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How To Protect Yourself Against Identity Theft
, I came across a great sections with several tips/action steps that I could perform to help safeguard myself against one of the worst crimes of all, identity theft. 
Another way to prevent identity prowlers from stumbling upon old papers/statements with your personal information on them is to prevent the papers from being sent to you in the first place.
If you’re like most people, you receive hundreds of “pre-approved” bank, credit card, and loan offers every year in the mail. Of course, all of these are unsolicited, unwanted, and a nuisance. However, if you are not careful, they can even become very dangerous because they contain your personal information.
Now, there is a tool offered by the three credit reporting agencies called Opt Out Pre-Screen. By clicking on the link below, or by calling 888-5-OPTOUT, you can choose not to be sent these offers permanently, or for 5 years at a time.
I hope these simple steps help to safeguard you and your family from identity theft. Please let me know if you have any questions.
Keep on learning!
Jacob
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Free Desktop Sharing, Web Conferencing, and Teleconferencing Tools
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It is FREE to use.
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You can host a meeting with up to 20 partcipants.
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It has a video/audio sharing application built in.
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It gives you your own personal teleconference PIN and phone number to call in to so that partcipants can speak to each other.
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The desktop sharing center is web-based. In other words, participants do not have to download and/or pay for a program in order to be able to join the meeting. You simply point them towards your personalized web address.
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
How I Saved Myself Money With Rental Cars (And You Can Too)
.
The book is great because it is nicely divided in to chapters, based on different financial “hurdles” that a person can, and probably will face in life. Examples of the topics are shown below:
• Cars
• Banking
• Credit
• Family
• Health
• Home
• Retirement
• Shopping
• Taxes
• TV and Phones
• Travel
For each of these topics, David then proceeds to discuss potential ways that people (you included) have or could be ripped off.
One of the most compelling sections of this book is about ways to save money on rental cars. I liked the content so much that I wanted to share combined advice from David’s book, and my personal experiences in an effort so everyone can benefit.
For the sake of analysis in this post, I am going to assume two scenarios of renting a car – Scenario 1) Renting a full-size car for 2 days during the workweek – June 29 through July 1st, 2010, in Richmond, VA, Scenario 2) Renting a full-size car for 2 days during the weekend – July 10-12, 2010, in Richmond, VA.
• Tip # 1 – Shopping Around
The first bit of advice that Bach offers is that prices can vary greatly between the different rental car companies.
My favorite website for doing this comparison is Kayak.com. At this site, you can type in exactly what type of car you want, and it automatically not only gives you results from Kayak’s search engine, but also pops up search results for priceline.com, hotwire.com, travelocity.com, and expedia.com. Amazing right!? Another great place to compare rates online for different rental carriers is CarRentals.com.
Another tip that David presents to us is the idea of making sure not to overlook the smaller, regional rental car companies. Names of these companies are listed below.
- ACE
- Advantage
- Fox
- Triangle
- U-haul
Often, these companies will be able to match, or beat, the rental rates of the national chains.
The rental rates for Scenario 1 for several different companies are listed below.
Scenario 1
Enterprise – $105
Budget – $110
Hertz – $113
Ace – $118
As you can see, there is a slight difference in rental rates. Clearly, this difference wouldn’t make that much of a difference for just two days, but if you were to rent for longer, the price differential would be even greater (because the rental rates are per day).
Enterprise is the cheapest, followed by Budget. It is interesting to note that in this instance, the smaller rental company was actually much more expensive. Interesting!
• Tip #2 – Negotiating and Asking for Discounts
Another great piece of advice that David instills in us while reading his book is the power of simply remembering to 1) find and 2) ask for a discount.
Finding Discounts
For example, many of the most company organizations that we belong to today (AARP, Sam’s Club, AAA, Costco, gyms, and even certain companies) offer discounts on many different types of service. Usually, rental cars are included! So, be sure to ask about what discounts you can get. This goes for hotel rooms as well!
In addition to these discount offers, rental cars publish discount coupons on consumer discount websites such as Rental Codes and Rental Car Momma
Asking for Discounts
In addition to the already published offers discussed above, you should always remember to ask “are you all having any specials currently?” After all, the worst they can say is “no” right?
Another trick to use here is that after you have used a site like kayak.com to find the cheapest rental car rate, you should call the actual rental car store where you will rent from and ask, “can you give me a better rate than the website?” Many times, they will!
