Easy Like Sunday Morning Weekly Roundup – # 1 – October 9th, 2011

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One thing that has been on my blog radar for quite some time now is to start putting together a weekly roundup. For about 5 months now, I’ve had a general idea about what theme I wanted the ongoing roundup series to have, what I wanted to include as far as content, and the overall purpose.

What’s the purpose, you might be asking? Simple! I feel like with a roundup, I’ll be able to connect with you, the readers, on a more personal (non personal finance informational transmission only) level, encourage community, and also to give back to the other bloggers around the blogosphere who have mentioned My Personal Finance Journey throughout the past week.

As far as the theme goes, the title of the roundup gives it away. The roundup theme is named after the Lionel Richie song, Easy Like Sunday Morning, to remind us of the importance of slowing down at least once a week to take appreciation for that which transpired over the past few days.

So, without further ado, let’s get started!

Weekly Updates from Jacob’s Personal Finance Journey and Life

• Unfortunately, I was not able to get away to attend the 1st ever Financial Blogger Conference in Chicago this past week. However, I have very much been enjoying reading all of the detailed recap posts from the >200 bloggers who did attend. 
• Free From Broke included a very detailed listing of all of the posts around the blogosphere recaping the conference in his recap post, and Good Financial Cents posted an AMAZING video featuring interviews with close to 30 of the bloggers and sponsors. 
• As far as my personal finances go, this past week has been pretty routine, with no big expenditures occurring. The main thing I am planning for right now is to save $700 for a trip to New York City in November to accompany my girlfriend (who runs a wine blog called The Academic Wino, which I’d recommend checking out) when she does the New York City Marathon on November 6th. 
• As far as my life in general, this past week, I have been continuing my graduate school research in Alzheimer’s disease in my lab (see picture of me at my lab work area below, of course sporting the proper PPE!) and have started a new half marathon training program to get ready for the Richmond Suntrust Half-Marathon in mid-November. My best time for this race is 1 hour 30 minutes. We’ll see if I can get close to this this year. Should be fun nonetheless! 

My Favorite 10 Posts of the Past Week

Guest Posts from Personal Finance Bloggers on My Personal Finance Journey

There were no guest posts from other PF bloggers on My Personal Finance Journey this week. Let’s change that, shall we?

If you’re an individual PF blogger (not a company that has a blog) and would like to guest post on my site, please click here to read more details about how to kick off the guest posting process. I’d love to hear from you!

Blasts From the Past

For the first 6 months after I started this blog, I pretty much “blogged in a cave.” What I mean by this is that I cranked out over 200 very good blog articles in this time period, but since I didn’t know any better, I didn’t reach out to other bloggers, get involved with the online community through commenting on other sites, or do any kind of site promotion at all. As you can imagine, some of the articles written during this time period didn’t get the attention that I think they deserved corresponding to the content contained.

The Blast from the Past section will feature one old My Personal Finance Journey article each week that I feel is high quality, but was published prior to my blog having any sort of real readership. This week’s article is listed below:

Ways for Parents to Give Their Children a Head Start in Life

The winner this week is J. Money from Budgets Are Sexy. He won head-over-heels more Plutus Awards at this year’s Financial Blogger Conference than anyone else, runs an incredibly entertaining blog, and spearheads the charitable Love Drop event on top of being a full-time blogger.

If you know of someone in the PF blogging world that is really doing amazing things, feel free to send me an email for consideration in future roundups.

Giveaways

Blog Carnivals Featuring My Personal Finance Journey Articles

Top 10 Referring Sites to My Personal Finance Journey This Past Week

However, I have several other domain names purchased, and I am currently learning WordPress Self-Hosted to get these sites live as soon as time allows! I’ll be sure to keep you all updated on progress.

Well, that wraps up this week! If you have any suggestions or recommendations for things you’d like to see in this weekly roundup, just let me know by sending me an email!

As always, thanks to all the readers for creating such a great community here at My Personal Finance Journey. Your interaction is what keeps me going on this blog!

Until next time – Jacob

Personal Finance Issues and Concerns Faced by Scientists and Engineers – Interview Today at Smart Family Finances

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Happy Saturday everyone! It’s a beautiful day here in Virginia, where the clouds that have lingered over the East Coast of the US have finally lifted, and we have sunshine and 70 degree F weather!

I wanted to let everyone know of an interview I did that was published today by our friend, Shaun, over at Smart Family Finance. Just click on the link below to view the interview.

Interview at Smart Family Finances.com – Personal Finance Issues and Concerns Faced by Engineers and Scientists


As the title of the interview mentions, the questions discussed and answered relate to the specific debt accumulation and money saving financial issues encountered by scientists (especially scientists just beginning their careers). Overall, these problems are caused by the ability of scientists and engineers to earn MUCH HIGHER than average starting salaries at a very young age, often before they are financially mature.

The specific questions that are answered are listed below. Be sure to head on over and check it out!

I hope you all enjoy the interview. Please let me know if you have any questions!

