Portfolio Update: The Latest Chart

"Sometimes you are the hammer... sometimes you are the nail."

Sub-Prime Article

FORTUNE Magazine has an interesting article about the sub-prime mess on page 120 of the October issue.

Specifically, it details Goldman Sachs GSAMP's. Actually, I found it quite interesting and explanatory of the product and packaging side of this messy event.

http://money.cnn.com/2007/10/15/markets/junk_mortgages.fortune/index.htm?postversion=2007101609

Happy reading.

Portfolio Update: Onions Amoung Us makes moves.

Onions Amoung Us had been selling stock; taking profits since early October. However, mid-last week Onions Amoung Us began buying stocks.

This is the current 20 Year portfolio.

Sorry it is so small... please click for a better view.

Happy Investing!

Checking with Interest...

I just saw a commercial from Charles Schwab advertising a checking account paying 4.25% interest.

http://www.schwab.com/public/schwab/home/account_types/brokerage/schwab_one_with_ic.html?cmsid=P-1778106

No minimums when you link to a brokerage account.

While I don't need another broker a checking account with a rate like that is awful tempting.

Might be worth a look for you.


"Strike while the iron is hot."

Fear vs Greed and Market Events

& Onions Amoung Us take thereof...

In the immortal words of Mr Gekko, "Greed is good." And while greed can certainly turn into something good for investors greed is just one of the psychological motivators the markets need to operate as they do. The other motivator being - fear. Both are useful. Both are necessary.

Both tempt or instill, by their very nature, investors to make decisions, either sound or unfounded, either calculated or reactionary.

Greed can be a useful driver for investors. It can create opportunity as well as create the greater fool.

A smart investor seizes opportunity while not succumbing to the temptation of chasing investments at their tops and thereby becoming the greater fool.

And fear, well I've heard a number of times in my life, that fear is just meant to warn you of danger and not to make you afraid.

Taking that into account. Don't let fear scare you away from making prudent investment decisions. Just like greed, fear also creates opportunity.

Of the two psychological factors I've mentioned, I feel, that fear is the strongest. Fear drives people away from their investments and drives down the prices of their investments usually much more expeditiously than greed can raise them.

Yesterday, I heard a man speak about markets and investments. The man manages $30 Billion in assets. Paraphrased, basically he said, don't let the markets or market events scare you. If you invest in sound companies and as long as those companies stay fundamentally sound, you'll be just fine.

I like to follow the money. As long as companies are making money and they are transparent about that then I am not fearful.

Market events, like the current Sub-prime scare, I feel, are just that... Events. Events, that yes, carry with them serious concerns that need to be worked out or worked through, but still just events.

And what do we know now about events that scare... well, they also create Opportunity.

Let's peek back to 1998 for a moment when there was a "scary" event. When LTCM blew up in a confluence of associated events it made quite a mess. It was a big move as you will see in the charts from the April 1998 High of over 9,063 to the 7,539 August 1998 Low.*

But then the charts also show how the markets came back. In four months, the market made a new high! In a year, the markets were even higher!!

Events clear out the junk.

Markets discount everything, they correct, evaluate and consolidate. Then they move on.

Take note of this though... sometimes there are very real reasons for why things are scary. So, please make sure to temper your hunt for opportunity with a realistic assessment of the underlying fundamentals. And, that would mean... it's OK to build a position in cash. That would also mean it's OK to be a Contrarian Investor as well.

That being said... understand and define the investing style that is right for you, be aware and do your research. Most importantly, stay objective and don't let market events over take you emotionally, just let the markets present you with opportunity.

* Note: My chart data is monthly so exact High's and Low's are not portrayed.

Savings

In a previous post I mentioned Emergency Savings.

There are a number of Online Savings account available to meet the Savers needs.

Personally, I use an HSBC Direct savings account. Their current rate is 5.05%. Update: 3.55% APY as of 4 Feb 2008

That's a pretty good rate for only having to deposit just $1 to open the account, no monthly fee and no minimum balance requirement.

It is an Online account. That is how they can afford to pay such a good rate... because there are no tellers involved. That is cost efficient for them and just plain good for us savers.


