker, though, make sure you do your research. Consider your personal needs and investing goals and choose a broker that is likely to provide you with the best service for you.

Things to Look for in an Online Broker

As you make your decision about an online broker, consider what the broker has to offer, as compared to others. Here are some items to pay attention to:

• Investment Choices: Your first consideration should be the investment choices offered. Does the broker offer what you are looking for? Stocks, bonds, various funds (including ETFs) and other assets should be considered. There are some brokers that offer currencies and that offer futures and options. You can also find many brokers that can help you open an IRA or other type of retirement account. Figure out what investment options you want, and look at brokers that offer what you want.
• Costs: Different online brokers have varying fee structures. Find out about the commissions, the flat-fees for trades, and other costs. Some of these costs include extra fees for trading funds, getting phone advice, and more. You want to choose an online broker that is going to provide you with good value, with lower costs.
• Research Tools: Understand what tools are available with your broker. You might be able to access additional tools with a “premium” account that costs extra. Or, you might find that the free tools are sufficient. Go through the research tools and choose an online broker that provides you with the information you need to make informed decisions.
• Customer Service: Even though your investment choices and the costs you pay might be the most important points to you, don’t forget to consider customer service. Read reviews of different online brokers to get a feel for how well they serve customers. Also, you can look for items such as phone help, and 24/7 online chat. You want to ensure that you will be able to get the help you need with your broker.
• Other Perks: Consider the other perks that an online broker might offer. Some of these perks might include banking services (including an ATM card to access your cash account). Look at all that the online broker has to offer, and whether or not you require it.

Figure out which items are most important to you, and which you are willing to be flexible on. No online brokerage is going to be ideal for everyone, so you will need to prioritize the characteristics that are most important for you. You might be willing to pay a little more for a wide variety of investment options and first-class customer service. Or, if you are more of a do-it-yourself investor with basic needs, something with rock-bottom prices and basic investment choices might work best. When ready to sign up, visit our stock broker promo codes section. We are constantly updating the promotions offered.

The important thing is to understand what you want in an investment broker, and then compare your options so that you get will be the best value in your situation.

• TD Ameritrade Review – The Perfect Online Broker?
• Smart Money 2011 Broker Survey
• Stock Broker Reviews (Updated 2011)
• Barron’s 2011 Broker Survey
• Fidelity Review – Opening an Online Brokerage Account

How to Choose an Online Broker is from Investor Junkie Copyright © Empowering Media, Inc.

Capitalism is about expanding the economic pie, not trying to divide a static pie equally. Quite frankly I am getting tired of socialist writers, and progressive politicians implying the economic pie is static, and we must divide it equally. They claim everyone deserves their “fair share” of the pie. Life isn’t fair, nor will it ever be. Only from everyone collectively caring about themselves does the quality of life improve for the whole.

With capitalism the quality of life improves for everyone, not just the elite 1% as some might lead you to believe. The poor in the United States are richer than many other countries, especially if we compare ourselves to emerging countries like China. Here is an interesting stat from the Millionaire Next Door, 80% of today’s millionaires in the United States are first generation wealthy. Unlike what our politicians lead us to believe, most citizens did not inherit their wealth.

What if Apple Didn’t Exist?

Let me give you a great example to prove my point about the growing pie of capitalism. Imagine for a moment if Apple (AAPL) did not exist. The many technologies that Apple either invented, leveraged or perfected has touched so many individuals. There would be no iPod, iPod Touch, iPhones, iPads, and Apple Macintosh computers. There would be no App Store, no third party accessories, no applications for the Macintosh OS X platform.

Imagine all of the copycat products that have emerged because of Apple. Many high flying companies had to change their business strategy (cough RIMM) because of Apple. In the process this competition directly improved our lives.

Now imagine all the Apple employees, and the vendors it uses. Imagine the amount of individuals generating an income indirectly from Apple:

• Developers creating apps for the app store
• Cases for the iPhone
• iPhone battery add-ons to extend it’s battery life
• Classes offered to educate on how to use Apple’s products
• Shareholders who’s wealth has increased dramatically
• The net effect goes on and on…

Can you truly say if Apple didn’t exist, the world be as great of a place? Apple’s products changed the lives of millions, and I’ll assume for most the better. I use Apple as an example because it recently became the largest company in the world from just starting as an idea in someone’s garage.

That’s not the say other competing technologies couldn’t/wouldn’t exist if Apple didn’t exist, they certainly do. My point is businesses, entrepreneurs and workers create value from where there was none. The added value improves the lives of not just the people who created it, but increases the wealth for all.

This is specially true with information and service age we live in. With a service economy there’s no natural resource to dig out of the ground, nothing to transport, and no machines to build. It’s purely the sharing of knowledge that adds value to others.

But Capitalism Isn’t Perfect

I’ll be the first person to admit there are flaws with capitalism. Yes there is inequality with capitalism, but inequality exists with socialism, and communism. The inequality in communism and socialism is determined by the state, and favors people who have an inside connection. The only thing these economic systems do is force the economic pie to become stagnant, and the pie no longer grows bigger. There’s a reason why Cuban’s still drive cars from the 1950′s. If you ever visited Cuba, it would appear you are in a time warp.

I’m not saying Apple is a perfect company either. Apple, just like capitalism, is currently the best economic system available. History has shown all other existing “isms” have failed miserably.

Until someone divises an economic model that works best with man’s psychology of fear and greed, capitalism is the best way to collectively improve the lives of everyone. Capitalism has also proven to be much better than the path we are going towards – socialism. The only thing socialism makes equal is misery.

• Low Fixed Interest Rates Game Plan
• CNBC Commercial – Capitalize on it!
• Steve Jobs Creating Jobs

Capitalism is NOT a Zero Sum Game! is from Investor Junkie Copyright © Empowering Media, Inc.

One of the resources that many investors turn to when evaluating funds is Morningstar. Morningstar has built an entire business on rating funds, using the famous five-star system that many of us are familiar with. But, while funds like to tout their ratings and investors rely on them to determine what constitutes a “good” fund, these ratings may not be terribly meaningful.

How Does Morningstar Figure Its Ratings?

Funds with a three year history all have ratings ranging from one star (lowest) to five stars (highest). In order to determine its star ratings, Morningstar looks at risk-adjusted trailing performance. As part of the formula, Morningstar does include costs, considering returns that come after fees are deducted. However, the fact that past performance is a huge part of Morningstar’s rating system means that there is a big problem with how meaningful the ratings actually are.

Past Performance and Future Results

Investors are familiar with this common chant: “Past performance does not guarantee future results.” This means that it becomes necessary to ask yourself how meaningful a star rating system based on what has happened in the past is. If past performance can’t be taken as an indicator of future results, Morningstar ratings based on these performances might not be as meaningful as expected.

It is true that past performance can provide clues about a company, and its likely health. From that standpoint, looking into the past isn’t a bad idea. But relying heavily on Morningstar ratings to help you choose a fund that will perform in the future might not be in the best interest of your investment portfolio.

Could Expense Ratios Be More Meaningful?

Instead of relying on Morningstar ratings, you might actually be better off checking into expense ratios. In 2010, Russel Kinnel, Morningstar Director of Research, actually addressed the issue of star ratings vs. expense ratios (you need a Morningstar free membership to read it). He basically hedged on the usefulness of the ratings from Morningstar, and pointed out that expense ratios offer a better gauge of how a fund is likely to perform in the future.

The problem is that many funds, especially index funds, are going to deliver average returns when compared to the market. A lower cost fund, therefore, provides you with the best chance of doing well. When shopping around for a fund, therefore, you might be better off taking a look at the expense ratios, and not paying as much attention to what star rating Morningstar provided.

Bottom Line

Morningstar’s ratings can provide you with helpful information about a fund, and can be one of the tools that you use when considering where to put your money. However, it’s a mistake to put too much faith in Morningstar ratings. They are not as meaningful as Morningstar — and the funds that tout their four and five star ratings — would have us believe.