***Photo courtesy of http://www.flickr.com/photos/rocknroll_guitar/3841235072/sizes/l/in/photostream/

Professional Liability Insurance – Is it Something You Really Need?

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The following is a guest post. Enjoy! 

How about you all? Do you think that liability insurance is needed for businesses these days? If you own a business, do you carry a liability insurance policy? 


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

• So let’s see – do I feel that business owners need liability insurance? 
• Yes, indeed I do. 
• Typically, the purpose of insurance is to protect you from financial disasters and protect your earnings ability. 
• So, if you own a small business and it is your sole source of income, I believe it does make sense to have business insurance (which usually includes a liability coverage portion). 
• One question that I did have in particular was to any of the full time bloggers out there….Do you all have business insurance for if someone sued you for copyright infringement, etc? I’d be interested in hearing your thoughts on this and whether or not you think it is needed…
• As I was reading through the post above, it really reminded me of all of the precautions that the moving company had to take in packing up and transporting my belongings during my two moves to Virginia and Philadelphia over the past few years. 
• In these moves, every component I owned was wrapped so carefully, that it made me cringe to think of the shear number of lawsuits the company has no doubt faced over the years that’s forced them to start being some strict about their packing. Truly amazing! 

***Photo courtesy of http://farm3.static.flickr.com/2795/4122171512_3f4dc612d0.jpg

Contents and Building Insurance – Are These Coverage Types Necessary and What Do They Include?

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The following is a guest post. Enjoy! 

Just how important is home insurance? Are contents and building insurance really necessary? Home insurance is vitally important and must include contents and buildings insurance if you want your home to be fully protected.

Home insurance should be a central part of your planning for the future. Should your house be severely damaged by storms or fire, or robbed and vandalized by an intruder who steals valuable items, how would you financially cover repairs and replacement costs without the assistance of your home insurance coverage?

Home insurance protects your property, but also your financial stability. Facing the costs of repairing extensive damage or replacing stolen valuables without any help from a home insurance payout would be a daunting prospect and one that must be avoided. The simple answer is to secure strong home insurance which incorporates both contents and building insurance.

What do contents and building home insurance cover you for?

Contents insurance provides important cover for all of the valuable items in your home, from your top of the line TV to your expensive jewelry. Sadly, burglaries are a common crime, particularly when the early dark nights of winter draw in.

You’ve worked hard for your home and property, why wouldn’t you cover everything contained within its walls with contents insurance? Contents insurance provides cover for your valuables against storms, fire, theft, attempted theft, and vandalism.

Should you be an unfortunate victim of a natural disaster, accident or crime, your contents insurance will pay money towards repairs or replacements. Be certain not to underestimate the worth of your valuables. It makes sense to pay for more expensive contents insurance that provides the strongest possible cover for your property.

Buildings insurance is equally important. It covers your house and all outbuildings like sheds, garages, and greenhouses against damage caused by severe weather conditions like heavy snowfall or storms.

It also covers accidents like fires and crime and vandalism. Likewise, the bursting of water pipes, leaking of gas pipes, broken roof tiles and chimneys, and the accidental breaking of windows are also usually covered by buildings insurance. Check each considered policy carefully for what is covered.

Conclusions

Needless to say, house repairs can be quite expensive. Buildings insurance is the best way to ensure you are covered for all those accidents and emergencies that are impossible to foretell and which would otherwise be a huge financial drain. Home insurance incorporating contents and building insurance provides peace of mind and protection for your home, family and finances.

Note from Jacob: It’s important to realize that even with home insurance coverage, you should still maintain an adequate emergency fund and home maintenance account in order to cover your home insurance deductible, other expenses that would endanger your earnings ability, and routine house maintenance that does not require tapping in to your home insurance.

How about you all? Do you have home insurance currently on your house? Do you feel it’s worth the cost? Have you ever had to tap in to your home insurance? Were fewer repair and replacements covered than you anticipated? 

Safe Travels to All Finance Bloggers Heading to the Conference This Weekend!

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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As we all get geared up for the weekend, I just wanted to take moment to wish happy and safe travels to all of my financial blogging friends that are going to the Financial Blogger Conference in Chicago this weekend.

Unfortunately, my schedule didn’t allow me to be able to attend, but I look forward to hearing all about everyone’s learnings and fun stories about meeting face to face after blogging in different parts of the country and world over the past year or two!

So, have fun and be safe friends!

***Photo courtesy of http://viewology.net/wp-content/uploads/2010/05/Thai-Airasia-HS-AAJ-Boeing-737-Plane-Landing-Photo-6-500×334.jpg

Chaikin Power Gauge Stock Rating Widget Review

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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If you’ve read this blog before or are familiar with the blog carnival I created, The Carnival of Passive Investing, you’re probably aware that I’m not a big fan of being heavily invested in individual stocks.

The reason for this is that in my mind, investing in individual stocks is more of a speculative activity, rather than investing. After all, 70% of actively managed money fails to outperform the market indices. Due to these considerations, most of my retirement funds are invested in passively managed index mutual funds.

