Money Tips For Life: Financial wisdom for the average Joe.

Helping you make and save more so that you can enjoy the finer things of life!

Monday, April 22, 2013

4 Things to Consider When Choosing Your Online Brokerage Firm

Today, Business Insider posted an article by Mandi Woodruff titled "Online Brokerage Firms Aren't Right For Everyone."  Though I agree with the general ideas mentioned in the article, I disagree with the notion that individuals shouldn't choose an online brokerage firm.

Mandi mentions the following reasons for why an individual investor should be wary:
  1. the number of available online brokerage firms and their offerings can be overwhelming for individual investors
  2. trading fees can eat away your profits with some accounts charging anywhere from $5 to $200 per trade
  3. some online brokerages charge inactivity fees
  4. some online brokerages charge hidden fees for transactions such as transferring your account to another firm
The article quotes Susan Lyons, a senior strategy analyst for NerdWallet Investing as saying "While over 17 million investors have accounts at the three largest online brokerages—Schwab, eTrade, and TD Ameritrade—their financial filings reveal their average customer executes less than two trades per month, for the majority of users, this means they could be saving money on unnecessary fees—to the tune of over $1.8 billion total per year—by investing elsewhere."

I couldn't agree more.

Discount online brokerage firms are a great way for the average (passive) individual investor to be active in the market without fees eating away at their profits.

I recommend that an individual investor consider the following 4 things before choosing a discount brokerage firm:
  1. Does the firm offer a robust mobile trading platform?
  2. Does the firm provide educational resources (how-to articles, company financial reports, streaming news, etc.)?
  3. What are your support options?  Will there be someone to help when you need it?
  4. And last but not least, how long has the firm been in business?
Finding a company that has a positive response to these questions will help you avoid headaches down the road.  I began investing with Scottrade ($7 per stock trade), then moved to SogoTrade ($3 per stock trade), and am currently with a platform I truly love - OptionsHouse ($3.95 per stock trade).  

As Susan rightly states, the point of picking an online discount brokerage firm is "to help you save money - not waste more of it with unnecessary fees."

Note: I chose OptionsHouse because they offer an innovative, customizable, and award winning platform that can compete with the larger firms but yet they have kept their rates low so that the average investor can easily afford it.  If you want to see what they offer, click this referral link to get 100 commission free trades when you open and fund an account with $5,000.

Thursday, January 3, 2013

4 Easy to Use Tools to Automate Your Finances

It is that time of the year again when we are at the heights of optimism and are confident that we can turn over a new leaf and better ourselves. Sadly, after just a little time, most of us find that we simply don’t have the willpower, energy, or resources to stick to our goals. 

Most of us simply quit at this point, but this year, let us break our past patterns, and as a nation, stick to our financial resolutions. To help us do that, I want to highlight some online tools that will make it easier for us to track our spending, monitor our credit score, and invest in the stock market.

The stepping stone to financial freedom is automation and these tools are a great starting point to get you on the right track.

Track your spending:

If you are just beginning your journey to financial freedom, the first step is to keep track of your expenses and create realistic budgets to keep you on track. Back in the old days, this involved keeping track of your receipts but with the advent of PFM software, this can be done automatically for you using tools like PowerWallet and Mint.

These tools allow you to connect your online financial accounts (checking/savings, CDs, credit cards, mortgages etc.) so that you can see the history of all your accounts in one place.  In addition to automatically pulling all your transaction data, they will also automatically categorize the transactions so that you can better understand your expenses and present the information in easy to understand charts and graphs.

Once you understand how money is being spent, you can now setup monthly budgets for each category and track your actual spending against those categories.  
PowerWallet goes a step further than most PFM software and will help create a budget for you based on your expenses.

We cannot change our behavior without first understanding it and PFM software give you the power to plan and the power to organize.

Monitor your credit score:

By now, we are all aware that our credit score greatly impacts our ability to get the best rates on credit cards, mortgages, and auto loans.  A conservative estimate is that lower credit score costs the average consumer $4,500 - $6,000 per year due to extra charges that are assessed solely because of a low credit score.

It is time to fight back and become smart about managing our credit.

With an increase in ID theft, most financial institutions now bundle credit monitoring services as part of their offerings. However, these services generally only monitor for new credit activity and do not give the consumer access to their credit score.

A better and free solution is CreditSesame – a great tool that gives you a complete picture of your credit and loans in one place.  Through their partnership with Experian (one of the 3 credit bureaus) and major financial institutions, they also offer credit score, credit monitoring, and loan and savings recommendations that will save you money.  They also provide great tips on ways to improve your credit score.

Invest in the stock market:

Trying to time the market is the most common approach of many investors. With most
amateur and novice investors losing money in the long run, this strategy is dangerous and costly. A more conservative way to invest is to use an investment strategy called dollar cost averaging, that is, investing the same amount on a regular basis over a specific time period.

The best tool I have found in this regard is Betterment, which allows you to use this approach to invest in a diversified portfolio of Treasury Bond ETFs and Stock Market ETFs while giving you the control over your level of risk.  Betterment allows you to set up multiple savings goals (retirement, college, down payment on a house, etc.) and for each goal, set your level of risk.  The site also offers useful charts to track your progress and gives advice on the best ways to reach your goals.  This is very much a hands free solution for those who want to take advantage of the profit potential of the stock market with as little complication or intervention as possible.

For those who want to get their feet wet trading individual securities, I would recommend a low cost broker like OptionsHouse.  Despite having one of the lowest rates of any online broker, OptionsHouse has an award winning trading platform - ranked by Barron’s as #1 for mobile trading - that includes innovative risk management tools such as the probability calculator (find the likelihood of a stock reaching a specific price) and volatility charts. 

By far the best feature they offer is their virtual trading platform which allows you to use virtual dollars to enter virtual orders, track the simulated performance of your account, and experiment with new strategies in order to hone your trading skills.  This is a great tool for the novice investor who wants to build their trading confidence before putting real money to work. 

I will leave you with this quote by Dave Ramsey:

“Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this.”

Best of luck on your journey to financial freedom in 2013!

Wednesday, January 2, 2013

PowerWallet - YES you can do it all!

Oftentimes it seems that Personal Finance Management software are a dime a dozen with each new comer offering just a slightly different twist.  However, I believe we have a new player in this space who can change the game for good – PowerWallet.

I recently partnered with PowerWallet and believe that their one stop solution to financial management can give them a competitive edge over their competitors.

Company History

PowerWallet was founded by an industry leader, Howard Dvorkin, the founder of Consolidated Credit in response to the Great Recession of 2008 as a means to “give everyday people the tools to help weather the current economic storms and manage their money going forward.”  To make this a reality, they interviewed real people with real financial problems to understand what they can do to help.  The result of those conversations was to build an online PFM platform that was user-friendly, simple, and accessible to everyone.

Competitive Advantage

Like all PFM software, PowerWallet allows you to connect your online financial accounts so that you can see the transaction history of all your accounts in one place.  In addition, each transaction is automatically categorized (you can also change them to your liking) based on the merchant name so that you can keep track of your spending across most common categories. 

What sets PowerWallet apart from their competitors is what they do with your transaction data.

In the past I’ve used my share of deal sites like envaluted, offermatic, and mylinkables and was willing to share my purchase history to get great deal offers.  However, the business models of envaulted and offermatic were not sustainable and they have both gone since out of business.  PowerWallet is attempting to do what these companies have tried and failed by making their product not just a PFM tool but also an integrated and customized deal finder tool.  

They accomplish the goal of finding relevant deals (to places you actually shop or visit) by analyzing your recent transactions and matching it against their database of coupons, discounts, and offers online through their partnership with yipit (my sources have told me that they hope to expand the daily deals network in the near future).  The end result is that not only can you manage your money using PowerWallet but they will also identify daily savings opportunities for you to take advantage of.
Another competitive advantage is that unlike other more popular tools, PowerWallet makes creating budgets easier by automatically showing you what your spending habits have been for any given category.  This helps the user in creating a more realistic budget.  You can also choose whether you want to apply this budget for specific time periods – 3 months, 6 months, 1 year or 2 years.

They have also taken a page from online bill pay services and incorporated storage of bills directly in your PowerWallet account.  From the Bills module, you can directly access your bills from specific service providers.  Once you’ve connected all your service providers, the Bill Calendar will show you all your upcoming payments (including the amount) and from here, you can easily access your provider’s website to pay your bill.

My Summary

It will be an uphill battle for PowerWallet to challenge PFM stalwarts like Mint, Quicken, and Yodlee but I think their approach in integrating multiple solutions into their product can work in their favor.  The only drawback I see at the moment is that they do not have any mobile solutions and that’s a must if they want to survive.

Friday, December 21, 2012

The Gift of Giving

With the holidays just around the corner, most of us are busy working our way down the shopping lists. We go to such great lengths to see a smile on the face of our loved ones that many times we look past the sufferings of others.

This holiday season let us try to bring cheer into the life of someone who needs it the most, with the gift of giving.

Look for organizations in your own town that need support. Most places are looking for volunteers to help out with various tasks. If you do not have the time, you can always donate goods to these places – used clothes, canned goods, ready-to-eat meals. An old plushie that you have no use for can bring joy to a child who has never seen one before.

If you don’t fit in either of these categories, there is another option – the gift of money. There are so many places and people that need the money in these hard times; the homeless, those who lost everything during Superstorm Sandy, those who need medical help but cannot afford to pay for it, local shelters, organizations like Red Cross, Salvation Army, this list is endless. The smallest amount you give will still make a huge difference in the lives of many.

With technology at our fingertips, things are made so much easier for us. All the information we need is obtained at the touch of a button, and the donation we wish to make can be done with another click.

With so many options before us, we can share the true meaning of the holiday season and spread cheer around us with the spirit of giving.

Happy Holidays!

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Thursday, December 20, 2012

3 Investing Lessons from 2012

There are just 11 days left in the year, and like most people right now, I’ve got my eyes set on the holidays and some R&R, hoping to indulge in some good times with family and friends, and, in the process, recharge my batteries as we head into 2013.

However, it’s not all about sleeping in, playing with my daughter, enjoying a cocktail or dueling it out with my in-laws in a game of pinochle. (And by dueling it out, I generally mean scolding my father-in-law for outbidding everyone on every deal, dragging me into crummy hands and then getting set. But I digress. Hooray for in-laws!)

For me, this is the time of year I like to schedule a few free hours, maybe spread out over a few days, to do some post-op on my trading. Honestly, because this is my passion and my job, I’ve already done a bunch of informal analysis during the year; in fact, usually anytime I’m heavily in cash and the market isn’t doing much, I spend some time reviewing trades from the prior few weeks or months.

But year-end is a time for reflection, both in life and in the market. And I’ve personally found that I get a disproportionate number of good ideas from my year-end analysis … probably because I am usually in a more relaxed mood and have more time to ponder how to improve.

Anyway, the bulk of my year-end analysis will occur during the next few days, but I’ve already started the process and, as I said above, I’ve collected plenty of data throughout the year. So since this is my last Wealth Advisory of 2012, I’ll go over a few of the things I’ve learned (or re-learned) this year.

1. In trendless markets, don’t get caught in the middle.

Getting “caught in the middle” means you don’t take partial profits (say, after a 10% to 20% gain) on the way up … but you’re also not willing to sit through a 20% or 25% base-building period over many weeks. Thus, you end up selling after a meaningful decline, leaving yourself no real profit, and often bailing out right before a stock renews its longer-term advance.

Think of it this way—we’ve seen stocks do well, but generally in a three-steps-forward, two-steps-back manner. Thus, you want to either sit through all five steps to develop bigger gains, or at least take some off the table after the first couple of steps on the way up.

Until we enter a trendier environment (and I am optimistic that could happen in 2013), then, it’s probably best to incorporate some partial selling strategies on the way up—say, booking one-third or one-half after you’re up 10% or 15%—or, conversely, practicing patience with winners during a market correction, allowing a few to rebuild bases.

I think I’ve done a decent job of that this year, actually, holding on to some winners like Lennar (LEN) and Equinix (EQIX) through tedious stretches, and even a growth name like LinkedIn (LNKD), which I continue to have very high hopes for.

But I know I’ve also been caught in the middle on a few other names, riding them up and then back down, selling around breakeven, and then watching in agony as the stocks get going again.

“But Mike,” you ask, “how will I know if the environment has changed?” Easy—your results! If you’re finding that, over a month or two, most stocks you’ve sold (or taken partial profits in) continue to kite higher, you’ll know trends are sticking, in which case you should be more inclined to let winners run.

I’m looking forward to that! But in the meantime, it’s best to

2. Rely on your system for less stress, better decisions.

When investing in a world full of uncertainties, it can be both stressful and counterproductive to always be adjusting and anticipating all possible outcomes. What happens if there’s a Fiscal Cliff deal? Or a partial deal? What about Europe? Will Europe have more debt problems next year? What’s up with China? And who’s going to win the Super Bowl?!

Many investors, even those who are experienced, usually spend WAY too much time worrying about every possible outcome, and designing action plans to deal with whatever outcome occurs. Such an effort is laudable; having a plan, after all, is a good thing.

But obsessing over every scenario is stressful and often counterproductive. We used to have a saying in the office: “When you’re confused, turn it over to the rules.” After all, if you have a system, it’s there for a reason—to rely on it! And by doing so, not only are your decisions usually better, they’re easier to make.

The bottom line is that year-end is a great time to develop or further tweak your system. Of course, if you subscribe to any of my publications, you’re welcome to piggyback on our own methods!

3. Don’t get pigeon-holed when picking stocks.

What I mean by “pigeon-holed” is that too many investors stick with the familiar when it comes to picking stocks—if you’ve had good luck with technology stocks, you tend to focus there. If you’ve had success with companies growing revenues at triple-digit rates, you focus on those. And so on.

But what I originally learned in 2009 is that you have to adjust to what the market is offering. Back then, I was used to buying stocks with big earnings growth that were hitting new 52-week highs. But guess what—after a 50% market decline, few stocks were near 52-week highs, and because of the Great Recession, few had big earnings growth. There were some, but I could have done much better by looking at so-called “bottoming bases” and getting onboard.

Thankfully, I used that lesson somewhat this year, at least in the sense of not being pigeon-holed. Housing stocks looked very interesting a year ago at this time, even though their sales and earnings figures were lackluster and they weren’t true growth stocks. Nevertheless, I added Lennar to the Cabot Market Letter Model Portfolio in mid-January. It’s been a great winner for us and I’m optimistic that it has a lot further to run.

The point is that you should definitely stick to core principles—to me, that means a strong stock with outstanding volume that also has a “ruling reason” to go up meaningfully in the months ahead—but realize that every year is a bit different in terms of what institutional investors will favor.

As I said above, I’ll be doing more post-op work during the next couple of weeks, but these three points are things I’ve already learned. If you do your own analysis, I’d love to hear some new rules or tools you’ve learned. I hope to share some of them in a future Wealth Advisory.


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As for the market, it’s looking better and better. Part of me thinks that if Washington strikes a deal, the last of the major uncertainties will be taken away. (The others include Europe, whose markets are acting stronger than the U.S., China’s growth, which is re-accelerating, and the Fed, which has telegraphed future easing for many quarters to come.)

All of this could lead to a more sustained bull move than most investors expect. Heck, in my view, most investors don’t expect any bull move at all. As usual, I won’t predict what comes, but the evidence in front of me gives me reason to be optimistic.

My stock idea for today is something I haven’t officially recommended for at least a couple of years, but it’s been on my watch list for a while. It’s Oasis Petroleum (OAS), a small ($590 million in annual revenue) oil explorer that’s raking in the dough in the Williston Basin, one of the more lucrative areas in the Bakken (located in North Dakota and Montana).

And the company is growing like mad! In the third quarter, total production was up 109% from a year ago, with a 78% gain expected for the fourth quarter. Meanwhile, cash flow soared 121% to $139 million, and there’s likely much more where that came from—management believes it has about a decade of inventory wells to be drilled, so it’s going ahead with an aggressive program.

But what impresses me is that this isn’t just about production. Management saw that well costs were skyrocketing, and so it set up its own well services division, and that has made a huge impact—the average cost to drill and maintain a well has dropped 16% since the start of 2012, and the top brass believes another 5% to 10% reduction is possible next year.

Combine those lower costs with more wells and stable-to-rising oil prices, and you have a recipe for a big winner.

What about the stock itself? OAS came public in mid-2010 and had a great run, advancing from 14 to 36 by February 2011. But that was the top! And since then the stock has been bobbing around in a gradually tightening range; it fell to 18 in the summer of 2011, to 22 during this past summer, and recently, to 28, as the market suffered through a two-month correction.

However, this latest pullback has been tight and quiet; OAS has been sitting in a 15% range for 14 weeks! To me, it looks coiled, and all I’m waiting for is a big-volume thrust above 33 to start a position. Keep an eye on it!

--- For the latest stock tips from the Cabot family of newsletters, click here.

The original article by Mike Cintolo can be found here: 3 Investing Lessons from 2012

For more information about wise investment strategies, see related article: How to invest in the stock market without gambling

Wednesday, November 28, 2012

The simplest way to invest – just use Betterment

Recently, I gave a close friend one of the most passionate speeches of my life.  You might think it was about sports, politics or religion but instead it was about how much I’m in LOVE with Betterment – the best investment tool I’ve found… and it’s poised to revolutionize the industry!

Betterment describes itself as “the fully diversified, automated, and smart investment account that helps you feel good about your future” and I couldn’t agree more.  The product is pure genius and by far the simplest and safest way to invest.

I will post a full review in a few days but here are a few reasons why I’m in LOVE with Betterment:
  •  Free (and simple) to open an account
  • Well designed website – it’s easy to navigate and has some great charts to help you with your asset allocation
  • ETFs vs Stocks – rather than investing in individual stocks (greater risk), you invest in a mix of stock ETFs and Treasury bond ETFs.
  • Low fee – free to open and try for 30 days, but afterwards, they charge a small fee ranging from .15% to .35% of your account balance.
  • No minimum balance – you can invest how little or how much as you want with no additional fees
  • Dollar Cost Averaging – the product teaches you to invest automatically on a regular basis.  To me, this is how everyone should be taught to invest and makes good financial sense.
  • Protected by SIPC and regulated by FINRA/SEC– your money is safe from fraud
  • Excellent management team – the bio (found on the website) of key management team members is very impressive.
  • Revolutionary – since 2010 (when they opened their doors), they have consistently evolved their product offerings and come up with new and innovative ways to help people invest better and smarter.
Get a $25 Account Bonus when you sign up for Betterment. Start now!