For me, Online is where I keep my Emergency Savings.

At my brick and mortar bank, I flow enough money through my regular savings and checking accounts to meet my obligations and fund my investments.

After that, the Online rate is just too great to not take advantage of and as I try to build my Emergency Savings anytime I have extra money HSBC Direct is where it goes.

Now, this is something I feel I should tell you. It takes a few days to perform transfers from bank to bank.

In a way, I feel that is good. It makes you think before you raid your savings... hehe.

But, if it really is an emergency and you need your money it will take a few days to gain access; hopefully those days aren't that crucial. So that is something to think about. With a little emergency planning, taking advantage of these higher rates should be doable.

HSBC does offer an ATM withdrawal, but to be honest I don't know anything about how wide their network is... I'm sorry. I will work on that.

If your situation is as such that you need faster access then I'm sure that there is still a place for an online savings account for at least a portion of your savings.

I know it sounds like I am waffling on this a bit. I mean the words, "Emergency Savings" bring with them the connotation of money needed fast to met the needs of an emerging situtation. But, I only know my situation and not yours. I can speak to what I am comfortable with and it's up to you to figure out the comfort level of your situation and hopefully what I say helps with that.

It's just that unless you have a lot of money, Banks just don't pay you a very good rate on your deposits.

Online... you can get a great rate and that great rate will help you build your Emergency Savings faster.

Hopefully, I've at least given you something to mull over. Something that will help you strengthen your financial future.

Happy Saving.

Portfolio Update: CCCXXII sells FDG! & Watch those Closed End Fund payout ratio's.

Checked out my Roth this afternoon and saw that FDG was up nicely.

Actually, it's up over 19% from my last entry point. Seemed like the time to reap profits. So I've sold my entire FDG position. It was good too me... good ol' FDG .

Honestly, I may get back into after it goes back down as long as the payout ratio holds steady.


The reason I mention payout ratios is that these closed end funds can be fidgety and risky and somewhat confounding. Some funds I have followed have had dividend payout ratio go from say 98% up to 135%. Seemingly, without warning. Some factors are, changes in earnings per share and the numbers are in the midst of shaking out (also, pay attention to Forward Earnings projections) or it could be the funds management actually raising the payout. Whatever the case stay on the lookout.

Now, I like dividends... what I wouldn't like is a jump from 98% to 135% in the payout ratio because basically that just results in a return of capital.

I must admit I like my funds with a bit lower ratio but I've made allowances for that high dividend yield as long as it is just that, a dividend and not a return of capital.

Something else to look at in buying Closed End funds are NAV (Net Asset Value.) A fund trading at less that the NAV is discounted. One trading at a price above NAV is trading at a premium.

My Retirement Account's 20 Year Portfolio

Now, I'm not suggesting this is suitable for anyone... Shoot, it may not be suitable for me but it's what I got. And for now, I'm stickin' to it.

These are my thoughts for what will be important over the years coming up to 2027. Crazy, you might say, trying to look so far ahead into the future. Ahead of the curve, well that surely might be true. But, I suppose there isn't any harm in trying.

As you will see, my Fund investments give me great diversification. In my Roth, I try to boost my exposure to certain sectors that I feel are important for the future.

My Roth stock buying list is as follows:

XLV... Health care... I figure the only way to afford health care in the future is to buy the stocks today.

XLK & FDN, Tech Stocks and Internet... Out of favor for a while until lately, I feel they can and will still run.

IAI... Brokers generally make money... up markets or down... eventually they get their cut.

XLE & PBW... Civilization needs fuel/power to advance. I'm covering it by buying Oil Co's and the Alternatives with these two tickers.

PHO... Water... The most important element. Water is such an integral part of our lives... without it... we just wouldn't exist. And with global population increasing the demand for water will continue to rise. These companies will hopefully bring us the water management and control systems that we are gonna need.





Don't mind those risky little positions in the closed end funds. Just trying to spice up my dividend yields... though, I'm not sure it's worth the risk. But we'll see about that... won't we...

"Don't take any wooden nickels."

401k

Recently, I heard the Rich Man, Poor Man guy talk about 401k plans being a trap for the middle class. He talked about it as just being prepared to pay taxes in the future on what you save now.

I dunno... I mean I understand what he meant. He doesn't like to pay taxes and that is understandable. Also, he is an advocate of the entrepreneurial way and that's fine too.

But, what if you don't want to be an entrepreneur? And, what if you are happy in your work and your employer offers a 401k type plan? Well, I gotta say, that you really must participate and contribute at least up to the percentage that your employer matches.

Looking at it like this... No where else, can you instantly double your money. And that's an awfully nice feeling. To know that every paycheck you can turn $50 into $100 instantly. And in retirement, you'll be able to look back and smile.

Looking at it like this... If you are worried about down turns in the market, well, the market has to go down 50% before you start losing "your" contributions. While that's a terrible bearishly pessimistic view, if that's what you need to bring things into focus... go ahead and use it.

Another way of looking at it... Deferring income can save taxes now and some people may qualify for tax credits. (See Federal Form 8880) But, let me make this clear, I am not offering tax advice.

Risk Tolerance: As far as what you invest in, well, that has a lot to do with your time horizon. A younger person can assume more risk. An older person may need to mix in more bonds or perhaps, mostly bonds. I can't determine this for you. After all, I don't have a license. hehe... But hopefully, I can enlighten you a bit and if you need help you'll be able to understand what a professional tells you when you seek their advice.

One way to determine risk tolerance is this... With the investments you hold can you sleep at night? If you can't sleep then you might need to re-evaluate your holdings or get more educated to make sure you understand what you hold.

I can say this... Get Diversified. And if you own a lot of your employers stock, sell some, if at all possible. I'm not saying you have to sell it all but having a large percentage of your wealth tied to one investment can be dangerous i.e. ENRON. So diversify.

To sum up 401k investing... Always take full advantage of the employer match, determine your Risk Tolerance and Be Diversified accordingly.

Now, I know, it isn't always that easy to save some money back but if you can do anything at all do it. And if you get a raise in pay, a bonus or some kind of cash award go ahead and put that towards your future. The time to save for the future is now. Wait... and it will be too late.

The next step: After taking full advantage of the employer match, you might want to consider a Roth IRA.

The experts say, that you should also have an emergency fund. That you should save up an amount equal to your expenses for a certain period of time... 3 months, 6 months. I have to admit that I don't have a fully funded emergency savings account. I've found it pretty hard to do so, but slowly I am getting there. Just keep taking steps to improve your position. Some day, we'll get there. *smile*

Personally, I do take full advantage of my employers match and I have a Roth that I contribute to as well.

But perhaps, the Roth is something for another post.

Happy Investing.

Zecco

Have you ever heard of Zecco Trading?

They are a newer stock broker... not much over a year old or so.

I have an IRA account with them.

To be honest, since they are so new, they have had some technical issues but nothing that has been so bad that it has bothered me.

What's to get bothered about? They offer free stock trades. And a pleasant surprise was the price improvement in their order execution system. While ya can't get price improvements all the time there are times (especially during market volatility) when your order gets executed at a better price than what you specified... i.e. you receive bigger proceeds from a sale or have to invest less on a buy.

So, overall, I've been pretty happy with them.

They do have fees for certain things like most brokers do. IRA fee $30.

Here is the commission schedule:

Minimum Balance	Equity Trades	Options Trades
$2,500 or above	10 free trades/month, $4.50 thereafter	$4.50 per trade + 50 cents per contract
Below $2,500	$4.50 per trade

That's an incredibly low cost for trading or investing and with pricing like that you can easily build a diversified, liquid portfolio.

As of today, I've made 146 stock trades without a commission since May 2007. With my other broker that would have costed $2,182.70. But with Zecco my trading costs were Zero.*

Over the long term, just imagine how saving on trading costs will benefit you in retirement by compounding your savings at just a modest interest rate over 20 years... Let's see, $2k saved per year compounded for 20 years at say 4% = $130,015... that'll stuff your piggy bank. :0)

Zecco Trading... free stock trades


Update: 10-1-2007

*146 trades were made before changes in the commission schedule while the broker offered up to 40 free trades per month.