Archives for April 2011

AutoSlash.com Review: My Car Rental Experience

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

I just got back from my trip to Orlando, where I tried the new car rental website AutoSlash.com to book, and previously wrote an introductory summary of their features. To briefly recap, the website takes advantage of a unique feature of car rental reservations to continuously check for lower prices over time and re-book you whenever there is a price drop.

Here is the price history of my one week rental of a mid-size car in April 2011 from Orlando International Airport (MCO). I later realized it included Good Friday and Easter weekend, which I think increased the demand of cars.

  • Day 1 – $665.61 including all taxes and fees, with Payless. This was really the lowest price I could find at the time across Kayak, Expedia, etc.
  • Day 2 – $346.18 with Dollar Rent A Car at .
  • Day 3 – $320.41 again with Dollar.
  • Day 38 – $273.68, final price with Dollar.

As you can see, there was a flurry of activity in the beginning, nothing for a long time, and then finally one last price drop at the end. This is only a theory, but I think that the folks behind Autoslash do a price search for a week or so after your rental reservation is first made, and again a week or so before your actual rental date. Or perhaps this is just a result of how the rental agencies vary their prices over time.

Regardless, I was really happy with my experience, and will use them again in the future. They found a better price than I could have found, with really zero effort on my part. Many of these rental agencies are clones of each other anyway. I picked up my car from Dollar with no issues with my special coupon code, and drove away in a huge Ford Crown Victoria with 9 miles on the odometer since that’s all they had left. I declined all additional insurance coverages from them, and returned it with no problems. This last part is more of a testament to that specific Dollar franchise, but it increases my confidence with places that aren’t Avis or Hertz.

How Often Should I Rebalance My Investment Portfolio? Updated

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Here’s a slightly updated and revised version of an older post I had on rebalancing a portfolio to maintain a target asset allocation.

What is Rebalancing?
Let say you examine your risk tolerance and decide to invest in a mixture of 70% stocks and 30% bonds. As the years go by, your portfolio will drift one way or another. You may drop down to 60% stocks or rise up to 90% stocks. The act of rebalancing involves selling or buying shares in order to return to your initial stock/bond ratio of 70%/30%.

Why Rebalance?
Rebalancing is a way to maintain the risk to expected-reward ratio that you have chosen for your investments. In the example above, doing nothing may leave you with a 90% stock/10% bond portfolio, which is much more aggressive than your initial 70%/30% stock/bond mix.

In addition, rebalancing also forces you to buy temporarily under-performing assets and sell over-performing assets (buy low, sell high). This is the exact opposite behavior of what is shown by many investors, which is to buy in when something is hot and over-performing, only to sell when the same investment becomes out of style (buy high, sell low).

However, in taxable accounts, rebalancing will create capital gains/losses and therefore tax consequences. In some brokerage accounts, rebalancing will incur commission costs or trading fees. This is why, if possible, it is a good idea to redirect any new investment deposits in order to try and maintain your target ratios.

How Often Should I Rebalance?
[Read more…]

Prosper $104 New Lender Bonus – First 200 Only

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Person-to-person lending site Prosper is offering new lenders a $104 bonus for the first 200 people to complete a new lender application, starting at Noon Pacific on Wednesday 4/27. You must reinvest the bonus into Prosper loan notes, which you can later sell or collect loan payments from until they mature. I really don’t like these types of promos because it’s hard to know if you’ll actually qualify for the bonus. If you’re interested, definitely apply as close to the start time as possible.

To be eligible for the bonus, you must complete the Prosper Lender Registration process starting at noon Pacific Daylight Time on Wednesday , April 27, 2011 (the “Promotion Date”). Only the first 200 customers who complete the process will be eligible for the $104 bonus. The $104 bonus can only be used for investments in Prosper Notes; at its discretion, Prosper may withdraw the bonus in the event that the funds are not invested within 14 days of the Promotion Date.