Use Morningstar ratings as one indicator in selecting a fund. Don’t forget to look for other variables, including expense ratios, fund management, underlying investing methods, and economic factors. Not withstanding, Morningstar’s premium membership is still very useful. It has a 10-year performance history and many tools that can be used in aiding your investment decsions.

• Morningstar Review – Premium Membership
• Ginnie Mae Investing
• My WTF Fund
• Fidelity Commission Free ETFs
• Smart Money 2011 Broker Survey

Morningstar Ratings — Are They Meaningful? is from Investor Junkie Copyright © Empowering Media, Inc.

Mitt Romney continues to be under fire for his high income and how little taxes he pays in comparison to that income.  Yet, is it really that terrible that he uses the tax code to his advantage?  He may come under even more scrutiny now that Warren Buffet’s secretary was at the State of the Union address to give a face to the “average” salary earner who pays taxes at a higher percentage rate than millionaires like Mitt Romney and Warren Buffet.

Here is what I am reading this weekend:

Warren Buffet’s Secretary Likely Makes Between $200,000 and $500,000 a Year: Forbes  Is she such a good example of the “average” taxpayer with income in this range?

Affluent Investment Choices Turn Away from Cash Toward Stocks: Millionaire Corner  Surprisingly, non-millionaire investors are more active than millionaire investors.

37 Must Read Posts for Tax Savings: Money Spruce  Check out some of the best tax-related posts around the personal finance sphere.

Obama’s “Buffet Rule” Equivalent to Raising Top Marginal Rate on Millionaires to 44%: The Tax Foundation  In the State of the Union address, Obama was more specific about his proposed tax increase on the rich.  Here is what it would mean.

Fed Holds Interest Rates Unchanged and Sees ‘Exceptionally Low’ Interest Rates Through LATE 2014: Business Insider  The title really says it all.  Part of the reason is “strains in the global financial markets.”

• Weekend Reading for January 13, 2012
• Weekend Reading for January 6, 2012
• Weekend Reading, January 20, 2012
• Weekend Reading for January 16, 2010
• Weekend Reading for June 24, 2011

Weekend Reading for January 27, 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

A recent survey by the Wells Fargo/Gallup Small Business Index showed that
about 50 percent of small business owners are concerned that they wonít have a sufficient amount of money in savings to retire. If these owners are worried, what about their employees?
They need a comfortable nest egg as well. Helping your employees build a comfortable retirement account can provide direct benefits to your business.

The following are six reasons that your business should offer a 401K program to its employees.

1. Retirement plans help with recruitment.

In the past, pension plans were the norm but in these difficult economic times, they are becoming rarer. Offering a 401K plan will serve as a draw in terms of recruiting top talent.
If an employee has a choice among two offers with similar responsibilities, the chances are that s/he will choose the job that offers a pension plan as part of its benefit package.
In short, 401K plans will attract highly skilled candidates to your firm and perhaps even compensate for a smaller starting salary.

2. Pension plans reduce employee resignations.

The journal Plan Advisor, reports that about 40 percent of small business employees would resign from their current job for a new job that provides a pension plan.
As per an AARP survey, retirement plans count among the top 10 factors in why employees choose to work for a given employer. Offering a pension plan sends the message that your firm cares about its employees,
while also helping your firm remain competitive within its niche by retaining top talent. Employee retention also has a direct impact on your company’s bottom line as it reduces recruiting and training costs.

3. Pension Plans reduce the tax burden of small firms.

If you offer a 401K plan, your business may be eligible for a $500. tax credit during the first three years of the planís existence.
Also a consideration is the tax deductions your firm will be able to take for all contributions it makes to employee pension plans.
Since it is likely that you will be adding to your pension plan as well, you will also save on personal income taxes.

4. 401K plans are easy to arrange and manage.

Current Web-based pension plans for small business owners are easy to set-up and manage.
Utilizing online set-up and management requires little time commitment with little, if any, paperwork.
Employees will also have 24/7 access to their 401K accounts, along with the email and phone number of a retirement advisor.

5. 401K plans help small business owners manage their own retirement savings.

Too often, small business owners focus on growing their business and neglect building a nest egg.
Having a 401K will motivate small business owners to start their own retirement savings.
Even should you start another business, it is simple to rollover your 401K savings into a new account.

6. Pension plans contribute to the overall economy.

By helping employees build a nest egg and retire comfortably, small business owners contribute to building a healthy economy overall by enabling people to have a greater amount of disposable income during their senior years.

Daniela Baker is a small business blogger and helps small business owners compare business credit card offers at CreditDonkey.

• How A Small Business Can Perform Like Wynn Resorts
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• Could Your Business Handle Another Recession?
• How To Help Small Businesses

Why Your Small Business Should Offer a 401K is from Investor Junkie Copyright © Empowering Media, Inc.

Presidential candidate Mitt Romney today released a summary of his 2010 taxes. He paid 14% (technically 13.9%) in taxes that year. The Wall Street Journal reports, the Romney family made $21.6 million, paid $3 million in federal taxes taxes, and also donated $3 million to charities.

Out of his 2010 income, $12.6 million was from capital gains, $3.3 million was from interest and $4.9 million in ordinary dividends.

Most of the media, some Republican candidates, and the especially the Democrats all are focusing on the “low” percentage he paid. I instead, as the entrepreneur and investor, look at it from a different perspective.

Let me first state I am not a direct supporter of Mitt Romney. Though I do hope he becomes the Republican candidate, because he’s the lesser of the evils available.

This might not be obvious to some, but Mitt Romney paid $3 million in federal taxes in one year! Many individuals don’t pay that amount in taxes over their lifetime. So we collectively should be thanking him for huge amount he contributes annually to the federal tax base.

Many propose Mitt’s low tax percentage is a gleaming example of why investment income should be taxed at a higher rate. Lets not forget Mitt at one point had earned income. How did he create his investment portfolio? By building a business, making some intelligent decisions, and investing his money wisely. He’s achieved the American dream. Instead many are painting him in an evil light, like he must of done something wrong to acquire his wealth. Garbage! He was able to reorganize companies or create leveraged buyouts for companies he worked with. Many would not exist today, if it not for investments from Bain Capital. Mitt Romney took many risks with the business he co-founded, and is getting rewarded for those risks.

For the legality aspect of the taxes paid, nothing Mitt has done is illegal. I can assure you, without knowing specifics, he’s on the radar of the IRS to ensure he is paying the correct amount of taxes per year. When you are in the top 4,000 income earners for the USA, you don’t slip under the radar of the IRS.

Everyone logically tries to minimize their taxes and “not pay one dime more”. Even Warren Buffett who declares he should pay more in taxes, doesn’t pay more than he must legally. In fact Buffett is currently in dispute with the IRS about some back taxes he owes. If you have a beef with Mitt’s taxes you should contact your Senator, not blame him for minimizing his taxes.

Ok let’s say for argument sake you think Mitt Romney should pay more in taxes on his investment income. For simplicity sake let’s double the rate to 28%. Well it just so happens Mitt donated the same amount he paid in taxes. So Mitt Romney could easily afford this tax increase, eliminate his donations, and still more or less have the same net annual income (minus tax deductions for donations).

So in effect because of the tax increases, charities are out of a generous donation by the Romney family, and the government has a bigger amount of income. My question to the readers, who do you think is more effective with that “donation”? The government, or private charities?

I realize Romney would probably still donate a large amount of his income to charity. My point is the amount donated would probably get affected, and the remaining taxes paid would get sucked out of the private sector. The tax increase could affect investing, or consumption by the Romney family. A tax increase for all would collectively affect the economy.

From my standpoint, I surely would rather have a individual in the oval office who’s worked in the private sector most of his life, and became very successful at what he did. Rather than someone who’s never worked in the private sector, always lived off the government dole, and constantly makes claims about “evil” business owners, investors, or doctors. Which person do I associate with more, and who would like to become? The answer is obvious.