However, having said this, I am also very fascinated with the idea of being able to select winning individual stocks (I’m just not convinced enough to place my entire future on it). One of my hobbies is to investigate new stock trading methodologies to see if they are effective over long-term periods. In fact, I often enjoy using small denominations of funds (what I call play money) to invest in individual stocks to see how these methodologies work. An example of one of these investigations I did was a look at Phil Town’s Rule Number 1 stock trading system.

Needless to say, I’m always on the lookout for new and exciting tools that can give stock traders an advantage that will enable them to profit. One of these tools that I’ve been exposed to recently is the Chaikin Power Gauge Stock Rating Widget.

Current State of Stock Ratings by Analysts

Since this widget provides ratings of the common stocks of individual companies, I couldn’t resist briefly ranting about the current state of stock ratings that we all see in the newspapers and financial press…

As you’re probably already aware, this current system of having “analysts” (I love how vague this term is – why don’t they specify who the analyst is or what company they work for?!) rate stocks is laughable at best due to the intense conflicts of interest present in the system. What exactly creates this conflict of interest? Well, as far as I know, the analysts that rate company stocks work for the same big investment banking houses that get paid millions (if not billions) of Dollars by the publicly traded companies receiving the rating for their investment banking work. In other words, the analysts doing the ratings are paid by the same companies they are paid to rank…Crazy, uh? In my opinion, this is the ultimate in conflicting interests!

In fact, I’d venture a guess that the current analyst ratings of individual stocks are about as trustworthy as a politician promising to set up a colony on Mars if he or she is elected President of the United States. End rant..

Using the Chaikin Power Gauge Stock Rating Widget – Features and Widget Outputs

The Chaikin Stock Rating Widget is embedded below (you can use it directly on this webpage, or any webpage where you see it, which is a cool feature!). To try it, enter any stock symbol in the entry box and hit enter.

Once you enter a stock ticker symbol and hit the “enter” button, the following qualitative and quantitative details will be generated automatically for you on the widget. 

• The current trading price per share of the common stock (the widget doesn’t do ETFs or mutual funds yet). 
• The Chaikin Power Gauge rating – This rating is based on market expert Marc Chaikin’s back-tested 20 factor model, which has been proven successful at identifying a stock’s potential over the next 3-6 months. I personally didn’t yet look in to the details about what 20 factors this widget takes in to consideration.
• Pretty much all you need to know in interpreting the rating is that green is bullish and red is bearish. Makes sense, right?
• Along with the overall Power Gauge rating, the widget displays the bullish or bearish levels of the following company details.
• Financial metrics.
• Earnings performance.
• Price/volume activity.
• Expert opinions.

If after reading the information displayed on widget, you decide that you want more information, you can click “For details on this stock, click here” to request a free 4-page stock report sent instantly via email. When I requested a 4-page detailed report on Southwestern Energy as a test, I was pleasantly surprised at how many details are delivered in the report. Pretty cool stuff for being free!

Effectiveness of Power Gauge Stock Rating Widget

So, if you’re like me, right now, you’re probably thinking, “This widget sounds great and easy to use, Jacob, but whether or not it actually works is what I really need to know!”

In my opinion, this widget could potentially be used in one of two ways.

• First, it could be used in conjunction with your existing stock evaluation methodology as a “check,” a way to get another perspective on a stock before buying or selling it. If you’re going to use the widget in this manner, I think you have all of the tools and knowledge you need; simply research a stock using your current method and then see if this widget concurs.
• Second, it could be potentially used as a sole source of information on a stock in order to decide whether or not to buy/sell. If you’re going to use it this way, the effectiveness of the widget’s ratings become more serious, important, and crucial. Let’s explore this second case a little bit more, shall we?

However, I have a plan to see if we can find out…This should be most interesting!

Listed below is a “mixed bag” of 10 of the 30 Dow Jones Industrial Average companies from different industries. Along with the name of each company, I’ve also listed the current stock price per share, ticker symbol, and the Chaikin Power Gauge Rating from the last week of September, 2011. It’s interesting to note that the widget doesn’t predict that a single one of these stocks will go up in the next 3-6 months.

I’ve placed two reminders on my Outlook calendar – one in 3 months from now and one from 6 months – to check the performance of these stocks since this posting. I’ll plan to update this post with how the performance does or doesn’t match what was predicted below by the widget at that time. Should be very interesting!

3M (MMM) – $74 – Very Bearish
American Express (AXP) – $46.45 – Neutral – Trend Down
Boeing (BA) – $59.51 – Neutral
Coca-Cola (KO) – $67.39 – Bearish
ExxonMobil (XOM) – $69.30 – Neutral – Trend Down
The Home Depot (HD) – $33.72 – Neutral
Merck (MRK) – $31.04 – Neutral – Trend Down
Wal-Mart (WMT) – $50.79 – Neutral – Trend Down
Disney (DIS) – $29.81 – Neutral – Trend Down
Microsoft (MSFT) – $25.06 – Neutral – Trend Down

How about you all? Have you ever used the Chaikin Stock Rating widget or any other similar tool for analyzing stocks? If so, which ones? How well have you found they work? 


Share your experiences by commenting below!


Note: This review was sponsored monetarily by Chaikin Power Tools. However, the views and opinions expressed represent my honest evaluation of the product.

***Photo courtesy of http://www.chaikinpowertools.com/

1% Commission "Full Service" Real Estate Agents – Are They Worth the Savings?

As you’re probably already aware, most real estate agents are paid on a percentage-based commission structure of the overall sale value of the associated home or real estate. Typically, this percent commission is around 6%, with 3% going to the selling-agent’s firm and the other 3% going to the buying-agent’s firm.

Begin mild-ranting about the current real estate agent commission structure… 

Due to the very nature of this commission structure, an immediate conflict of interest presents itself for the buying-agent. This is due to the fact that the buyer wants to pay as low of a price as possible for the property investment, but the agent will receive less money if he or she secures his or her buyer a lower price. Of course, if you find a professional agent, the expectation is that the buyer’s agent will act in your best interest instead of solely for monetary gain. In fact, when I purchased my condominium last year, my full service buying agent acted very responsibly in trying to find me a reasonable place for the best price possible. End complaining.

So, the bottom line is that with regular real estate agents, the seller can expect to give away about 6% of the money he or she receives from the buyer to pay for real estate agent services (this does not include closing fees of course). While 6% may not seem like a ton of money (after all, we pay waiters and waitresses 15% commission on the food we buy), if you are selling your $500,000 McMansion house, you’re looking at shelling out close to $30,000 to the real estate agents in one transaction. Looking at numbers like this, you can really see how potentially lucrative being an effective real estate agent can be!

Recently, while driving my car around town or riding my bike through the countryside, I’ve begun to see more and more “FOR SALE” signs popping up advertising that the seller of the property is using a 1% commission real estate agent to assist in selling the property. Here in Virginia, one of the popular 1% commission companies I often see is Equity Saver USA.

Clearly, these sellers weren’t all too willing and anxious to fork over the hefty 6% real estate agent fee and were looking for an alternative. In seeing these signs, I began to wonder several things that I wanted to examine in today’s post –

• 1) Do these 1% commission agents offer similar types of services as regular real estate agents, and if not, what services do they take shortcuts on in order to save money?, and 
• 2) Are these 1% real estate agents able to negotiate good prices for the property sellers?

What Services Do 1% Commission Full Service Real Estate Agents Offer?

All of you have most likely heard the age-old adage that states, “You get what you pay for.”

Translating this to the current investigation, my initial thought would be that if you decided to use a 1% commission agent to sell your home, you’d get a worse service with fewer actions taken on your behalf. However, according to 1% commission agent websites, they are able to offer the same services as 6% commission agents for a lower cost because they use a model that takes advantage of technological resources that were not available 20 years ago when 6% commissions were the norm.

Because of this potential discrepancy, I feel it’s important for us to take a look at exactly what types of services 1% commission agents offer. The following services were listed on 1% commission agent, Equity Saver USA’s, website. The description of some of the services are adapted slightly for increased readability.

• Upload 10 minutes of full speed online video showcasing your property.
• Broadcast up to 5 minutes of AM audible sales information to potential buyers listing from their car radio.
• Automated and extensive use of all real estate and social networking sites, including MLS & Realtor.com.
• 24/7 dedicated phone support and tour scheduling.
• Mobile office with Internet access, GPS, TV, DVD, satellite radio and leather captain chairs.
• Use of larger 24″x36″ FOR SALE signs for greater visibility.
• Online access to all Virginia Association of Realtor approved contract forms.
• Custom websites dedicated to showcasing your property.
• Utilize “old fashioned” print, radio and TV advertising when needed.
• We are designated Realtors. Realtors subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge related to buying and selling real estate.

How Effective are 1% Commission Agents?

Looking at the list of services that 1% commission agents offer above, it seems to me that at least officially, these 1% commission real estate agents offer all of the services that I would need in an agent if I were to ever sell my condo. They even offer full MLS listing, which is a key feature in today’s “online” real estate shopping market.

However, my worry in blindly using a 1% commission real estate agent to sell my condo lies in the unsaid importance of the “unofficial” services that real estate agents/brokers offer. In other words, I would be concerned about whether or not I’ll be forced to end up selling my home below market value if I don’t obtain these unofficial services.

In the town in which I live, most of the condos for sale that are equivalent to the one I’ll be looking to sell when I finish graduate school are being offered through Better Homes and Garden Realty, a normal full service 6% commission real estate brokerage.

Now, let’s say that I put my condo on the market using a 1% commission broker. It doesn’t take much stretch of the imagination to expect that a powerhouse like Better Home and Garden won’t be too thrilled about my 1% commission broker “stabbing the industry in the back” by charging 5X less than they are for the same services. Let’s now assume that Joe Smo, a new person in town, is looking to buy a condo in the range of the list price of my condo, but doesn’t know the area and just wants a place that will work, be safe, and is in his price range. Joe Smo, at the advice of a colleague, obtains the help of a 6% commission real estate agent to show him around.

Since there are SO many places on the market now with the economy the way it is, it again doesn’t take too much of a stretch of the imagination to envision that the agent helping Joe Smo could merely opt not to show Joe my place, in favor of helping the cause of his or her other 6% commission agent friends who are still being “true” to the real estate community. Sure, the agent would gladly show Joe my condo if he found it listed on MLS (a service included with 1% commission agents) and specifically requested to see it. But, this might not happen since Joe is new to the area.

In my opinion, it is highly likely that this unsaid, unofficial stuff takes place every day in the real estate business. And, being on the wrong side of it can be quite detrimental to obtaining a high resale value for your home.

In order to find a more definitive answer to this hypothesis, I performed an Internet search to try to find any studies that have been conducted on the effectiveness/performance of 1% commission real estate agents compared to “normally” priced ones. However, there were no studies to be found. So, we are unfortunately left with only speculation at this point (sigh).

Are 1% Commission Agents Common in Other Countries as well, or just the United States?

As I was analyzing the situation above, I began to think back on the days that I spent studying abroad in Spain in 2008. During the two months or so I was there, I lived with a family that owned the majority of the small apartment complex in which they lived. And, I began wondering whether or not people (such as mi familia en Espana) engaging in an overseas property investment (outside of the United States) encounter and have to deal with the same types of real estate agent commission issues that we do here.

In general, from what I found in looking around various online resources, 1% commission agents are definitely available for selection in other countries. For example, I found several 1% agents operating out of Canada – one in Toronto and one in Ontario. I also found a 1% commission agent operating out of Falls Church, New Zealand (I’d really like to visit NZ someday by the way!). In these countries, the “normal” rate for real estate agent commissions seemed to be somewhere between 5-8%, which seems to be about in-line with the US.

However, I read that in some instances in Europe (Spain, Bulgaria, and Cyprus), commissions paid to real estate agents can be as high as 25%! Wild stuff! I just hope that my family I lived with in Spain didn’t have to pay this much!

Conclusion

Drawing from the various findings of this post, several key takeaways present themselves to me.

First, while I have no doubt that a 1% commission agent can technically provide the same MLS listing and property promotion services that a 6% commission agent could, I think that the “real estate society” isn’t quite ready to part with 6% commissions, which will make it difficult for now at least to use a 1% commission agent. This is especially true in today’s “buyer’s market” where property prices are going down and down, yet the properties seem to be unable to be sold. I know this is definitely the case right now in my neighborhood.

Second, I do honestly believe that eventually, real estate agent commissions will trend down and that 1% commissions will become “accepted” in the community. This would be similar to the downward shift in stock trading commissions experienced in recent years with the advent of the deep discount brokerage. Related to this trend, I’d also be interested in keeping an eye out for any data analyses/studies that come out comparing the performance of 1% commission agents to “traditional” ones. I think that would really provide a necessary insight in to the current situation.

How about you all? Have you ever used a 1% commission real estate agent? If so, do you feel there were as effective as a traditionally-priced agent? If you’ve stayed away from 1% agents, what specifically were your concerns?

Share your experiences by commenting below!

How Checking Your Credit Report Can Stop Identity Theft

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post. Enjoy! 

Identity theft costs American consumers and businesses almost 50 billion Dollars annually. In 2009, more than 11 million people were victims of identity theft and lost an average of almost $5000 per person. This type of crime is growing at a rapid pace due to the sophistication of hacking groups and the ability of thieves to sell private information on the internet. As more personal information moves online with social media and technology like “the cloud”, identity theft may even become an even bigger problem. With regular monitoring of your financial data, it is possible to catch the theft in progress and stop it before serious damage is done. So, how can you spot it?

Checking Your Credit Report

Keeping close tabs on your credit report is important if you’re going to notice any activity that seems abnormal. Your credit report shows your entire credit history, and you should be able to spot anything fraudulent.

The best place to check all 3 of your credit reports (from the three biggest credit reporting agencies – Equifax, Transunion, or Experian) is Annualcreditreport.com. The Fair Credit Reporting Act (which was recently amended in 2010) allows all people to have free access to their credit information (report), one time per year. You can check all three reports free of charge and search for activity that looks suspicious. Your good credit score can be seriously damaged by fraudulent activity, so keeping a close watch on it is important. However, viewing your credit score is not included in the one time per year free credit report viewing.

How to Spot Identity Theft

Your credit report shows all open and closed credit accounts, all the way back to when you opened your first credit card or paid your first utility bill. If you see anything that you don’t recognize, it may be the result of identity theft. The FTC recommends that consumers check their credit at least once per year to make sure it doesn’t contain any fraudulent activity.

Other signs of identity theft may include:

– Phone calls or mail saying you have been approved for credit cards or loans that you did not apply for.
– Missing financial mail like bank or credit card statements.
– Bills and/or credit card charges for items you did not purchase.

What to Do if You Notice Fraud

If you do notice suspicious activity on your credit file, you can have a fraud alert placed on your report. This alert will help stop any unauthorized use of your credit. There are 2 types of fraud alerts, an “initial alert” and an “extended alert”.

An initial alert is put on your credit file for around 90 days. This is a step you might take if you believe your personal information may have been stolen and could be used fraudulently. If you know you are a victim of identity theft already, you may need to file an extended alert which will stay on your credit file for 7 years. This means that creditors must contact you before issuing any new credit in your name.

You will also need to close any accounts that were opened in your name. You can contact the fraud department of the company that issued the account and explain your situation. Keep a record of all correspondence with the company. It may be important to have proof of any agreements that you have made about your case.

You also may want to file a complaint with the FTC and the police. This can help law enforcement find the perpetrators of the theft and prevent any further illegal activity with your credit.

Credit Monitoring Services

Credit monitoring is a service which can be purchased through a credit bureau like Equifax, Transunion, or Experian. This service will alert you any time new accounts are opened or suspicious activity occurs on your credit file. This would include the application for new credit cards, loans or mortgages, or the opening of an account with a mobile phone provider. Some companies that provide credit monitoring will also insure you for losses that result from identity theft. The amount you will be covered for varies with each company and monitoring plan.

Conclusions

Identity theft is a serious problem that can be very expensive and time consuming to deal with. There are measures you can take before a theft happens to lessen the chance that you will be a victim. Regular monitoring of your credit report and financial information will help you notice illegal activity before it turns into something more serious.

How about you all? Have you ever been a victim of identity theft? If so, what steps did you take to correct it? Have you ever noticed any unauthorized charges on your credit cards? 


What steps do you take to protect yourself from identity theft? How often do you check your credit report?  


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

• Personally, I’ve been lucky enough to not have been a victim of identity theft so far in life. As far as bad luck goes, I think having your identity stolen would be one of the worst things that could happen since it can affect your purchasing and borrowing ability as well as your credibility as a person for years to come.
• How I protect myself from identity theft
• There are several steps I take to stop identity theft from happening to me, the majority of which are covered in a previous post I wrote which can be assessed at the following link – How To Protect Yourself Against Identity Theft. 
• The main steps I take include the following – 1) place a free 3 month fraud alert on my credit report at all three of the main credit agencies (this must be renewed every 3 months), 2) monitor my credit report once a year using the free site mentioned above in this post, and 3) reduce the amount of junk mail I get by “opting out” of these lists at a site called Opt Out Pre-Screen (reducing the amount of junk mail decreases the amount of documents floating around the trash and mail system with my personal details on it).
• Several additional steps that have been added to my “identity theft prevention regimen” lately are to never click links in scam emails and always make sure I see that an Internet website is secured before entering my payment details.
• @ Does insurance cover identity theft?
• As I was reading this post, I began to think that it would be nice (since identity theft is becoming more and more common these days) for some type of insurance policy an individual would already be carrying would protect him or her against damages done by identity theft. 
• According to the Insurance Information Institute (III), insurance companies are now offering identity theft coverage either as add-ons to home insurance policies or as separate policies. 
• As mentioned above, another increasingly popular service that provides identity theft coverage is credit monitoring services.
• So, since identity theft coverage is not currently included in regular insurance, the question becomes whether or not this type of coverage is worth the extra $25-$50 per year. 
• An investigation in to answering this question would be a good topic for a future post. However, my instinct tells me that it probably is not worth the money for the current risk level. Additionally, much of the service offered by credit monitoring agencies can actually be performed by you manually using the steps described above (setting up fraud alerts, etc). 
• But, we may see this changing in the coming years as identity theft becomes more prevalent.
• @ How identity theft happens –
• One of my more computer-savvy friends recently told me, much to my surprise, that the majority of identity theft incidents happen simply by random occurrence rather than specifically targeting a certain individual. 
• What he said would happen is that a hacker runs a computer script that scans through millions of account numbers, applying number and letter codes in order to discover a person’s password. If a password is “cracked,” it is more the result of random chance than targeting a specific person for personal reasons.
• Furthermore, he told that the majority of identity theft incidents occur through non-technological means. What he meant by this was that more identity theft cases occur simply by someone eaves-dropping on a nearby conversation when a person mentions his or her Social Security number out loud or when someone finds credit card information written on a piece of paper in the trash than when someone uses high-tech computer software to hack an account.
• I found this interesting!
• @ How often you should check your credit report for fraud – 
• Because identity theft seems to be turning in to a more significant problem, it begs the question of whether or not checking your credit report once per year (the free route) is sufficient.
• In thinking about this, my thought is that checking your credit score twice per year is probably both a reasonable and safer plan.
• @ I wonder what percentage of identity thieves are actually caught or apprehended?
• When I had finished reading through this article, I felt slightly disheartened because it seems to me that identity theft is almost too easy for fraudsters to get away with. 
• After all, if you are a victim of identity theft, it’s not like you can report it to the local police to look in to since the person who took your identity could be in a different country or state. So, just who goes after these people?! And furthermore, how do they prioritize which cases to investigate?
• Because of this, I was curious to find out what percentage of identity thieves are actually caught.
• According to a study I found on Privacy Rights.org, only about 1 in 700 identity thieves are caught. This is truly amazing! That’s a 0.14% chance!
• Just as a point of reference, the probability that you will become a victim of identity theft is 1 in 200. Wild stuff!

***Photo courtesy of http://farm3.static.flickr.com/2285/1594411528_1512b1aad5.jpg

Was The “Lost Decade” Really Lost For Investors?

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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This following is a member post by me that was posted on Yakezie.com back in June of this year. I wanted to post it here as well so that you all would have a copy. Enjoy!

A topic that is commonly discussed these days in the personal finance community is something called, “The Lost Decade.” In fact, while I was recently reading several financial magazines, I found out that many would-be experts would have us believe that the past 10 years were completely useless for investors. Quite a bold statement if you ask me!

After reading these statements, I began to wonder, “What facts do the actual numbers dictate to us?” This analysis will be the topic of today’s post.

What Is The Lost Decade?

For those of you unfamiliar with the phrase, “The Lost Decade,” it basically is referring to the fact that during the past ten years, the stock market has fluctuated up and down, but has only gone up 0.48% overall from start to finish. This performance can be seen from the Google Finance screenshot of the S&P 500 index below.

Now, I’m definitely not going to argue that a 0.48% return spread over 10 years is good. Quite the opposite, actually. Earning a 0.48% return is ridiculous! If an investor was to just earn this return, it would be quite accurate to call the 10 year period, The Lost Decade. After all, you could have earned more by merely investing in an online bank savings account!

However, my disagreement with this phrase/name stems from my belief that it does not capture the actual way that the majority of individual investors save (or should save) for retirement.

How Do The Majority of People Save For Retirement?

OK, so if I’m not quite ready to jump to labeling the past decade as “The Lost Decade” because it doesn’t capture the way that most investors save money, just how do I believe people go about tackling the beast we know as “investing?”

In my opinion, when it comes to squirreling away the money that matters for retirement, most people invest using dollar cost averaging (or something similar). This strategy involves investing a specific amount of money (or specific % of your income) each month. By doing this, an investor can accumulate shares of the investment he or she specifies at varying price levels, with more shares being purchased during stock market declines and fewer shares being purchased at higher prices.

Because dollar cost averaging results in ownership of shares purchased at many different price levels, further analysis is required before we place a label on the past decade.

Dollar Cost Averaging Analysis of Two Portfolios

After several iterations of trying to decide on the most effective way to demonstrate this, I decided on two hypothetical portfolios – a basic portfolio and an expanded portfolio.

Both portfolios have the following shared characteristics:

• Examine the total return and investment risk (standard deviation) of a $10,000 initial and $500 monthly follow-on investments from June, 2001 to June, 2011.
• Employ an overall asset allocation of 25% fixed income investments and 75% equity investments.
• Assume monthly rebalancing to maintain these asset allocation targets.
• Naturally, passive investing is used because it has been show to outperform individual stock selection on a long-term basis.
• For simplicity, an analysis of the effect of trading commissions, taxes, expense ratios, and inflation is not included.

However, the two portfolios diverge in regards to the specific mix of investments used to achieve the 75%/25% overall asset allocation split.

The basic portfolio invests only in two assets – 1-year Treasury Bills (T-bills) for the fixed income portion of the portfolio and an S&P500 index fund for the equity piece.

The expanded portfolio uses the exact same index mutual fund asset class selection as I do currently, as shown in the list below. All investments are assumed to be Vanguard index mutual funds, except for the T-bills portion.

Note: All Vanguard mutual fund historical price data was downloaded from Yahoo Finance for the analysis.

This asset class mix/investing strategy was the result of multiple books about Modern Portfolio Theory, including A Random Walk Down Wall Street by Burt Malkiel, Stocks for the Long Run by Jeremy Siegel, and What Wall Street Doesn’t Want You to Know by Larry Swedroe.

1. % Cash (T-bills Target 5%)
2. % Non-Inflation Protected Bond Funds (Target 15%)
3. % TIPS Bonds – (Target 5%)
4. % International Equity (Target 11%)
5. % International Emerging Markets (Target 11%)
6. % Domestic Large Cap (Target 8%)
7. % Domestic Small Cap (Target 8%)
8. % Domestic Small Cap Value (Target 14%)
9. % Domestic Large Cap Value (Target 13%)
10.% REIT (Real Estate Investment Trust – Target 10%)

As you can see in the list above, instead of just having one equity or fixed income asset class (like T-bills or the S&P 500), there are MANY! In addition, we have also added both international and emerging market index funds in to the mix.

I hypothesized that since these different asset have a correlation that does not equal 1, the expanded portfolio would offer a higher return for a given level of risk, consistent with the Efficient Frontier hypothesis/phenomena.

