May 2006
You are currently browsing the articles from General Finance written in the month of May 2006.
Call up all the businesses you have monthly bills and have them directly taken from your bank account. It will give you peace of mind and you will never be late on a payment again. Also, call up your mutual fund and have them draw directly from your banl account as well. This way you are dollar-cost averaging as well as never seeing or missing this money then. This keeps your financial life disciplined and less work for you in the long run.
Written by mike on May 28th, 2006 with no comments.
Read more articles on Household.
Some words to the wise about where your money goes:
NEEDS should take up about 50% of your budget
- Mortgage or rent
- Car/health/renter’s/homewoners insurance
- Groceries
- Taxes/property taxes/sales tax
- Student loans (this is one loan you can never get away from)
- Child-support/alimony
- Contractual payments
WANTS can take up 30% of your budget
- Cable/Dish TV
- Alcohol
- Dining out
- Non-essential food
- Haircuts
- Magazines/newspapers
- Vacations
- Babysitters
- Recreational fees and gear
- Presents
- Entertainment
20% should go to SAVINGS
- Retirement contributions
- Other investments
- Mortgage and car payments over minimum
- Money markets
- Payments against credit card debt
Written by mike on May 28th, 2006 with 1 comment.
Read more articles on Budgeting.
When you become more comfortable with your abilities as an investor you might want to try to see if you can bypass mutual funds and buy some of the stocks on your own.
Here are some ruiles of thumb in a diversified portfolio:
- Large-cap stocks: If you are ready, you should definitely try to buy large-cap stocks on your own. Large cap mutual funds do what many can do on their own. If you use a discount brokerage house you only fees will be to buy and sell these stocks. As we all know mutual funds have a lot of fees compared to this method. Pick at least 12 stocks in the different industry sectors.
- Mid-cap stocks: If you are very experienced and love doing your your own trading then try to do the mid-cap portion of your portfolio as well. Invest in at least 3 and go into different industry sectors. Be careful and make sure you are truly comfortable with this.
- Small-cap stocks: Small cap investing on your own is too difficult for almost all amateur investors. If you have the guts to do it try a couple companies on your own, but most of the time stick with a good small-cap mutual fund.
- International Stocks: It is too difficult to invest in international companies–please rely on professionals here. International stocks are too difficult to track and mutual fund will do the trick for this portion of your portfolio.
- High-quality bonds: U.S. Treasuries can be bought online easily through www.treasurydirect.gov. You can do this on your own and it is not terribly difficult.
- High-Yield bonds & Short Term bonds: For both of these it is best to rely on a bond fund. Research is difficult and unless you have advice from a professional it is difficult to do well here.
Written by mike on May 27th, 2006 with 3 comments.
Read more articles on Investing and Stocks.
If you have been paying attention to the way the stock market has behaved in the past couple weeks you have had a good introductory course on how market timing is near impossible. One day the stock market plummets and the next it rebounds and vice versa. Trying to figure out the perfect time to invest is difficult to say the least. Hopefully, you have watched the market and seen how erratically it can be. By dollar cost averaging you will have peace of mind and not have to stay up at night if you did not get in at the exact right time. Or if you invest in increments that will help your cause as well.
Written by mike on May 26th, 2006 with 1 comment.
Read more articles on Stock Market.
Growth stocks and value stocks differ in many ways and investing in both can be a method of further diversifying your portfolio. Growth companies typically take profits and put them back in the company. They also often have high P/E ratios. They are companies that are making an effort to grow and be more prosporous. Now value stocks are not the opposite of growth, but they are different. They have a lower P/E ratio and often give out dividends to investors. These characteristics also go for mutual funds. And there is even mutual funds that are Blends which “blend” growth and value stocks into their portfolio.
So because these types of investments differ you can diversify your portfolio further. As your portfolio growths you can focus on these different categories of stocks and mutual funds to make your investments have a lower risk and better return.
Written by mike on May 25th, 2006 with 1 comment.
Read more articles on Stock Market and Stocks.
Energy costs in the home are one of the most neglected aspects of energy saving that you can do. People usually think of gasoline and driving less. While it is true that that will cut your costs and help the environment you can go even further by doing a check of your home to make it more energy efficient. Click here for some very good information on energy saving tips. By implementing these changes you will save more, energy and help the environment.
Written by mike on May 25th, 2006 with no comments.
Read more articles on Budgeting and Household.
Retirement investing and investing outside of retirement are two different investment approaches. With retirement accounts like your 401ks, Roth IRA, traditional IRAs, Simple IRA, Keogh, etc. you need to look at the big picture and long-term in order to hit your retirement funding goals. Now investing an extra $5,000 you have to make a profit works a little bit different. You have to answer some questions about your goals before making investment decisions. With this money are your goals short-term or long-term? Is this mad money that you can speculate with? Will you need that $5,000 in the future for an upcoming expense? These answers will take you down different paths to investing that money. Open an account at an online discount brokerage firm if you do not already have one. Check their fees that go along with each type of transaction (Remember that if you are going to put this money in mutual funds go directly to that fund to invest so you can save some money). Decide if you want bonds, mutual funds, stocks, etc or a combination thereof. Remember it is always best to be diversified so if this is not mad money please diversify. If it is mad money you still need to be smart—just do not pick an investment because you think it will do well; pick one because you researched it and the signs point to it doing well.
Written by mike on May 24th, 2006 with no comments.
Read more articles on Investing and Retirement.
We have discussed the Rule of 72 in the past. Take 72 and divide it by the rate of interest of profits a security makes and you will know how long it takes to double. Now when thinking about retirement take calculators like www.bloomberg.com’s to figure out your road to retirement. This is only a path to retirement, but you must stick to your plan to make the numbers in the retirement calculator a realtity.
Written by mike on May 23rd, 2006 with no comments.
Read more articles on Retirement.
The idea behind dollar cost averaging in investing for your portfolio is to buy using the same dollar amount of a stock or mutual fund (most likely mutual fund) at a regular interval. For example, you begin to invest in a certain mutual fund for your Roth IRA. The minimum initial investment in this mutual fund for a Roth IRA is $250. After reading the prospectus, filling out the necessary paperwork, signing it and enclosing a check for $250 your account is opened by the mutual fund on the 15th of the month. When you filled out your paperwork you instructed the fund to take out $250 from your savings account (see the forms for what bank information the mutual fund will need) on the 15th of each month thereafter. The benefit of investing the same dollar amount at the same time interval is that you will average out the highs and lows in the market and will not be prone to bad market timing.
Written by mike on May 23rd, 2006 with no comments.
Read more articles on Uncategorized.
EFTs are often less expensive to own than index funds, but the brokerage fees go along with EFTs so they are not always better. Here is how you can compare and decide:
- If you dollar-cost average or invest in small amounts go with an INDEX FUND because brokerage fees on small amounts will eat up the EFT’s savings
- If you are investing a bonus, windfall or IRA rollover go with an EFT because transaction fees will impact your bottom line less
- Make systematic withdrawals in retirement go with an INDEX FUND because the ETF transaction fees will eat up your returns
- If you harvest tax losses go with an EFT because often mutual funds have redemption fees if held under a certain time limit
Written by mike on May 22nd, 2006 with no comments.
Read more articles on Investing.