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How America's Cheapest Family Invests
Tweet Share on Facebook December 18, 2008 Comment (4)Steve and Annette Economides, along with three of their five kids--"The Cheapest Family in America"--were on the Today show this morning, talking about how they manage to live on $44,000 a year, debt-free and in a fairly cushy neighborhood.
Hearing about their exhaustive bargain-hunting was interesting, but I kept wondering if--and how--they invest. I couldn't find anything substantive in previous interviews with the clan, so I walked down to the bookstore to check out their book.
Investing is mentioned in one chapter near the end of the book, but the Economides mainly focus on the importance of an emergency fund. Their idea of investing for the future involves first paying off debt, then paying off cars and saving for a replacement, followed by building an emergency fund, considering your insurance needs, paying off your house, and--at the bottom of the list--investing in an IRA or 401(k).
For a book whose title touts "Cashing in on Your Dreams," I was surprised at the lack of space devoted to saving for retirement. As for their own investments, the couple only says that they stick to conservative mutual funds.
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McNabb Calls Current Market Environment 'Vanguard Weather'
Tweet Share on Facebook December 18, 2008 CommentBill McNabb, the coach-flying optimist who took over as Vanguard's president and chief executive in August, describes the current market environment as "Vanguard weather," according to American Banker.
According to McNabb, Vanguard's number of new accounts increased during two of the most turbulent months this year, September and October. He also said buys outnumbered sells by 2 to 1 in the brokerage business, and 80 percent to 90 percent of individual investors stuck to their investing strategy.
Vanguard was one of the few mutual-fund giants that saw more investors streaming in than out in November. Inflows were $2.1 billion for the month, versus outflows of $5 billion in October, according to this story. Increasing interest in Treasury funds was likely a big booster.
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The 20 Worst-Performing Industries of 2008
Tweet Share on Facebook December 18, 2008 Comment (25)Industry trends tracker Sageworks just released a list of the worst-performing industries over the past 12 months, measured by sales growth:
- Sawmills and wood preservation
- Lumber and other construction materials merchant wholesalers
- Offices of real estate agents and brokers
- Activities related to credit intermediation
- Cement and concrete product manufacturing
- Motor vehicle and motor vehicle parts and supplies merchant wholesalers
- Taxi and limousine services
- Nondepository credit intermediation
- Florists
- Other wood product manufacturing
- Building material and supplies dealers
- Furniture stores
- Furniture and home furnishings merchant wholesalers
- Veneer, plywood, and engineered wood product manufacturing
- Drycleaning and laundry services
- Drugs and druggists' sundries merchant wholesalers
- Residential building construction
- Radio and television broadcasting
- Ship and boat building
- Automotive equipment rental and leasing
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A Ponzi Scheme Red Flag
Tweet Share on Facebook December 17, 2008 Comment (1)Here's the most-repeated tip I heard while talking to sources for this story on How to Avoid a Ponzi Scheme:
Understand the difference between a manager and a custodian. A custodian, which would include the Fidelitys and Charles Schwabs of the world, is in possession of your investment account and issues periodic statements of transactions. The manager of assets (your financial adviser) executes those transactions. "A lot of people fail to understand why it's important to separate these functions," says Kochis. "Frauds almost always occur when those two things are put together." In other words, look out for an investment manager who wants complete control of your money and asks that checks be made out to him or her. You can sleep tight if your funds are in the custody of a broker-dealer firm regulated by the Financial Industry Regulatory Authority and backed by the Securities Investor Protection Corp. But make sure you receive at least quarterly statements, says Mickey Cargile, founder and managing partner WNB Private Client Services, which is based in Midland, Texas. "The key is that you get it directly from the custodian and not from the adviser."
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Afternoon Buzz: Apple Fans, Analysts Freak Out
Tweet Share on Facebook December 17, 2008 CommentNews that Steve Jobs wouldn't be delivering his annual keynote at the Macworld show sent shares of Apple's stock down 7 percent today. One analyst (Piper Jaffray's Gene Munster) thinks Jobs will soon be replaced. And Oppenheimer analyst Yair Reiner downgraded the stock today on concerns stemming from Jobs' pullout, to "perform" from "outperform." That follows downgrades by Goldman Sachs and Calyon Securities analysts earlier this week.
Here's Silicon Alley Insider's list of possible reasons Jobs is bowing out of his Stevenote (I prefer No. 3):
- Apple is just phasing out trade shows.
- Apple wants to let other executives share the limelight.
- Steve just wants to pop out of a cake or something and stun his adoring fans.
- Apple, Steve, and Macworld are having some sort of business dispute.
- Apple expected to have an exciting product or two to announce, but it has now realized that they won't be ready.
- Steve is sick.
Speaking of Mac, New York Governor David Paterson is pushing an iPod tax.
So...does the Fed rate cut mean you and I can get a zero-percent loan? In at least one case, yes, but it's no free lunch.
Which leads me to: LOLFed.
