Archives for February 2006

Learn Real Estate Investing At Community College?

It appears that housing prices are starting to flatten out in my area, while rents are rising. So my interest in learning how to find, buy, and manage a rental property of my own is back, but I’m getting tired of plodding through my Modern Real Estate Practice textbook. By chance, I noticed that my local community college also offers some short non-credit courses in Real Estate Investing. Here are some sample listings that caught my eye:

Elements of Small Property Investment
Learn easy-to-use rules to analyze income property for sale or purchase. Includes terms, evaluation forumulas, and analysis sheets used to recognize a profitable venture.
(3 hour class, $45)

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Don’t Be A Victim

I just finished watching the end of the Winter Olympics on my TiVo, and I was struck by something. These athletes are inspiring not because they can go fast on snow, but because they did not focus on the fact that they were too short or too skinny, that practicing every day is really hard, or that not enough people watch their sport. They achieve excellence because they know what they want and they are not afraid to work for it.

Right now there seems to be a trend towards books like ‘Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead‘ and ‘Generation Debt‘, about how young people have it so rough – what with credit card companies throwing money at us, high education costs, and soaring housing prices. No wonder we’re in debt. My response? Don’t Be A Victim! Yes, Social Security is gonna suck big time for us. Education is expensive, but it’s up to you to make it worth it. I can’t afford a house either, so guess what? I’m saving up for one.
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More Credit Card Debt, Here I Come!

I’ve decided to continue my somewhat controversial practice of borrowing cash from credit cards and profiting by earning interest off of it. As I’ve already got my $100 gift card from my Citi Professional Card with ThankYou Network, I’m going to use the no balance transfer fee 0% APR offer also included with it to take out $9,000 free for 9 months. I figure I can put it in a bank account earning at least 4.5% APR, so that would be about $300 profit pre-tax. This will join the $20,000 in borrowed money that I already have out.

For those interested, please see the following posts which detail how I go about doing this, see my very detailed series on How To Make Money From 0% APR Balance Transfers.
Please read through those posts and the comments before yelling at me! =) Your concerns are most likely already voiced, and my response already jotted down. I’ve been doing this for years and I’ve heard it all. Yes, there are some dangers. Here’s a good rule of thumb: If you’ve missed a credit card payment deadline within the last year, doing this may not be a good idea. The simple truth is that I have personally decided that it is worth the risk for me. Why do I bother? Moola. Dough. Bling. A quick and dirty example:

If you have good credit, you can borrow $30,000 for 12 months with no fees (use one of the offers listed above). $30,000 x 4.5% = $1,350. Even after taxes, I’m looking at over a grand of free money. As usual it took me way less time to request my check than it did to write this post.

Reconstructing Our Portfolio: Initial Thoughts

Now that I have decided to stop spending time learning to trade individual stocks, I want to focus instead on optimizing our retirement portfolio. Right now we have almost $50,000 in retirement accounts, and if I liquidate my stock positions and start adding money regularly to a taxable brokerage account we can keeping building on that. That seems like enough money to split in between some different mutual funds to achieve a more specific asset allocation.

I intend to choose an asset allocation based on Modern Portfolio Theory, which tries to achieve the greatest return for a given amount of risk. Or the least risk for a given long-term expected return. There is lots of math and research behind it, but I’ll get more into that later. I’ve gone ahead and ordered a book dedicated to this, The Intelligent Asset Allocator by William Bernstein, to be my main resource. My overall goals are to (1) make my portfolio optimized with minimal expenses and (2) make it easy to maintain and continuously add money to.

Buying Generic… Sometimes

My wife and I were in Costco recently and came across the big tubs of laundry detergent. I moved instinctively towards the store-brand Kirkland, but then I got The Look. “Umm… no. We are going to spend the extra 4 bucks and buy the Tide.” Tip for the soon to be married – pick your battles wisely ;). 4 bucks is not worth it. We got the name-brand Bounce dryer sheets too. (Why we even need dryer sheets at all is beyond me)

This came to mind today as I was flipping through a free trial issue of Consumer Reports magazine I received. They compared 24 laundry detergents, and guess which was a CR Best Buy and beat out Tide? Yep, Kirkland Signature. Which got me to thinking, what products are we okay with ‘going generic’ with, and which are we not? Any why? It’s actually pretty funny, and doesn’t really make much sense at times.
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MyMoneyBlog Archives In Bite-Sized Bits

I have been blogging for over a year now, and it has been a great journey. For those that don’t want slog through all the old posts, I’ve compiled a kind of highlight reel (insert ESPN theme here):

If you haven’t already, I’d also like to invite you to subscribe to my RSS Feed, bookmark this site (Ctrl-D), or subscribe to e-mail updates.

