Blog – Page 134

Yakezie Carnival readers. Or Sarin victims.

If it’s Monday, it must be the CoW. The Carnival of Wealth, an agglomeration of personal finance blog posts from across the cosmos.

There are other weekly roundups. What’s so great about yours?

Have you seen the other ones? Here’s a competing carnival that features 80 submissions this week. Are you going to read every capsule? Of course you aren’t. No one is. Not even the carnival host. He just copied the submission summaries word-for-word and added a couple of paragraphs at the start and end. That carnival’s not only unreadable, it’s unread. Each submitter just searches the post for his or her own contribution, then leaves a comment saying “Thanks for including me”, and the fundamental objective of engaging readers is sacrificed to the false god of link love. Control Your Cash doesn’t play like that. We try to keep you entertained and informed. Imagine that. Our method isn’t for everyone, and neither our readers nor us would have it any other way. Shall we begin?

Does Madison DuPaix at My Dollar Plan really carry all the credit cards she recommends? This week she’s applying for 12 cards so she can earn herself a bunch of airline miles and related sign-up bonuses. Don’t worry, Ms. DuPaix does mention that she cancels these cards before the annual fees kick in. She also mentions that she’s carried some of these cards several times. Hey, if Delta and American Express are dumb enough to keep giving Madison miles and get nothing in return, good for her. Keeping track of all these cards seems like a lot of work, but if the rewards weren’t worth it, she wouldn’t be doing it.

Tim Fraticelli at Personal Finance By The Book wins this week’s verbosity award. Extremely long story short, he discusses whether you should create a will or a living trust. His conclusion is…inconclusive. Also, it was helpful of him to explain what a will is, seeing as we all arrived here from Sirius β the other day and aren’t familiar with such earthly customs. This post is a literary example of Wadsworth’s Constant in action.

Life Insurance Quotes is a commercial site, but whatever. They discuss the same topic the previous submitter did, but in more gripping prose. (Reason #5 for getting a will? “You could end up brain dead.”)

(Post rejected because it was in the Neutral Zone. Awful, but not distinctive enough that it’s worth goofing on.)

John Kiernan at Wallet Blog is gold, as usual. He writes about the confounding practice of car rental companies levying surcharges – sometimes as large as 1,567% – to drivers who don’t pay tolls.

Which is unfair and illegal, because often those drivers don’t even have an opportunity to pay said tolls. Drive through a checkpoint on a cashless toll road, and there’s no basket for you to dump your coins into. Instead, the transportation authority will bill the car’s owner; i.e., the rental company. Which gets charged $3 or whatever, and passes the expenses onto you – plus as much as $50 for processing. Here’s the major culprit, and here’s its co-conspirator, the ominously named Violation Management Services. The latter are the ones tasked with tacking on the obscene fees. Just doing their superiors’ bidding, they’re the Rudolf Hess to Fox Rent-A-Car’s Hitler. Get a load of this line from the “About Us” page on Violation Management’s horribly written website:

We provid(e) results that promote customer satisfaction for our client and their customers.

Never mind the redundantly redundant use of “customer(s)”, nor the singular/plural confusion, what renter is going to have their satisfaction promoted by being stuck with a $50 surcharge for a $3 toll? May Violation Management’s CEO and the illiterate lackey who scribbled together that unreadable site both get the hantavirus, hopefully from each other.

Barb Friedberg has a new e-book about investing.

What’s the antonym of “retard”? Whatever it is, we nominate Dave of Dividends For The Long Run Blog for next month’s honors. This week he illustrates the foolhardiness of getting excited about dividend yields for their own sake. If you focus on dividend yields, rather than consistent raw dividends (or perhaps, you know, appreciation), you’re cheering for fractions. More to the point, you’re cheering for high numerators or low denominators. A large dividend relative to stock price often means instability. Apple spent 3 decades with a constant dividend yield of 0, and on balance, few of its investors are complaining.

Knowledge for its own sake from Edward Webber at TaxFix, who gives us a primer on income tax rates in the United Kingdom for 2012. Bonus: the post contains a picture of a £10 note, with a smiling Queen Elizabeth on it.