• What Does Netflix and Taxes Have In Common?
• Weekend Reading for January 27, 2012
• All About Taxes
• Weekend Reading for January 13, 2012
• Weekend Reading, January 20, 2012

What’s Wrong With Mitt Romney Paying 14% in Taxes? is from Investor Junkie Copyright © Empowering Media, Inc.

Contango isn’t a latin dance move; rather, it’s when an investment drifts as compared to the underlying investment.

In recent years exchange-traded funds (ETFs) have increased in popularity. These investments are collections of shares in multiple investments, but, unlike mutual funds, ETFs can be traded fairly easily on stock exchanges. ETFs are generally low-cost, and many consider them an easy way to diversify easily while maintaining the ability to easily carry out stock-like transactions.

ETFs aren’t limited to stocks, either. There are ETFs that include a wide range of investments. You can find bond, currency and commodity ETFs without too much trouble. However, when you start getting into ETFs that contain more complex investments, such as commodities or leveraged ETFs, you run into some very interesting issues.

ETFs and Contango

Investing in commodities can provide you with diversity, and add an element of growth to your portfolio. Plus, commodity ETFs get rid of some of the complexities that come with dealing with a futures account. Commodity ETFs have made commodity investing more accessible to more people. However, the fact that these ETFs are dealing in futures means that there are some issues that need to be addressed.

Perhaps the biggest issue with investing in commodity ETFs is contango. Contango is an issue that comes into play with any investment that is futures-based. Contango is a situation in which the near-month futures are actually less expensive than those that expire later on. As a result, when the roll process is underway, it can easily result in selling low and buying high. This is a situation that investors don’t want to be in, since it means losses.

Contango becomes more obvious when investing with leveraged ETFs. Leveraged ETFs are ETFs that are designed to magnify gains or losses compared to an index. So for example, if you invest in ProShares Ultra S&P500 (SSO) it’s designed to give 2x return of the underlying S&P 500 index. The issue is this: Every day the indexing is reset since the ETF is futures based. Over time your returns do not match S&P 500 multiplied by two. Because of this, a leveraged ETF should only be used as short term (a few weeks) investment.

When it comes to commodity ETFs, contango can be an issue also. When you compare a contangoed ETF to the spot prices of the commodities involved, you might find an unfavorable situation. Over time, if the commodity contracts underlying the ETF are exhibiting contango, eventually the ETF loses value. And the situation continues — with your commodity ETF’s value being eroded — as long as there is contango in the commodities.

Paying Attention

While ETFs make it easier to invest in a variety of asset classes, using an ETF does not release you from your obligation to pay attention to what is happening with your investments. It also doesn’t release you from the obligation to understand investments before you put your money in. Before you invest in a commodity ETF — or any ETF — you should not only understand how ETFs work, but also know how the underlying investments function.

Before you invest in a commodity ETF, you should know how commodities contracts work. You should understand concepts related to the futures market. Consider ETFs as futures investments, and not just as a clever way to trade commodities as if they are stocks. It’s important that you consider the fact that, as underlying investments become more complicated, so, too, do ETFs. While ETFs can be valuable tools, and help you add diversity to your portfolio, you should remember that they are not completely safe, and investing them won’t protect you from what is happening with the underlying investments.

• Fidelity Commission Free ETFs
• optionsXpress Merges with Charles Schwab

What is ETF Contango? is from Investor Junkie Copyright © Empowering Media, Inc.

Just when it seemed Mitt Romney might sweep the first three primaries, controversy has erupted based on the fact he revealed he just pays taxes at the 15% rate and that he holds off shore accounts.  Rick Perry has dropped out and is endorsing Newt Gingrich, dropping the pool to just 4 candidates.  South Carolina is set to be an important primary.

Here is what I am reading this weekend:

Top Ten Annoying Brokerage Fees of 2011 (and the brokerages that charged them): SigFig  Do you know some brokers charge you when they try to make your account more secure?  That is just one of 10 annoying fees many well-known brokers charge.

Computers Are Replacing the Middle Class:  Business Insider Many people worry that our jobs are being outsourced to foreign countries, but it may be that computers are used to eliminate middle-class workers.

Obama Administration Said to Reject Keystone XL Oil Pipeline: Yahoo! Finance  For a president who is said to be pro-job growth, this move says just the opposite.

• Weekend Reading for January 6, 2012
• Weekend Reading for January 13, 2012
• Weekend Reading for January 27, 2012
• Weekend Reading for January 16, 2010
• Lending Club (January 2012 Update)

Weekend Reading, January 20, 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

Active investing can be hard. While it’s difficult to beat the indexed averages over the long haul, it’s not impossible. I believe this is more true as an individual investor, than a professional. Let me explain in more detail. An individual investor doesn’t have to worry about annual performance results, your job isn’t on the line, or are you beating your peers. In addition, actively managed funds have the issue of redemptions, taxes, expenses, shear size and size of companies they can legally invest in that all drag down their performance. In many aspects they simply mirror an index they are trying to beat. As an individual investor you are much smaller and nimble, and can follow your own game plan. Picking individual stocks can be hard, but it’s not impossible if you are a great shopper.

Why Active Investing?

Let me first state our portfolio isn’t mostly active stock picking. It is actually quite the opposite. My family has most (over 80%) of our investments in passive indexed based funds. It’s actually quite boring. Our asset allocation will always remain that way. I’ll only adjust asset allocation percentages as we increase in age, or feel a need to stabilize future returns based upon new research data I’ve read.

I’ve designed our asset allocation in case we cannot do beat the averages. Our active investments it will not dramatically hurt returns. Yet it is also possible to get some alpha by actively picking stocks. A completely passive portfolio does not have this option. Like what we saw for the past ten years where the S&P 500 was flat, so would your portfolio.

Another way to look at our investment strategy is I’m hedging my bets between passive investing and active investing – favoring the belief of passive investing works better.

Quite honestly, the other aspect of stock picking is it’s an active hobby for me, and one of the primarily reasons I created this investing blog. It gives me something to do than with a completely passive stock portfolio. To me a passive portfolio is like watching the grass grow. My investment strategy does introduce some increased risk with our portfolio, but with the potential for a higher rate of return. As long as you know and understand this, you should be ok for some part of your portfolio for active investing. The only way to increase your wealth is by increasing risk, though not by betting the farm.

Learn To Become A Better Investor By Shopping

I say to become a better investor, you should first learn how to be a better shopper. I mean this quite literally. When shopping for consumer goods or at the supermarket, would you overpay for something knowing you could get it somewhere else cheaper? I actually find it pretty amazing that people will trample over each other to save a few dollars during black friday, yet run away in fear when stocks tank. Mark Cuban stated right now middle class individuals should focus on saving money when shopping than the low returns they are getting in the market. I somewhat agree with this statement, but feel now’s the time to also become an expert shopper in the stock market.

Learn what’s a good price for the products you buy on a weekly basis. Learn when something is a good deal, or when it isn’t. If you believe in value investing, then you should understand when a stock is a great price, and when it’s expensive. Using Warren Buffett’s analogy to baseball, only take swings at stocks you like. For the individual investor, unlike the professional, there is no pressure you must buy a stock.

As a kid I always loved watching the game show Price Is Right, especially the game Cliff Hangers. How many times have you watched the show, and a contestant doesn’t understand how to play the game? While this is happening you are yelling at the TV? I know I have on a number of occasions. Be it in the game Beat the Clock, or when on contestants row not outbidding the others by a dollar? Many people don’t study how to be good shoppers of consumer goods, so it doesn’t surprise me that most aren’t good at investing.

What’s The Two Factors For Value Investing?

In my mind, value investing really comes down to understanding only two aspects. When investing in a stock I ask these two questions:

1. Is the stock cheaply priced?
2. What’s the prospect of future growth for the company in the next five to ten years?

Everything else is secondary. While there are many quantitative data to help determine the answers to these questions, it all boils down to these two questions. Only having one of these factors when stock picking you might do ok, but having both is critical for good long term investing success. Is the stock a good value?

