While investors cannot know everything about any given investment — predicting the future isn’t easy — investors should know enough to have reasonable forecasts about the future.

Stocks are representative of ownership in a business — an organization with suppliers, customers, employees, buildings, and office furniture.

Finding a good stock means finding a good business that is priced at a reasonable valuation. Here’s how to evaluate companies before purchasing their stock.

Sourcing Vital Information

The best way to evaluate a company is to work with source documents. I’m not talking about analysts’ commentary or posts on SeekingAlpha. I’m talking about the nitty-gritty SEC documents that companies must file as a public company.

The key SEC documents are:

• 10-Ks and 10-Qs: Each year a company will file a 10-K (also known as an annual report) and three 10-Qs (which are quarterly reports). These reports can span hundreds of pages, but they contain some of the most vital information for an investment decision. Besides the raw financial data in financial reporting, pay particular attention to the “management discussion and analysis” section, which contains information about the business from the perspective of key insiders and managers.
• DEF 14-A: This filing is a proxy statement which contains information on the board of directors, major shareholders, and upcoming votes in which shareholders can participate. You should collect the names of directors from this document and Google them for any biography, or other information you can find. You want to make sure that managers have a history in this particular business or industry before investing. You’ll also want to take note of the major shareholders, and what their interest might be. If you run into Carl Icahn in a DEF 14-A, you’ll absolutely want to know what this activist investor has in store for the company you’re evaluating.

There are also other documents that are not sent to the SEC. Larger companies will prepare an earnings presentation when they report quarterly earnings, then post it on the investor relations portion of their website.

Use this information to get a better idea of exactly what the company does, where it’s growing, and how it intends to make decisions in the future. SeekingAlpha also logs transcripts of conference calls, which can be used to get a feel for what the business’s managers see for the company in the future.

Competitive and Business Analysis

The single biggest risk to any business is that of competition. Any thorough analysis is one which surveys information on your potential investment, but also the information of key competitors.

For example, you shouldn’t buy Coach without understanding Vera Bradley. You shouldn’t buy Anheuser-Busch InBev without understanding Molson Coors.

The best way to understand a very big company is by breaking it down. Anheuser-Busch InBev isn’t just Bud Light. It’s a globally diversified company that sells in markets ranging from Mexico to Brazil and China with hundreds of adult beverages in its portfolio.

A proper analysis is one which breaks down the company into several different units. For example, it’s slow-growing American business should be viewed separately from its fast-growing business in Latin America.

You’ll want to look at a business as if you were the sole owner and customer all at the same time.

Ask yourself:

• Can I really understand this business? (This question alone can save you thousands of dollars and hour and hours of research. I know nothing of the pharmaceutical business – I’m no doctor – so I avoid it at all costs.)
• Why would I buy this company’s product?
• Why is this company’s product better than its competition?
• How does this business maintain an edge over other businesses in its industry?
• How does this company’s sales move with the economy?
• Where does the company position its product? Is it a low cost leader or a premium brand?

You should also question the quality of the management:

• What do the managers really care about?
• Are they experienced in this particular industry?
• Do the managers have a significant stake in the company’s stock?
• How are managers compensated? Do they earn based on sales? Net income? Or are they compensated based on returns on the business’s investment dollars?
• Do managers want to be the best at one thing, or mediocre at several things? (Focused management is key!)

Goal: Crush Your Dreams

Every business looks great on paper. Every investment opportunity looks like a multibagger just waiting for your investment. But the goal of any analysis should be to destroy your reasons for owning a business. It should compel you to avoid an investment, not make one.

The best investors are those who can be most critical of a business and, after being so critical as to try to kill the idea, if the business still looks good, then its an investment worth making.

Remember, there are more than 3,000 companies in the Wilshire 5000 index. You don’t have to buy the first business that strikes your eye.

How to Evaluate Companies Before Purchasing Their Stock is from Investor Junkie Copyright © Empowering Media, Inc.

This review has been updated for 2013. We’ve tested SogoTrade since mid-2007. The firm has been ok throughout this entire time period, especially considering that it has changed ownership recently from Genesis Securities to Wang Investments.

SogoTrade seems great if you are just trading with stocks and ETFs, but with mutual funds it’s not recommended.
If you are a passive investor SogoTrade is definitely not right for you.

Since Vanguard Investments is without a doubt the low-cost leader in index funds of this nature, and might be a better option. Active traders are a better fit to SogoTrade’s pricing model. Though low in option pricing, SogoTrade lacks the features an options trader really needs.

Let’s discuss the various characteristics and features of SogoTrade.

SogoTrade Account Options

To date, the only type of account we’ve tested with SogoTrade.com is an individual, taxable stock trading account. However, SogoTrade offers the following types of accounts from which a person can choose.

• Individual, taxable trading accounts
• Traditional and Rollover IRAs
• Educational Savings Accounts (ESA’s)

SogoTrade Investment Options

Within my individual, taxable trading account (mentioned above), I have only so far invested in individual stocks and ETF’s. However, SogoTrade.com offers the following selection of investments from which to choose.

• Stocks
• ETFs
• Margin accounts
• Fixed income (bonds) and CDs
• Money market mutual funds and regular mutual funds
• Stock/ETF options

SogoTrade Fees and Commissions

As is often the case in today’s investing environment where we seem to have many different brokerages competing for our business/money, the fees, commissions, and account minimum details are really what drive people’s decisions about which investing house to go with.

Listed below are the all-important fine-print cost details for SogoTrade.com:

Sogotrade does have options to lower trades to as low as $3 per trade. One option is to pre-purchase 20 trades. The other method is perform more than 50 trades per month, and you automatically get $3.00 per trade.

There’s no recurring/periodic account maintenance or inactivity fees on individual, taxable accounts. If you want a paper statement it’s $5 month, and free to receive online. IRA account unfortunately have a $30 annual IRA fee, but there’s no fee for opening an IRA.

Visit their web site for the complete listing of SogoTrade’s fees. They also feature a very nice comparison of their fees to other major brokerages.

Online Account Interface and User Experience

Overall, SogoTrade’s online account/user interface offers the tools you need to execute trades without many added bells-and-whistles (which is what you’d come to expect from a low-cost leader in online stock trading).

Once you fill out all of the account sign-up forms and log in to your account, you’ll see a screen like the one in the image pasted below. Shown on this “starting” screen are the normal account details one would expect to see, including your cash balance, market value of your holdings, amount of cash you have available for trading, and total account equity. The screen also shows the current status of any open stock trading orders you have as well as a snap-shot of your portfolio positions and the market value over time of your total portfolio.

In order to get a more detailed view of what’s going on with your portfolio holdings, you can navigate on the “start” page to the “account” drop-down menu and click the “account positions” menu selection. When you do this, a screen similar to the one in the image below appears.

Along with showing the normal investment holding details (ticker symbol, price per share, no. of shares, total purchase cost, market value, and % and $ value gain/loss), one fairly interesting feature of this tool is that it displays a pie chart that shows a breakdown of your portfolio by long and short positions. As you can see in the screenshot below, I don’t currently have any short positions, however, this is a very useful tool to quickly capture the overall components of your portfolio.

Another important SogoTrade online account feature that I almost always have to use at tax time to tally up my stock gains/losses each year is the “account history” menu feature. An example of what this feature looks like is shown below. Using this feature, you can look up your stock purchase, dividend, commission, and selling records from a two year period.

Summary

On the positive, SogoTrade is currently the lowest brokerage available, though you have to be a frequent trader or prepay for trades.

However, being a low-cost leader in stock trades, do not expect a lot of extra “bells-and-whistles” or help researching which stock to buy. SogoTrade assumes that you have done this research independently. Options traders might want to look at OptionsHouse or optionXpress as more feature filled alternatives.

Additionally, SogoTrade is not the best/lowest cost option for purchasing mutual funds. If you are looking to invest in that type of security, we would recommend another broker. In addition, with many commission free ETFs available at other firms, can save you considerable transaction fees as well.

For an IRA, SogoTrade is not recommended. There are many other low cost brokers like TradeKing that don’t charge for maintaining an IRA account.

Rating: 3 out of 5

SogoTrade Review – The No Frills Stock Broker is from Investor Junkie Copyright © Empowering Media, Inc.

Here’s what I’m reading this weekend:

Pimco:  Everything Is Expensive and We’re Probably Heading for Another Recession:  Forbes  According to Pimco, the immediate economic future looks bleak.  Included are some of the best bets for investing in this environment.

Whole Foods CEO John Mackey on ‘Rebranding Capitalism’:  Barron’s  Mackey offers capitalism with a conscience.  Do you agree?

How America Lost Its Way:  WSJ  Strong argument about how to improve America’s position and support entrepreneurs.  Chance are, you probably agree with the author.