Are Individual Stocks Worth The Time And Effort?

Thanks to everyone who shared why they do or do not trade individual stocks. Here’s what I think. I believe there are market inefficiencies that can be taken advantage of. I also think that unless you understand how to read a company’s financial statements and investor psychology, it is highly unlikely you can beat the market over time. Since I don’t know either of those things, I have no business trading stocks until I do.

But! I think a more important question is whether spending all that time looking at stocks is worth it. Not only do you have to build up your knowledge overall, you then have to constantly monitor the markets for new developments. After all that, by how much are you really going to beat a well-balanced mutual fund portfolio? I personally feel that unless you have a real passion for it, most people would get a better return on their time pursuing other things like career advancement or more entreprenurial activities. So I think I’m gonna do that instead.

Why Do You Trade Stocks?

I’m conflicted. Lots of people trade individual stocks. I do. My friends do. Maybe you do. I used to dream of watching CNBC tickers, making quick trades on my PDA, getting in on IPOs. But so far, I’ve just made the occasional trade based on some loose predictions, a good story, or love for their product. But the more I read, the more I think – why bother at all? The average active mutual fund manager cannot beat the market over time. These people have finance degrees, experience, lots of underlings, and I’m sure some smidgen of intelligence for them to be managing millions of dollars in capital. I don’t see myself as any better.

So my question is – why do you do it? Is it entertainment value? Maybe you work in the industry so you know it better than the managers? Do you believe the articles from a $5 subscription to Forbes are actually cutting edge advice? Maybe everyone else just didn’t read enough Benjamin Graham or Berkshire Hathaway annual reports? What makes you think that you can beat the market? Even though I used some sarsasm back there, I really do want to know.

Mutual Funds: Don’t Chase Past Performance

This is a pet peeve of mine, and I am seeing it more and more as the dot-com crash of 2001 fades into the distance. As I read various money magazines, I see mutual fund companies taking out full page ads touting their 1-, 3-, and 5-Year average annual returns. How they beat the S&P 500 Index or Lipper average to a pulp. Then, in the fine print below, you will always find these required words: ‘Past performance does not guarantee future results’. You know why? Because it’s true.

Sure, I could make up a MyMoneyBlog Alpha, Beta, Kappa, and Zeta Mutual Fund with different holdings, and one of them will probably beat the market too just by the odds. Heck, I have personally beaten the S&P 500 since I started trading stocks five years ago, even neglecting dividends. Does that mean you should trust me with your money? If so, please send it to… Historically, just because a mutual fund has beaten the averages for a recent time period, it does not mean it will in the future. In fact, due to mean reversion it is likely to do even worse than average.
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HSBC Offers Extended, $10 Free Checking Bonus

It looks like the $50 bonus offer for opening HSBC’s Smart Package checking is now extended to March 15th, 2006. There is also a $10 bonus for opening the HSBC Free Checking account. Go to this page and enter the promotional code ‘check‘ in the box on the bottom right.

Click here for a comparison and why both of these go great with the HSBC Direct 4.80% OnlineSavings account.

Citi mtvU Card – 5% Back At Restaurants and

I forgot about this card – The Citi mtvU Platinum Select Visa Card is a credit cards for college students, that offers an interested array of perks. Like the Citi Professional Card, it is part of the Citi ThankYou Network. The card gives you 5 ThankYou Points for every dollar you spend at restaurants, bookstores, record stores, movie theaters and video rental stores. But guess what is considered a bookstore, no matter what you buy?! This is the same as 5% back in gift cards or 5% cash back towards your student loans.

The only problem is that there are reports that they verify if you are a student. Some get asked, many slip by. If you are a student, you also get some points for having good grades: “250 to 2,000 ThankYou Points? twice a year for a good GPA. 25 ThankYou Points? a month for paying your bill on time and not going over your credit limit.” So get a 4.0 and pay your bills and get $43 for free every year! There’s no annual fee and even no minimum income or cosigner requirement. I bet anyone under 25 gets approved for this automatically. I’m over but hey, I’m a student now 😉

Getting My 2% Cash Back On Everything

I just got my check from Fidelity for cashing out my 529 plan, courtesy of my MBNA 529 College Rewards Mastercard which gives me 2% cashback on everything I buy into that 529 account. My first disbursement request was lost in the mail, but my check finally came:

Out of the $1,600 I received, I would estimate that $900 was from my own deposits, $600 was from earning 2% cashback, and $100 from the tax-free growth of my conservately-chosen 529 portfolio. Nice!
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