The important aspect when buying a product is are you getting the best value for your money. Notice I didn’t say the cheapest price. This philosophy also applies to investing. Would you buy a stock that’s priced expensively because everyone else is rushing into that stock? Technical trader do, but I think it’s silly way to look at the stock market by a rearview mirror. Would you buy a stock that has no growth prospects yet is cheap? For me, the answer is a resounding no on both counts.

For example, Microsoft’s (MSFT) stock price (not including dividends) has basically gone nowhere in the past ten years. Some value investors say Microsoft is a great deal, and should be picked up. I agree it’s priced cheaply. In my opinion the prospects for future growth are weak at best unless there is some massive leadership changes. I believe Microsoft has a leadership issue, and has it’s hands in too many low/no profit buckets. Microsoft has lost it’s way, and has missed many technology paradigm changes. Unless those factors change, I will not invest in Microsoft.

On the other hand, Apple’s (AAPL) stock has recently been valued cheap. But it’s growth prospects are much greater than Microsoft. This is even including the many headwinds it will experience in the next five – ten years:

• The passing of Steve Jobs. Will the current CEO or future CEOs be as iconic and a strong leader to help push innovation?
• Will Google’s (GOOG) Android operating system become the Microsoft Windows of smart phones killing into Apple’s profit margin?
• Can Apple keep it’s large profit margins?
• Will Apple continue to grow (though definitely slower)?
• Has Apple tapped out it’s growth with existing products?
• Will Apple continue to innovate with new products and in new categories?

I believe all of these factors are still positive for the company. I’ll continue to keep my Apple shares. For me, I will only sell Apple when these factors become a major detriment for the company.

In Summary

So when it comes to value investing, know when a stock is a good deal and it’s future prospects for growth.

Disclosure: I own shares of AAPL.

• Technology is Great, Unless It Doesn’t Work
• Lending Club Investor Promotion

How Do You Become A Great Investor? Learn How To Shop! is from Investor Junkie Copyright © Empowering Media, Inc.

One of the ways that many investors like to earn money from their portfolios is through dividend investing. Companies that pay dividends to their shareholders are often considered solid bets — especially dividend aristocrats. When companies pay dividends, they are returning some of their profits to shareholders. These dividend payouts are different from stock appreciation, so you receive them regularly, as part of the company’s desire to share profits around, rather than as the result selling your shares.
While receiving cash is nice, you can actually put your dividends to use with the help of dividend reinvestment plans, which are known as DRIPs. These plans allow you to reinvest the dividends to buy more shares of the stock.

Reinvesting Your Dividends

Companies that offer DRIPs allow you to, instead of receive a check for your dividends, automatically use the money to buy more shares. If you own a stock that pays 20 cents a share each quarter, and you own 100 shares, that’s $20 each quarter. Without a DRIP, you get that $20, and you have to decide what to do with it. If you decide to invest it, though, you will likely have to pay a transaction fee.

If you are signed up for the company’s DRIP, that $20 buys more shares in the company automatically. If the stock price is $15 a share, instead of getting a check for $20, your dividend payout is used to automatically purchase another 1.33 shares of the company’s stock. Most of the time, shares bought with reinvested dividends don’t come with transaction fees. Even many online brokers won’t charge you fees for reinvesting dividends.

Over time, these extra shares can add up. As you acquire more shares, your dividend payout increases as well. DRIPs allow you to boost your payout. In our example above, the next quarter you now have 101.33 shares to base the payout on, so that now you get $20.27, and you can purchase 1.35 more shares (if the price hasn’t changed from $15), bringing your total to 102.68 shares, with your reinvested dividends.

While it seems like a small difference now, the cumulative effects can be much bigger. You are constantly buying shares, which increases the amount of money you receive in dividend payouts. Plus, you are building your portfolio up with very little effort. Later, if you decide to sell some stock, you will have more shares that you can sell at a (hopefully) higher price. All the way around, DRIPs can help you maximize your dividend investing efforts.

How to Start DRIP Investing

Find out if the company of interest to you has a DRIP plan. Many dividend paying companies offer some sort of plan. You can contact the company for information. You will either be directed to an in-house representative who can set you up, or you will be directed to a transfer agent who handles multiple company DRIPs. You can also go directly to a transfer agent for a list of companies it manages DRIPs for. It is also possible to check with your broker to become involved in DRIP investing.

No related posts.

What are DRIPs? is from Investor Junkie Copyright © Empowering Media, Inc.

Mitt Romney is on a roll having won both the Iowa and New Hampshire primaries.  Many of his competitors are looking at South Carolina to claim their own stake and to halt Romney’s string of wins.  In a contest that has had several front runners early on who inevitably dropped out, Romney is looking like the Republican candidate for 2012.

Here is what I am reading this weekend:

Did the Rich Get Rich from Hard Work or “Connections”?: WSJ  More Americans think the rich got their money through family rather than hard work.  This view is most pronounced among the young.

U.S. Debt Nears 15.194 Trillion Ceiling: WSJ  The U.S. debt is precariously close to the limit.  Raising the limit is easy, but there are repercussions.

The Problem with a Wealth Tax: WSJ  The movement to tax wealth rather than income is gaining popularity.  One significant problem: how do you nail down someone’s net worth when the rich themselves have trouble determining their exact net worth?

What We Need from Suze Orman Instead of Another Celebrity-Endorsed Useless Prepaid Debit Card: PT Money  Careful analysis of Suze Orman’s new prepaid debit card with this food for thought: “Should Suze Get a Pass Where Kim Kardashian Did Not?”

Apple CEO Tim Cook Didn’t Really Make $378 Million in 2011: CNN Money  Tim Cook has a very worthwhile reason to stay with Apple for the next 10 years. . .

• Weekend Reading for January 27, 2012
• Weekend Reading for January 6, 2012
• Weekend Reading, January 20, 2012
• Weekend Reading for January 16, 2010
• Lending Club (January 2012 Update)

Weekend Reading for January 13, 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

1. 100 Commission-Free Trades Promotion
2. Get A Free Kindle Fire
3. Dell Monitor Promotion
4. IRA Promotion #1
5. IRA Promotion #2
6. Financial Times Promotion
7. Morningstar Promotion

OptionsHouse 100 Commission-Free Trades Promotion

OptionsHouse Free Kindle Fire Promotion

OptionsHouse Dell Monitor Promotion

OptionsHouse IRA Promotion #1

OptionsHouse IRA Promotion #2

OptionsHouse Financial Times Promotion

OptionsHouse Morningstar Promotion

• OptionsHouse Review – Unparalleled Trading Tools
• OptionsHouse Announces an iPhone App
• E*Trade Review (Updated 2011)
• Stock Broker Reviews (Updated 2011)
• 2012 Dividend Aristocrats

OptionsHouse Promotional Code (Updated 2012) is from Investor Junkie Copyright © Empowering Media, Inc.

In the 90′s and 00′s, the brokerage business was dominated by one trend: the rise of the online discount brokerage. Prior to 1995, most trades were placed by calling your stock broker who charged a massive commission. The customers expected these brokers to provide trading advice, and buy/sell recommendations. Such firms were later known as “full service” brokerages to contrast them against the discount brokerages the internet made possible. Discount brokerages allowed you to connect through computer software (via modem initially, eventually via the internet) and execute trades without human intervention. As a result they could charge
much lower prices – now as low as $4.95 per trade.

There is another type of brokerage which may initially appear to be a discount brokerage, but is in reality something fairly different. For lack of another term I will coin “prosumer brokerage” by analogy to prosumer electronics – electronics that straddle the gap between professional tools and consumer electronics. These brokerages have a look and feel more or less like discount brokerages, but have features and pricing that mimic professional trading environments. Interactive Brokers is by far the most popular of these prosumer brokerages. Depending on your level of expertise and trading activity, they could be a very good or very poor choice for your needs.