Google Glass Banned from Shareholder Meeting:  Yahoo! Finance  Google Glass has the potential to invade others’ privacy in ways that we’ve not yet seen.  Case in point, Google wouldn’t allow Google Glass into their shareholders’ meeting for fear of a breach in privacy.

Downside of Entrepreneurial Success:  TwitPic  Planning to sell your business?  Here’s what you need to know before and after the sale.

Weekend Reading for June 15, 2013 is from Investor Junkie Copyright © Empowering Media, Inc.

Investing involves taking on a certain amount of risk, and how well you can handle that risk will depend on your situation. Before investing for the first time, there are a few things you will need to consider.

Make sure you can live on your paycheck.

There’s one very important fact to be aware of when you invest money: the money that you put into your investments will not be available for spending. You need to live on your current paycheck — less the amount you are allocating for investing.

Basically, you have to live within your means, and to do so will require that you have some sort of budget set up that will enable you to live on less money.

If you’re accustomed to spending 100% of your paycheck to pay bills and other necessities, you’ll have to find the money needed to invest and to do it on a regular basis.

Have some money set aside that you be invested.

No matter how enthusiastic you are about investing, some of your money should always be held someplace that’s completely safe. You will be taking risks with the money you are investing, so some of it must be held in a risk-free status.

For beginning investors, the best place for this cash is in an emergency fund. You can hold it in a savings account, money market fund or very short-term certificates of deposit (CD’s) — since all are both safe and highly liquid.

The idea is to have money you can get your hands on in an emergency, so you don’t need to liquidate investments to raise the necessary cash.

Keep your debts to a minimum.

You might have a mortgage and/or a car loan, but you will need to keep your debt to a minimum before investing.

Here’s the thing — if you are trying to invest money to grow your investments, you are largely defeating the purpose if you owe a substantial amount of money in credit card debt at 10% interest or higher. The money you make on your investments is being paid back to the bank, to pay your credit card interest. That’s like putting the money into one pocket, only to pull it out of the other.

In addition, the less debt you owe, the more money you will have available to put into savings. And taking it a step further, paying off a credit card with a 10% rate of interest is like locking in a 10% investment return forever.

Paying off debt is one of the best “investments” you can make, and a guaranteed one at that!

Educate yourself before taking the plunge.

Before investing any money, spend some time learning how to do it. Sure, you can invest in mutual funds and exchange traded funds so that the money will be managed by professionals.

But you still need to learn about portfolio allocations, market risks and at least enough investment terminology to be conversant.

Even knowing just a little bit about investing will help you to ask intelligent questions. And that’s important because ultimately, you are the one who is responsible for your investment success or failure.

The more you know about investments, the more money you’ll make and the more successful your investments will become.

Understand your personal risk tolerance.

Before investing a single dollar, you first need to seriously consider your risk tolerance. In order to be successful, you will have to invest at least some of your money in the stock market. How much will largely depend on how much risk you can take on and still sleep at night.

You can manage risk through diversification, and that will minimize your exposure. But you will still need to get comfortable with some level of risk, and that’s often done gradually.

Dollar cost averaging is one of the very best ways to move into the market gradually, helping you build and develop your risk tolerance as you do.

Set the proper expectations.

It’s critical to understand that investing isn’t remotely related to get-rich-quick. In fact, it’s far more closely related to getting rich slowly.

You need to grasp this concept so you don’t become frustrated and give up on investing because you aren’t doubling your money every year. You’ll especially need the perspective for those times when the markets are in decline mode and pulling your investments down.

Think of your investments as an eventual replacement of your employment income, not as a quick path to riches. There will be some years when your investments will do really well, and others when you may find yourself wishing you had it all in a passbook savings account.

You’ll need patience through it all, and after many years you’ll be handsomely rewarded for your efforts. Only the right expectation will allow that to happen.

Get all of these factors working in your favor, and you’ll be already to hit the ground running with your investments.

6 Important Things to Consider Before Investing is from Investor Junkie Copyright © Empowering Media, Inc.

1. Bonds

When you aren’t planning on investing in stocks, one of the time-honored alternatives is bonds. You can keep your principal (relatively) safe with bonds, and earn interest.

Many investors turn to government bonds in times of economic uncertainty, since they are considered the next best thing to a “sure” thing. If you want a higher yield, and are willing to take on a little more risk, you can consider emerging market bonds.

2. Annuities

Yes, we’ve heard a lot about how annuities can be a nightmare — and without a doubt they can be. However, there are some annuity products out there that aren’t so bad.

With the right annuity, you can plan for regular, reliable income (assuming you trust the insurance company selling the annuity). Your investment won’t see a lot of growth, but it will enable you to receive a regular chunk of income when you’re ready for it.

Before you invest in an annuity, though, do your homework. Annuities are known for fees, as well as for beneficiary snags and potential tax issues.

3. P2P Loans

An increasingly popular investment option is P2P (peer-to-peer) lending. You can use P2P lending as a way to earn interest on your money — and usually at a better rate than bonds or cash.

In some cases, particularly during an economic downturn, annualized returns from P2P loans can even beat stock market returns.

However, you still run the risk of loss. If the borrower defaults on the loan, you could lose your principal. But with a little careful probing, it’s possible for you to find solid prospects for your P2P portfolio.

And if you want to help others while earning a return on your money, you can consider microloans to those in third-world countries who are trying to start businesses to raise themselves out of poverty.

4. Real Estate

Why not invest in something you can touch? You can buy property and hold onto it, hoping to sell it for more later (a strategy my grandfather employed to great success when he sold to developers after 20 years).

Another strategy is to buy income property. You can purchase property designed to provide you with regular income from renters. In either case, real estate can be a solid alternative to the stock market — if you can handle the management aspects.

5. Gold

One of the most popular alternatives to the stock market is gold. When you invest in physical gold, you not only have something tangible, but you also have something that nearly every culture has considered valuable for thousands of years.

In a pinch, you can use your gold as currency in some places. You can hoard it and wait for the dollar to collapse (if you believe that’s what’s coming).

As long as you understand how to counteract some of the difficulties of investing in physical gold (where to store it, etc.), it can be a fine choice for some investors.

What is your favorite investing alternative to the stock market?

5 Alternatives to Investing in the Stock Market is from Investor Junkie Copyright © Empowering Media, Inc.

But while TV and Internet advice may be free and readily available, it might be worth no more than the price you’re paying for it — which is nothing.

In order for advice to be of any value, it should come from people who are in an educated position, and have at least some familiarity with your personal circumstances.

You can get this advice by creating your own panel of trustworthy advisors. In some cases that will cost you money, but it will generally be well worth the price.

Enlist Paid Advisors

No one likes paying for advice, but sooner or later we will reach our limit of understanding what we’re getting into. When this happens, refusing to pay for expert advice can be a completely irresponsible act.

You should have a short list of professional paid advisors. However, that should never mean you can trust an advisor’s advice simply because you are paying him or her for it. The advisors you choose should meet certain criteria:

1. Be people who you are personally comfortable
2. Posess proper qualifications for their area of expertise
3. Be well-recommended by several people you trust
4. Have a good reputation in your location
5. Have a solid understanding of your personal situation, needs and preferences

You should apply this criteria to any paid advisors who you hire. Some of these types of advisors should include an:

• Attorney
• Accountant or CPA
• Financial planner
• Investment advisor
• Insurance broker

At different stages of your life, you’ll have a need for each of these professional advisors, though financial planners and investment advisors are often the same person.

Work With Informal Advisors

Sometimes the type of advice you need does not rise to the level of paying a professional.

In addition, it helps to have informal advisors who can help you reach logical decisions based on what paid advisors have told you. You should have a list of informal advisors that you can turn to when the need arises.

You might start with family and friends, and while that sounds logical on the surface, it’s not always the best course.

While you may trust a friend’s logic, if he or she has no real expertise in the area you are seeking advice, the opinion may be very little value. The friend or family member should at least have some familiarity with the area of your concern.

You can start your list of informal advisors with family and friends, but you should also go beyond the circle in order for your “panel” to be complete.

You may want to add business contacts, networking contacts (in specialized areas), mastermind group participants or anyone with expertise who is close enough to know your situation, but far enough away from you to be objective.

Your informal panel of advisors will probably be able to handle the great majority of situations and concerns when you need outside advice. This will enable you to restrict your use of paid advisors to only the most complex situations.

DIY and Learn What You Can

Whether you are using paid or informal advisors, you should always have at least some understanding of the situation. This will help you to know where to turn for advice, to know if the advice you are being given is truly right, and even to help you ask the right questions.

This doesn’t mean you need to be an expert in the area you’re seeking advice, but it does mean you may need to do some research before even seeking outside opinions.

Very often, the answer to whatever dilemma you face will come out in your research (this is where Google comes in handy). At that point, you can use outside advisors to simply validate your understanding.

It’s smart to invest time on a regular basis doing some research and familiarizing yourself with any areas of business or investment that are common in your life.