• Tip #3 – Renting on the Weekend
Since a large majority of the business that rental car companies get is from business travelers, they can generally charge a higher price during the week vs. the weekend. As individuals, we need to take advantage of this price differential by making every possible effort to rent on the weekend.
Listed below are the rental rates from several different companies in Scenario 2. As you can see, the rates are ~50% cheaper. Awesome!
Scenario 2
Budget – $57 (a 45% price reduction from renting during the week)
Hertz – $60
Ace – $118
This is consistent with what I have experienced as well. In a recent trip, the rental rates from Enterprise for a full size rental car were $25/day on the weekend and $59/day during the week.
• Tip # 4 – Avoid Renting at the Airport
Similarly, since demand for rental cars is higher at airports, the rental car companies charge more if you rent from these locations.
Because of this, you should always do a cost analysis to compare how much more you will pay for the convenience of renting directly from the airport. Many times (if you will be renting for more than 2 days), it will be a lot cheaper to rent from a nearby location, and then simply take a taxi to the airport.
If we perform the exact same rental car search on kayak.com from Scenario 2 above, except that we change the rental location to the airport, the results become as follows:
Scenario 2 @ the airport
Dollar – $68 (~20% increase in price from renting at a neighborhood location)
Alamo – $73
Hertz – $107
• Tip #5 – Avoid Dropping Off at a Different Location Than You Rented From
The privilege of being able to drop off the rental car at a location different from where you rented comes at a high cost.
Let’s take a look at what happens to the rental rates in Scenario 2 if we rent the car in Richmond, VA and drop it off in Baltimore, MD. The results are shown below.
Clearly, the prices vary significantly in this case, depending on which rental company you choose.
Scenario 2 w/ dropping off at a different location
Alamo – $212 (272% price increase from original Scenario 2 rate – crazy!)
National – $302
These prices are even higher than what I have experienced. In a recent trip where I rented from Enterprise, they were charging a flat $75 car drop off charge for returning the car to a location different from where it was rented.
• Tip # 6 – Avoid Buying the Insurance Coverage They Offer
This topic is extensive, and will be covered in a future post.
However, the short answer, is that most people DO NOT need to buy the coverage offered.
• Tip # 7 – Fill Up With Gas Before Returning the Car, gas 2.60 – they offer 3.90
A very easy way to get ripped off when renting a car is to forget to fill up the car’s tank with gas before returning it.
For example, when I recently rented a car from Enterprise, the going rate for gas at gas stations was $2.60/gal. However, the rate being charged for Enterprise to fill up the tank was $3.90/gal (a 50% increase in price).
In plain English, for a 16 gallon gas tank, this would mean that you would pay Enterprise $63 to fill up the tank, but you could do it yourself for just $42.
I hope these tips will be useful and you can bring a printout of this post with you next time you go to rent a car. I know I will!
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Are IPO’s a Good Investment Option?
In multiple previous posts (see posts at link below for more details), I have made the case for why holding index mutual funds is a far superior strategy for individual investors than buying and selling individual stocks.
My Money Blog – Individual Stocks vs. Index Mutual Funds
However, in these postings, at no point did I address the issue of whether or not IPO’s (or Initial Public Offerings) make for good investments. This will be the topic of today’s post.
To begin this analysis, we first need to start with defining what an Initial Public Offering, or IPO, is exactly.
What is an IPO?
According to Investopedia.org, an IPO can be defined as shown below:
- “The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.”
Typically, the company going public will team up with an underwriter (usually an investment banking firm) that will help the company the timing of when to begin selling shares of stock on the public market and what price at which to offer them.
Now that we have an idea of what an IPO is, let’s take a look at how they have performed against the test of time.
Performance of IPO’s Over the Years
As you might have guessed, according to academic research supporting the Efficient Market Hypothesis (place link to investopedia.org here), since IPOs are individual stocks, they are already, by nature, less effective than index mutual funds.
So, let’s say that is “Strike 1” against IPOs.
“Strikes 2-5” come to us from four studies cited in Larry Swedroe’s book titled, The Only Guide to a Winning Investment Strategy You’ll Ever Need
. The results of these studies are summarized below:
- Study 1
- Strategy – buying every IPO from 1970-1990 at the closing price of the 1st day of trading for an IPO and then holding each for 5 years.
- Results – IPO investments performed 7% below benchmark performance of companies with comparable market capitalization already trading.
