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Where to Stash $5,000: ETF or Mutual Fund?
Tweet Share on Facebook November 12, 2008 Comment (1)If you're thinking about taking the plunge into exchange-traded funds, the biggest question you should ask yourself is how frequently you plan to contribute. That's what Jim Wiandt, editor and publisher of the Journal of Indexes, tells me.
"A good general rule is if you're putting in $5,000 or more, you're often going to be better off with the ETF structure," says Wiandt, who is also publisher of IndexUniverse.com. That's because transaction fees add up, especially when you're contributing in regular intervals.
With ETFs, there is no minimum investment, so you can buy a handful of $15 shares if you choose. You could even buy a single $15 share, but you're going to shell out roughly that amount in brokerage fees for the transaction. The idea is that the more money you contribute, the milder the brokerage bite. And these days, you can find a discount brokerage that charges low--or no--fees. But to get the no-fee benefit, you have to either maintain a set balance (as with Zecco), or have a particular amount in bank deposits or a combination of bank and loan deposits (that's the case at Bank of America and Wells Fargo.)
You can read about my experience with ETF investing here.
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Big Shots Feeling Financial Pain: Buffett, Harvard, and the Millionaires-Only Yellowstone Club
Tweet Share on Facebook November 11, 2008 Comment (1)Your 401(k) is probably looking pretty pitiful. But it might give you a little comfort to know that it's not just you—even investing gurus and big-shot CEOs are feeling the hurt. According to DealBook:
So far this year, the average decline of the corporate stock holdings of CEOs at 175 large U.S. companies is about 50 percent.
The equity value in Buffett's Berkshire Hathaway is down about 22 percent.
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Why Stocks are Up on a Dreary Jobs Report
Tweet Share on Facebook November 7, 2008 Comment (2)Stocks seemed to shrug off the ugly jobs report this morning (by mid-morning, the Dow was up 144 points.)
How bad was the jobs news? According to Economix, the share of working adults (61.8 percent) is at its lowest level in 15 years. "And even that, arguably, understates the depth of the problem. Fifteen years ago, women were less likely to be in the labor force than they [are] today. The share of adult men with jobs, which has been gradually falling for much of the last few decades, is now at its lowest level since the Labor Department began keeping records in 1948."
So why are stocks up? The jump could be a bounce back from the steep stock declines of the past two days. And although payroll losses (240,000 in October) exceeded the Wall Street's expectation of 200,000 jobs, the WSJ notes that some analysts were increasingly bearish heading into the report. To top it off, traders are out trolling for bargains.
Speaking of bargains, check out my story this week on investing for cheapskates.
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Direxion's ETFs on Steroids
Tweet Share on Facebook November 6, 2008 Comment (7)Some say investing is essentially gambling. Even those who disagree might change their minds after reading up on Direxion Funds' new crop of ETFs, which magnify bets for or against an index using 300 percent leverage (other fund families offer the double-down option of 200 percent leverage, but Direxion is the first to up the ante.)
Consider two of the funds: the Large Cap Bull 3x Shares and the Large Cap Bear 3x Shares, which both use the large-company focused Russell 1000 as a benchmark. As the WSJ points out, if the Russell 1000 rises 2 percent in one day, the Large Cap Bull fund is designed to rise 6 percent (minus expenses). And if the Russell 1000 falls 2 percent in one day, the Bull fund loses about 2 percent.
Clearly, the funds aim to deliver supersized gains, but they'll also produced supersized losses--and in a bumpy market, expect them to bounce around like pinballs.
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Whole Foods: Busting the 'Whole Paycheck' Image?
Tweet Share on Facebook November 6, 2008 Comment (3)I live across the street from Whole Foods, and needless to say, that's where I spend a good deal of money—so much that the store might as well take an automatic deduction from my paycheck. Usually, I turn to Whole Foods for things like tofu and seitan for my vegetarian significant other, produce, and craft beers that are hard to find anywhere else. Although my intention is to shop for the bulk of my groceries at a regular store, I inevitably go the lazy route and end up buying a $6 bag of chocolate chips.
So naturally, I'm interested in how their “Whole Deal” program is working out. The store has been under the gun in this weak consumer environment, so they've been pushing the idea that they're budget friendly, using shopping-on-the-cheap tours of the store and free recipe books that incorporate some of their less expensive products.
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Google to Yahoo: It's Not You, It's Me
Tweet Share on Facebook November 5, 2008 Comment (2)Google's search advertising deal with Yahoo is finito, Google said in a blog post this morning:
After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement.
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Stock Picks for an Obama Portfolio
Tweet Share on Facebook November 5, 2008 Comment (2)Obama's big victory certainly doesn't ensure a quick turnaround in the stock market, but it bodes well for a couple of sectors.
Jim Cramer thinks Obama's reign as president will be good for the agriculture sector, as he's a big backer of ethanol and farming. Specifically, Cramer likes Deere, the stock of which has dropped from nearly $80 a year ago to $43.
James Altucher, managing partner at Formula Capital, favors agriculture as well—including "dirt cheap" stocks Mosaic, Potash, and KBR. He also says infrastructure stocks stand to gain as well on Obama's pledge to support spending on roads and bridges, but he is less enthusiastic about biotech and healthcare stocks.
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Reserve Primary Fund: A Money Market Nightmare
Tweet Share on Facebook November 3, 2008 Comment (5)The Reserve Primary Fund, which violated the sacred code of money market funds in September when it "broke the buck" (more on that here), is now distributing checks to shareholders. Each investor is getting back only 50 percent of their current account balance. The president of Reserve Management—the fund's adviser—said this is an initial step in the process of liquidating the fund and that they're "committed to making future distributions when more cash becomes available."
After it hands out $26 billion to shareholders, the Reserve Primary will have roughly $25 billion in assets. It had been worth $64.3 billion at the end of May, according to this story. In the next couple of days, the fund plans to post its plan for the total liquidation of assets.
Needless to say, customers are angry.