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Investing Goodies: 2008's Biggest Financial Fiascos
Tweet Share on Facebook December 17, 2008 Comment (15)The Consumerist revisits the year's biggest financial snafus, which include some that are surely fresh on your mind, and others you may have forgotten, such as the time Countrywide honcho Angelo Mozilo replied to an email from a distressed homeowner, and calls his plea "disgusting."
After Yale disclosed that its endowment has fallen more than 13 percent between the end of June and the end of October, the university announced that it's going to do some belt-tightening.
Zipcar's getting more competition. Hertz is rolling out a very similar service, which will initially be available in New York, Park Ridge, N.J., London, and Paris, and it'll offer fun cars like the Toyota Prius and the Mini Cooper. I wrote about Zipcar's successful business model earlier this year.
And finally, here's why investors responded to yesterday's Fed rate cut with an "Eh."
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Snazzy Financial Services for Gen Y
Tweet Share on Facebook December 17, 2008 Comment (5)How do you track your spending? A former roommate of mine meticulously recorded each penny she spent in a plain old notebook. I tried that, but didn't stick to it. I also experimented with Excel spreadsheets and Microsoft Money, but just couldn't commit. Today, I just log onto my accounts online to get a ballpark figure of how much I've spent.
I'm not the only one who's lazy: According to this story in the WSJ, lots of us track their finances online. Not surprisingly, lots of free sites are popping up and angling to capture the Generation Y audience, such as Mint.com, Rudder, and Thrive (the last two, I've never heard of.)
Established banks and other financial firms are also trying to draw in Gen Y customers with jazzy like including social networking and blogs. Wachovia's on Twitter. PNC offers a checking- and savings-account service called "Virtual Wallet," where customers can use a tool that separates their money into three segments: checking-account money for bills, spending money, and money for savings. I actually have an account with PNC, but am obviously out of the loop. Maybe that's because I'm too GenX.
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Funds for Tough Times: Forester Value
Tweet Share on Facebook December 16, 2008 CommentSo far this year, not a single diversified stock fund has made money. Most have gotten creamed: According to Morningstar, the average loss for funds that invest in the United States is 42 percent, and, for those that invest internationally, 50 percent. Here's a look at relatively conservative stock funds that produced positive returns during the last bear market (March 24, 2000, through Oct. 9, 2002) and have been holding up better than their peers so far this year.
Forester Value (FVALX). Risk-conscious investors, listen up: In its history, Forester Value has lost money only in 2007, when it dropped 5 percent. It's down just 3 percent so far this year, which makes it the second-best performing U.S. stock fund (behind Embarcadero Alternative Strategies). The fund built up its cash stake earlier in the year, but recently, just more than 15 percent of its assets were in cash. Healthcare and food stocks make up Forester's top five, among them Johnson & Johnson and Kraft Foods, which have both held up relatively well in 2008.
2000-02 bear market return: 5 percent
2008 year-to-date return: -3 percentMore funds for tough times:
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Funds for Tough Times: Berwyn Fund
Tweet Share on Facebook December 16, 2008 CommentSo far this year, not a single diversified stock fund has made money. Most have gotten creamed: According to Morningstar, the average loss for funds that invest in the United States is 42 percent, and, for those that invest internationally, 50 percent. Here's a look at relatively conservative stock funds that produced positive returns during the last bear market (March 24, 2000, through Oct. 9, 2002) and have been holding up better than their peers so far this year.
Berwyn Fund (BERWX). Another solid choice for a small-company fund, the tiny $115 million Berwyn fund has a strong value bent. The managers buy stocks trading at deep discounts to expected earnings growth, and they aren't afraid to trim back on positions that have sharply appreciated. Recently, the fund's top holdings included several companies that have posted positive (or near positive) returns so far this year: Suffolk Bancorp, FPIC Insurance Group, and Granite Construction.
2000-02 bear market return: 6 percent
2008 year-to-date return: -31 percentMore funds for tough times:
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Funds for Tough Times: Royce Special Equity
Tweet Share on Facebook December 16, 2008 CommentSo far this year, not a single diversified stock fund has made money. Most have gotten creamed: According to Morningstar, the average loss for funds that invest in the United States is 42 percent, and, for those that invest internationally, 50 percent. Here's a look at relatively conservative stock funds that produced positive returns during the last bear market (March 24, 2000, through Oct. 9, 2002) and have been holding up better than their peers so far this year.
Royce Special Equity (RYSEX). In general, small-company funds don't offer much by the way of safety, as small companies are riskier than their more stable, large-company brethren. But this fund isn't a bad choice for investors looking to fill that hole in their portfolio. Managed by Charles Dreifus since 1998, Royce Special Equity sticks to a disciplined strategy, which reflects the philosophy of legendary value investor Benjamin Graham. Dreifus buys companies that have a high return on capital, and he makes sure not to overpay. He also takes a skeptical eye to company balance sheets and sells stocks when he thinks they're fully valued.
2000-02 bear market return: 19 percent
2008 year-to-date return: -23 percent
More funds for tough times:
