Zecco.com Investing Brokerage Review

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Zecco.com and I have a pretty long history. I joined Zecco back when it had just started in the 2006-2007 time frame. This was when I was just beginning to learn about investing and trading stocks (I have since changed my investing strategy to a passive investing approach, investing only in index mutual funds. But, that is another story!). 


Zecco blasted on to the market with quite a revolutionary concept – commission free stock trading. Naturally, this was the reason that I (like many others) joined! It was hard to believe at that time that a brokerage could be offering commission free stock trading.


Of course, this was back during the “21st Century glory days” of investing, when the market was going higher and higher and brokers were competing desperately for your money. Since that time, Zecco (like everything) has gradually tightened up and increased their commissions to a level that is less enticing than it once was. However, they are still in my mind, one of the better and cheapest discount brokerages around. 


Let’s explore some of the details of this “player” in the investing world to determine if it’s right for you. 

Account and Investment Options

Through all of the years I have used Zecco, I have just had one account – an individual, taxable, stock trading account.

Having said that, Zecco isn’t without options. Zecco.com has gradually expanded their offerings, and they now feature the following types of investing accounts and investment options:

Account Options:

• Individual and joint taxable investment accounts
• Traditional, Rollover (from 401k), and Roth IRAs
• Just be careful, a $30 per year IRA maintenance fee applies to IRA accounts.

Fees, Account Minimums, and Commissions

With the exception of offering Forex trading, Zecco (thus far) seems pretty much like your standard online brokerage investment firm, offering the typical account types and investment vehicles. However, as is normally the case in today’s environment where firms are competing fiercely for your business by offering lower fees and better account terms, an inspection of the fee schedule is a key step in determining whether Zecco is a suitable match for you.

As such, the details of Zecco’s fee, commissions, and account minimums can be seen in the table at the following link – fees, commissions, and account minimums. A summary of the key points can be seen below.

Account Minimums

• This is one of the strong points of Zecco (especially when compared to the $500 account minimum of its closest competitor, which in my mind is Sogotrade), as there are NO account minimums (except for minimums imposed by specific mutual funds that you decide to purchase) and no inactivity fees.

Fees & Commissions

• The commission for buying and selling stocks and ETFs is pretty straightforward, as it costs only $4.95 per trade.
• For options, Zecco’s fee is the $4.95 from above + a fee of $0.65 per options contract.
• For mutual funds traded online, the commission is $10 per trade. However, for broker assisted trades, this fees is almost doubled at $19.99.
• For bonds/CDs, the commission is $4.50 per transaction, with a $22.50 minimum.

Online Account User Experience

Overall, the online investor/user interface offers the essential information you need to invest and manage your money, but does not feature any of the “bells and whistles” that you might find with other brokerages.


For example, if you are looking for automatically generated performance charts, pretty asset allocation pie-charts, etc, then you probably will want to look someplace else!


Shown below is a screenshot of the “Account Overview” screen that pops up when you first log in to your account. As you can see, it is a fairly simple and straightforward interface, with not a lot of distraction. Displayed on this page are the start of day and real time cash balance, market value, total equity, maintained excess (if investing in options), and total remaining account buying power values. 

From the main screen, you can then click “Positions” on the left sidebar, and you will be taken to a list of your purchased assets. An example screenshot is shown below.

As you can see from the screenshot above, you are given the typical information about your ETF and individual stock holdings, including last price, intraday change, share quantity, total profit/loss since you first purchased the shares, and the current market value.

Summary / What’s the Bottom Line?

We’ve gone in to a lot of detail in today’s review of Zecco. So, let’s just do a quick recap.

Overall, Zecco offers the various tax-deferred and individual account options that one would expect from a popular brokerage firm (stocks, ETFs, and mutual funds). However, the addition of Forex trading is somewhat unique. If you are looking to do Forex trading, you may want to look in to Zecco. 

Zecco’s commissions/fees on buying and selling individual stocks, ETFs, and mutual funds, are pretty competitive compared to the other online discount brokerages on the market today, especially since they do not have a required account minimum. However, they are definitely not the cheapest! 


For example, Sogotrade.com offers $3 commission stock/ETF trading. Sogotrade does require a $500 account minimum to open an account. But, if you are looking to invest large amounts of money, you will spend less in commissions in the long run if you choose Sogotrade.

Another “con” of Zecco is their $30 per year IRA maintenance fee. Because of this (and the fact that Zecco charges a $10 commission per mutual fund trade), I would avoid Zecco for retirement investing. Instead, I would open up an account with Vanguard of Fidelity and simply invest in their proprietary, lower-cost mutual funds or ETFs (which one can do with no trading fees incurred and no account maintenance fee).



So, use Zecco if you have less than $500 to invest in a taxable stocks/ETF account, but look elsewhere if you have more than $500 or are looking to open up an IRA. 


How about you all? Have you used Zecco.com before? If so, what type of trading did you use it for? Were you satisfied with your experience? 


Share your experiences by commenting below!

***Photo courtesy of zecco.com

Yakezie Carnival – Examples of Selflessly Helping Others Throughout History – September 25th, 2011 Edition

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Welcome everyone to the September 25th, 2011 edition of the Yakezie Carnival!


About This Carnival

For those of you unfamiliar with the Yakezie Personal Finance Blog Network, it is the web’s largest, most involved, and most organized group of personal finance and lifestyle bloggers. Participants in the network collaborate multiple times throughout each day on the Yakezie forums and through other mediums. You can view all of the details at the “About Yakezie” page by clicking here.

Each week, the members and challengers of the Yakezie Network submit their best articles to be featured in the Yakezie Carnival. And, today, it is My Personal Finance Journey’s honor to be the host! We last hosted the carnival at the beginning of the summer on June 26th prior to the launch of the Tour de Personal Finance and had a great time!

Jacob’s Deep Yakezie Reflections of the Day – Yakezie Changed My Blogging Life?


In January of 2010, I started My Personal Finance Journey. I “blogged in a cave” for about 6 months without reaching out to any other bloggers, which I found out later was a big mistake. However, I guess this time wasn’t totally lost since I generated almost 200 posts during this time, some of which still get read quite a bit (long chain approach of blogging if you read that post on ProBlogger). 


On July 10th, 2010, I joined the Yakezie Challenge without totally understanding or appreciating what it was (shhh..don’t tell Sam haha). At this point, I didn’t really know what I was doing blogging at all. I didn’t understand the etiquette (I would leave comments such as, “Nice article – check out my related post at this URL.” Blogs probably thought I was spam!), the business, or the communication of blogging. In fact, about 5 months dwindled by before I actually did anything with Yakezie. 


However, in December of 2010, this all changed; I started being very active on the Yakezie Forums and trying to help others in the Network wherever possible. And, I can say with certainty now that I would not be the same today were it not for Yakezie. 


Today’s Carnival Theme


OK, enough with the sentiment, Jacob. What about that carnival? You got it. 


Since the slogan of Yakezie is “to selflessly help others,” I figured it would be interesting to dig up some examples throughout history where people have selflessly helped others, not only in business but, in all walks of life. It’s so interesting to see time and time again that by simply helping others, you actually end up helping yourself in the process. So, enjoy!