For example, if you regularly seek investment advice, you should become as educated as you can in regards to investments. This will put you in a position to judge the validity of the advice you’re given by others.

We need to have a panel of trustworthy advisors to rely on, but at the same time we should never put ourselves completely at the mercy of their advice.

After all, advice may help, but in any action you take success or failure will rest completely on your own shoulders — not your advisors.

What sources of advice do you regularly seek when it comes to business and investing?

Why You Need to Assemble Your Own Panel of Trustworthy Advisors is from Investor Junkie Copyright © Empowering Media, Inc.

A full-service broker is someone who not only provides the capability to invest, but many other things like tax advice and retirement planning, as well as extensive research and knowledge.

What to Expect When Choosing Edward Jones

This is the type of service I was looking for as a new investor. As someone who hadn’t invested in anything before, I needed an expert with the knowledge to help me learn.

So when I first opened a Roth IRA with Edward Jones over 5 years ago, I was aware of the fact that I’d have to pay a higher price for full-service treatment, and I felt an in-person broker would be the best way to go.

An advantage to working with an Edward Jones’ advisor is that the recommendations and investing strategy is easy to understand. Their investing policy is pretty straightforward, so you can be sure you’re not only getting the best service, but gaining some knowledge of how to invest along the way.

While they offer a variety of portfolio options, including blue chip stocks and bonds, I chose to go with actively managed mutual funds. Under the Roth IRA umbrella, I’m able to invest in mutual funds that earn a pretty decent return and interest, all tax-free.

Even though Edward Jones approaches their clients in a more hands-on fashion, they won’t be in your face every day of the year. In fact, unless I call to ask for an update, my broker won’t get in touch with me except for twice a year.

Edward Jones Commissions and Fees

Unlike Edward Jones, a discount brokerage might be a better alternative to control your own investments. Although they might offer less service options, they’ll no doubt have lower fees.

You’ll also have to pay a yearly account fee of $40 for all retirement accounts, which can either be withdrawn directly out of your investment account or your bank account.

This makes Edward Jones an expensive option compared, but if you need the extra guidance and full-service features, then this could be a good option until you learn the investing ropes for yourself.

If you’re investing with an Individual Retirement Account (IRA) like I am, here is the complete schedule of fees from Edward Jones.

What Your Investment Strategy Will Cost

When talking to your Edward Jones advisor, you’ll be able to determine the best investment strategy for your goals. They’ll ask you what you’re saving for and how much you’re willing to risk to reach that goal.

For me, I chose the dollar cost averaging method, which requires a steady but disciplined investment every month for many years. The majority of successful investments remain that way because you view it as a long-term investment.

I’m not trying to play the stock market game, so every month I put in the maximum amount that I can contribute to a Roth IRA and watch my investment consistently increase.

The point of this strategy is to make slow and steady returns over a long period of time, and take advantage of the market when it’s down, since dollar cost averaging allows you to buy lower-priced stocks with the same amount of money.

Conflicts of Interest

The biggest drawback to investing with Edward Jones is the fact that your financial advisor is paid on commissions. So they earn money when you:

• Buy or sell stocks
• Buy bonds
• Buy mutual funds that charge a sales load

This compensation system can lead your advisor to give you a biased investment strategy advice. For example, even if it’s in your best interest, your advisor has no incentive to recommend no-load mutual funds since they won’t make a commission from the sale.

Additionally, since they act as a transfer agent for the mutual fund company (by setting up a separate account with the mutual fund company that represents your holdings), they’re much more likely to recommend certain fund companies.

If they offer these fund companies preferential treatment, they’re paid part of the revenue share annually, per mutual fund position by the preferred mutual fund company.

Edward Jones Summary of Pros and Cons

Pros:

• Local offices with in-person meetings
• Full service investing and customer service
• Easy to understand investment strategy
• View your account activity online

Cons:

• Higher than average fees and investing costs
• Conflict of interest
• No access to online trading

In my experience — and for my needs right now — the added knowledge and expertise that comes with hiring a full-service broker is worth paying the 2% fee. Not only do I get to learn the ins-and-outs of investing, but I can contact my broker and ask him questions.

But I wouldn’t recommend it for anyone who is educated enough to DIY their investments, because you have to make enough of a return to cover the annual costs.

So, when it comes to what’s best for you, it’s important that you do the research and understand your financial needs. Only you will have your best interest at heart — no matter how good the investment or brokerage firm claims to be.
Rating:

Edward Jones Review – Is a Full-Service Broker Worth the Price? is from Investor Junkie Copyright © Empowering Media, Inc.

Unconventional Business Advice from Successful Entrepreneurs:  All Business Experts  Are you self-employed or thinking of taking the leap?  Don’t miss this article that shares unconventional business tips from over 30 successful online entrepreneurs.

Americans Short on Financial Know How:  WSJ  The title says it all.  One interesting fact from the research–those who say that they’re good with managing money also use payday loans and have overdrawn their checking accounts.  How’s that for a disconnect?

When a College Degree is the Minimum Requirement for a Minimal Job:  Out of Your Rut  More and more, a college degree is necessary for even entry level jobs.  Rather than spending $100,000 to $200,000 on that college degree, why not take one of these steps that could be far more lucrative.

The Top Ten Assets Owned by Millionaires:  Thomas J. Stanley  Curious what assets millionaires own?  Here are the top 10.  You may be surprised by some of them.

Astonishing Numbers:  America’s Poor Still Live Better Than Most of the Rest of Humanity:  Forbes  Sometimes, a bit of perspective makes all the difference.

Weekend Reading for June 8, 2013 is from Investor Junkie Copyright © Empowering Media, Inc.

Whether it goes higher, begins to turn lower, or just floats along in the middle — now is an excellent time to take steps to generate more investment income.

Investment income is like locking in your gains. If your stock portfolio has grown substantially in the past few years, you have the advantage of using the capital to invest in high-yielding assets that will continue to enrich your portfolio, even if stock prices don’t continue to climb.

Think of it as diversifying your returns away from complete reliance on growth.

Here are some smart strategies to generate more investment income from your portfolio.

1. Emphasize dividend stocks.

Dividend stocks are the obvious first place to start looking. You aren’t abandoning stocks at this point, but looking for investments that also pay an above-average rate of return through dividends.

Dividend stocks have at least three advantages:

1. Above average income
2. Continued participation in capital appreciation
3. Some protection against price declines is afforded by the dividend yield

One of the caveats here, is that a stock isn’t worth holding simply because it has a high dividend yield. Some stocks can yield well into double-digit percentage returns, but that is often an indication of underlying weakness.

For example, the stock may have recently had a bad run that depressed the price, dramatically increasing the dividend yield. Eventually, the dividend will have to be cut to accommodate the company’s weakened financial state.

If holding individual dividend stocks seems like a crapshoot, you always have the alternative of investing in a dividend index fund. One such fund is iShares Select Dividend ETF. The ETF invests in a wide range of mostly U.S. dividend paying stocks, and has yield of 3.58%.

2. Cut investment expenses.

By default cutting investment expenses is a way of increasing your income. The most obvious way to do this is by working with the lowest cost broker that you can.

Stock transaction fees can really add up if you’re an active trader, so you will want to look for a broker that has lowest transaction fees possible.

If you’re a fund investor, you’ll want to pay especially close attention to 12b-1 fees. These are fees that cover the operational expenses of a fund, and since they are charged within the fund — rather than as a direct charge to you — they are easy to miss.

These fees can range from 0.25% to 1% of your fund investment each year. You want to invest in funds that are on the lowest end of the range possible, as a difference of just 0.5% on your investment each and every year can make a substantial difference over a long period of time.

You’ll also want to do this within the framework of working with funds and brokers that do not charge load fees. While these are one-time charges, they can reduce your overall return, particularly if you frequently trade funds.

3. Minimize trading transactions.

One of the best ways to reduce investment expenses is to minimize your trading. If you are looking for your portfolio to provide greater investment income, you’ll want to stay with your investment choices on a long-term basis.

This is when it’s important to stick with the investment strategy you’ve carefully planned out so you can reduce your transactions. The less trading you do, the lower your investment expenses will be, and the greater your investment income.

4. Consider non-traditional investments.

In recent years, many investors have become hyper-focused on stocks. But there are income opportunities outside the stock market, and now is an excellent time to investigate potential opportunities.

Not only is this a way of locating income sources for your portfolio, but it will also function as a needed source of diversification.

Treasury Inflation Protected Securities (TIPS). These are U.S. Treasury securities that come with interest, plus inflation adjustments. The current yield on a 5 year TIPS is 0.91%, which won’t exactly light your portfolio on fire, but not much in the fixed income sector will these days. The beauty of TIPS is that the yield increases with inflation — and that’s what usually precedes higher interest rates. Your yield will improve without you needing to chase higher-yielding investments in a rising interest rate market.

Income property. Depending upon where you live, you may find income properties available at bargain prices. Rental real estate is more risky (and more hands on) than paper investments. But in some areas, prices have been so depressed by the housing collapse that rental property is now a financially viable alternative.

A $150,000 property that can be purchased with a 20% down payment ($30,000) and a $120,000 mortgage at about 4.5%, will have a monthly principal and interest payment of about $608. With $250 added for real estate taxes and property insurance, that’s a total monthly payment of $858. If the house can be rented for $1,000 per month, you’ll have a net positive cash flow of $142 per month, or $1,704 per year. That will represent a return of 5.68% on your $30,000 down payment.

REITs. If you don’t feel like getting your hands dirty with direct ownership of rental property, you can always opt instead for a real estate investment trust, or REIT. We can think of REITs as mutual funds for income producing real estate, so when you buy into one you’re actually investing in a portfolio of properties (or mortgages on those properties).

You can invest in an index type REIT, such as the Vanguard REIT Index Fund (VGRSX). The fund has well diversified holdings and a yield of 3.38%. You can’t even get that on a 30-year Treasury Bond.

What strategy are you implementing to generate more investment income?

4 Strategies to Generate More Investment Income is from Investor Junkie Copyright © Empowering Media, Inc.

When you work at a more traditional job, you have access to employer-subsidized health insurance, and you have access to employer-sponsored retirement plans. As an entrepreneur? Not so much!

You won’t have access to many of the benefits other workers take for granted, and retirement planning can be one of the biggest hurdles to clear.

Especially since you can’t just sign up with your employer’s plan (and possibly get a match) as part of your contract. You have to take care of your retirement all on your own.

Choose the Right Retirement Account for Entrepreneurs

The good news is that you can still save for retirement. Self-employed entrepreneurs may not get the “free money” that comes with an employer matching program, but they can still set money aside in tax-advantage retirement accounts.

Some of the options available to self-employed entrepreneurs include:

• Solo 401(k)
• SEP IRA
• SIMPLE IRA
• “Regular” IRA (including Roth version)
• Profit Sharing Plan

You have a lot on your mind as an entrepreneur, what with retirement planning situation, you need to look ahead to figure out how much you should be setting aside. The reality for many entrepreneurs is that it may not be possible to set aside a large amount of money each month, since so much of your capital is going toward getting started and running your business.

Use one of the many retirement calculators available online to determine how much you need to set aside now to improve your chances of retiring the way you want later. The important thing is to start setting something aside right now — the earlier you start the better.

Increase Retirement Contributions as Your Business Grows

However, it is common for entrepreneurs to put a little less aside as their businesses are getting started, and the increase the amount set aside over time. This has been the case for me. I started out putting aside a relatively small amount aside each month, but as my business has grown, I’ve been able to contribute more to my retirement account.

Look ahead to when you will need the money, and figure out what you hope to accomplish with it. Then, as you earn more over time, you can begin to increase the amount that you set aside.

Make it automatic so you don’t have to think about it, and have less of a chance of missing any savings. My retirement account contributions are taken out of my checking account each month. As my business improves over time, I can increase the automatic withdrawals.

Take Your Lifestyle Into Consideration

Retirement planning isn’t just about the money. Many self-employed entrepreneurs aren’t interested in just sitting still during retirement.

A recent study from the Institute of Economic Affairs indicates that retirement can be bad for your health — especially your mental and emotional health — as you lose motivation in your life to do something interesting that you enjoy.

As you plan your retirement, make sure you have something worthwhile to replace your enterprise, whether it’s staying involved with your business in some capacity, taking up a new hobby, or traveling the world.

Be sure to take the lifestyle and business you’re trying to create into account when planning your retirement future.

Image courtesy of stockimages at FreeDigitalPhotos.net

How to Plan for Retirement as a Self-Employed Entrepreneur is from Investor Junkie Copyright © Empowering Media, Inc.

1. Earn Up To $2,500
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200 Commission-Free Trades From Fidelity

This offer is available to new or existing Fidelity customers. In order to get the free trades, you have to specify the Fidelity account. This offer is similar to the OptionsHouse promotion but requires a much higher amount of money to deposit for investing. If you are already looking to invest with Fidelity, this is an ok deal, but not if you are undecided on your choice of broker. You must perform these free trades within 90 days. This offer expires on December 31st, 2013.

For more information about this offer, please visit their web site.

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Get an Apple gift card up to $500 in value. Fidelity IRA, trust, and business accounts are not eligible for this offer. This offer is only available for new or existing customers of Fidelity. Funding must come from a non-Fidelity account. This offer ends December 31st 2013.

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Fidelity is offering a promotion when you open up a new account with them. Get up to 50,000 American Airlines AAdvantage miles when you open and fund a non-retirement brokerage account. Funding must come from an external non-Fidelity account. This offer ends September 31st 2014.

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Earn up to 50,000 MileagePlus miles from United when you open a new account with Fidelity. Like the above over with American Airlines, you must fund a non-retirement brokerage account. Funding must also come from an external non-Fidelity account. This offer ends October 1st 2014.

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Fidelity Promotions – Six Offers to Choose From is from Investor Junkie Copyright © Empowering Media, Inc.

Many brokers offer free trades when signing up. Granted this isn’t the same as our list of commission free ETFs brokers offer. Though if you have a large amount of cash to invest initially, this could help minimize your transaction fees.

If you pick a broker that offers both, you’ll want to initially invest in stocks/funds/ETFs that are considered free trades. Then, to maximize your free trades, once the initial free trade promotion ends use the commission free ETFs to make your other purchases.

It’s critical you minimize your transaction fees! Otherwise they can eat into your returns, and unlike investment returns, is a known cost. The less you pay in transaction fees, the bigger your possible return of investment.

Permanent commission free for all trades is no longer an option. Zecco at one point offered this as an option, but soon abandoned it.

With the current round of free trade promotions, discount brokerages either place a limited time on their offer, limit the amount of trades, or both. These seven free trade promotions are in no particular order.

1. optionsXpress – 50 Free Trades
2. TD Ameritrade – Free Trades for 60 days
3. OptionsHouse Trade Free for 60 Days Offer
4. TradeStation – Trade FREE For 60 Days
5. 200 Commission-Free Trades From Fidelity
6. E*Trade Trade Free For 60 Days
7. tradeMONSTER 30 Days Commission Free

optionsXpress – 50 Free Trades

To get the 50 free trades with optionsXpress, you’ll need to open a new account and deposit or transfer at least $5,000 into it. This promotion has a cash value of up to $750 and the offer ends June 30th, 2013.

TD Ameritrade – Free Trades for 60 days

TD Ameritrade offers up to $600 in cash, with their 60 days of free trading. Visit their web site for more details. You must deposit at least $25,000, to gain access to the 60 days free trading. TD Ameritrade only allows up to 500 trades and the deposit must come from an external non-TD Ameritrade account. Offer ends on September 30th, 2013 and is only valid for new customers.

OptionsHouse Trade – Free for 60 Days Offer

To qualify for this promotion, just open a new account with OptionsHouse and deposit $5,000. The promo ends December 31st, 2013. New OptionsHouse accounts receive 100 commission-free trades for stock or option trades executed within 60 days of funding the new account. You will not receive any cash for unused free trades.

TradeStation – Trade FREE For 60 Days

Open a new TradeStation brokerage account, and trade commission free for 60 days! TradeStation has a $5,000 account minimum requirement.The commission free trades are valued up to $500.

Fidelity – 200 Commission-Free Trades

Good News! Whether you’re a new or existing Fidelity customer, you can get in on this offer. In order to get the free trades, you have to specify the Fidelity account. The trades must be performed within 90 days and the amount of free trades depends upon the amount of your deposit. This offer expires on December 31st, 2013.

E*Trade – Trade FREE For 60 Days

With this offer, it’s also possible to get up to $500 in cash. See the link below for more information about the cash bonus. This E*Trade promotion is only available to new customers when you open an account with a least $10,000. Once you’ve made the deposit, you’ll get 500 commission-free trades. The trades can be used for stock or option trades.
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Image courtesy of franky242 at FreeDigitalPhotos.net

Best Free Stock Trading Promotions is from Investor Junkie Copyright © Empowering Media, Inc.

Here’s what I’m reading this weekend:

Stock Buyback Announcements Have Gone Parabolic:  Business Insider  There’s a lot of stock being pulled from the market recently.  Apple is responsible for some of it, but not all.

What Are I Bonds and Why I’m Buying:  Retire by 40  Bonds can be a very safe investment, especially if you don’t meet the criteria Retire by 40 outlines to be invested entirely in stocks.

Why the Rich Don’t Feel Rich:  Yahoo! Finance  Think a physician making $570,000 a year has no financial worries?  Think again.

Steve Jobs’ Family Has Secretly Been Giving Away Money for 20 Years:  Business Insider  For the critics of Steve Jobs, here’s one criticism you can take off your list.  They’ve been anonymously donating money for years.

Reviewing My Rental Property Returns:  Yes, I Am Cheap  If you’re thinking of adding rentals to your list of investments, you’ll be interested to see how one landlord is doing financially.

Weekend Reading for June 1, 2013 is from Investor Junkie Copyright © Empowering Media, Inc.

And there are plenty of details when it comes to online brokers! Which ones should you focus on when trying to pick an online broker?

Choose According to Your Needs

One of the first considerations when you pick an online broker is determining what type of account you want to open. Will it be a traditional investment account, or will it be a retirement account, such as an IRA or Roth IRA?

Though most online brokers handle both types of accounts, you may want to choose a broker that favors one or the other — particularly in the case of retirement accounts.

You want to avoid a broker who has only recently adopted retirement accounts, as they will lack experience in handling your account that could result in tax complications.

With a traditional investment account, you may want to investigate additional services provided, such as check writing privileges and other features that will affect the accessibility of funds.

This will be especially important if you intend to use your brokerage account as an important part of your overall financial management.

Pay Attention to Fees

When we’re talking about online broker fees, we’re talking about all fees involved. That means annual account maintenance fees, transaction fees, broker assistance charges and any other fees you are likely to incur as a result of having the account.

You will need to get a list of all fees charged by the broker and make a determination as to which are most likely to impact you. It’s important to understand that the cheapest broker in one category may not be the best choice for you.

For example, let’s say that Broker A charges $5 per trade and $150 as an annual account maintenance fee. Meanwhile, Broker B charges $7 per trade, and $50 for the annual account maintenance fee.

If you expect to make fewer than 50 trades per year, you’ll be better off with Broker B because you will not be making enough trades to fully benefit from the lower transaction fees that Broker A offers.

Also, if you invest primarily in mutual funds or ETF’s, you’ll need to be more concerned with charges related to the trading of funds, rather than stock transaction fees.

Check for Account Minimums

Most online brokers will have a minimum amount to open an account, as well as a minimum maintenance balance. This is primarily a concern for first-time investors with small accounts. If you only have $1,000 to put into the account, then a broker with a $10,000 minimum will be out of the question — no matter how low their fees are.

Similarly, if you expect to move money in and out of your account on a fairly frequent basis, you’ll need to take a close look at minimum maintenance balance requirements.

If you have enough money to meet the $10,000 minimum upfront requirement for a broker, you’ll need to know how low you can draw your account before it creates a problem. If it is likely that you will draw your account down to say $2,000, you’ll have to work with a broker that will allow you to drop to that level.

Dropping below the minimum could result in higher fees, or a call to increase the balance of your account.

Focus on Investment Selection

No matter how low the fees of an online broker are, it will do you little good if they do not offer full-service in your primary area of investment interest.

For example, if you like to trade options and a particular online broker does not offer that service — or offers it only in a very limited capacity — there’ll be no point in working with that broker.

Find out exactly what types of investments the online broker handles, and make sure it matches your own investment preferences. Also, plan to dig a little deeper and make sure they offer all of the services in connection with the particular investment you consider to be important.

Know the Account Funding Methods

Most online brokers offer (and strongly encourage) funding your account electronically from your checking, savings, or other asset accounts.

While this is the preferred method of funding, if you plan to use other methods you will have to make sure the online broker accepts them. This can include checks, money orders or even third-party checks.

Most will accept virtually all forms payment, but it once again comes back to fees. Some will charge fees for various funding methods, and that it will come down to a matter of how much those fees are.

The Right Way to Pick an Online Broker

Whatever online investment broker you choose to go with, make sure that they fit both your financial lifestyle and investment preferences.

It’s never a matter of just going with the cheapest broker — if they can’t satisfy the requirements that you expect, you’ll probably be better off going elsewhere and paying a little bit more.

What criteria do you use to choose an online broker?

The Right Way to Pick an Online Broker is from Investor Junkie Copyright © Empowering Media, Inc.

Nowhere is this more true than when it comes to your investment portfolio. Investing is one of the best ways for you to build wealth, but not all investments are created equal.

Before you put your hard-earned money at risk, here are three things you should never invest in:

1. Something You Don’t Understand

Warren Buffett once said that you shouldn’t invest in something that you don’t understand. A good rule of thumb is to explain how an investment works to someone else.

Can you do it in a clear and concise manner? Can you use terms that make sense to other people? If not, then perhaps you shouldn’t be investing in that asset.

One of the reasons that Buffett termed derivative swaps weapons of financial mass destruction was due to their difficult to understand nature.

But you shouldn’t confine your inability to understand to the complex financial instruments. Before you start choosing individual stocks, you should understand how different sectors relate to each other, and how to identify value.

Before making an investment, review your knowledge of it. Do you know how it’s traded? Do you understand what can affect its value? If you don’t understand that asset, stay away.

2. Anything Described as a “Sure Thing”

In investing, a “sure thing” doesn’t exist. There are always some risks involved. Some investments are considered “safer” than others, but even with the least risky of investments, there’s still a chance that you can lose money.

From money market mutual funds (some of which saw losses in the wake of the financial crisis) to bonds, there is a chance that you will lose money.

When someone tells you that they have a “sure thing,” and they’re going to let you in on it, your first thought should be to run away. As fast as you can — this is the language of scammers.

Instead of relying on someone’s word that you have a fail-safe investment opportunity, do your research. Learn about the investment. If there isn’t much to learn, and you can’t see why it should be “sure,” keep your money out of it.

3. An Asset that Doesn’t Fit Your Long-Term Plan

The most successful investors have a plan for their money. They have goals for their wealth, and they understand how their investments work to make those goals a reality. When you have a solid investing plan, you want to make sure your assets are all working together towards a common goal.

Before you add something new to your portfolio, ask yourself whether or not it fits with your long-term investment plan. Does it through your portfolio off balance?

Is it unnecessarily risky at a time when you need more stability in your portfolio? Perhaps the investment is too conservative at a time when you need to add a growth component.

Successful investing requires that you plan ahead, and take the time to understand what is happening with your portfolio. Avoid investments that are likely to throw you off course.

3 Kinds of Assets You Should Never Invest In is from Investor Junkie Copyright © Empowering Media, Inc.

There was a time when paying off debt before retiring was self-evident. No one had to tell a retiree to do it, he just did it almost as if doing so on instinct.

But that was a different time, when people in general were more debt adverse than they are today.

Now, millions of people have come to live with debt and see it as a normal part of life.

But it isn’t — especially when you are about to retire.

Pay Off Debt

The sooner you pay off your debts, the more money you’ll have to invest for retirement. This can be especially important in those last few years leading up to retirement. It will be your final opportunity to juice your retirement investment portfolio with a little bit more money — just in case.

In truth, it’s even more important earlier in life when you’re just beginning your retirement savings and investment plan. The less money you pay towards debt every month, the more you will have to stash into retirement savings.

Since the time value of money concept works most efficiently in the early years of investing, your ability to get out of debt and to redirect the money into savings can be a downright revolutionary act!

But let’s say that for whatever reason you were unable to do that earlier in your life — you can still do it now. And you should!

You may not get the investment kick you would have if you’d gotten out of debt much earlier in life, but it will still provide tangible benefits even if you do it at the last minute.

Lower Your Expenses

Paying off debt means lower living expenses in retirement. You may have had a car payment all your life, but you shouldn’t need — or want — one in retirement.

You probably won’t be flipping your car every few years the way you did during your working life, so there’s no need for a continuous car payment.

If you buy a car — and pay cash for it — you’ll have a tangible investment that will last you a decade or longer. And a payment should not be associated with it.

For most people, the single biggest living expense that’s possible to cut is the mortgage payment. Many investment experts have made the point — but it’s worth re-emphasizing — that your primary residence should be owned free and clear when you retire. Eliminating a $1,000 per month mortgage payment will reduce your need for income by the same amount.

And credit cards — which should go without saying — need to go away. Not only do credit cards generally carry the highest rates of interest, but those rates are also variable and could rise at the worst possible times.

If they do, and your debt is substantial, you’ll be looking at an out-sized reduction in your monthly cash-flow from the suddenly higher credit card payments.

Warning: Don’t expect today’s super low interest rates to stick around well into your retirement. Because if they don’t, it could be a game changer for those with too much debt.

Live With More Certainty

During your working years you generally have more flexibility to deal with uncertainty. But once you retire, and you’re living on a fixed income, that flexibility will be gone.

Since debt is one of the biggest “X factors” in life, eliminating it before you retire will also take away that uncertainty. You want to be able to enjoy your retirement years, and that won’t be quite is easy if you’re carrying a significant amount of debt.

Retirement coincides with older age, and that alone can bring a host of variables — including health conditions and adult children returning to the nest.

