Archives for February 2006

Carnival of Investing #10

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Welcome to the 10th edition of the Carnival of Investing. Whew, with hosting my Reverse Carnival last week and then putting this one together, I forgot how much time it takes. Thanks to all the submitters, and then also all previous Carnival hosts! Without further ado, here are the entries this week that relate to stocks, bonds, mutual funds, derivatives, and other investments:

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My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Ponzi : The Legend Lives On

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Ponzi Book CoverPonzi scheme. You’ve most likely heard of the term, although you may not know exactly how it works. A Ponzi scheme is a scam where investors are promised amazingly high returns on their money based on some ‘secret super-investment’, but in reality the money to pay older investors is simply taken from the money of new investors. Of course, this can’t go on forever, and the investors involved at the end are usually left with nothing.

Let’s take the most recent ‘investment program’ which reeks of being a Ponzi scheme, 12DailyPro, which is now being investigated by the FBI. The story of this interested me so much I started reading ‘Ponzi: The Incredible True Story of the King of Financial Cons‘. The similarities between his story and 12DailyPro are astonishing.

Let’s start with Charles Ponzi, an Italian immigrant in the 1920s who promised a 50% return in only 45 days, compared to the 3-4% that banks were giving out at the time. He stated that the crazy returns he got were from some sort of international transactions involving postal stamps and currency exchanges. The first people involved were skeptical, but when he delivered on the promise in 45 days, people started rushing in with their money. At his peak, he had about $10 million (in 1920s money!!) of other people’s cash. Of course, there was a spectacular collapse when the government finally stepped in and shut it down. Even at the end, Ponzi still had many devoted followers who refused to believe it was a scam.

Ok, now fast forward to the present:

12DailyPro.com debuts, and promises a 44% return on your money in only 12 days, as compared to the ~4% APY banks are giving out now. The investment program states that the money comes from users surfing websites with advertisements for about 5 minutes a day, amongst other vague things. The first people involved were skeptical, but as the site consistently delivered the said returns, people started rushing in with their money. Millions of dollars are reported to have went through the company. Due to recent investigations by various state and federal authorities, the site has shut down, with many people losing tens of thousands of dollars. Even during this collapse, 12DailyPro still has many devoted followers who refuse to believe it was a scam.

Eery, isn’t it? I believe some people invested in 12DailyPro knowing full well it was a Ponzi, but also aware that the early adopters could come out well ahead. I think the rest truly thought they had found a gold mine that would erase all their debts and give them passive income forever. Anyways, the book was really good and almost made you root for Ponzi and want him to come out on top. I couldn’t put it down, the story really shows how greed can blind people.

For more on 12DP, check out this Wall Street Journal piece. A quote from the article:

Asked if he thought the gains were too good to be true, Mr. White said, “I suppose there was a possibility it was a Ponzi scheme. You always had that at the back of your mind.” He added: “144% in 12 days? You don’t get that from your bank.”

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


More IRA Options For Those Starting Out

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I listed one good IRA option yesterday for those that are just starting out saving, but now I want to spend some time and explore more options. I don’t want it to seem like I favor Fidelity – people were asking for a good option and I threw one out there. Maybe not the best, but again, sometimes just starting is more important. Besides, you all know that my own retirement money is at Vanguard. 😉

For the purposes of this comparison, I am assuming that we are talking about a person who does not have a lump sum to invest, but can manage to set aside $200 a month towards an IRA. For those that think that’s too little to start, consider this: Just $200 a month, starting from age 25, growing at a tax-deferred 8% annually, will grow to about $1,000,000 by age 70. For simplicity of comparing investment choices, I will also compare each broker’s auto-pilot retirement funds.
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My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Goodbye MB Trading

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I just closed my MB Trading brokerage account, which I only recently opened. First, I didn’t really like the interface of their proprietary software or their website layout at all. Neither was not very user-friendly, at least for my amateur tastes.

On top of that, early February they charged me $10 for ‘Jan Software Charges’, which turned out to be their options feed, which I don’t recall signing up for and I definitely never used. Their e-mail support then took 3 days to get back to me when I asked to cancel that feed. Not only would they not waive the original fee, but since it was already February when I got charged, I was charged another $10 for getting the feed in February! $20 in fees and I only had the account open 3 weeks.

All these things are minor separately, but together it just left a bad taste in my mouth. So I’m now looking for another low-cost broker.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Time To Start Saving? Fidelity SimpleStart IRA

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I’m sure some of you are motivated to do avoid some of the financial mistakes shared yesterday. A good way to start is by funding yourself an tax-advantaged IRA. Fidelity has come out with a pretty decent product for this – their SimpleStart IRA. You just need to commit to contributing $200 a month ($2,400 a year) to the IRA, and you can avoid the $2,500 initial minimum investments of many of their funds. Also, as you are not paying any trade commissions and there are no annual maintenance fees, more of your money is going towards your investments.

Fidelity’s Freedom Funds, which are automatically rebalanced based on your planned retirement timeframe, are a good simple option I would recommend for those without strong opinions otherwise. This is just one option I’m throwing out there. Either way, get started!

Added: I’ve done a more thorough comparison of ‘IRA Options For Those Starting Out‘, including brokers that require a committment of only $50 per month.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


VirtualBank up to 4.60% APY Interest

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

VirtualBank recently released that their eMoney Market Account is now paying 4.60% APY. New accounts can get a $20 bonus. My Rate-Chaser Calculator may also come in handy.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Reverse Carnival of Money Mistakes

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Wow, I am really impressed with the great quality and variety of submissions for this Reverse Carnival of Money Mistakes. Everything from everyday expenses to complete lifestyle overhauls is covered, and I’m sure everyone reading it can relate to at least some of the money bloopers listed below. This is truly an entertaining way to learn from others. I love reading about personal experiences. A hearty Thanks to everyone who contributed! Also thanks to those who have spread the word about this Carnival, and thanks in advance for those that will.

I’ve shared some excerpts, but be sure to check out the links for the entire story. To celebrate the end of Valentine’s Day (Let’s just say I may need to buy another saute pan after ‘reducing’ my soy ginger sauce to… charcoal), I’ve chosen a pink motif:

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My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


New Pinecone Survey Sign-up Link

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

There appears to be a new sign-up link for Pinecone Research $5 surveys the mentioned previously, via commenter Grant:

[link is dead]

If you are looking for some paid surveys that are looking for new members, check out MySurvey (see my experiences) and SurveySavvy.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


HSBC Checking + OnlineSavings = Great Combo

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I recently opened an HSBC Checking Account to get the $50 bonus, but also to work with my existing HSBC Direct/OnlineSavings account paying 4.80% APY. Now that I have both, I would definitely recommend it! With my SmartPackage Interest Checking account, there is no monthly fee with either direct deposit or $3,000 in combined balances in ‘qualifying accounts’. The big question was whether the OnlineSavings account is such an account. To have written confirmation, I sent an online secure message on HSBC’s site. The response:

Your Online Savings account balance will be included for the combined balance requirement of your checking account.

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My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Prosper.com : Person-to-Person Lending

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Banks have a great gig. Most pay you puny interest, and then turn around and lend it to credit card holders at 15-30% APR. A new start-up, Prosper.com, aims to shrink this gap by allowing individuals to lend directly to each other. As a lender, you get to see the credit rating of a potential borrower and well as the reputation of the ‘group’ they are affiliated with, and decide at what rate you would be willing to loan out your money. Read more at the New York Times and BusinessWeek .

This has been done before in the UK, at a site called Zopa.com. Their model is a bit different in that your loan amount is spread across at least 50 borrowers, up to a maximum of ?200 per borrower. Although you can choose to only fund part of a loan at Prosper, I would think a 50-way split would give you much better protection against the total loss of your money. Still, this is very innovative, and I definitely will write more about it later. Thanks to commenter micah for the heads up.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


SEP-IRA Basics for the Self-Employed

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Simplified Employee Pensions, or SEP-IRAs, are a retirement account available to both small business employers and employees under certain requirements. Although I’m sure they are covered more thoroughly elsewhere, I wanted to jot some notes down focusing on the self-employed, that is, you are both the only employer and employee all rolled into one. Beware, during my research I found a lot of outdated and thus inaccurate information online.

Who’s Eligible?
Anyone who has any amount of self-employment income, even if you already have a retirement plan with your other job.
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My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.


Self-Employed Retirement Account Options

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Before I finish my taxes, I’ll have to decide how I want to put some of my self-employment income away for retirement. I didn’t know there were so many options! In addition to the usual Traditional and Roth IRAs, I could also do use any of the following:

  • Simplified Employee Pension IRA (SEP-IRA)
  • Savings Incentive Match Plan for Employees IRA (SIMPLE IRA)
  • Keogh Profit-sharing Plan
  • Individual, or Solo 401k’s
  • Solo Roth 401k’s

I’m definitely going to explore all these options soon, but due to their deadlines the only one that I can actually use for 2005 income is the SEP-IRA, which allows me to open and fund it as late as the extended deadline for tax returns. Gotta love easy decisions.

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.