Queen Elizabeth gets our vote for most underrated person on the planet. Which seems impossible, seeing as she’s also the most famous person on the planet, but hear us out. Yes, she was born into the very archetype of wealth and privilege, but (in ascending order of notability):

She and Prince Philip have stayed married for 64 years, or 11,787 times longer than Britney Spears and that guy.
Her Majesty might have some loony family members, but her reign (indeed, her entire life) has been free of scandal.
She’s in perfect health, and if she hangs on for another 12 years, which would make her 98 (and this is someone whose mother lived to be 101), she’ll pass Louis XIV as the longest-reigning monarch in European history.
She’s a World War II veteran. And she didn’t have some frou-frou occupation specialty befitting a princess, like nurse’s assistant who folds towels and fills up the occasional syringe. She was a freaking tank mechanic. At the age of 19. We wonder how many of her loyal subjects know how to change the oil on their Vauxhall Corsas.

47% of you are carrying credit card debt? Well, certainly not 47% of you, but 47% of Americans en masse. Tim at Nerd Wallet exposes the depth and breadth of our collective indebtedness. Believe it or not, our cumulative credit card debt has decreased in the last couple of years – both the raw totals and the per capita numbers.

But that’s nothing to be proud of. It’s mostly chargeoffs – credit card issuers giving up on the deadest of beats. Also, Tim outlines the historic shift in the makeup of that debt. Student loan balances are now larger than credit card balances! U! S! A! U! S! A! Yeah, but you need an education because an investment in your fut…oh, put a sock in us. Small consolation that we predicted this scenario years ago.

Dividend Growth Investor tells the stories of 3 of the most successful dividend investors of all time. Warren Buffett and 2 ladies, none of whom were ostentatious but all of whom understood patience and consistency.

From the lovely Liana Arnold at CardHub comes news that could serve as the last paragraph in Groupon’s upcoming eulogy. Capital One, purveyor of some of the most annoying commercials and most voluminous junk mail of all time, has started offering daily deals along with its monthly statements. Now, cardholders barely have to breathe and blink to take advantage of short-term retail sales. It’s stuff you’d probably buy anyway, cheaper.

No.
(Karl Marrion at Wise Stock Buyer asks, rhetorically, if you should use stock-picking software. Also, the poor guy only has 15 Twitter followers, one of which is another account of his. Follow him, out of pity if nothing else.)

(Post rejected for CHILD TAX CREDIT its embarrassing use of CHILD TAX CREDIT search engine optimization “copywriting”, which is CHILD TAX CREDIT almost a perfect CHILD TAX CREDIT oxymoron.)

That paragraph flowed as smoothly as the rejected post. Also, CHILD TAX CREDIT.

Finally, this week’s most provocative post is from W of Off Road Finance. Heck, it might be the most provocative post we’ve ever run. Part manifesto, part dystopian prophecy, it’s a call-to-arms to secure your finances by not investing. Like, not at all.

I don’t want my family’s prosperity to be tied to stock or bond prices, the value of my home, the employment situation, the performance of rental properties etc.

Which sounds like it wouldn’t leave a whole lot, but W has a strategy in place. This post is labeled “Part I”, and you won’t want to wait to see what’s coming next.

And that’s it. New Anti-Tip tomorrow, new post Wednesday, new CoW Monday, and all sorts of goodness on Investopedia, Forbes, Yahoo! Finance, ProBlogger et al. Ciao.

Also, the circus pays next to nothing

NOTE: A big, sloppy welcome to all The Simple Dollar readers who discovered us this week. Unlike that site, where the comments are the only parts worth reading, here it’s the exact opposite. (Primarily because we don’t run comments. If you want to say something compelling or critical, try us here. Check out the archives, too. Reams of actionable, non-obvious advice and analysis for the upwardly aspiring. Enjoy.)

Can you handle another food/investing analogy? Well, you’re getting one.

The standard recommendation is to invest 60% of your portfolio in stocks and 40% in bonds. Or (110 – your age)% in stocks and (your age – 10)% in bonds. Or 57% in stocks and 53% in bonds (awesome if you can do it). All of the above are useless, pointless and unhelpful.

It’s like saying 40% of your daily caloric intake should be carbohydrates, 30% protein and 30% fat.

Okay, then let’s eat a diet consisting of 40% Gummi bears, 30% bearded seal meat and 30% lard. DONE!