Dealing with either of those issues — and a few more we haven’t covered — will only be complicated by debt. Being debt-free will help you to be prepared for whatever may happen in your retirement years.

More Control Over Your Assets

Debt has a way of compromising asset ownership. Whether it’s a house that still has a mortgage on it, or a car with an outstanding loan, your assets are never truly yours when you owe money on them.

In an extreme example, owing more on your house than the property is worth could prevent you from moving to a retirement location of your choice.

Even unsecured loans can compromise asset positions. Let’s say you have a $200,000 investment portfolio, but you owe $20,000 in credit card debt. The credit card debt functions almost like a margin loan against your investment portfolio.

If you’re earning 8% on your portfolio, but you’re paying 12% in interest on your credit cards, the entire situation is working against you, slowly draining your income and wealth.

One of the often unspoken goals of retirement planning should be having complete control of your assets. That makes for greater freedom of action, but it also leads to better sleep at night. Having debt of any kind can interfere with that sense of peace.

If it’s the last thing you do before retiring, pay off your debts — all of them.

Is it time you rethink carrying debt into your retirement years?

Image courtesy of markuso at FreeDigitalPhotos.net

The One Thing You Need To Do Before Retiring is from Investor Junkie Copyright © Empowering Media, Inc.

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tradeMONSTER Promotion is from Investor Junkie Copyright © Empowering Media, Inc.

Here’s what I’m reading this weekend:

Sucking a Business Dry:  WSJ  Oreck vacuums are yet the latest example of private equity firms thinking for the short term instead of the long term and leaving the ruins of a company in their wake.

Millenials Are Better Savers Than Boomers, Gen-X:  WSJ  Here’s a good piece of news amidst all the bad news of college students saddled with credit card and student loan debt.

How a Pick for a Financial Adviser Can Go Wrong:  WSJ  Finding a financial adviser can be difficult.  Interview several, and you may receive wildly different advice.  Here’s what to consider when choosing.

What Makes a Risk Taker?  WSJ  Think you’re not a risk taker?  So did many of the people in this article.  Turns out your willingness to take a risk depends on several different factors.

Stuntmen Race Cars – On Only Two Wheels:  Reuters  This is a mix between “What-the?” and “How’d they do that?”  When will the American kids start doing this?  Wow.

Weekend Reading for May 25, 2013 is from Investor Junkie Copyright © Empowering Media, Inc.

So “risk free” returns from either bank CDs or the US Treasury, for the most part, are a losing bet.

This is because the Federal Funds rate has been at 0% – 0.25% for the last five years with perhaps many more years to come, and quantitative easing. These measures by the FED pushes down all fixed income investments rates: from bank CDs to high-yield bonds.

I’ll go through all of the possible investment options that earn income, and list the pros and cons for each. For some of the options, you’ll find helpful links to more detailed articles.

Bank CDs

Checking out Ratebrain’s web site I see the highest CD is from Connexus Credit Unit at 2.00% APY for a five year CD. Second up is Discover Bank’s 10 year CD at 1.95%.

I don’t know about you, but nether sounds like a great deal. The Federal Reserve has gone on record stating they are targeting a 2% inflation rate. Historically, the FED tends to overshoot their targeted rate, so not including taxes, you are losing money in real terms.

Though this isn’t to say you shouldn’t have some money invested in CDs — you should definitely have some savings in Bank CDs — they are not subject to a rising interest rate, unlike bonds and bond funds. To put it another way we are at very low interest rates for fixed income.

Logically we only have one way to go from here…UP! While it’s possible for rates to go lower, rates cannot go below zero. So there’s much more risk in rates going higher. When this happens returns for bonds will go lower and even possible negative.

Checking and Savings Accounts

Another option are high interest checking and savings accounts. Again using Ratebrain, I found the highest checking account available is at 3.00% APY.

While this is better deal than Bank CDs, they are subject to rate risk. Meaning the rate is not fixed and could be changed at anytime. So while you are getting some return on your money, it’s possible the bank will change.

On the positive side your money will be very liquid, and can withdraw at a moments notice. It appears the highest savings accounts are 1.00% APY and under. So unless you are using them for short-term savings (under one year), you might want to put your money elsewhere.

US Savings Bonds

Investing in I Bonds is something I’ve mentioned previously. Though, like everything else on the list, it isn’t as good of a deal as it’s been previously.

The current US I Bond earns 1.18% APY and while this return is not great, it is tied to the rate of inflation — so if inflation rises, so will your I Bonds. The other advantage with I Bonds is they are tax-deferred until you redeem them and they are not subject to interest rate risk as well.

Unlike TIPs they never can yield a negative return and they make a decent choice for mid-term (3-5 years) savings. EE Bonds are not so much a good deal, and are currently returning a 0.20% through October 31st, 2013.

US Treasuries

Currently TIPs have a real negative return. In otherwords, not even including taxes, you are paying the government to hold on to your money. It’s not exactly a good bet.

Other US Treasuries are a bad deal as well. The 10 year treasury currently yields 1.94% and shorter maturities are even worse. So while they have the guarantee of the government, they aren’t earning much compared to the inflation rate.

Dividend Stocks

There are many boring stocks which have increased their dividends annually. They are called dividend aristocrats, and have a list of current stocks on our site.

The nice thing about dividend aristocrats is every year your dividend payout is slightly more. So the longer you hold onto the stock the more your annual dividend. However, the disadvantages of any dividend stock are:

• Dividend payout can end at anytime. During the 2008 crisis a few long-term dividend payers stopped paying a dividend
• While the dividend payout is nice the principal invested may lose value.

Like many of the other fixed-income investments listed here, it’s also a crowded trade — meaning many investors are also looking for yield, and are turning to dividend paying stocks as well. As stock prices increase, this pushes down the effective yield. So the higher the prices of the stock rises, the more likely the lower the yield.

The other disadvantage is, stocks are NOT the same as bonds. Stocks typically vary more in price than bonds. So while you are generating annual income, it’s possible your principal loses value. Though at the current rates for bonds, it is also possible for individual bonds to lose principal, if sold before maturity.

High-Yield Bonds

High-yield bonds (otherwise known as junk bonds) are a higher risk to default compared to better rated corporate bonds. While the economy has improved since the 2008-2009 recession, they were a better investment.

At the current state of the economy they have been yielding less, but with the same risk. Investing in high-yield bond funds can be dangerous, if the rates rise quickly. With any bond investing, understand the difference between owning a bond and a bond fund.

Muni Bonds

Muni bonds really only makes sense when you are one of those “evil” one percenters who are in the upper-income brackets. Your effective yield is much higher than the real yield after taxes.

With muni bonds you can earn more tax-free money, than in other taxable investments. Highly rated muni bonds can be a good investment, but like other investments can get hit if interest rates rise.

Ginnie Mae Bonds

Ginnie Mae bonds are a possible investment option for getting a higher yield. Since most individuals do not have enough savings to properly invest directly in Ginnie Maes, this means most individuals will own a Ginnie Mae bond fund. If interest rates rise they could suffer a dramatic fall.

Lending Club and Prosper

I myself have some money invested with both Lending Club and Prosper, which I review here and here respectively.

With both services you have the ability to earn 10%+ APY on your investments. Though, this is only possible with considerable risk and active management needed.

The downside of either service is your investment isn’t very liquid. Once you invest in a note, it will take some time to unwind your investment. Either you need to wait 3-5 years for your note to be fully paid, or try selling on the secondary market.

So while the returns are good, and from my experience returns are very stable, the money invested is pretty much locked in for a long period of time.

REITs

Real Estate Investment Trusts, or REITs for short, are another possible option for getting a higher yield on your investments. Individually they invest in either real estate or real estate mortgages and are a great way to diversify into real estate, without directly owning property.

There are many types of REITs available: from malls, to self storage units. Income generated from REITs are typically stable, since 90% or more of the income produced must be distributed. However, since they are taxed as ordinary income in your portfolio, the disadvantage to REITs are they are not so great for taxable accounts.

MLPs

Master Limited Partnerships, or MLP for short, typically own natural gas and oil pipelines. By name, they are partnerships that have the tax advantages to be placed in a taxable account, with historically stable returns.

At the moment, returns for the average MLP are 5%; down from the historical 8% and they have a low correlation to bonds and stocks. The disadvantage is that you need to own one for long period and can be complex to deal with tax issues.

Getting a Higher Yield

To generate higher yields in the current economic environment, you need to own a mixture of the various assets listed above. The only chance you’ll have to keep up with inflation is by asset allocating your savings in various “risk-free” and risky fixed-income assets.

It’s even possible you’ll even have a positive return in real terms. This is unfortunately the cause of the times we currently live in — long gone are the days of just putting your money in bank CDs and earning 4-5% APY.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Getting a Higher Yield: How to Make Your Money Earn More is from Investor Junkie Copyright © Empowering Media, Inc.