If you are an existing lender, you probably go the e-mail that they are currently offering 4% cashback for manual investments in their “featured” listings.

British Airways 100k Miles Promo – Booking Award Tickets On American Airlines Using British Airways Miles

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Update 5/6/11: The 100k mile card promotion is now expired. The information on using British Airways miles should still be accurate.

First, a quick reminder that the British Airways 100,000 mile promotion mentioned previously is scheduled to expire in less than two weeks on May 6th. To recap, the Chase British Airways Visa Signature card (expired) is offering 50,000 British Airways (BA) Executive Club miles for new cardmembers with first purchase, and another 50,000 BA miles after spending $2,500 within 3 months of opening, for a total of 100,000 miles.

There are many options on how to spend these points, for example we spent them on business class tickets to London and Rome. But to show the basic value of this offer, I looked into how to use British Airways miles to book award travel on American Airlines, their partner in the US. If American Airlines has a domestic award seat available in their “MileSAAver” category, then in general you can book it with British Air miles. A flight within the continental US costs 25,000 BA miles plus $5, with no fuel surcharges. (Other combinations of less miles and more cash are available, see below.)

If your flight is a direct flight with no stopovers, you can search and book an award online at BritishAirways.com. On the site, go to “Spending BA Miles” and then “Book with partner airlines” and then “Make a reward booking”. They always try to find BA flights first, but once you search for domestic flights, you’ll see this option to include partner airlines.

Here is a screenshot of an award I found from Los Angeles to Dallas/Ft. Worth for 25,000 miles + $5:


(click to enlarge)

Note that I can see the availability even if I don’t have enough miles to actually book it yet. Alternatively, you can book an American Airlines flight from the continental US to Hawaii for 35,000 + $5. Here is an award I found from Los Angeles to Honolulu during the summer for that amount:


(click to enlarge)

Of course, it’s better if you can book ahead of time for the best availability. If your flight has a stopover, you might want to look for award availability on the American Airlines website first and then call British Airways to book the award flight. Since you can’t find the airfare online through their search system, you can try asking them to waive their phone booking fee. Thus, with the 100,000 miles from this offer (plus $20 in fees), you could by four domestic round-trip tickets in the lower 48, or nearly three round trip tickets to Hawaii.

Finding Shadow NAVs for Money Market Funds

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Money market funds always seek to maintain a published stable net asset value (NAV) of $1.00. If it drops even to $0.99, known as “breaking the buck”, people start to panic. Funds are allowed us book values and then round to the nearest penny ($0.995 becomes $1.00), so small fluctuations can be hidden from investors. On January 31st, the SEC started requiring money market funds to disclose their “shadow” NAV, which is the value of their holding at actual market prices out to four decimals places (i.e. $0.9995 or $1.0003). However, you only get to see them with a 60-day lag and by looking through SEC filings.

Shadow NAV Definition

The net asset value per share most recently calculated using available market quotations (or an appropriate substitute that reflects current market conditions), including the value of any capital support agreement, to the nearest hundredth of a cent.

How Do I Find The Shadow NAV For a Specific Fund?
These shadow NAVs are not widely publicized, although if a major money market fund had an abnormally low one, the financial media would probably pick up on it. To find the latest shadow NAV for a specific fund:

  • Visit the SEC EDGAR Search page and enter the ticker symbol.
  • Filter the big list of results by entering “N-MFP” under Filing Type.
  • The highest result should be the most recent N-MFP filing. Click on the “Documents” button, followed by clicking on the red link for “primary_doc.html”.
  • Scroll down to “Item 18. Shadow Price of the Series” for your fund.

As an example, here is the latest N-MFP filing for the Fidelity Cash Reserves Fund (FDRXX) with a Shadow NAV of $1.0003 as of 1/31/11.

What Is A Dangerously Low Shadow NAV?
[Read more…]

Groupon: $8 For Domino’s Pizza, $20 For General Mills Combo

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Update 4/21: There is a new national deal for a General Mills sampler pack that include a whole bunch of random goodies like cereal and sn.acks, along with a coupon book. Over 1,000 bought already, partially I guess since cereal is so darn expensive these days

Groupon has a national deal (still valid 4/21) at Domino’s Pizza that gets you any large pizza with up to 10 toppings (online order, carryout only) for $8. Valid at all locations in lower 48. I haven’t tried their new revamped pizza yet… is it really better?

If you don’t have a Groupon account already, please use my sign-up link, and I’ll get some Groupon credit for referring you. (It feeds my dining-out addiction… literally.) Then visit the Domino’s pizza deal link.

You can save even more with cashback shopping sites like eBates ($5 new customer bonus), Mr. Rebates ($5 bonus), and BigCrumbs.

Building Sample Portfolios With Commission-Free ETFs

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Inside this Wall Street Journal article about the recent phenomenon of brokers offering commission-free ETFs, portfolio manager Rick Ferri constructed some sample portfolios from the available offerings of Fidelity, Schwab, TD Ameritrade, and Vanguard.

In this Bogleheads thread, Ferri clarifies that these portfolio are not necessarily complete sample portfolios, just what you might be able to build given what was available. Still, a potentially helpful exercise.

The portfolios I provided for today’s Wall Street Journal article were created under a strict WSJ mandate. I was to take only the free trade ETFs available at each firm and form as similar as possible portfolios across all platforms. Since each platforms is different with many asset class choices being very limited, the portfolios contained only a very basic asset allocation. An ETF/index fund portfolio would hold more asset classes without the WSJ constraints.

Firstrade Commission Free ETF Trades List (First Trade)

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Get 250 Free Trades and more at Firstrade!Discount stock broker Firstrade.com announced that they will join other brokers in offering a limited number of free ETFs to be traded with no commission. You must hold them for 30 days. If you sell an eligible ETF within 30 days of purchase, their regular $6.95 online commission fee will apply. Here’s the current list of 10 ETFs:

Stocks
iShares S&P 500 Index Fund (IVV)
Vanguard Small Cap Growth ETF (VBK)
iShares S&P MidCap 400 Index Fund (IJH)
Vanguard Dividend Appreciation ETF (VIG)
Vanguard Emerging Markets ETF (VWO)
iShares FTSE/Xinhua China 25 Index Fund (FXI)

Bonds
Vanguard Short Term Bond ETF (BSV)
Vanguard Intermediate Term Bond ETF (BIV)
Vanguard Long Term Bond ETF (BLV)

Commodities Futures
PowerShares DB Commodity Index Tracking Fund (DBC)

The list manages to cover most of the basic asset classes, although it’s missing a certain continent called Europe. I’m sure they figure nobody cares about those old and boring countries anyway, especially if you could invest in China again… even though the Emerging Market ETF is already 18% China.

Infographic: Where Did Your Tax Dollars Go?

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Tax Day has come and gone (unless you filed an extension). Recently, there was a competition to see who could best “create data visualizations that would make it easier for U.S. citizens to understand how the government spends our tax money”. I’m guessing that most people really don’t know, including myself. The winner was WhereDidMyTaxDollarsGo.com, where you simply type in your income and filing status and off it goes.

I certainly found it very visually appealing. It appears to assume you take the standard deduction. I figured that national defense, Social Security, Medicare, and debt interest payments were going to be a big chunk, but wasn’t really aware of how big the “Income Security” category was. Overall, it reminded me of a less-intimidating version of the US Budget poster.

Savings I-Bonds March 2011 CPI Update: 4.60% Variable Rate = Competitve Interest Rates

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

New inflation numbers for March 2011 were announced on April 15th, so it’s time for the usual semi-annual update and rate predictions. This time around presents a good buying opportunity for a low-risk investment with interest rates higher than current bank CDs.