You can’t look at classifications. They tell you nothing. You have to look at individual cases. Otherwise, you’d be forced to believe that:

-All pit bulls are dangerous
-All Jews are stingy
-All blacks enjoy grape soda
-All Armenians beat their wives
-All Canadians are sensitive.

Alright, that last one is demonstrably true.

Yes, we get the conventional wisdom. You’re supposed to be invested in equities when you’re young, i.e. when you can withstand greater variation in your investments. If you’re 22 and you get wiped out because you loaded up on Electronic Arts stock, the thinking goes that it’s not the end of the world because you have decades left in which to earn money. And if you bought lots of Recon Technology (a penny stock that’s up 4- or 5-fold this year, and will probably come crashing down to Earth soon enough), well, that’ll increase your options and require you to work incrementally less hard for a living in the long road ahead of you.

And when you’re old, you need to limit your downside – and by extension, your upside. No fancy swings for me, young man. Instead I’ll load up on debentures and other low-risk investments. I just want to come as close to a fixed income as I can. Now let me watch 60 Minutes in peace, and turn that damn music down.

No one should invest in asset classes. But people hear advice that’s easy to swallow, or at least easy to remember, and they say to the person in charge of their 401(k), “Put me in that one fund, with the 60-40 stock-bond split.” BOOM! Investing now completed! That was easy!

When you passively manage your investments – that is, when you get someone else to do it – you’re letting that person dictate your potential return. More accurately, you’re letting that person’s biases and instincts dictate your return. Here’s what we mean:

Your company’s comptroller has one overriding professional objective, and it has nothing to do with making sure you have a comfortable retirement. Rather, it’s far more mundane. Like most people on this planet, all he wants is to keep his job. Same goes for the fund manager’s representative who shows up at your workplace on open enrollment day. She could give a damn whether you sign up for the aggressive no-load fund or the generic income fund. She just wants you to sign up for something, and wants you to not lose so much money that it’ll jeopardize her position.

Further up the chain, the fund manager is playing it conservatively, too. Invest in too few blue chips, and you’re running the risk of higher returns. Which means you’re running the risk of lower returns, which if they come to fruition could lead to angry investors. Enough angry investors means the fund manager gets fired and has to do something else for a living, maybe even work retail in a building with fewer than 80 floors. Most fund managers would rather die, so they continue playing it safe, creating largely indistinguishable mutual funds that each do not-too-horribly. And everyone’s happy. The fund manager doesn’t have to worry about returns that are far from average, the Morgan Stanley or Ameriprise advisor doesn’t have to worry about losing your company’s business, the aforementioned comptroller thus keeps your company’s owner satisfied, and your future is now invested in a hideously complex 401(k) that includes minute amounts of hundreds of large companies, almost all of which will stay stable enough on balance to keep your investment from vanishing.

But you can do so much more. It doesn’t matter how old you are, what your sensitivity to risk is, or whether Dave Ramsey thinks your portfolio incurs a suitable split between stocks and bonds; underpriced securities (really, underpriced investments of any kind) are always there, and always available to whomever’s in the mood for mostly free money.

Buy individual stocks, not just mutual funds. Stocks with powerful fundamentals are always worth buying. And if you’re unclear, by “powerful fundamentals” we mean regular profits, little debt (or at least, debt that the company’s profitable operations can afford to cover), possible treasury stock, and a high ratio of assets to liabilities. If any of those terms sound unfamiliar, buy our book.

God’s greatest gift to the amateur investor is stocks whose prices have temporarily fallen for irrational reasons, yet whose underlying businesses still have those powerful fundamentals. When public pressure is on the stock of a healthy company like British Petroleum to fall (as it was a couple of years ago), or on Netflix to fall (as it was last autumn), that’s a buy sign if ever there was one. It’s the exact opposite of the recent love-in between dilettante investors and Facebook, a company awash in publicity but with no publicly verifiable financial data to speak of. Quite the opposite, in fact.

Unballyhooed is good. Temporarily beleaguered is good (accent on “temporarily”). But nothing substitutes for a strong set of financial statements. A mere $3 can get you on your way to learning how to add a little self-determination to your investing. And give you a chance to make far, far more than if you’re merely letting someone else pick out a mutual fund for you.

Carnival of Wealth, Less is More Edition

It’s Time To Get Unbalanced

Buy Now!

Looking for something?