Here are 4 reasons it might be time to rethink your current investing goals:

1. Your Priorities Are Different

Before you decide to invest, you need to know what you are investing for — and understand what goals you’re hoping to reach with those investments.

There are many reasons to invest, from creating a steady stream of income, to building up a nest egg for retirement, to trying to get enough money for a down payment on a house.

What are your most important priorities?

When you first set your investing goals, you may have had different priorities. You may have been more interested in saving enough for your child’s college.

Now, though, perhaps you realize that retirement is a better goal. The way you invest for your child’s college is going to be different from the way you invest to build a retirement nest egg.

Acknowledge your priorities have changed, then set new investing goals that reflect your new priorities.

2. Your Circumstances Have Changed

We can’t predict everything that will happen to us. There are times when a job loss or other unexpected situation can change your circumstances — and lead to re-evaluating your investing goals.

Perhaps your original investing goal included setting aside $500 a month in a retirement account. However, if your income has decreased dramatically in recent months this goal may no longer be feasible. You might have to adjust your goal so you’re setting aside only $200 a month, for now.

Likewise, it makes sense to change your investing goals when you make more money. You might be setting aside $500 now, but an increase in income might mean that you can now set aside $800 a month.

If you have been investing in an IRA, but you have maxed it out, you might need to adjust your investing goals to include taxable accounts — or consider opening a SEP or SIMPLE IRA with higher annual contribution limits.

3. The Markets Are No Longer the Same

Don’t forget to consider the possibility of changing markets. Some experts believe that current conditions will result in higher inflation in coming decades.

If this is the case, then your $1 million portfolio investing goal might not be sufficient. If you want a secure retirement, you might need a $2 million nest egg.

Additionally, there are those that believe that asset correlation between bonds and stocks could become an issue. If this is one of your fears, your investing goals might need to change to include further asset diversification.

4. The Fundamentals of Investing Have Altered

If your investment goals include more specific items — such as investing a certain percentage of your money in a particular asset or asset class — you might need to make adjustments if the fundamentals have changed.

If your investment in a specific dividend stock is part of your investing goal, and the fundamentals change for the worse, you need a new goal and a new target.

Consider the fundamentals of an asset class or sector, as well as of individual investments. Make changes to your goals based on the changes you see underlying your investments. Tweaking your goals and your approach can help you stay in the game, even when things seem to be falling apart.

Is it time to rethink your investing goals?

Image courtesy of IntheNow at FreeDigitalPhotos.net

4 Compelling Reasons to Rethink Your Investing Goals is from Investor Junkie Copyright © Empowering Media, Inc.

Or is it?

The market tends to get nosebleeds when it sets new records.

New highs — logically of course — represent the beginning of bear market cycles. But it’s an open question as to how high is too high, or at least high enough to trip of a round of selling on a major level.

The Dow Is Back! What’s the Best Investment Strategy?

The optimist might ask, “what’s the big deal, 15,000 is just a number?” That’s true enough. So were 10,000, 11,000, 12,000 and so on, and the Dow Jones Industrial broke through them all.

But as the Dow goes, this is a very big number, and that has an important psychological effect. The investment community is comprised of millions of people, and people all have human emotions that often guide them in their decisions.

When we look at small numbers, they look manageable so we’re more comfortable with them, but when we look at large numbers we get a little scared.

It doesn’t matter if there’s no substance to the fear of larger numbers — perception alone is what causes people to act. If enough people get spooked by a big number, a sell-off will follow, facts be damned. So it was with the last three major market downturns.

The 1987 crash happened just a few months after the Dow topped 2,700. Did the fear of a 3,000 market have anything to do with that?

The 2000 slide began after the market topped 11,700. Was 12,000 looking like too much to handle? In 2007 the decline began after the market broke past the 14,000 mark, then dropped the Dow by more than 50%. Did investors decide that 14,000 overshot the mark?

I’m not trying to imply that the Dow crossing the this mark for the second time means that a downturn is automatic. But there is solid evidence that new highs increase the risk.

Now that the Dow is back in record territory, where do you think it’ll go from here — and more importantly, how do you expect to react?

Buy When Everyone Else is Selling

The standard investing advice on Wall Street has always been to buy when everyone else is selling. Is this a strategy that you plan to follow?

If you do, at what point do you start buying and how aggressively?

One of the problems with this strategy is that you could buy-in after the market has fallen. So what happens if, over the next year the market falls another 30% from that level? You may not take as big of a hit as people who bought in at of the top, but you’ll be taking a large hit nonetheless.

The previous two market slides have shown that a drop of 50% or more is hardly out of the question.

Sell and Limit Your Risks

Another option is to start selling, so you free up your cash and can buy stocks later at bargain prices. This is an excellent strategy, but there is one serious flaw. At what point do you push the panic button and begin selling again?

Trying to sell into a declining market can be something like chasing a greased pig. A 10% or 20% decline in the market is hardly uncommon.

If you sell after the market has sold off, there is a huge risk that the market will turn up, locking in your losses and preventing you from participating in the recovery.

The basic limitation is that you can never know if a drop is a routine correction or the beginning of a protracted decline.

Hold and Stick to Your Game Plan

If a market decline turns out to be a correction — as most are — it’ll be easy enough to just ride it out until the market resumes it’s climb.

But during more serious declines, like the 1973-74, 1987, 2000-02, and 2007-09 markets, the ride down can be serious white-knuckle time. Those are the kind of markets that test even the most committed investor’s resolve.

Even though in each case the investors who held on well past the crashes were handsomely rewarded for their perseverance, it’s often difficult to accept that concept after stocks have fallen significantly and are continuing to do so. It can take nerves of steel, and not everyone has that.

What’s your plan if the market starts to fall? Will you buy, sell or hold?

When Stock Markets Start Falling What’s the Best Investment Strategy? is from Investor Junkie Copyright © Empowering Media, Inc.

Instead, I took a path some might call insane: I decided to begin writing a blog and this week I launch a podcast called Stacking Benjamins with a website not far behind.

This will be my second website. I bet you’re wondering — as a former advisor to over 150 families who managed more than $60M dollars, is this because blogging and podcasting are undiscovered gold mines?

In two words: probably not.

However, let’s look at the investing pros and cons to online ventures like blogging and podcasting.

The Upside to Making Money Online

From far away blogging can seem like a fantastic opportunity. The top 10% of bloggers, according to a 2009 Problogger survey, make north of $100k per year. Because so many people characterize this as passive income (just set up the site and the money pours in!) you might be tempted to pursue this as a passive income investment opportunity.

As if that isn’t enough, in recent years, some blogs have sold in for unimaginable sums. The list of blogs selling for more than $1M might make you think these online ventures are unexplored opportunities you can exploit.

Podcasting can also seem lucrative. According to podcast hosting company Libsyn, once you reach 5,000 downloads per episode, you can expect to earn decent income through advertisements on your podcast. If you reach 10,000 listeners, you might even find it as a good income source.

The Downside to Making Money Online

Here’s the surprise: the top 10% of bloggers are a hard-working crew — no matter what they say. Great blogs aren’t reaping rewards overnight and they don’t gain traffic or large audiences out of thin air.

Bloggers who make it look effortless are able to do so because they’re skilled pros who know how to keep the family secret (just like the guys who’ve had a vasectomy and swear it’s the easiest thing they’ve ever done — and they were playing tennis hours later, sure.).

While the numbers speak for themselves, the stats are not looking up from a blog-selling perspective. Most analysts now agree that those $1M+ blog sales are anomalies and the chance of that type of money switching hands again is improbable.

It turns out that most people come to blogs for the voice of the author, and the second that big bloggers leave their site, readers tend to flee. So unless you pick the lock on a new way to gain a ton of reader loyalty without becoming The Huffington Post, your chances of earning a huge sum from a blog are slim.

Podcasts are largely a loss-leader for bloggers too. Successful blogger Pat Flynn preaches that a podcast is important not for the income opportunity, but because it drives people to your work and increases your name recognition within your community.

The gulf between people who podcast versus the number earning money from podcasts, is huge. The podcast landscape is currently owned by comedians and NPR shows. If you’re not one of these two categories or an already established name (Dave Ramsey), the chances of making it big financially are slim.

In short: blogging and podcasting are not great sources of income unless you’re looking for another full-time job. People who blog or podcast and are successful, invest a ton of time and energy into perfecting the process.

Making the Case for Blogging or Podcasting

There are still very credible reasons to jump on the blogging and podcasting bandwagon from an investment perspective:

• Credibility. Whatever field you’re in, having a blog or podcast can help drive readers or listeners toward your products or services. It’ll also give your name recognition, which can increase the standing within your industry among peers.
• Focus. Although I sold my financial planning business, I’m still obsessed with the field and the process. My blog and podcast help to crystallize my thoughts about the actions people should take and the needs they should address.
• Information. For investors, nothing speaks like information. Because I needed to network as a blogger to reach a wider audience, I’ve found others who want to share strategies about how they invest with me and my readers. Every week when I have a guest on my Stacking Benjamins podcast, it’s an opportunity to talk to an expert in my field. That’s a big win for me and my portfolio.