- Study 2
- Strategy – buying every IPO that rose as least $20 million from 1988-1993 (1,006 IPO’s).
- Results – Underperformed Russell 3000 index by 30% in the three years after going public. In addition, 46% of the IPOs produced negative returns.
- Study 3
- Strategy –Buy all IPO’s issued in 1993 and hold until mid-October 1998
- Results – Found that the average IPO returned 67% less than the S&P500 index.
- Study 4
- Strategy – Buying all IPOs that rose 60% or more on their opening day and then holding from 1988-1995.
- Results – Underperformed market by 2-3% per month (24-36% per year). Wow!
As you can see from the pitiful under-performance above, IPO’s, even though they are a very exciting investment option, are definitely not the best choice for individual investors.
By all practical terms, you will never have sufficient knowledge that you would need in order to make an informed purchasing or selling decision with IPOs. Due to this very strong reasoning, IPO’s are best to be avoided by individual investors.
If you do enjoy the excitement that IPOs offer, there is no problem with using a small amount of funds to buy IPOs and place them in the Play Money portion of your portfolio.
For more information on Play Money/how to work IPO’s in to your investment strategy, please click on the link below.
My Experience
Personally, I have never invested in an IPO, and therefore, am curious to learn about experiences you all have had with them.
Please feel free to post a comment below and tell everyone how an IPO fared for you!
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Are Lifecycle Mutual Funds a Good Investment Option?
, the following case can be made for avoiding Balanced, or Lifestyle Funds.Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
What if Everyone Invested Only In Index Mutual Funds?
In many of my postings on this website (including the post at the link below where I explain my overall investment strategy), I have discussed the numerous benefits involved with investing in index mutual funds.
provides, in my mind, a very good investigation of this question.Keep on learning!
Creating and Implementing Your Investment Strategy – Part 6 – Putting It All Together
- My overall equity/fixed income split is 75 / 25%. Therefore, I would rebalance at this high level if my equity or fixed income allocations are outside the ranges of 70-80%, and 20-30%, respectively.
- My equity split is 29% international / 71% US domestic. Therefore, I would rebalance at this level is my international or domestic allocations are outside the ranges of 24-34%, and 66-76%, respectively.
Creating and Implementing Your Investment Strategy – Part 5 – Determine Your Specific Mix of Equity Investments
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A Random Walk Down Wall Street
By Malkiel -
The Four Pillars of Investing and The Intelligent Asset Allocator, both by Bernstein
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What Wall Street Doesn’t Want You to Know by Swedroe.
By Malkiel
and The Intelligent Asset Allocator
, both by Bernstein
by Swedroe.
The table below shows the recommended breakdown and categories of mutual fund investments needed to make up the domestic portion of your equity portfolio. I have also, for your convenience, listed the corresponding Vanguard index mutual funds that can be bought for your portfolio if you choose.
To find the overall percentages of your portfolio that each fund should contribute, simply multiply your overal equity allocation % (70% in this example) by the % allocation of the equity portion of your portfolio. This multiplication can be done to all of the funds with the exception of the REIT portion, which needs to make up 10-15% of your overall portfolio, increasing as you age.
The table below shows the recommended components to make up the international portion of your equity portfolio, based on a 30% international / 70% domestic equity split. It should be noted that in several of the books I referenced above, they suggest purchasing Large cap value, small cap, and small cap value international funds as well.
However, since these funds are not readily accessible through Fidelity and Vanguard, I avoid them (they are only available through DFA Fund Advisors).
In place of these categories, I use a Total International Stock Fund offered with low management fees through Vanguard.
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Creating and Implementing Your Investment Strategy – Part 4 – Determine Your Mix of International and Domestic Equity Investments
At a high level, the reason that you will want to add international investments to your equity portfolio is due to the fact that the price movements are not highly correlated with the returns of US equities. Because of this low correlation, it provides decreased risk and increased returns through the power of diversification.
Optimal Split –
A study published in the Journal of Investing in 1998 took an in-depth look at the performance and risk associated with different portfolios with varying asset allocation levels of international/domestic US equities.
The results of the study showed that the split that showed the optimal performance was an equity portfolio with 40% international and 60% US domestic. This allocation provided the highest returns with the lowest risk/price volatility. In other words, it had the highest Sharpe Ratio.
Finding The Split That Suits You Best –
While the 40% international allocation described above is the “optimal” split, as defined by academic research, it doesn’t necessarily mean that you should allocate 40% of your equity holdings to international investments.