To get us started, listed below are this week’s Top 3 Editor’s Picks. Typically, when I host a carnival, it is quite clear what the three winning articles are. However, I find that when I’ve hosted Yakezie Carnivals, the quality of the articles is so high that I often find myself torn between about 8 articles competing for the top spots. 


1. Wealth Informatics: How much emergency fund do I really need? – The amount of emergency fund recommended varies from $1000 to 1 year salary. How much do we really need?

A amazingly good post here from Suba, the resource-post master. I typically recommend simply keeping 6-9 months of expenses in an emergency fund. When I ran the 9 months of expenses figure for Suba’s situation described in this post, I came out with around $12,000 for her target emergency fund balance, which is in the ballpark of what she figured as well with the exception one personal expense item.

So, I think the 6-9 months recommendation is a good way to “keep things simple” and get people started towards an emergency fund goal. However, once they accumulate that savings, it’d be good to go through this list that Suba provides to obtain further visibility and optimization.

2.  Smart Family Finance: Are You Ready to be Your 20-Something’s Financial Advisor? – 7 percent of 20-somethings consult a professional financial advisor, but one in three consult their parents. Are you ready to be your 20-Something’s unofficial financial advisor?

In today’s society, not only are young adults coming back home to live with Mom and Dad, but it is also becoming a trend to use them as their sole source of financial advice. In this post, Smart Family Finance gives a list of the gamut of financial areas on which young adults are seeking advice from their parents.  I have definitely consulted my parents on almost all of the things on this list. However, I always investigate the advice given further to make sure I am taking the right path. So, my overall advice here is that young people blindly taking their parents’ suggestions could get them in to trouble.

3. KNS Financial: A Lawyer Is Forced To Become A Stripper To Make Ends Meet: How Far Would You Go? – A lawyer turned stripper, gives us a picture of what financial desperation really looks like. How far would you go to make ends meet? What would be your first move?

Very good post KNS! In some ways, this reminds me of the “what would you do if you were homeless” Yakezie blog swap we did a while back. In that, people shared just what they would do if hard times were forced upon them. If I was laid off from a “professional” job and couldn’t find another due to the economy, I would try to target jobs that are fairly high paying but don’t require advanced degrees. Some of these include being an airport valet (make lots of money in tips) or Porta-Potty cleaner.

And, listed below are the best of the rest! The selected entries are formatted as follows – 1) Blog title in bold, 2) Post title and link, and 3) a description written by the site owner about the post.

Frugal Confessions: Smart Stores: Consumer Monitoring in Exchange for Your Information – Retailers and manufacturers have developed some pretty crafty ways to monitor and target consumers over the years, like the example above. And people who hunt down deals (frugal people like us) appear to be the ones who are most monitored given the nature of how this technology works.

My Journey to Millions: How Much Will Your Expenses Be in Retirement? – In retirement planning, you don’t need 50%, 60%, 70%, 80%, 90% or 100% of your pre-retirement income. During retirement, you need the amount that your budget dictates.

Prairie Eco Thrifter: Is Going Green Killing Our Economy? – While the environmental movement is not the sole cause of a shift in the patterns of our everyday lives, it does contribute. The demand to protect the environment certainly has placed a strain on the economy. In a time like this, it makes one wonder whether it is really worth it.

Live Real, Now: Time vs. Money – My time is valuable. No matter what I do, or how hard I work, I can never get more than my allotment. Why would I waste it to save a fraction of what I can earn by using it in other ways?

Mainstream Mom: Is Extreme Couponing Right for You? – I get that you can save an incredible amount on groceries, and that is fantastic. I save an incredible amount too, I just don’t stockpile it in my garage.

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Selflessly Helping Others – Example 1 – Help Others and You Will Be Helped in Return

Source – http://www.helpothers.org/story.php?sid=21057
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Living in Financial Excellence: 7 Good Character Traits of a Cheapskate – “Cheapskate” is such a negative term in today’s society, but when you look at the definition and characteristics of being a cheapskate, it’s actually a good thing (at least in my eyes). Today, I discuss what qualities define cheapskates and how those qualities set cheapskates up for long-term success.

Invest It Wisely: The Biggest Unknown Risk of Stock Investing – “We say that stocks are risky because we know that prices can suddenly drop hard — stock prices are volatile. But, we also believe that stocks are not really all that risky for those committed to holding them for the long term. In the long term, stocks always provide good returns. By following a Buy-and-Hold strategy, we can overcome the riskiness of stocks.” Personally, I don’t think it is so. I view this as dangerous thinking.

Control Your Cash: Follow these steps for guaranteed wealth, seriously – As a discipline, personal finance is similar to sociology and women’s studies in that there’s almost no hands-on knowledge involved.

Maximizing Money: Why I Finally Closed My Chase Bank Checking Account – After years as a happy customer, I closed my Chase Bank checking account, even though I would have rather kept it open. This is the story of my experience as a Chase customer.

My University Money: The Government Can’t Actually Create Jobs – The government has tons of problems, but their solutions usually add to them.

Investor Junkie: What Do Netflix and Taxes Have in Common? – Now you might be wondering what does taxes have to do with Netflix? Everything! This is a classic example of elastic demand

Free Money Wisdom: Tips for Borrowing from a Family Member–Family Personal Loans – Utilize the information in this article to decide if taking out a family loan makes sense for your situation and what you can do to ensure that you manage yourself in a manner that will equate to a situation that is comfortable for all participating parties.

Mom’s Plans: How We Plan to Tackle Our Debt – We would like to have a significant chunk to put down on a house in a few years, and I don’t want to purchase a house if we have other debt. Here is our plan for paying down our current debt quickly.

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Selflessly Helping Others – Example 2 – Urban Legend About Winston Churchill in a Virtuous Cycle of Giving and Receiving 

“Fleming was a poor Scottish farmer. One day at work in a field he heard a cry for help. Following the sound, Fleming came to a deep bog, in which a boy was stuck up to his chest, screaming and sinking. Farmer Fleming tied a rope around his own waist and the other end to a tree, and waded into the bog. After a mighty struggle in which it seemed they would both perish, the exhausted farmer pulled himself and the boy to safety. He took the lad back to the farmhouse, where Mrs Fleming fed him, dried his clothes, and when satisfied he had recovered, sent him on his way home.

Source – http://www.businessballs.com/stories.htm
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The Frugal Toad: College Students and Identity Theft – College students made up roughly 25% of all victims of identity theft last year.  Find out how to lower your risk of Identity Theft by using these six strategies.

Narrow Bridge Finance: Home Buyer’s Guide Part II: From Offer to Contract – A continued look at the process of buying a home. This article focuses on the steps for making an offer and going under contract.

The Happy Homeowner: Why I’m Taking a Vacation Instead of Paying Down My Debt – If my financial journey were compared to a hand of Texas Hold’em, I have seen Dave Ramsey’s gazelle-like intensity–and raised it by a few hundred Suze Orman “DENIED!’s.”  This article highlights why it’s important to infuse balance in your financial journey.

The Penny Hoarder: 5 Weird Ways to Make Money Recycling – Collecting cans for the recycling center is not the only way to make a buck with your recyclables. Check out these 5 new, very weird ways to make extra money recycling…

Everything Finance: Money and Relationships: What’s the Root of Your Problem? – You’ve probably heard plenty about how money problems and relationship problems often go hand in hand. You’ve seen the statistics, and read about the reality of financial and budget problems and their impact on relationships.