New Inflation Rate
September 2010 CPI-U was 218.439. March 2011 CPI-U was 223.467, for a semi-annual increase of 2.30%. Using the official formula, the variable interest rate for the next 6 months will be approximately 4.60%, depending on the upcoming fixed rate announcement.

Purchase and Redemption Timing Tips
You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur a interest penalty of the last 3 month of interest. A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. It’s best to give yourself a little buffer time though, since if you wait too long your effective purchase date may be bumped into the next month.

Buying in April

If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.0%. You will be guaranteed an variable interest rate of 0.74% for the next 6 months, for a total rate of 0 + 0.74 = 0.74%. For the 6 months after that, the total rate will be 0.0 + 4.60 = 4.60%. Let’s say we hold for the minimum of one year and pay the 3-month interest penalty. If you buy on April 30th and sell on April 1, 2012, you’ll earn a 1.66% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. This is better than any 1-year bank CD that I can find right now, keeping in mind the liquidity concerns and the purchase limits.

Given that you lose the last 3 months of interest (again, for holding less than 5 years), it might be better to wait long enough to grab that 4.60% for the entire 6-month period. If you buy on April 30th and hold until July 1st, 2012, you’d achieve a annualized return of ~2.29% over 14 months.

Buying in May

If you wait until May, you will get a new unknown fixed rate plus 4.60% for the first 6 months. My guess for the fixed rate would be 0.0% again, given current real yields for TIPS. The next 6 months will be based on an unknown rate based on future inflation. Worst case scenario, there will be zero inflation and you get paid nothing. Even in that case, if you buy on May 31st, 2011 and sell on May 1st, 2012, you would end up with an annualized return of 2.51% over 11 months.

If you are looking simply for the highest interest rate for a short period, then it would likely be better to wait until May 31st to buy up your savings bonds this year. If CPI inflation is very low or negative for the next 6 months and you are holding for at least 14 months, then it may end up being slightly better to buy in April. In the end, there’s more potential upside for buying in May, so that’s what I plan to do.

Low Purchase Limits
The annual purchase limit is now $5,000 in paper I-bonds and $5,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. Buy online at TreasuryDirect.gov. As for paper, here is a post on how to buy paper savings bonds from your local bank. Some larger banks may have an electronic process.

For more background, see the rest of my posts on savings bonds. I’m keeping all of mine for the foreseeable future, due to their tax deferral possibilities and other unique advantages.

Benjamin Franklin’s Daily Schedule

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bfdaily

If you are into personal finance, you have to respect Ben Franklin. Amongst many other things, he started a successful business and “retired” at 42, after which he devoted his time to science and later statesmanship. He wrote and published the Poor Richard’s Alamanac for over 25 years, probably the first version of a widely read “frugal blog”. Don’t miss reading this illustrated post by Maira Kalman.

Above is a peek into his daily schedule, originally from the Autobiography of Benjamin Franklin, which by the way is available for free in the public domain. Don’t miss the questions on the left part. Seven hours of sleep, not too bad. 🙂 Found via The Big Picture.

Last-Minute TurboTax Giveaway – April 18th Deadline

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A rep from TurboTax contacted me to help give away three copies of their TurboTax Online software as a last-minute promotion reminding folks that the filing deadline this year is extended to Monday, April 18th due to the usual April 15th being a holiday in the District of Columbia (Emancipation Day). Apparently, 27% of taxpayers wait until the last two weeks to file their returns. I seem to wait longer and longer, especially with all these 1099s to wait for.

The giveaway is for a code redeemable at TurboTax.com and good for one free federal + state preparation and e-file with TurboTax Premier Online 2010 ($87 retail value). This is the level above Deluxe, which has added guidance for investments and those with rental income (Schedule E).

If you’d like to be entered for the giveaway, just leave a comment with a valid e-mail below by 1pm Eastern on Friday, April 15th. You don’t need to include your full name, but one entry per reader please. I’ll randomly pick 3 winners and contact you via e-mail later that same day so you can finish the darn things over the weekend.