Commissions and Fees

Discount brokers typically employ a flat fee model for stock transactions. This is a little strange, since exchanges charge the brokers a variable fee based on the number of shares traded. What this means is that the typical discount broker overcharges for small trades and under-charges for big trades. To give you an idea, executing a market order on the NYSE costs a broker $0.002 per share. So with a $5 order fee, any market order for a NYSE stock over 25 lots (2500 shares) actually causes a discount broker to lose money. In contrast, a market order for 100 shares only costs the broker $0.20 to execute, but they charge $5 anyways and thus make a tidy profit.

Interactive Brokers uses a different pricing model – for stocks they charge $0.005 per share regardless of the number of shares traded, with a $1 minimum per trade. This makes small trades much less expensive than
with a discount broker ($1 vs. $5). However, certain large trades which would be loss leaders at a discount brokerage will cost more at Interactive Brokers. Interactive Brokers also charges a $10 per month
data fee for basic US market data which is waived if you generate at least $30 in commissions.

Based on your trading pattern, you should be able to determine if this fee structure is better or worse for you than competing brokers.

Interactive brokers also offers an alternate pricing model called “cost plus” which more directly tracks exchange costs, and allows traders to at least partially capture liquidity-adding rebates that some exchanges offer.

You can read Interactive Broker’s full cost information here.

Available Products

Interactive Brokers offers the widest product range I’ve ever see for any retail broker. They’ve got US stocks, futures, bonds, options on all of the above, as well as nearly every popular foreign stock, bond and futures market. When products are traded on numerous markets (such as with many US stocks) Interactive Brokers will hold memberships on multiple markets and offer “smart” routing to direct your order to the most advantageous market. Alternately, if you have a preference for one exchange (perhaps due to cost+ pricing) you can bypass smart routing and direct your order to your preferred exchange yourself.

Margin & Limits on Accounts

There is a minimum deposit of $10,000 (or foreign currency equivalent) to open an account at Interactive Brokers.

Interactive Brokers Account Types

• cash accounts that can only enter long securities positions, long option positions, and covered short option positions (if that makes no sense to you, don’t worry)
• margin accounts which allow the purchase of securities on margin, short security positions, futures positions and naked options positions
• portfolio margin accounts which allow the same positions as “regular” margin accounts, but use a different method for calculating margin requirements that is typically far more favorable for the customer in the sense of allowing more leverage. Portfolio margin accounts. A minimum account balance of $100,000 is required for portfolio margin and foreign accounts may not be eligible.

Margin accounts require you to pass a credit check I think, or at least to answer some question about net worth. It’s been a while since I signed up for mine.

Before enabling futures and options trading, IB asks the account holder some questions about trading experience. If you answer you have no experience, I’m not sure they will enable these features.

Trading Platform

Interactive Brokers’ trading platform is Trader Workstation, TWS for short. It is Java based and will run on any computer system with a modern JAVA environment (Windows, Mac, Linux, most UNIX-likes). I have personal experience running it on Windows and Linux, and both worked fine. TWS is a very complicated piece of software – its basic functions are order entry, book keeping and charting. In addition it contains a kitchen sink of other features – news feeds, trading assistants for specific types of
trading (especially options stuff), algorithm support for unusual order types etc. If some of this stuff causes
your eyes to glaze over, that’s OK – you don’t have to use it (and I don’t).

Overall, TWS is somewhat clunky (its appearance hasn’t changed in 10 years) but it is usable.

Security

The security features built into TWS seem to be better than most. Account login requires a physical token (a credit card sized card with lots of numbers) which they mail to your house and which must be activated and used every time you login. Connections are encrypted with standard SSL encryption if you so desire.

The physical token is a bit of a pain, but it would serve to keep random hackers (even one who somehow intercepted a login/password pair) out of your account. There are also fund transfer restrictions that should help prevent someone from transferring money out of your account without your authorization.

3rd Party Connectivity

While TWS has a lot of functionality, it’s not the best available software for many applications. For my bread and butter futures trading I use NinjaTrader, which is an add-on charting, trading and automation package that includes several features I like. Third party packages like NinjaTrader connect to Interactive Brokers indirectly via the application programming interface or “API” feature of trader workstation. The API also allows you to program your own automated strategies that run in conjunction with the TWS software if you so desire – obviously you need to know exactly what you’re doing before diving into something like that. There are large numbers of 3rd party packages available that do all sorts
of things, and I’m not going to dig into what all’s available here.

For most users, the API just means that TWS and 3rd party products will probably work together OK. Since Interactive Brokers is the most popular prosumer brokerage, tools vendors pretty much have to support them. There will likely be some minor wrinkles – for example certain tools may only
work with certain TWS versions. But in general you can get everything to play together.

Trade Execution

Issues around trade execution (how quickly your trades execute, on what exchange, and at what price) are very complicated. In general my experience has been that IB offers good execution for most things – better in general than discount brokerages. But they are generally not quite as good as other firms specifically designed for the best execution on one or a small number of exchanges. So if, for example, you only trade stocks you might get slightly better execution via a stock-only prop desk with dark pool access, exchange co-location, cost+ pricing etc. But in general IB is pretty good, and is very good considering the huge number of exchanges they operate on.

Demo Account

Interactive Brokers offers a very functional “demo” account feature along with each real account. This account has $1M of fake money, and instead of executing trades in the market executes them against Interactive Brokers’ simulation engine. Compared to most other paper trading environments the Interactive Brokers demo account is very realistic in terms of the price trades execute at and things like that.
This allows you to learn the features of TWS and test out trading strategies in a more realistic environment without risking any real money.

Customer Service

Interactive Brokers customer service has been consistently professional and helpful in the five I’ve had to deal with them. Deposits and withdrawals have gone smoothly. I have heard this same positive sentiment
echoed by other customers.

On the negative side I have heard a few inexperienced traders say they got a hint of “your ignorance isn’t our problem” attitude from Interactive Brokers. I don’t know the details of any of those incidents or who was in the right.

Financial Stability

Brokerage stability is a very complicated topic. History shows that it’s easy for apparently healthy financial firms to blow up in a startlingly short period of time – rather than go into the details here
I suggest you read my comments on the MF Global fiasco. Brokerage customers, especially those who exceed SIPC limits (or equivilent outside the US), are wise to be cautious. My general perception is the Interactive
Brokers is less likely to take your money than most brokerages based on the following reasons:

1. They have a fairly substantial amount of firm capital “protecting” the customer accounts (about $4.5B last time I checked).
2. Interactive Brokers carries substantial supplemental insurance beyond SIPC via Lloyds of London.
3. Interactive Brokers has survived several negative market events without imploding or showing imprudent losses – 2008 crash, the “flash crash” etc.

One contrary piece of evidence is that Interactive Brokers’ stock price (IBKR)has not fared particularly well the last few years. This is a traditional warning sign of broker financial distress, but in this case I think they’re still well outside the danger zone. I am keeping my eyes on the stock price though,and if it breaks $10 or so I’ll start investigating why.

Overall

If you have an appropriate level of expertise to use the Interactive Brokers software, and their pricing model is attractive for the type of trading you do then they are frequently the best available brokerage
choice. There’s a good reason Interactive Brokers is the most popular prosumer brokerage – in an industry full of cranks and the professionally unsatisfied, Interactive Brokers has mostly happy customers.

That said, new traders will likely have a fairly negative experience with them due to the platform complexity and general “know what you’re doing” attitude.

Full disclosure: I have been an Interactive Brokers customer for about 10 years and have overall had a positive experience. I have no other financial relationship with them.

This review written by W from Off-Road Finance.

• TD Ameritrade Review – The Perfect Online Broker?
• SogoTrade Review
• Scottrade Review
• Fidelity Review – Opening an Online Brokerage Account
• TradeKing Review

Interactive Brokers Review is from Investor Junkie Copyright © Empowering Media, Inc.

The discount stock broker Zecco extended their refer a friend promotion while their are rolling out their new Zecco Trading Center. Get $100 when a friend refers you. Currently this is the only offer Zecco has available.

In order to qualify for the referral a friend program: you click on the link below, and deposit $10,000 within 60 days. You must keep a minimum balance of $10,000 balance for at least 90 days. Once you meet all of these requirements, Zecco will deposit the $100 cash bonus into your account. Both individuals get $100 for the referral. Hurry because this promo ends February 29, 2012.

The terms are higher than the TradeKing refer-a-friend promotion, but still decent none the less.

Zecco Trading has some of the lowest commissions for any discount broker. Not only do they offer $4.95 per trade fee, but extensive free trading & research tools, and an online investor community. Options are $4.95 plus $0.65 per contract. Read our Zecco review for more information about their service.

Unlike other web sites, no E-mail address is required to complete this transaction. Just click on the special link provided below.

• Zecco Announces Zecco Elite
• Zecco Trading No Longer Free
• Zecco Review
• Lending Club (January 2012 Update)
• Trading Execution – Does it Happen Instantly?

Zecco Promo Code – $100 Referral From A Friend is from Investor Junkie Copyright © Empowering Media, Inc.

I haven’t given an update an performance update with my WTF Fund to my readers in awhile. The last time I gave an update was in April 2011. At the time I was in the read, and I’ve done much better since then.

2011 Results

As of January 5th 2012 I am up 14.5% from my initial $10,000 investment, mostly because of owning Apple (AAPL). The account is now currently worth $11,454.92. I sold my shares of Cisco (CSCO) in July at a loss of 16.84%. If I still owned the stock today, I still would be negative even after dividends.

Investments

I traded only Apple during the remaining part of the year. Since last year the stock market was very volatile, and I was able to buy more shares during the dips. Apple is $10,450.75 of the fund. The remaining $1,004.17 is in cash.

I believe Apple has much more room to grow, though at a slower pace. Not including the $82+ Billion they have in the bank, their forward P/E is 10.7. This is almost unheard for a tech stock like Apple. With the passing of Steve Jobs, this is a critical year for Apple to prove themselves in the post Jobs era.

Many fear Apple will languish without Steve’s persona, and perform like they were during the 90′s. Apple is a much different company since then. Not only do they have a very capable management team on board, their existing and planned products should last at least for the next 3-5 years. Apple isn’t going anywhere, and at worst case will coast along. Though many would love to be like Apple, and exist with the profit margins and cash flow they have. I plan to own the stock at least this year, and more than likely at least the next 3 – 5 years.

Keep in mind their competitors like Amazon (AMZN) or Google (GOOG) are not keeping idle. Although it seems they are creating some neat technology, they still have the issue of the fat profit margins Apple creates. The competitors, while can replicate just about everything technical, they just can’t seem to replicate their profits, the Apple ecosystem, and marketing buzz.

A perfect example of this is Amazon’s Kindle Fire. At $200 a pop, they have a very slim profit margin, and it’s rumored they are selling at a minor loss. Amazon (like Gillette) hopes to make up for the difference in the “razor blades” they sell.

I bought the Kindle Fire for my mother for Christmas. It’s great for someone who needs an electronic reader, but ok for other functions. It lacks the finesse of Apple’s iOS. I still see the Kindle line as primarily e-readers, with some lite web surfing or E-mail reading. While it no doubt will eat into Apple’s sales, I don’t see it affecting consumers who need the full features of an iPad. Keep in mind also it’s rumored that the iPad 3 will soon come out, and the iPad 2 models will be sold at a discount. If Apple sells the lowest iPad at $300, I can see how buyers could easily justify the $100 more to buy the iPad instead.

Future Plans

I currently have a open order to buy Oracle (ORCL) at $25/share. I just missed that price point a few weeks ago, and kicking myself because the price Oracle is now at $25.50/share. I am seeing many technology companies fitting the value investment profile. Which is great for me since I’m a value investor, and a lover of technology. I’m on the hunt this year, and hope to find some good stock deals. Oracle is one of them.

Funds at the moment are little tight, and want to fully fund retirement and 529 accounts first. I do plan on adding additional $10k to this fund sometime this year. In the mean time will investigate possible stocks to purchase.

• WTF Fund (April 2011 Update)
• My WTF Fund
• Weekend Reading for August 26, 2011
• Lending Club (January 2011 Update)
• Lending Club (October 2011 Update)

2011 WTF Fund Update is from Investor Junkie Copyright © Empowering Media, Inc.

This week the Iowa Caucus was held.  Some were surprised to see Romney and Santorum in a statistical dead heat with Romney edging out Santorum by 7 votes.  Bachman dropped out of the race.  Now the candidates travel to New Hampshire, where it remains to be seen if Santorum can keep up the momentum.

Here is what I am reading this weekend:

Fidelity Investments Looking Ready to Offer Exchange-Traded Funds: WSJ  Fidelity may soon be the place to go for all of your index ETF investing.

A Family’s Billions, Artfully Sheltered:  The New York Times.  See how Ronald S. Lauder, son of Estee Lauder, craftily protects his fortune from taxes.

Chart of the Day: Here’s How Every Asset Class Performed in 2011:  Business Insider Good chart to see what is currently performing well.  Gold is number four.

 Record Dividends in 2012 Should Help Consumers:  WSJ  Dividends were plentiful in 2011, and they are predicted to get even better in 2012, which should help consumers and retirees.

Lending Club: Join Lending Club and get a $300.  If you have been on the fence about joining, now might be a good time.

• Weekend Reading for January 13, 2012
• Weekend Reading for January 27, 2012
• Weekend Reading, January 20, 2012
• Lending Club (January 2012 Update)
• Weekend Reading for January 16, 2010

Weekend Reading for January 6, 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

A lot of the time, the debate about debt revolves around whether debt is “good” or “bad” — or whether debt is just debt, and can’t be classified in positive or negative terms. What the debate really comes down to, though, is whether or not the debt is socially acceptable.

Our Society Accepts Debt as a Part of Life

In truth, our society accepts that debt is a part of life. Most of us expect to be in debt at some point in our lives. In fact, many of expect to have debt for anywhere between 15 and 30 years due to the expectation that we will buy homes.

On top of that, as the price of an education rises, many of us expect that we will have to borrow in order to afford the cost of college. Student loans have become an acceptable part of our society. We bemoan high levels of student debt, but students don’t incur shame as a result of having education loans.

Our society even accepts car loan debt. I’m no exception. I put down a sizable down payment for my latest car purchase, but I still borrowed (at a 1.9% interest rate). So, even though a new car might not be a “need,” and it’s possible to save up for a couple years to buy one with cash, I’m probably not going to be stigmatized for financing a portion of my car’s purchase price.

So, What Makes Debt Socially Acceptable?

What makes some debt, like student loans, socially acceptable while other debt, like credit cards and payday loans, are considered shameful?

• Buy an asset: One of the biggest factors in determining whether or not debt is socially acceptable is whether or not it is used to buy an asset. A home is an asset. Our society views an education as an asset (albeit it one considered more for its future potential). Even a car, since you use it to get to work and get around, can be considered an asset in spite of its depreciating financial value.
• Planned finances vs. living beyond your means: There is an assumption that if you are resorting to credit cards to make ends meet, or if you have to turn to a payday loan, you’re mismanaging your finances. A home purchase or a car purchase, even though bought with debt, is considered a planned purchase. You have to get your finances in order to “afford” it. The use of credit cards without paying off the balance each month implies that you are wasting your money.

Of course, excessive debt, no matter what you purchase with it, is considered shameful. If you can’t make your mortgage payments, or if you taxed your finances to buy a flashy car, or if you borrow to buy an investment on margin and it turns out to have been a loser, your debt is still considered shameful. In order for debt to be socially acceptable, it needs to be used to buy things that are considered “normal,” and it needs to be “affordable.”

Readers: What do you think? What makes debt acceptable?

• A US Debt Limit that’s Unlmited?!?
• 0% APR Transfer..That Really Isn’t

What Makes Debt Socially Acceptable? is from Investor Junkie Copyright © Empowering Media, Inc.

How many times, have you heard as a justification for buying something, this excuse: “It’s a collectible! In a couple of decades it will be worth something!”
While it’s true that some items do increase in value over time, and some collectibles can provide you with a decent enough return as an alternative investment, chances are that those items labeled “collector’s” by the company trying to sell them aren’t going to be worth much down the road. In fact, even if you keep them in mint condition, they might be worth less than you paid for them.

Trend Collectibles

One of the biggest problems with trying to make money of collectibles comes when you try to cash in on a trend. Remember the Beanie Baby toys? At the height of the craze, when they were must-haves, prices spiked. But now you can get them for as little as $0.99 if you know where to look. Some of the “exclusive” versions, and some others might go for more, but you can usually find most of them for much less.

If you were desperately paying $20 for a Beanie Baby back in the day, you are probably disappointed to realize that your “investment” has lost value. These types of mass-produced trend “collectibles,” which include Precious Moments figures, Hess trucks, movie action figures (my husband loves Lord of the Rings figures) and other similar items, probably aren’t going to hold their value down the road — much less fund your retirement.

What Makes Collectibles Valuable?

Part of the reason some collectibles are valuable is due to their scarcity. Something mass produced in our day and age isn’t likely to turn into some rare collector’s item. Some of the qualities of valuable collector’s items include:

• Age: The older something is, the more likely it is to be valuable.
• Condition: Even something old isn’t likely to be worth as much if it is in poor condition. The better condition something is in, the more valuable it is likely to be.
• Scarcity: Of course, something rare enough, even if the quality has deteriorated, can still be worth something. This is seen often in certain coins, as well as some other items.
• History/Authenticity: The history of an item might render it a collectible, as well. There are certain swords, mass-produced during the Civil War and used by grunts, that aren’t worth all that much. However, an officer’s sword of certain design, fetches more. Make it a famous general’s sword, and you have an item that could be worth a great deal indeed. The history of an item — who used it — can add value. A set of George Washington’s false teeth are worth more than a set from the same time period used by a nameless man.

If you look at those factors, it becomes fairly obvious, fairly quickly, that most of the “collectibles” produced today for that purpose probably won’t fetch all that much down the road. If you’re going to collect such items, you might want to do it as a hobby, for the enjoyment you receive from it, rather than expecting to rely on them for future wealth.

• The “Investment” Often Missed.
• Investment in Physical Gold?
• Five Ways to Improve your P2P Investment
• Is Lending Club No Longer a Good Investment?
• REIT (Real Estate Investment Trust) Investing

Are Your Collectibles Really an Investment? is from Investor Junkie Copyright © Empowering Media, Inc.

Here are my current Lending Club results. As of today my return is 10.59% NAR, and have $7,264.59 invested, and almost $1,000 total in interest. I have over 340 active notes. Since my last update, I now have six charged off loans, and currently seven 31-120 days late notes. The increase in defaults obviously decreased my return from the previous 11.31% reported in October 2011.

It’s interesting to note if you look closely at the above screenshot, and my previous the “compare” link is no longer available. Lending Club removed this feature sometime in mid-December. You no longer can compare your performance to other Lending Club investors. I kind of liked this feature, but understood it was somewhat flawed. Peter Renton of the Social Lending Network has a post discussing the change in more detail.

For those who care, you can still access the comparison page by entering this URL:

https://www.lendingclub.com/account/lendersPerformance.action

You must be logged in already to be able to view this page. I’m in the 56% Percentile, and still above the 9.64% NAR.

Lending Club Refer A Friend Promotion

Get $300 when you start investing with Lending Club. To qualify, you must open account by selecting the button below and depositing $10,000. See their web site for more terms and conditions.

Portfolio Analyzer

Fellow blogger Nickel Steamroller has a great portfolio analyzer tool.

http://www.nickelsteamroller.com/portfolio

This tool will help determine ROI, which is slightly lower than NAR. In my opinion ROI should be used so you can accurately compare your returns with other investments. The ROI for my portfolio is 8.95%. It also gives the average age of the loans, which in my case is 347 days. The analyzer also gives a recommendations of which notes you should sell or keep.

• Lending Club (January 2011 Update)
• Lending Club (July 2011 Update)
• Lending Club (October 2010 Update)
• Lending Club (October 2011 Update)
• Lending Club (July 2010 Update)

Lending Club (January 2012 Update) is from Investor Junkie Copyright © Empowering Media, Inc.

TradeKing offers low cost commissions ($4.95 per trade), and great customer service. They have a wide range of investing tools available, and a comprehensive online education center. Here is the list of current promotions for TradeKing.

1. TradeKing $100 Signup Bonus
2. TradeKing $50 Refer A Friend
3. Switch To TradeKing And Get Up To $150

TradeKing $100 Signup Bonus

Terms and Conditions

TradeKing $50 Refer A Friend

Switch To TradeKing And Get Up To $150

1. Create a new account with TradeKing
2. Print out, fill out and sign the account transfer form.
3. Mail or fax the transfer form to TradeKing, along with a copy of your previous stock broker statement.
4. Request a reimbursement. You do this by faxing your transfer reimbursement form, along with proof of transfer fee from your old discount broker. TradeKing’s fax number is 866-699-0563.

• TradeKing Lowers Their Option Pricing
• TradeKing – Trade Free On Friday
• TradeKing iPhone App Released
• TradeKing Review
• Lending Club (January 2012 Update)

TradeKing Promotional Code 2012 is from Investor Junkie Copyright © Empowering Media, Inc.

The last week of 2011 brought us North Korean leader Kim Jong Il’s funeral.  His son, Kim Jung Un, has taken power.  In the United States, Mitt Romney seems to be the latest Republican front runner, but during the past few months, the front runner seems to change every few weeks.  No doubt that 2012 will be a year of political interest, both nationally and internationally.

Wait a Second. . .Did Amazon Kindle Fire Sales Totally Blow?:  Business Insider  While it looks like Amazon Kindle Fire sales were low, there is hope that sales will eventually be on par with iPad.

 Millions of Americans Are Realizing They Can Default on Their Mortgages and Live Scot-Free For Years:  Business Insider  Thanks to backed up foreclosure reviews, many Americans are staying in their homes for a year or more before they face any repercussions for not paying their mortgage.

 Doug Kass’s 15 Surprises for 2012:  Business Insider  Take a glimpse into the world Kass predicts in 2012.

Vanguard Founder John Bogle on Stock Returns: 1 to 2 Percent a Year:  My Plan IQ  The title says it all; after inflation and fees, among other things, look for 1 to 2% returns.

Zecco Trading:  Here is a good deal–stocks trade for just $4.95, plus earn a $100 reward!

• Weekend Reading for December 2, 2011
• Weekend Reading for December 23, 2011
• Weekend Reading for December 9, 2011
• Weekend Reading for December 16, 2011
• Weekend Reading for October 14, 2011

Weekend Reading for December 30, 2011 is from Investor Junkie Copyright © Empowering Media, Inc.

TradeKing started their refer a friend program again. Since I’m a TradeKing customer you can apply for this offer. You must click on the special link below. You must be transferring at least $1,000 to qualify for the referral fee. See our TradeKing promo codes web page for other offers.

You can check out my TradeKing review for more insight about them. I’ve been with TradeKing for approximately one year now, and like their customer service and cost of their trades.

The requirements for the referral are:

• Get referred by an existing account holder (if you don’t know someone, I have an account with TradeKing)
• Open a non retirement account
• Must be a US resident
• Deposit at least $1,000 into the new account
• Make at least one trade

Both individuals will get $50 for the referral. For more info please see their requirements.