Money Reasons: How I Saved $1190 By Purchasing A Cable Modem– In this article, I describe how sometimes, savings creep up on you.  My cable modem purchase over 11 years ago is one such example!  If you still rent a cable modem, check out my article and see why I decided to buy my cable modem instead.

Stock Market Basics: Best Gold ETF – Invest in gold via the gold ETF, as it is the easy way to invest in gold without the troubles of buying and selling gold in physical form. Plus, gold investment is a must in your portfolio given the state of economy.

20’s Finances: Is it Hard to Time the Market in a Recession? – Offering advice on the best time to invest in the stock market.

Investorz’ Blog: What to Consider When Investing in Commodities –Most investors don’t invest in commodities for one reason or another. But, using the right techniques, trading commodities can be far more profitable than stocks. Here are a few things you should know before investing in commodities, which is a much different world than stocks.

Buck Inspire: Las Vegas Ground Transportation, Mortgage Options – Knowing your ground transportation options will make your travel plans run smoother.  But, knowing all your mortgage options will help you make the most informed, biggest financial decision of your life!

Squirrelers: Save Time and Money by Hiring the Right Home Improvement Contractor – When getting work done on your home, it’s important to hire the right people for the job. This post provides tips on how to go about doing just that.

Krantcents: Am I Training for a Race? – I am in training physically, mentally, and progressing to my goals.

Saving Money Today: Investing in Gold – With gold prices soaring and more investors looking to add some to their asset mix, it’s important to learn the different ways to invest in gold.

Compounding Returns: Trading Options? Keep an Eye on Expenses. – Options for low cost trading. Expenses can cut into your profits. It’s in your best interest to find the lowest fee brokerage.

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Selflessly Helping Others – Example 3 – Want Someone to Save Your Life? Save Theirs First!

In 1996, Kevin Stephan of Lancaster, N.Y. was serving as a bat boy for his brother’s baseball team when someone accidentally hit him in the chest with a bat. This collision caused his heart to stop beating. However, Penny Brown, an off-duty nurse, was in the stands and performed CPR on Kevin to revive him. Kevin recovered from this incident.


Ten years later, Penny Brown was eating in a restaurant and choked on her food. Coincidentally, Kevin worked as a cook at this very same restaurant and had learned CPR during training as a volunteer fire fighter. Thankfully, Kevin performed the Heimlich maneuver and saved Penny’s life.


Fate sure works in mysterious ways eh?!

MSNBC has the complete story here – http://www.msnbc.msn.com/id/11190559/ns/us_news-weird_news/t/teen-saves-life-woman-who-saved-him/
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Fat Guy, Skinny Wallet: Why I Chose Not To Use Debt Consolidation – Debt consolidation was not the right choice for me many years ago. Find out the details that made me turn away from this seemingly helpful service.

TotallyMoney: How to deal with bringing debt into a relationship – Can debt and relationships work?

Smart On Money: How To Deal With Regular Bills When You Have An Irregular Income – When your income doesn’t come in 24 equal payments spaced evenly throughout the year, it can be hard to make a budget.

Money Q&A: Should You Pay Off The Lowest Balance Or Highest Interest Rate Debts First? – There are several opinions as to which method of paying off credit card and other debt is best. Should you pay off the debts with the highest interest rate first? Or, should you tackle debts with the lowest balances first?

How To Save Money: US Bank Account Comparison For Canadians – A thorough side-by-side comparison of all US dollar checking and savings accounts that are currently offered by the major Canadian banks.

Free From Broke:  Budgeting for Christmas Shopping Before it’s too Late – Start budgeting for Christmas shopping now before it’s too late! Otherwise, you can be stuck in debt. Read this article for tips on how to budget your Christmas shopping.

BeatingTheIndex:The Bet On Rising World Energy Consumption – World energy consumption is rising sharply in the next 2 decades which makes a compelling case for investing in the energy sector.

Broke Professionals: Moving up the career ladder – Have you ever wondered why Johnny Jerk down the hall was promoted to that director slot while you were passed over? Here are profiles of three managers with whom I once worked.

The College Investor: Best 401k Moves – A look at the best moves you can make to maximize your 401k!

My Multiple Incomes: The Ultimate Guide to Social Media Backlinks – A look at the social media options out there and how to use them to create backlinks to your website.

Not Made of Money: Don’t Let Money Errors Derail Your Finances – Everyone makes mistakes: bank tellers, store clerks, and us. I’m never put out when someone makes an honest error. I simply point out the problem and ask them to correct it. If I’m not looking for them, though, those errors can cost a lot of money.

Family Money Values: Why We Have Official Family Meetings – In the years following 9/11, I realized that life is so fragile – it really sank in that we could die suddenly, at any time. The boys had grown up by then and had moved out, but I started thinking about what would happen to them if we did die suddenly and together. That is when I started sharing information about our finances and estate plans with them.  We do so in family meetings and so can you.

One Cent At A Time: What Makes You Feel Rich And Wealthy? – Why do you want to be rich? To have more fun, respect, social status, and a worry free life? I have an answer for you – you don’t need huge amounts of money to achieve all these great things in life.

Our Journey To Zero: Save Your Budget, Spice up Your Life – Reuse That Halloween Costume! – Tired of spending your hard earned money on a new Halloween costume every year?  Here’s some ways to get some extra mileage out of your ghoulish get ups!

Financial Success for Young Adults:Would QE3 Make Stock Prices Go Up? – The speculation surrounding a third round of quantitative easing has investors concerned and maybe a little excited that their retirement accounts will get a boost. Let’s see what would happen if QE3 began.

Well, that wraps up this week’s Yakezie Carnival! Thanks so much for everyone for participating. Next week’s carnival will be hosted by Family Money Values Blog. Get your posts in soon!

Thanks for reading,

Jacob

***Photo courtesy of http://farm1.static.flickr.com/192/471143582_e8b3a758d9.jpg

Are You REALLY Doing Everything You Can to Save for the Future?

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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.

Times are tough. But, are they really? Think about everything you know about the Great Depression of the 1930s. Try and recall the photographs of the era that were plastered in virtually every history book you’ve ever seen. Skin-and-bones unfortunates lined the block to get a bowl of soup. Barefoot families hopped the rails in hopes of finding a better life elsewhere. Back then, if your neighbor had a radio you could listen to through the walls on a quiet winter’s night, you were the luckiest guy on the block besides your neighbor.

Putting Today’s Recession Economy in to Perspective

Relative to the rest of history, and especially within the history of this country, that wasn’t very long ago. Yet today’s “tough times” are very different from those of the 1930’s. You might be facing foreclosure, but let me ask you something: how much do you have today that a struggling family didn’t have during the Great Depression? How much of that can you let go of, if times are really that tough?

For a majority of Americans, audacious adjustments in their standard of living are not being undertaken to better preserve a solid financial future. For example, how many families with sub-par income have expensive monthly mobile phone contracts? Loads! Even reducing down to prepaid phones is leaps and bounds compared to the sacrifices previous generations had to make when it came to limited communications. But, it could save families countless sums if they severely restricted or even eliminated their mobile phone usage.