The Real Promise with Investing in Online Ventures

If you’re willing to pay attention to your online venture for a year and put time into growing a small audience, it is possible to spend minimal time on your property and garner a small income stream.

Our first blog, the Free Financial Advisor, will often make over $1,000 per month without much work. We have articles ghost written for $10 – $25 each. A partner and I both spend less than 5 hours a week maintaining the property and our incomes have stayed steady.

It’s nice to get a $500 check, but back in my financial planning days I wouldn’t have thought twice about doing this: I would have shunned it immediately.

Now that I have the blog, I’m excited about it. Maybe I can grow this into a $1,000/month income without working hard. That’d be nice for vacations and “spending” money.

Can You Consider Blogging and Podcasting as Investments?

Absolutely not. As you can see, there’s too much work and not enough pay at the end for it to be the upside of your portfolio. Even buying blogs and flipping them is a fairly time consuming and risky venture.

My personal goals are more ambitious. I don’t think anyone is really doing what our podcast is doing.

While there are hard-hitting advice shows out there (among others, Moneyplan SOS, The Money Girl, and Dave Ramsey come to mind), there no “car talk” tone shows in the finance arena. The only show which comes close to our tone is called Planet Money, and as an NPR show, it has a more economics and story-based premise than our magazine-style, community based show.

I believe Stacking Benjamins as a podcast can lead people to some quality writing at my new website. There will be a big synergy between the two properties that I believe will feed off each other.

People who want more information on a story we run on the podcast, can search the blog for better answers. Consequently, people who find the site can easily log into the podcast and take our show for a spin.

As our testing with a former podcast (2 Guys & Your Money) showed me, we continually picked up new listeners and had great reviews. I was humbled by how much people liked our show enough that I put the final polish on it to create Stacking Benjamins.

All in all, I don’t look at my online ventures as an investment — I look at them as an entrepreneurial income source AFTER I’ve already made money doing the job that paid well. I’d advise you to do the same before investing in blogs or podcasts.

About the Author:
Joe Saul-Sehy is the host of the Stacking Benjamins podcast, whose sister site launches June 4th. As a financial advisor for 16 years, Joe helped 150 families plan for goals and manage around $60M. He was the ABC – Detroit WXYZ “Money Man” appearing twice weekly on the news. His advice has appeared in Bride, Child, and Best Life magazines, as well as the Los Angeles Times, Baltimore Sun, and Chicago Sun-Times among others. You can subscribe to Stacking Benjamins on iTunes.

Are Online Ventures the New Secret to Wealth? is from Investor Junkie Copyright © Empowering Media, Inc.

You can trade and hold U.S. securities as well as Canadian ones, and the firm is particularly investor-friendly when it comes to gold investments. Questrade also accommodates registered savings plans with advantageous pricing.

Breakdown of Questrade Fees

Questrade is one of the lowest cost investment brokers in the industry. Fees are as follows:

There are no fees to open or close an account, but there is an inactivity fee of $19.95 assessed quarterly. However, that fee is waived if your account has a minimum balance of $5,000.

Complete List of Questrade Features

Questrade offers all the services you’d expect to see from a full-service online investment brokerage firm, including the full range of investment options and online trading tools.

But they also offer the following:

Low minimum deposit. You can open your Questrade account with as little as $1,000 and there are no trading or equity minimums.

Tax-sheltered savings plans. You can hold a Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP) and Tax Free Savings Account (TFSA) with Questrade. Registered savings plans have no initial fee and no annual fees.

Low transaction fees. Questrade offers one of the lowest transaction fee structures in the industry, starting with $4.95 per stock transaction (more on fees below).

Trading in physical gold. You can hold either gold coins or gold bars in your account, and orders over $10,000 (USD) can be executed on the same day. (Questrade note: The gold is guaranteed for weight and purity as well as safe-keeping.). You can also borrow up to 80% of the value of the gold you already hold in your account.

Trading of U.S. stocks. As a Canadian investment brokerage you can trade and hold U.S. stocks and options — as well as U.S. cash — in any registered plan, with no forced conversion charges.

Forex and currency exchange. Questrade offers 24-hour trading, leverage, liquidity, and more than 30 currency pairs.

Annual rebate of up to 1% in trailer fees. Mutual funds pay brokerage firms up to 1% of your fund investment to procure your business. Questrade will refund this charge to you each year under their Mutual Fund Maximizer program. An extra 1% per year can make a real difference in the performance of your funds over several years.

Fixed income investments. Includes bonds, term deposits and guaranteed investment certificates, all offered with no commissions on fixed-income trades.

List of Questrade Promotions

Questrade is currently offering the following promotions:

• Get 100 free trades when you fund a new account with a minimum of $10,000.
• Or fund it with $1,000 and get 10 free trades.
• Transfer for free. Move an account with a minimum of $25,000 from another Canadian brokerage and Questrade will pay your transfer out fees up to $150.
• Get $50 in free trades.

Questrade Review – Low Cost Investing For Canadians is from Investor Junkie Copyright © Empowering Media, Inc.

Here’s what I’m reading this weekend:

Why Financial Advisors Favor Bond Funds Over CDs:  The Finance Buff  Financial advisors know that CDs are currently better for their clients than bond funds.  So why aren’t they sharing this information?  Once again, we see that no one cares for your finances more than you.

Where Should You Keep Your Investment Assets?  US News Money  Be smart about investing your money in retirement accounts so you can reap as many tax advantages as possible.  Here are some strategies to do that.

Older Investors Reveal Exactly Why Their Retirement Plans Have Gone Off Track:  Business Insider  It’s no surprise that the recession had a significant impact on retirees’ savings.  What is surprising are the other reasons why their retirement is off track.

The Biggest Retirement Myth Ever Told:  The Motley Fool  We have a retirement crisis as many people don’t put away enough money for a healthy retirement.  The big shock, though, is that many are in better financial shape now that decades ago.

NFL Linebacker James Harrison Spends More On Massage Than You Did On Your House, but Can He Deduct It?:  Forbes  Ah, the life of a professional athlete.  Can Harrison deduct the $500,000 he spent last year to keep his body in tip-top shape?  Here’s the low down.

Weekend Reading for May 18, 2013 is from Investor Junkie Copyright © Empowering Media, Inc.

There are a lot of similarities between investing and riding a bike, and a few lessons you learn that can carry over to investing. Below are three ways investing is like riding a bike.

You Wobble at First, But Improve With Experience

Most of us don’t just hop on a bike and experience great success. Growing up, I lived partway up a hill.

My father taught me how to ride a bike simply by holding it steady while I climbed on, and then letting it go.

I was wobbly at first, not even getting all the way down the hill before falling off into someone’s yard. With experience, though, I improved and could zip down the hill with confidence.

Investing is the same way.

At first, you are likely to be a little wobbly, choosing the wrong investments and experiencing setbacks.

However, with experience, you become more confident, and more able to spot potential winners. And, just as I still sometimes falter while riding my bike, you will occasionally run into trouble with your investments. But with experience the recovery comes a little faster.

Protection is Important

You wear protective gear when you ride your bike (at least you should wear a helmet). Your bike helmet provides you with protection against serious injury.

If you are serious about biking, perhaps performing tricks or moving at high speeds, you might include elbow and knee pads. The greater the risks you take, the more protection you need while riding your bike.

You also require protection when you invest. There are a number of potential dangers associated with investing. Some assets are riskier than others, and carry a great potential for loss.

In these cases, you need to limit some of your exposure to risk by choosing investments that are less risky. Good diversity in your portfolio, and attention to other factors, can help you acquire the protection your portfolio needs.

If you aren’t wearing a helmet when you have a serious crash on your bike, you can be injured in a way that can’t be easily recovered from.

The helmet may not completely prevent injuries, but it increases the chances you will eventually recover and be able to ride again. With the right protection for your portfolio, you will be better able to recover from downturns — avoiding a serious portfolio disaster.

You Never Really Forget How

Just as you could probably get on a bike and ride right now — even if you haven’t been on a bike in years — in many ways you never really forget how to invest.

If you have good practice over time, and you understand to look for fundamentally sound investments and rebalance your portfolio, chances are, you will still be able to accomplish these tasks — even if you haven’t adjusted your portfolio in years.

Investing is like riding a bike in that as you begin to get into it, your old lessons and experiences will come back to you. You might wobble a little at first, but those basic principles will return.

Then you’ll be able to invest in your old style, just as I can go back to that old hill and ride down confidently.

Image courtesy of Naypong at FreeDigitalPhotos.net

3 Ways Investing is Like Riding a Bike is from Investor Junkie Copyright © Empowering Media, Inc.