You can also get a referral by leaving a comment on this post with a valid E-mail address.

Please do not put your E-mail addresses into the comment field, as others will see this information. You will then get an E-mail from me with the offer link. Click on the link, sign up, deposit the money, and make one trade and you’ll get the $50.

FYI, I do not spam! Like everyone else I hate spam, and your E-mail address will not be used for other purposes.

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TradeKing Referral – Get $50 From A Friend is from Investor Junkie Copyright © Empowering Media, Inc.

I recently reread Robert Kiyosaki’s Rich Dad, Poor Dad book. I read the book when it first came out in 2000, and I was still somewhat of a budding entrepreneur. I figured I would re-read the book now I have more experience under my belt. I also wanted to see if it’s held up to the test of time, and do I like it as much when I first read the book. A lot has happened financially in the past ten years, and I’m curious if some of his predictions came true.

When I first read the book, I primarily liked how he viewed the world from a different perspective. It got me to think different about my business and investing than previously. There seems to be a group that either loves the book, or outright hate Robert’s books and think they are all trash. The Simple Dollar review for example, adds a lot of personal bias and don’t think it’s a fair review. I have somewhat of a neutral viewpoint, and will review the book based upon my experience in the business world.

“Rich Dad, Poor Dad”, should be viewed as a general starting point, rather than a list of specific items to do as an entrepreneur. Robert Kiyosaki emphasizes on six key points through out the book. It’s the differentiator between his “poor” dad (his real dad), and the “rich” dad that helped him understand business and become wealthy.

1. The rich don’t work for money
2. The importance of financial literacy
3. Minding your own business
4. Taxes and corporations
5. The rich invent money
6. The need to work to learn and not to work for money

The Good

Flawed Educational System

As Robert mentions many times in the book, our traditional educational system is flawed. Our education system is designed primarily to create employees, and could be a negative influence for an entrepreneur. As Kiyosaki mentions, he’s not suggesting don’t go for higher education, he’s suggesting higher education does not assist with “street smarts”. Financial literacy is something that is rarely discussed in school, and if it is discussed only at basic levels. Based upon my personal background, I’ve made this a personal focus, and will make sure my children are well educated in this subject.

The cost of education continues to increase much faster than the rate of inflation. It’s becoming more clear our education system is broken. Robert’s statements about this topic are accurate.

Being An Entrepreneur Is Less Risky

It’s typically stated: owning a business is more risky, than working for someone else. In my opinion, owning a business gives you all sorts of self-reliance skills you will not get when working for someone else. If anything with today’s “cradle to grave” mentality, we are creating more dependent individuals.

Owning a business has given me much more independence, and invaluable skills I could still use if I were to work for someone else. Things I used to consider risky, or could never imagine doing before owning a business, I now do on a weekly basis.

Your Primary Residence Is NOT An Asset

Over the years it was generally accepted that your primary residence was an asset. Robert flat out states (and I believe correctly), your home is not an asset, since it does not generate positive cash flow. The housing bubble and collapse proved this correct.

“Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets”

While rental properties have also gone down in value, if you focused on positive cash flow, you still are bringing in money every month. Robert even states in his book, home values do not always go up.

Pretty much all consumable goods are liabilities, and something even I got tripped up with. He states you should buy investments that generate cash flow to help pay for your “doodads”. I think this is a great way to look at how to purchase your toys.

What is an Asset or Liability?

“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.”

A load of naysayers of Robert’s books point out this statement doesn’t follow general accounting standards. This is true, and Robert acknowledges this. The point, which many miss, with this statement is you should be focusing on cash flow get wealthy.

“Wealth is a person’s ability to survive so many number of days forward… or if I stopped working today, how long could I survive?”

This statement I still use today, and devoted few posts about this topic on my web site:

• How Wealthy Are You?
• Does Net Worth Matter?
• How to Become Wealthy

The Bad

There are many reports that Robert’s “Rich Dad” does not exist and was made up. This is more than likely true, but there have been many personal finance books that are works of fiction. The book “Wealthy Barber” comes to mind. The issue some people have with Robert is he makes his book work of non-fiction when it’s not, and I agree with this issue. I do find it interesting on John Reed’s site while he puts down Robert’s work, he’s also selling his own work.

Robert does somewhat downplay the role of risk in the investment suggestions. This is somewhat true, but he does suggest you fully understand your investments before diving in. Robert states investing is only risky if you don’t fully understand what you are investing in.

Summary

While I still recommend this book, especially for starting entrepreneurs, the book has some flaws. Take some of what Robert Kiyosaki says with a grain of salt. It should be read, if not for the motivation, just to get you to think differently than a salaried employee. I don’t love it, or hate and hence the reason why I give this book a 3 out of 5 stars. In my opinion, many topics he discusses hold the test of time.

If you do decide to read Robert’s books, I only recommend reading “Rich Dad, Poor Dad“, and “Rich Dad’s Cashflow Quadrant“. Most of the other books are simply a rehash of these two books. I DO NOT recommend attending any local seminars.

I will keep his book on my list of best personal finance books, for the primary reason to get you to think outside the box.

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Rich Dad, Poor Dad Review – Revisited Ten Years Later is from Investor Junkie Copyright © Empowering Media, Inc.

A few years ago, when my husband and I went to buy a house, we were required to have an income audit. Since I am the primary breadwinner and, at the time, my home business was only a couple of years old, the lender wanted to make sure that our income would be sufficient for the mortgage payments.
We were told an income audit was the ticket to qualifying for a mortgage with the best possible interest rate, so we began looking for an accountant to perform the audit. We enjoyed working with the accountant so much that we have continued to use him to help us prepare our taxes and work with us on other financial issues, especially those relating to the home business. Here are some ideas to help you hire the right accountant for you:

1. Ask Around

The first thing we did was to ask for referrals. We asked other people in town which accountants they used, and got some ideas of who might be a good fit for us. Then we called those accountants to have a brief chat.

2. Forming an Impression over the Phone

When you call to set up an appointment, pay attention to how the conversation goes. I actually had to leave a message at nearly all the CPA offices I called. Only three of them called back, so that narrowed things considerably. Two called back quickly; the third didn’t call back until after I’d made a decision.

I paid attention to the questions asked over the phone. One CPA just said that he’d do the income audit, while the other asked questions about my business, and told me what he needed from me beforehand to speed up the process. You can probably guess which man is still my accountant.

Later, as you move further in the process, determine how comfortable you are with the accountant in person. If you are uncomfortable, or if it doesn’t feel like it’s a good fit, don’t be afraid to look elsewhere for a CPA.

3. Check Credentials and References

Most states have boards, departments or offices that handle professional licensing, or that might even be specifically involved with CPA licensing. Check with the appropriate office to ensure that your accountant is up-to-date in his or her licenses, and that he or she has received the proper training.

You might also want to check references. You are making a hire; it’s a good idea to find out what others are saying. We didn’t check references for our CPA, though, since he had come highly recommended from some we trusted. But we did double check the credentials.

4. Choose Someone Who Fits Your Needs

Our CPA prepares a large number of tax returns for small businesses, as well as for individuals. He is experienced in preparing returns for home business owners. So, he takes care of the return for the LLC, and our individual return, each year. He is also well-versed in the issues that affect home business owners, and suggests tax strategies and accounting strategies that work for us.

I don’t think someone who mainly prepares individual tax returns, or someone who concentrated mostly on the returns for some of the bigger businesses in town, would be as “tuned in” to my needs as a home business owner. Look for someone who has experience working with your type of business.

Bottom Line

Your accountant has access to very sensitive information about you. You need to develop a bond with him or her, and you need to be able to trust your CPA. Choose carefully. Don’t be afraid to ask for references and check credentials. And look for someone who asks about your business and is willing to evaluate your individual situation and make strategy suggestions that fit you.

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How to Hire the Right Accountant for You is from Investor Junkie Copyright © Empowering Media, Inc.