Results

“So, enough talk, Jacob, what did you find out as your results?!”

The complete results of my analysis can be reviewed and downloaded at the shared Google Docs spreadsheet below. Enjoy!

Google Docs Spreadsheet – Was The Lost Decade Really Lost For Investors? – Analysis

However, a summary of my findings can be found in the table below.

The results of the basic portfolio with the application of dollar cost averaging were somewhat disappointing, with a total return over the past ten years of only 12%. However, this is still definitely better than a 0.48% overall return! During the ten years, we saw that by using this investing strategy, your money would have grown to a current value of ~$79,000.

The results of the expanded portfolio were surprisingly much better. I guess I always have read that this asset allocation stuff works, but have never done this in-depth of an analysis to determine just HOW effective it is!

A total return of 55% was realized over the 10 years. While this is not the 10% yearly average return that the stock market has provided since the 1800’s, it is a 351% increase in return compared to the basic portfolio. Quite amazing! The ending value of the portfolio was almost $30,000 higher than the basic strategy.

It is important to realize that the expanded portfolio value standard deviation did increase by 50%, so it was not completely a free lunch. The increased standard deviation was most likely contributed by the small cap, small cap value, and emerging market funds, as these are generally regarded as higher risk investments.

Conclusions

Now that the dust has settled (or maybe a more accurate saying would be that the spreadsheet electrons have settled) from this analysis, let’s take a step back and see what sort of conclusions we can draw. Several of the key ones I could think of are listed below:

• Even though the past ten years were not the best for investors, I don’t think I would consider them to be “lost” and completely useless to our wealth building goals. However, I suppose this depends on your required rate of return.
• The application of periodic investments using dollar cost averaging can produce higher overall returns than just investing one lump sum because it enables you to purchase lower-priced shares.
• Passive investing works. I would recommend using it! 🙂
• The addition of different asset classes (small-cap, large cap, value, international, etc) to a portfolio is beneficial for returns and risk management. However, it isn’t absolutely necessary, unless you are someone who enjoys managing your own money (as I do). If you like to keep things simple, merely having 2 index mutual funds will most likely provide adequate exposure.

How about you all? How did your investments perform over the past decade? Was it actually a “lost decade” for you?

Budgeting for Your Holiday? Don’t Forget Travel Insurance

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post. Enjoy!

How about you all? Do you generally purchase travel insurance when you go on trips, purchase rental cars, book hotel rooms, or book plane tickets? Do you feel travel insurance is worth the cost?


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

• @ How I plan/save for vacations – 
• At the beginning of the article above, it is mentioned that accumulating the funds needed for the “perfect” vacation can be quite difficult. Indeed, I agree that this is definitely an accurate statement. 
• However, I feel that there is a solution for saving for vacations that makes the grim prospect a little easier. What’s the solution, you’re probably asking? It’s called automatic transfers.
• For many years before setting up my Purpose Focused Financial Plan, I wanted to save for vacations. However, when the end of each month came, it seemed like all of my money had been exhausted. In this way, I never made any progress saving for a vacation. 
• The best way I’ve found to remedy this procrastination and ineffective-saving habit was to set up an automatic transfer once per month (at the beginning of the month though) from my checking account to my life values and dreams savings account with a pre-determined amount. This pre-determined amount is specifically earmarked for enabling me to fulfill a vacation determined from my yearly financial review of my life values and dreams. 
• @ Whether or not travel insurance is needed? Is it a good idea at all?
• First off, I just want mention that I think the advice given in this article is pretty accurate for how to proceed ONCE you know for sure that travel insurance is right for you.
• However, I feel that determining WHETHER OR NOT travel insurance is right for you is an entirely different discussion. 
• In short, in my opinion, I don’t feel that travel insurance is worth the money one bit for most normal individuals and families. Here’s why….
• Similar to the way rental car insurance companies try to push rental car insurance policies because they are wildly profitable since claims rarely need to be made, most purchased travel insurance policies will never be touched. 
• And, when claims are filed, I’m willing to bet that it was completely unnecessary because the traveler was already covered in some form or fashion by either their own health insurance or credit card insurance policies (if credit cards were used for the purchase).
• So, yeah, it would be “ideal” to have travel insurance. But, in tough economic times especially, you have to think about what you REALLY NEED.   
• So, now that I’ve gotten that out of the way, I do feel that travel insurance has its certain place or niche in the “travel economy.” 
• I feel that travel insurance is a good thing to have whenever an employee is traveling on company business. 
• At many companies, the employer is actually liable for an employee’s well-being and health when they are “on the company clock.” And, having a relatively inexpensive travel insurance policy is, in my opinion, a wise idea in order for all parties to know how damages will be paid if any accidents or damage is done by the employee to rental cars, etc during a trip. 
• This ensures that there is not the tension between the employer and employee about deciding who is “liable.” Instead, the situation is already paid for, and the employer-employee relationship can continue on a little smoother.

***Photo courtesy of http://images.cdn.fotopedia.com/flickr-2597316650-hd.jpg