What about food? Americans are notorious eaters, and little has changed in terms of what’s on our plate since the start of the Great Recession. It’s not so much what’s on the plate but how much is on it, that determines whether a family is effectively limiting themselves in order to squirrel away enough for the future. Nobody is suggesting families reduce themselves to the rations of the third world, but honestly, no one needs that second helping in this country, and smaller portions can easily equal to larger savings over time.

Conclusion

Families need to seriously stop and think about what they take for granted. We all want to be up-to-date on the latest technology, enjoy the best entertainment, and indulge in the comfort foods of choice. But, what’s the point if it impedes on the security of the future? There was once a time when tough times meant tough life. Maybe the reason we’ve yet to recover from this economic mess is that we’ve failed to live as tough as we ought to.

How about you all? Has your standard of living changed at all since the start of the recession in 2008-2009 (I know that mine hasn’t)? Do you feel you’re saving as much as you should be? 


Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/danielvoyager/3893900302/sizes/l/in/photostream/

Guide to Managing Your Savings and Investments in the Internet Age

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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 find that the new technology and resources on the Internet have made it simpler or harder to manage your investments and savings accounts? What online trading or banking platforms do you find are the easiest to use? 


Do you think that it’s almost too easy to monitor bank and investing balances these days?


Share your experiences by commenting below!

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

• @ The benefits and pitfalls of Internet banking and investing technology – Personally, I think that having all of the investing/banking technology and resources on the Internet are both a blessing and a huge problem all at the same time.
• It is a blessing because you have all of the data that investing “professionals” have only a click or keyboard stroke away. Investing online is also easier because you can make all of your transactions personally, without the need to call up and pay a stock or mutual fund broker.
• Additionally, Internet banking has facilitated the competition between banks across the country, helping to drive down fees/costs and increase savings rates. No longer is a person in Fayetteville, Arkansas restricted to only choosing Bank of Fayetteville and Arvest. Now, he or she can open up a high yield savings account online at most any bank in the country, including several banks that reduce costs by only having an online presence. 
• On top of this benefit, online banking also makes record keeping of transactions VERY easy. No more balancing your checkbook like my Mom used to do!
• However, having all of this information and technology online is a huge problem, in my opinion, because it facilitates increased access and viewing of personal banking and investing account balances/holdings.
• While this in of itself is not a bad thing, the problem is that in a recession or weak market, having  so much access to your account positions only INCREASES the chance that an investor will overreact and sell holdings at the exact time that he or she should be holding or even buying more shares!
• Just think about it! If your retirement balance is going down each day, logging in and seeing that you lost $10,000 overnight is NOT going to be good for your psychology! 
• Personally, I feel it is better to only try to check your accounts once a month at least and employ a passive investing strategy.
• @ The idea of savings accounts needing more effort and attention than investments – 
• Personally, I don’t agree with this assessment.
• I spend maybe a whole 5 min per month checking and tending to my various dream and life values savings accounts. I have automatic transfers set up to move money from my checking account, and basically, the only time I look at my savings accounts is to check the balances for my monthly net worth and portfolio assessment.  
• @ The idea that during a recession, one should simply leave their money with an actively managed mutual fund to await recovery –
• I don’t agree with this assessment either.
• First, I don’t agree with this assessment because 70% of actively managed mutual funds fail to beat market indices. Therefore, I promote index mutual funds as the more sensible choice.
• Second, while I do feel that it is prudent to avoid panicking and withdrawing money from your index mutual fund during a market downturn, blindly holding your money in the fund awaiting recovery is a foolish financial move. 
• In my opinion, the safer option is to rebalance your portfolio frequently. What this means is that during a recession, money held in fixed income assets would be moved over to buy more shares of equity in order to maintain the same asset allocation.
• @ The idea of “rate chasing” – moving your money from bank to bank trying to find the highest rate –
• Personally, I don’t agree with this practice either.
• I do admit that I was guilty of this practice back in 2005-2006 when I was just learning about saving and investing. I transferred my cash savings balances multiple times between Emigrant Direct, ING Direct, HSBC, etc as each of them competed in finding the highest rate. 
• However, what I found was that all of the effort and mental energy involved in seeking out higher interest rate accounts, transferring the balance, and then closing out the old account was much more hassle than it was worth. 
• Because of this, what I do now is choose a savings account at a competitive bank and simply stick with it. Even if I lose 0.05% interest per year by not using “the hot account,” I’m OK with this. The ones that I have settled in to using are HSBC Direct for my life values account, ING Direct for my life dreams account, and Dollar Savings Direct for my emergency fund. I haven’t changed from these in about 2 years now and am pretty satisfied.

***Photo courtesy of http://www.flickr.com/photos/dannyman/4662167556/sizes/l/in/photostream/

The Magic (and Limits) of Using Data to Guide Your Investment Decisions

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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 by Rob Bennett. Rob’s favorite book on investing is Irrational Exuberance. His bio can be found by clicking here. Enjoy!

How about you all? What type of investing strategy do you employ? Have you ever looked in to the Valuation-Informed Indexing approach to investing? If so, what did you think? 


Share your experiences by commenting below!

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

• Great article here Rob! Thanks again so much for sharing it with us.
• I did thoroughly enjoy comparing Valuation-Informed Index Investing with the various fixed asset allocation passive investing portfolios in the post on my site a while back. Thanks also for all your great comments and feedback on that post!
• @ Clarification between the “passive investing” (what I currently do) and “Buy-and-Hold” strategy labels –
  • There’s really only one thing I want to add to this article, and that is some clarification about the nature of several of the investing styles mentioned above – “passive investing” and “Buy-and-Hold“.
  • I’ve noticed over the past year and half of blogging that sometimes, there is confusion about passive investing and Buy-and-Hold being the same thing. While this could just be personal preference in how different individuals define things, I just wanted to write some clarification here to let everyone know how I interpret this subject.
  • To me, Buy-and-Hold is an ineffective strategy involving buying shares of a single asset-class index mutual fund and holding them indefinitely (or until retirement), hoping they will go up. For example, Buy-and-Hold would be if you were to purchase one share of an S&P500 mutual fund and hold on to it through thick and thin until you retired.
  • Passive investing, on the other hand (again in my interpretation), is something entirely different. In passive investing, I elect a target asset allocation (25% fixed income, 75% equities is my current asset allocation) and then initially buy index mutual funds to obtain this asset allocation.
    • As market fluctuations occur, instead of holding indefinitely (as in Buy-and-Hold), I actually rebalance through buying and selling shares as needed to maintain my target asset allocation levels. To do this, I review my portfolio once per month, and rebalance if I am outside of a +/- 5% band.
    • And, as I age through different stages of life, I change my target asset allocation to a more conservative level (higher fixed income percentages).
    • While this strategy is far from perfect, it’s the most convincing strategy I’ve found to-date.
  • So, as you can see, in my opinion, Buy-and-Hold’ing is much different than passive investing.
  • There is, however, a time when Buy-and-Hold and passive investing (in my definitions) would overlap. This would be when someone chooses to purchase a single solution asset allocation mutual fund or investing option that holds both fixed income and equity securities and handles rebalancing for you. Examples of this would include Target Retirement Date Funds and services like Betterment.com.
    • Since the fund handles rebalancing for you, you can actually buy-and-hold these shares without worrying as much that you bought “too low” or “too high”.

***Photo courtesy of http://www.flickr.com/photos/eschipul/4396806156/sizes/l/in/photostream/

Why Now is the Time to Save and Not Spend

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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? What techniques do you use to maximize your savings each month? Do you have an emergency fund set up? What bank/online bank is it with? How many months worth of expenses do you keep in the account? 


Share your experiences by commenting below!

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


Thanks for sharing this article Les! I think that now, more than ever, people are aware that they do need to save. However, what they are lacking is a practical guide to get them started. As such, it’s important to address these issues.

• @ Now not being the time to rack up large sums of debt – 
  • So yes, I definitely agree that now is not the time to get in to huge amounts of consumer debt (car loans, furniture loans, credit card debt, etc).
  • However, I would argue that now, since interest rates are so low, it’s actually a great time to either take out a new mortgage loan or refinance your existing mortgage on a a primary home or other type of real estate. According a recent investigation I performed, interest rates are lower than they have been for 50 years currently. As such, it’s a great, low-cost time to take out good forms of debt on appreciating assets.
  • However, this assumes that you have some excess money for down payments, etc, which might be a little hard to come by with the tough economic times. But, it’s a good thing to bear in mind.
• @ Always remember the account hierarchy – 
  • When you’re beginning to think about opening up a savings account and funding it, it’s ALWAYS important to keep the account hierarchy in mind.
  • What the account hierarchy tells us is in what order new funds should be prioritized as they are received. For example, if you don’t currently have adequate health insurance coverage, you have no business opening up a savings account and beginning to fund it until you have appropriate health coverage.
• @ Being prudent with the use of your emergency fund balance – 
  • It’s very important for us to take a moment to think about what emergency fund money should actually be used for.
  • The way I think about what types of expenses qualify for emergency fund use is this: if I don’t pay for this expense, will either my health or income/earning ability be hindered?
  • For example, if the car that I use to drive to work breaks down, I would be justified to use my emergency fund for these repairs since the car enables me to arrive at work safely where I earn my income.
  • One thing that I have to respectfully disagree with in this article is recommending that emergency fund money be used to fix up things around the house. I would argue that these items are not actually “emergencies” in the sense that your health or earnings ability will be affected.
  • Instead, I would recommend setting up an automatic transfer each month in to a home maintenance savings account.
• @ Be careful what type of savings account you choose –
  • One thing mentioned briefly in this article is that where you choose to open a savings account has a big impact in the amount of interest you will receive on your balance. And, I just wanted to add a little more detail to that advice.
  • For example, if you open up a savings account with Bank of America, you might only receive a 0.05% annual interest rate on your money. Talk about ridiculous!
  • However, if you open up an online high-yield savings account with ING or Dollar Savings Direct, you can currently earn 20 times more (1% annual interest rate).
• @ The importance of automatic transfers when saving money in your Emergency Fund account – 
  • One thing worth adding to the guidance given above about creating an emergency fund is that in my experience, the best and most effective way of consistently building a cash emergency fund is to set up an automatic deduction/transfer from your checking account at the beginning of the month to your emergency fund savings account.
  • Having this transfer automatic increases the likelihood that it occurs every month, and scheduling the transfer at the beginning of the month/pay period ensures that you don’t spend this money.
• @ How much money to save in your emergency fund – 
  • In the article above, Les mentions that $2,500 is a good amount to have in your emergency fund.
  • However, I think a better way to go about determining how much each individual should carry in their fund is to shoot for having 6-9 months worth of expenses in this account. This ensures that if you get separated from your current job, you have enough money saved up to live on while you are looking for more work.
• @ Increasing your tax withholding to force you to save money –
  • In the article above, it mentions that one way to increase savings is to use money you receive in your tax return. And, if you’re not receiving a large enough tax return, you can increase your W2 withholding.
  • While it is definitely true that increasing your tax withholding will automatically take money out of your account and inhibit you from spending it, I would argue that this is not the best way to save money because you are effectively giving an interest-free loan to the government.
  • Instead, I would recommend simply setting up an automatic withdrawal from your checking account to your savings account the day that your pay check is deposited each pay period. This will enable you to earn this interest for yourself.

***Photo courtesy of http://farm2.static.flickr.com/1063/5126344583_9031352c31.jpg

Festival of Frugality # 298 – Funny Graduate School Cartoons – September 20th, 2011 Edition

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1. Darwin presents Older Americans Are Going to Wreck Your Life – Here’s Why posted at Darwin’s Money, saying, “There are several surprising demographic and financial reasons why older Americans are set to wreck your life. Nobody’s talking about it, but the outcome is undeniable.”

I would give this article the top ranking merely for the picture at the top of this post (just kidding, but check it out anyway! haha). However, on a more serious note, this post brings up some VERY important issues about how the Baby Boomer’s and other aging individuals will affect the economy in the near future.

2. Mike Holman presents A practical way to estimate and budget for home maintenance costs posted at Money Smarts Blog, saying, “Traditional methods of calculating home maintenance costs can be misleading. Here is a more accurate to handle house maintenance costs.”

The posts you read while surfing the blogosphere that make you think to yourself, “I need to perform this same analysis with my specific situation,” are true gems! Indeed, they are probably the reason that many of us read blogs in the first place. This article is one of these posts. Personally, I have been using the percentage method of calculating home maintenance costs for the past year and a half since I bought my condo. The method described in this post seems much better though, and it definitely warrants me to give it a try!

3. Evan presents Can You Tell One Scotch from Another? Price versus Preference posted at My Journey to Millions, saying, “Just because you pay 50% more for your cell phone service doesn’t mean it is better …just because you overpaid on an engagement ring doesn’t make it more valuable…and just because your bottle of scotch is 4 times the price doesn’t mean you’ll like it more!”

Personally, I’ve never been able to see how people discern a significant difference between a good $15 bottle of a wine and an expensive $80 bottle of wine. Heck, I’m happy just having a $2.77 (price just went down) bottle of Oak Leaf from Wal-Mart for every day drinking. So, this post really resounded with me! Give it a read!

And now, on to the best of the rest!

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***Leading photo courtesy of http://www.flickr.com/photos/tulanesally/5198784680/sizes/l/in/photostream/

What if the Entire World Worked From Home?

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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 post was selected as No. 6 in the September 26, 2011 Best of Money Carnival hosted by Boomer and Echo. Be sure to head on over and read all of the top articles!

In recent years, working from home has emerged as a very popular, attractive, and enticing working arrangement. While there are probably many reasons that working at home is so enticing, I believe three are key:

• First, you can set your own schedule. 
• Two, you can wear whatever you want and not have to worry about a daily commute, both of which are enticing options!
• Third, you can potentially spend more time with your family and get more done around the house since you are there the whole day instead of away.

It seems like every day, I encounter additional people that are either shooting for or have already attained this goal of having a home-based business. Indeed, since I started blogging in January of 2010, two other Yakezie Network bloggers I have become acquainted with have made their blog their full-time work. Additionally, I am constantly bombarded with advertisements for new “legitimate” home-based business opportunities both online and on TV.

As I attempt to process and make sense of these inputs indicating a shift in favoring working at home, several questions come to my mind. First, with all this work at home “hype,” I’m curious to know just how many people are actually working from home these days. Second, what would happen if the entire (or the majority of the) workforce worked from home? Would this even be possible? And finally, would I want to work from home?

Looking at answers to these questions will be the subject of today’s post. So, let’s get started.

How many people currently work from home?

Advances in telecommunication technology in recent years have definitely made it possible for many people to work at home, if they are offered the opportunity. Indeed, with the advent of phone conferencing and free conference call services, the occurrence of having all meeting members in the same physical room has even become rare in normal office settings. So, needless to say, I am convinced that people can effectively work from home. However, I was curious to find out just how many people actually are working at home these days.

In searching around the Internet, I found the statistics below about the “work at home economy.”

• A new home business is started every 11 seconds! Wow! I’m sure about 90% of these don’t last long (Enterpaige.com).
• 50 million workers in the US (40% of the workforce – excluding self employed individuals) work at home at least part of their work week. 
• However, only 3 million work from home full-time, including self-employed individuals (TeleWork Research Network).
• There are approximately 18 million home based businesses in the United States, and they generate $427 Billion per year in revenue (Bureau of Labor Statistics).
• Home business scams and fraudulent opportunities earn $750 million each year (WorkingHomeGuide.com). That’s quite a lot of money! I know I’ve been duped in to trying my fair share of home businesses that didn’t turn out to be anything useful.

From these statistics, I personally gather a couple of takeaway messages.


First, if I am looking for a home-based business, I need to be super careful because there are many businesses that do not last past the first year and also many scams out there offering “lucrative” opportunity, where none actually exists. Second, I think it’s important to take note of the statistic above indicating only 3 million people work from home full-time. This means that only 1% of Americans have this full-time work at home situation. Therefore, I need to realize that it will not be easy to readily obtain. On the other hand of course, it is becoming VERY common for employers to allow their employees to work at home part of the week in “flexible work arrangements.”

Could the entire workforce work from home? What would be the effects?

So, in the investigation in the previous section, we actually found out that despite the “hype,” not all that many people are working from home full time (only about 1% of the US population). Given this relatively low current number of full-time home workers, I figured it would make for an interesting thought exercise to hypothesize what society or the economy would be like if we had the majority (80-100%) of the workforce working from home full-time.

Thoughts on feasibility of the entire workforce working at home

Personally, I don’t feel that it would ever be possible for the majority (80-100%) of workers to work from home because it would be difficult/impossible for service-related workers (restaurants, dentist offices, etc) and factory workers to perform their job function from home since their job either involves servicing clients directly or interfacing with expensive machinery only present at the work-place.

Impact of the elimination of the daily commute if the entire workforce worked at home


However, if a large majority of the population did work at home full-time, it would eliminate the costly daily commute that many workers endure. Commuting in this manner can be costly both from a monetary standpoint (in regards to gasoline expenditures) as well as from a time-cost standpoint (many people I used to work with drove 1 hour each way to work and back. Talk about wasted time!).

If people did not commute each day, it would free up people’s day and hopefully make them more productive at their job. According to a recent article by careers.guardian.co.uk, workers in Great Britain drive an average of 4.5 million total hours per day. Additionally, since people are purchasing less fuel, one would hope that the demand and cost of gasoline prices would decrease. This would be a benefit for everyone! In fact, a recent article by WorkingHomeGuide.com indicated that if 40% of the current workforce were to work from home, oil import demand would be decreased by 37%, a pretty significant amount!

Elimination of at-work social networks and friendships


One of the reasons that I am slightly against the work-from-home full-time idea is that it would effectively eliminate the camaraderie that exists between teams of people that work together frequently face-to-face on projects at the workplace. I’ll address this issue further in the following section.

Elimination of a distinction between work-life and home-life


Another thing that would be effectively eliminated if everyone were to work at home is a separation between home life and work life. I’ll address this more in the following section as well.

Would I want to work at home?

As you might imagine, since this blog is called My Personal Finance Journey, I often like to share my opinions on how the topics I discuss either do or don’t apply to my situation. In the case of working from home, I would have to say that I would be in the “camp” of not wanting to work at home full-time.

On one hand, it would be nice to be around my possessions and house all day and have access to home-cooked food all of the time. However, I think that after a while, I would get a case of cabin fever and feel the need to move about and explore somewhere new for a portion of the day. I suspect that this would be the case with me since this often happens if I have to stay home for several days on the weekend working on projects for graduate school. In general, I feel that a mix of scenery is good for me.

Second, I would not want to work from home because I enjoy having at least some form of separation between work and home. In my previous job, they actually gave me a laptop that I could use for work purposes. And, since I wasn’t able to even access external email accounts (Gmail, Outlook, etc), it was very easy to stay focused while at work because my computer used for family, friends, and blogging related issues would be waiting for me at home. Furthermore, being able to actually go to a different physical location makes this separation even easier to create. For example, if I were to ever run my own business that technically could be operated out of the home, I would most likely look for a small office space somewhere away from the house that would enable me to create this work-home life separation.

Third (and maybe most importantly), I would not want to work at home full time because some of my closest connections and friendships have emerged from relationships I’ve formed at the workplace. In my opinion, the connection you feel with a team of people working on a project at the workplace is very valuable and something that I wouldn’t want to lose.

Conclusions

Today, we’ve explored that although working from home is a popular concept or dream for a lot of people, only a small group have actually made this a reality. However, if working from home is something you’re shooting for, I believe it is very possible to make it happen with a little perseverance. After all, as we’ve seen, there are numerous time and cost-saving benefits that come with this type of working situation.

Thanks for reading!

How about you all? Have you ever thought about working from home? Are you currently working towards the goal of this work situation? What do you think the world would be like if EVERYONE worked from home?


Share your experiences by commenting below!

***Photo courtesy of http://farm2.static.flickr.com/1026/3169836251_b62772064d.jpg

A Journey of Investing in Company Stocks – From Childhood to Adulthood

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The following is a guest post from Jon Taylor. Jon and I have been friends since elementary school, and it’s truly an honor to have him do a post for my site! Enjoy.

Well recently, my childhood friend, Jacob, reached out to me and asked if I could write a guest article on his financial blog. He asked me to discuss my experiences as a company stock owner and specifically my role with owning Apple stock. Especially with the recent departure of Steve Jobs, I felt such an article would be appropriate.

How I Got Started Investing in Stocks

Getting into stocks really came to me by accident. While I was young, I was privileged to have my grandparents purchase some Wal-Mart company stock for me. Since I was too young to be interested in stocks, it was a non issue, and I never paid any attention to it.

My Experiences Investing in Apple

It wasn’t until 2005, my first year of college, that I started getting back into stocks. Due to my job being an Apple Specialist, I was always familiar with Apple’s products and how well they were doing as a company. For nothing other than an emotional attachment to the company, I had decided I wanted to purchase some Apple stock.

After looking at my Wal-Mart history it was evident that the stock had only devalued since it was given to me when I was young. I decided to cut my losses, sell all my Wal-Mart stock and put it towards Apple.

At this time, I started getting more into stocks and testing the waters about what other gems might be out there. Unfortunately, there was no industry that I understood better than Apple’s so any new stock purchases were a gamble for me. I invested in companies like Starbucks, Heely’s, Divx, which all proved to be losers in my portfolio. There’s a quote in the stock world, “invest in what you know” and I had decided it was time to do that.

Apple was riding the success of the iPod and a booming Mac business when I decided to stop buying any other stocks and stick to Apple. Investing in a company that I had full faith in allowed my conscience to be at ease and not feel like I’m gambling with companies.

Apple’s Stock Takes Off

Two years later it was 2007 and Apple had risen 280% and I finally made my second buy in. While Wall St. was clamoring that Apple is over valued and it can’t possibly go any higher, I was fully confident with my buy in. Knowing that Apple had a new product in the pipeline, the iPhone, it was a no brainer that Apple would continue its success. I knew that when Apple enters a new market, they do it because they can do it better than existing competition. With the successful launch of the iPhone later that year, I ended up buying back two more times over the passing year.

It wasn’t until 2009 that I decided to take my first profits off the table. My current investment was up 435% and I sold off about 19%. My stock broker always cringed at my lack of diversification but the results couldn’t be ignored. I had stuck to what I knew and it treated me well. With all my buy ins and sales thus far, my Apple stock currently stands at a 280% overall return.

The iPad has proven to be one of their best creations. With being in the sales industry, I have never seen a product that has produced as many smiles amongst all walks of life then the iPad. It has truly become a game changer in the electronics world and people who disagree with that just aren’t paying attention. While Apple does have good competition from Android in the phone industry, I don’t think anyone will come close to Apple in the tablet market. I predict the iPad will be much like the iPod market in which Apple dominated. Even with the stock floating around $400 I still feel it’s a good buy. While people might think it is too high, it will continue to go higher and iPhone, iPad and Mac sales are all on the rise and out performing their peers.

How Will Apple Do Without Steve Jobs?

As for Apple currently, I think they will be just fine. Tim Cook (the new CEO) has had a very significant role in Apple’s recent success, especially since Job has been ill. Tim has helped Apple secure high profit margins and has streamlined logistics. Steve Jobs is wise enough to have surrounded himself with excellent people whom his vision has been instilled. As Jon Gruber said, Jobs best creation was not Apple’s products, but Apple itself. Companies road maps are usually five years out and Apple will continue its success with Cook at the helm.

Unfortunately it is impossible to replace someone like Steve Jobs. It’s sad to think of Apple without him but it’s hard to ignore. While Steve is chairman of the board, things won’t change too much. Either way we will all have to sit back and see how Apple performs with the new CEO.

Jacob, it’s been great to talk with you and thanks for having me for this discussion. If you have any questions let me know, and I can answer them in the comments section.

How about you all? How do you feel Apple will fair without Steve Jobs at the helm? What age did you start investing in stocks? Do you feel that your parents (or grandparents) gave you a good financial head start to life? 


Share your experiences by commenting below!

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


First off, I just want to say “thanks” to Jon for sharing his experiences with us! Very interesting stuff!

• @ Giving your children (or grandchildren) a financial head start in life by purchasing shares of stock for them –
• As I’ve mentioned before in several posts, there are many things parents can do to give their children a financial head start in life. 
• One of my favorite ways that I’ve discussed in these past posts is for parents to buy a single share of stock for their children in a company in which they would likely be interested. For example, a parent could buy a share of stock in a company such as Disney, Mattel, or even Kellogg (for their favorite cereal; who doesn’t love Fruit Loops, after all!?). Parents can then use this share of stock as a way to capture their childrens’ interest and teach them about financial skills and concepts.
• In Jon’s case, his grandparents bought him a share of Wal-Mart stock. While this might not have been the best choice to “attract” Jon’s interest as a young child, it probably was chosen because Wal-Mart is a very strong company, and they were hoping it would make him some money by the time he was an adult.
• While this is a great thing to do, I would propose that as a child, it is probably more important to begin to learn financial skills than to simply have money accumulated for them once they are older. For this reason, I suggest that parents buy company stocks that children would have an interest in learning about finances with, in addition (or prior) to simply saving money for them to use later in life.
• One quick question for Jon before I get on to my other comments – What age did your grandparents purchase the first share of Wal-Mart stock? I’d be interested in hearing your thoughts about if you think they should have waited or bought the share of stock sooner?
• @ Investing in individual companies you know vs. investing in a passive investing portfolio of index mutual funds – 
• As I was reading this article, I began to think about a possible issue/question that could arise.
• On one hand, there’s no denying that some individuals, such as Jon here, have had great success in investing in individual stocks of companies with which they are very familiar. 
• So, this might beg the question – should everyone simply invest in individual stocks of companies they are intimately familiar with? 
• While there probably would be much debate as to how this question should be answered, given what I have experienced thus far in investing, I would say that the answer is, “no.”
• There are several reasons that I answer in this way. 
• First, I believe that stellar performances such as the one Jon experienced here are exceptions, not the rule/norm. What I mean by this is that for every single experience such as the one Jon detailed here, there are likely hundreds (maybe even thousands) of losses in equal magnitude experienced by other individual investors in other stocks.
• Second, I feel that the majority of people should not invest only in individual company stocks because they lack the self-discipline to resist selling in times when the financial media claims the stock is highly overvalued.
• Third, I would argue that even if person knows a company inside and out and is aware of the superiority of the products in the pipeline, the company’s long term stock performance can still suffer from factors that are somewhat outside your realm of knowledge. For example, the industry I am most familiar with is the biotech/pharmaceutical industry, having worked in it for several years now. However, I would not invest only in individual companies in this industry because even if I knew that a company had a great pipeline of drugs, a lawsuit on a product’s safety profile or unfavorable FDA inspection could result in instant devaluation of the company’s stock and could last for many years.
• Fourth, in the finance books I have read over the past 5 years or so, multiple studies have indicated that the occurrence of active management (so employing an investing strategy of buying/selling individual stocks) outperforming the market indices decreases drastically over the long term (20 years or more). What this means is that while it might be possible for someone to outperform the market by selecting individual stocks over a 5-6 year period, the odds become increasingly less favorable for creating a long-term investing strategy for retirement using this method.
• Because of these factors, I simply don’t believe normal individuals should invest significant amounts of money in individual stocks. Instead, I prefer to employ a passive investing strategy using low-cost index mutual funds to maintain a target asset allocation.
• However, I think that it is perfectly acceptable to invest what I call “play money” in individual stocks (or an amount that you are OK with losing and are not dependent on for retirement).
• @ How Apple Will Do Without Steve Jobs –
• It’s truly amazing to look at Apple’s (Nasdaq symbol – AAPL) stock performance over the past 6 years or so. According to Google Finance, since 2005, the stock has risen 971%! Pretty amazing if you ask me! 
• Personally, I am not sure how Apple will do without Steve Jobs. 
• Part of my uncertainty lies in that I don’t know if Steve was the “vision” that was responsible for all of the new products that came out.
• I feel that if he was merely the one that created the Apple organization and culture of innovation, the company will do just fine. However, if Steve was directed tied to the invention of the iPod, iPad, iTouch, iPhone, etc., Apple’s future success will be greatly hindered since it has depended on new products coming out in order to fuel its rapid growth.