Why is this you might be asking? The answer lies in the fact that an investment strategy is only as good as an individual’s ability to stick to it, even in the worst of times. The worst thing that could happen is that you determine several years from now that the 40% international equity allocation you decided upon is too much risk for you, and it causes you to sell off all of your holdings.
Therefore, in my opinion, the best approach is to use the 40% optimal split as the highest international allocation that anyone should employ in their investment strategy.
In other words, only the heartiest of souls that are very young (in their 20’s) should allocate 40% of their equity holdings to international investments.
For the rest of us, Burton Malkiel describes the following recommended allocations (based on age) in his famous book, A Random Walk Down Wall Street
. As you can see in the table below, even for people in their 20’s, Malkiel recommends that they only have 30% of their equity funds allocated to international instruments. I feel this level is very appropriate.
So, take a look at the table below to define at a high level of how your equity portfolio will be constructed.
In Part 5 of this series, I describe how you can determine the specific mutual funds that should make up the US domestic and international portions of your equity portfolio.
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog:
Creating and Implementing Your Investment Strategy – Part 3 – Determine Your Specific Mix of Fixed Income Investments
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______ % of my portfolio will be in fixed income investments and the remaining _____ % (1- fixed income %) will be in equity investments. The total should be 100%.
- For simplicity, throughout the rest of this post, we will assume that the asset split you choose is 30% fixed income and 70% equity.
So, you know that 30% of your investments should be placed in fixed-income vehicles. However, which ones should you choose to make up this 30%?
- Maturity
- No matter what the time horizon is for when your specific cash needs will occur, academic research has shown that short-term fixed income investment instruments have 1) less interest rate risk, and 2) higher returns.
- Because of these two factors, short-term (1-3 maturities) fixed income investments are considered superior to long-term ones.
- Fund Management
- As with equity investments, the fixed income security markets are extremely efficient, and therefore, active management is a loser’s game.
- Because of this, we will only want to seek out indexed/passively managed fixed income instruments for our investments.
- In my opinion, there are really four different options available to you as an individual investor for the fixed income portion of your portfolio:
- Cash / cash equivalents
- This category would include extremely liquid investment account types.
- Examples include money market accounts, savings accounts, and checking accounts.
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See following link to read my previous posting on these types of accounts – My Money Blog – Cash Equivalent Savings Accounts.
- Short-Term Indexed Bond Funds
- Offered by Vanguard and Fidelity. Vanguard fund I use is the Short-Term Bond Index, Ticker symbol – VBISX. Vanguard Bond Index Funds
- Feature low cost, passive management and expense ratios.
- Inflation Protected Bond Funds
- Also offered by Vanguard and Fidelity. Vanguard fund I use is the Inflation-Protected Securities fund, Ticker symbol – VIPSX.
- This type of investment instrument provides a hedge against changes in inflation.
- The interest rate associated with the bond fund changes with fluctuations in inflation.
- US Treasury Securities
- Can be used in place of Short Term Indexed Bond Funds. Personally, I prefer to use indexed bond funds due to the fact that they are offerred by Vanguard, and it therefore, keeps all of my investments in one place.
- Bought directly from the US government/treasury.
- Backed by the full faith and credit of the US goverment, and are therefore, very safe investments.
- Still have interest rate risk associated with them, however.
- Select the cash % allocation of your total portfolio, according to the first row of the table.
- Assume that you will allocate 5% of your total portfolio to inflation protected securities.
- Subtract the cash % and 5% inflation protected securities allocations from the overall fixed income allocation you calculated (in previous posts) to obtain the % of your portfolio that will be made up with a short term index bond fund.
For the 30% fixed income / 70% equity asset allocation example above (assuming the investor is below 60+ years old) –
- 5% of your overall portfolio would cash
- 5% would be inflation protected securities
- 20% (30%-5%-5%) would be index short term bond funds.
Note: The data is this table is taken from pgs. 350-351 of Malkiel’s famous book,
A Random Walk Down Wall Street. If you haven’t read it, click on the link to the left to pick up a cheap used copy from Amazon.com.
In Part 4 of this series, I take everyone through how to figure out your specific mix of index funds for the equity portion of your portfolio.
Keep on learning!
Jacob
To receive updates on topics such as this one as soon as they are published, click on the link below to subscribe to My Money Blog: