New Money
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Only Have a Little Cash? Here Are 4 Ways to Invest It
Continue reading… 4 CommentsIt's tough to scrape together enough cash to start investing, but even small sums become significant down the road. In this post from TheStreet.com, financial planner Ginita Wall, coauthor of It's More Than Your Money—It's Your Life: The New Money Club for Women, shares ways to invest $500, $1,000, $2,500, or $5,000:
$500: Buy an I savings bond, which currently pays 4.84 percent (the interest rate adjusts on a semiannual basis). At the current rate, she says your $500 will quadruple to $2,000 in 30 years. Savings bonds are a safe place to park your money, but it's worth considering what the purchasing power of $2,000 will be in three decades.
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20 Sustainable Stocks
Continue reading… 0 CommentsLast week, we ran a package of stories on alternative energy, including a guide to green companies—a list of major players, midsize firms, and up-and-comers involved in clean energy. Today, I heard about SustainableBusiness.com's list (published in its Progressive Investor newsletter) of the 20 most innovative companies making progress in greening their operations or developing a clean-technology business. Note that some of these companies don't trade on U.S. exchanges, but a handful do (I've provided ticker symbols):
Accsys Technologies: A U.K.-based company that converts softwoods into a new type of wood with attributes similar to hardwoods
Apogee Enterprises (APOG): Specializes in green building and energy-efficient construction
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What to Do About a Lousy 401(k) Plan
Continue reading… 2 CommentsThere's more to the 401(k) business than you may think. According to CNNMoney's "The Mole," administering a 401(k) plan is expensive, what with record keeping and compliance costs. As a result, some administrators offer low-cost plans to employers that are loaded with expensive mutual fund options. If this is the case at your job, the Mole suggests approaching your employer about changing 401(k) providers and otherwise opening an IRA (after you take advantage of any matching funds offered by your employer).
But how do you know if your 401(k) is subpar? Jeremy at GenerationXFinance, who works as a retirement planning specialist, provides a couple of red flags to help you determine if you're in a lousy plan:
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ETF Picks for New Investors
Continue reading… 5 CommentsI just spoke with Tom Lydon, a financial adviser, blogger, and coauthor of the new book iMoney: Profitable ETF Strategies for Every Investor. Here's his advice for novice investors interested in building an all-ETF portfolio:
For a new investor, it's important to have diversification. Given that we've had a decline in the market, it's a good time to get in. I'd encourage large, mid, small, and international ETFs. From a diversification standpoint, Vanguard Total Stock Market (symbol: VTI) is a fund to consider. It's a good, quick allocation for someone who doesn't want to necessarily have to pick asset classes. The underlying index has a little bit of everything.
Here's the thing about international investing: The world's market cap is two thirds outside the U.S. But here domestically, we have the vast majority of our allocation in the U.S. We are way overallocated domestically, and we should have more allocation internationally. If you want just international stocks, because you're pretty well represented domestically, consider Vanguard FTSE All-World ex-U.S. (symbol: VEU).
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Raiding Your 401(k): the Consequences of Cashing Out
Continue reading… 3 CommentsA whopping 40 percent of workers between the ages of 20 and 40 cash out of their retirement plan when they switch jobs, according to a recent Fidelity survey. Raiding your 401(k) piggy bank can be tempting—what with the shaky economy and the shrinking value of investments—but the consequences are steep.
Fidelity came up with this calculation: A person in the 25 percent federal tax bracket who makes a $50,000 withdrawal before age 59½ will pay federal taxes of $12,500 on that money. Assuming a hypothetical 7 percent state tax, that's an additional $3,500. Then, there's a 10 percent early withdrawal penalty ($5,000 in this case). So, after taxes and penalties, that $50,000 in retirement savings becomes $29,000.
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Surprise: ETF Fees Are Going Up
Continue reading… 2 CommentsExchange-traded funds are known for their dirt-cheap annual expenses, but data from Morningstar show that they're getting pricier: The average ETF now charges 0.54 percent in annual fees, up from 0.41 percent a year ago.
That may seem like chump change, but as the Wall Street Journal points out, if you put $10,000 into an ETF with a 0.54 percent expense ratio that earns an annualized 8 percent over 20 years, you'll have $41,826—about $1,100 less than if you had invested in a fund with a 0.41 percent expense ratio (which earned the same return over that period).
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The 10-ETF Portfolio
Continue reading… 4 CommentsWhen building an ETF portfolio, you could go the all-in-one route or go about assembling a team of sorts. You do this by choosing one fund that invests in large, U.S.-based companies, another that invests overseas, and so on.
Columnist Matt Krantz of USA Today recommends a 10-ETF portfolio, using a core holding of the Standard & Poor's 500 ETF (symbol SPY); an ETF that tracks large-value stocks, such as Vanguard's Large Cap Value ETF (VTV); and ETFs that invest in the following sectors: small companies, small-value companies, emerging markets, international, small-company international, real estate investment trusts (REITs), and bonds. He suggests rounding out the portfolio with a money-market fund.
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Fun Times at Camp Millionaire
Continue reading… 1 CommentWhen I think of summer camp, a few things immediately come to mind: s'mores, campfires, free swim, war canoe, and ranch dressing (I went to camp in Texas).
Things I would never have encountered at camp include budgeting, investing, and lessons on how to improve my credit score. But that's the idea at Camp Millionaire in Santa Barbara, Calif., where campers learn how to rebalance portfolios, invest in real estate, and avoid pesky credit card fees. Over five days, campers set up an economy in miniature with mock currency that kids spend, invest, and use to pay hypothetical bills, according to this story in the Wall Street Journal. (The weeklong session runs from $279 to $300.)
Here's the best part: One kid returned from camp using phrases like "adversely affect your credit score." According to the story, he told his mother that she was racking up unnecessary fees on her credit card and that the mortgage on their home was too high for her income.
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Global Investing in One Tidy Package
Continue reading… 1 CommentYou've probably heard the case for global funds: They're a way to get U.S. and international exposure in one package. You may not know that they come in the form of exchange-traded funds: Last week, Vanguard launched the Total World Stock Index ETF (symbol VT), which tracks 2,900 large and midsize company stocks spread throughout 47 countries, including the United States. It charges annual fees of 0.25 percent.
The ETF, which is based on the FTSE All-World Index, is most exposed to developed markets, including the United States (which accounts for 41 percent of assets). Other developed countries, including the United Kingdom, Japan, France, and Germany, make up 47 percent of the index. (Emerging markets account for 12 percent.) Also worth noting: The index is weighted by market capitalization, which means larger companies receive greater representation.
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Emergency Funds 101
Continue reading… 1 CommentCareful as you may be with your money, unexpected expenses are bound to come along. Money Blue Book recounts a few: a last-minute overseas trip to visit an ailing relative, a tax liability bill of nearly $10,000, and a car breakdown that cost more than $1,400.
If you're not at least somewhat prepared (who is prepared to spontaneously pony up $10,000?), unexpected bills can really sting. That's where your emergency fund comes in. Financial planners will advise you to lock up three to six months' of living expenses and access it only for true emergencies. But it's interesting to learn how this sometimes works out in real life. For example, Money Blue Book's Raymond takes a less stringent approach by using his emergency fund "as a monetary buffer for various out-of-the-norm, over-the-limit type expenses that include necessary car repair charges and unplanned vacation trips." Although he says savings and money-market accounts are ideal, he has also relied on a brokerage account as an emergency fund (not advisable) and a credit card with a zero percent balance-transfer offer (yikes!), which he used to pay off the $10,000 tax bill.