***Photo courtesy of http://www.flickr.com/photos/davidgsteadman/3197461036/sizes/l/in/photostream/

If I Could Have One Financial Do-Over…

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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 guest post was written by me back in June of this year and posted on Broke Professionals as a part of the Yakezie blog swap. In this monthly event, Yakezie participants pair up and exchange articles on a common topic.  


For June, we traded posts on the common topic of “if we could have one financial do-over, what would it be and why?” I wanted everyone to have a copy here as well for future reference. You can also view Broke Professional’s guest post on this site by clicking the following link – If We Could Have One Financial Do-Over – Broke Professionals 


Failures. Mistakes. I’m sure all of us have made numerous errors in our financial life that we wish we could take back. However, I don’t necessary think we should view failures as horrible things. They are only bad if we fail to learn from them. This, I believe, is key to success.

How Should We View Mistakes?

There are several quotes by basketball star, Michael Jordan, that I believe capture the essence of how we should all view failure in our lives. These are listed below:

“I’ve failed over and over and over again in my life, and that is why I succeed.” – Michael Jordan

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” – Michael Jordan

The One Mistake I Wish I Could Do-Over The Most

So, even though I’ve made some significant financial mistakes in my life and have learned from them, there are two in particular that I wish more than anything that I could take back/do-over. These are described below:

• The first financial mistake I’ve made in my life is that on and off from 2005-2008 (when I was just starting to learn how to invest), I invested in penny stocks and individual stocks from the advice of two investing newsletters. 
• For penny stocks, the newsletter I used was Pennystock.com (which, I can’t believe is still active and recommending stocks!). 
• For regular mid and large-cap stocks, I used Winning Investing.com (with Harry Domash). 
• While both of these newsletters weren’t particularly expensive (Pennystock was $80 for two years and Winning Investing was $15 per month), I still foolishly paid for stock advice that made me little to no money in the long run, especially after trading fees and newsletter costs are taken in to account.
• Something you might be asking yourself is, “Why, Jacob, was following the advice of stock picking newsletters a financial mistake? After all, many people do this same thing.”
• First of all, it is true that far too many individual investors follow the advice of stock newsletter analysts who claim to be experts (or may even be experts). Second, it is bad that many people act this way because numerous financial studies that I have read since my mistakes in the 2005-2008 time frame have proven that 70-80% of “professional” financial advisors fail to choose stocks that outperform the market.
• Instead of investing foolishly in these individual stocks, what I should have been doing is investing in a broad range of asset classes through the use of index mutual funds, and using rebalancing to maintain a set asset allocation. This strategy is commonly known as passive investing.
• The only money that I should have been investing in individual stocks is what I call “play money,” or small amounts of money (less than $500) that would be OK to lose.
• The second financial mistake I’ve made in my life that I wish I could do-over is being scammed out of around $1,500 by a “fly-by-night” CCD video camera supplier during my eBay selling/business days.

Even though investing in individual stocks was foolish and I wish I could take it back, I only lost 10-20% of the money I initially invested maximum. So, especially since I am young and realized the mistake early, I was able to bounce back from the mistake quickly.

Since for this blog swap, we have to pick just one financial mistake that we could do-over, I would have to choose the CCD video camera eBay supplier scam as my top mulligan pick. Read on below to find out why!

The Scam

Background


From 2004-2007 (during my undergrad days with no income), eBay selling was a pretty big hobby and side-business of mine. I started out just selling random things around the house – DVDs, CDs, clothes, suitcoats, bike parts, etc. However, the venture grew in to me sourcing items for resale from second hand shops, thrift stores, Goodwill, Salvation Army stores, and garage sales.

Eventually, I obtained my state sales tax ID and was able to buy goods at wholesale prices for resell on eBay. Using this method, I sold anything for a profit that I could find, including iPods, bike equipment, and even Breathalyzer testers! I was even able to claim the self employment income on my taxes one year in order to start up and fund a Roth IRA.

The Trickery

After making several thousand Dollars from eBay selling, it is possible that I became a little too aggressive in looking for additional products to resell…

One day back in 2005-2006, I received an unsolicited email from a seemingly nice man representing a supplier that sells Canon CCD cameras to people with wholesale licenses (state sales tax IDs). His back-story, company description, and website all seemed to check out as being legit, so I began working through the details of a potential deal for him to sell me several CCD cameras that I would resell on eBay.

My contact was very responsive to any and all questions I had during the negotiations of price, delivery, etc, and we finally decided on the price of $1500 per camera. The only suspicion that I had during the negotiation was that he insisted on payment being made through Western Union, instead of using PayPal or a credit card like I would have preferred. He mentioned some technicality about how their company receives payment that I believed at the time (but looking back on it, I obviously shouldn’t have gone for it).

Anyhow, I agreed to send money to him for one camera via Western Union in advance of receiving the product. I went to the grocery store that afternoon to make the transfer, and it went through with no problems. I then rushed home to tell my contact to confirm receipt of the money.

Well, he received it all right! So much so that he felt that he never had to talk to me again! He disconnected the phone number I was using to reach him, didn’t answer any emails, and I never heard from him again. Now, granted that I was a little less Internet savvy back then than I am now, but I really didn’t do much to try to track him down. I remember thinking that I didn’t believe there was anything I could do. I looked around at Western Union’s website, and couldn’t see any refund policies like the ones that credit cards or PayPal has.

So, in fewer words, I was essentially screwed, scammed, and hoodwinked out of $1,500. 

I’m not very proud of it, but that’s exactly what happened. There’s a lot of “shoulda-woulda-coulda’s” I scold myself for looking back on this experience. But, needless to say, I wish I could do-over this financial mistake.

Lessoned Learned

As I mentioned previously, it’s all right to make mistakes, as everybody does throughout their life. However, the key to success (in my opinion) is that we learn from our mistakes.

So, what things did I learn from my Canon CCD scam artist fiasco here (and that you can learn too)? I’ve listed the key ones below:

• Try harder to track down scam artists.
• While the tools and resources that are present on the Internet today weren’t necessarily available when this experience happened to me back in 2005-2006, I definitely should have tried harder to track down the guy who ran off with my money. 
• First, I should have tried to contact Western Union to see if there was any way to trace his whereabouts or get a refund. I didn’t bother to do any of that.
• Second, I should have tried to track down his company’s information using domain registration information.

• Unsolicited email deals are OK, as long as you pay with a guaranteed method.
• I learned from this experience that any time you pay in advance for a product online with a client you don’t know, you should always pay using a medium that enables you to make appeals and refund your money. 
• Good options for doing this are PayPal and credit cards. In fact, back when I was reselling items on eBay, I had to request a refund from a supplier through PayPal that didn’t come through with an order. Everything worked out smoothly getting my money back though.

• Request verification credentials from a reputable rating agency about companies/clients you deal with.
• Thinking back on my experience, I definitely should have done more research on the person/company I was working with before exposing myself to such a monetary risk. 
• A good way to check a company’s reputability is through use of the Better Business Bureau’s website, BBB.org.

How about you all? What financial mistakes have you made in your life? What’s the one mistake you wish you could do-over? Have you ever been scammed out of money by anyone or any company? 


Share your experiences by commenting below!

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