January 2012

Why and when debt can be bad?

I have always been a firm believer that not all debt is bad debt. As I think you may have heard several times especially during these times of slow economic growth that there is a distinction between bad debt and good debt. Before I get into describing what these are specifically, I just want to say that every one of us should make sure not to borrow to the hilt and this is really the cause of the stress and stigma associated with debt.

A rule of thumb is for your aggregate monthly long-term debt not to be more about 40 percent of your gross income every month. I think the two things that easily qualify as good debt are paying for a house and for a college education or any type of training that allows you to earn more in the future. Even companies use debt to finance these type of purchases strategically. I would even rule out financing a car as I agree with Suze Orman that it is much better to just pay with cash if you can afford it. If your thinking about buying a car with a loan, I strongly suggest you to check out my post on Retirement Talk.

Treat Your Savings Account Like a Bill

One of the biggest mistakes when it comes to contributing to a savings account is treating the contribution as optional.  This makes skipping a deposit so much easier, especially when there are other needs or wants clamoring for that money.  If you begin to treat your savings contribution like another monthly bill, it will become easier to make sure you really get it into the bank.

The trouble with Financial Ratios

I have talked about a variety of things in this blog as it relates to investment and how to earn and save money. In the next post, I really want to go into detail about financial ratios that are used to a great extent in financial statement analysis.
I think these financial ratios are a bit overrated from my point of view. I do agree that they give some insights into the past performance and future performance of a firm, but they don’t really give the broader picture is my one knock on them.

For instance, when analyzing the comparative performance of a business, it is hard to gather information when it needs a reference point from different time periods. The other criticism is that different accounting methods will result in wildly different ratio values. There is just something that seems to be more attractive about fundamental analysis and even technical analysis than by just simply looking at financial ratios to make important decisions about business valuation and other investment choices.

Fundamental Analysis – An Introduction

It deals with looking at a company’s fundamentals and specifically the financial statements of a firm

I stated in my first post on the Stock Fest blog that multiple techniques need to be used when day trading. One of these techniques is fundamental analysis that is used primarily in value investing which is what Warren Buffet does and his idol Benjamin Graham advocated for.

But it’s interesting that economists like Burton Malkiel, who has both a Harvard MBA and a PhD from Princeton University in economics along with a lot of top-class finance experience, think that neither technical analysis nor fundamental analysis can be used in beating the markets.  

The basic idea behind fundamental analysis is that markets will tend to misprice a security in the short term, but in the long run the actual price will be reached. An intrinsic value needs to be calculated and herein lies the difficulty as it can be tough to find that price. The calculated price utilizing fundamental analysis will dictate what an investor will do. If the intrinsic value is higher than the share price, the investor will buy the stock. If it is lower than the stock price, then the investor will sell.

Day Trading: An Intro

Hello and welcome everybody to the Stock Fest blog. I was really excited when I found this on the Klat network and will be posting a lot of information here. Today, I wanted to start off this blog by talking about day trading and before we start I would encourage you to check out some of my postings on Investment Talk.

What is day trading? It is when an investor buys and sells a security within the same day. If you have been trading stocks for sometime, I guess your probably familiar with the Pattern Day Trader Rule. For those of you who do not know, it is when a trader buys and sells a financial instrument within the same day four or more times in a five-day period. However, holding a position overnight – an overnight trade – does not count in the definition.

Day traders are also required to have a margin account. This can be likened to a borrowing on collateral when looking at an example outside of the stock trading world. This is usually how traders usually leverage their trading capital. As for legal requirements of brokerage houses for day traders, there aren’t really any.

Day trading is really a speculative trading strategy, but day traders should have a methodology to stick to if they are to limit losses and maintain their profitability. Furthermore, day traders will have to close out all positions by the end of the trading day to ensure that they do not get exposed to fluctuations in the market price of a security.

Shopping for your First Home

What an exciting time!  You have decided that you are ready to buy your first home.  But have you figured out what you want and what you can afford?  You haven’t?  Oohh.. it would be a good idea to do this before you contact your realtor and get looking.  It will save you both a headache and time in the process. 

One of the first things you should do is visit your lender – whether it is a bank or a mortgage broker – and determine what you can afford.  This is not what you are spending – but how much money they are willing to lend you for your mortgage.  You will need to take a paystub or tax forms with you as proof of income.  Be prepared to answer questions about any debt that you may have such as loans as well as credit cards that you use.   They will likely need to know how much money you have for the down payment.  It may take a week or longer to get an answer as to how much you qualify for, so make sure you ask how long until they give you an answer.

Forex Trading

"I know it has all these benefits. So how do we profit from forex? "

Forex has considerable advantages over other trading markets. The most convenient thing for me is the ability to trade continuously since the forex market operates for 24 hours except for weekends. It also allows for the chance for an investor to trade around the globe as was shown in that forex ad. The other thing with forex is that it is highly liquid being with it being a highly traded market that has average daily turnover in excess of $4 trillion.[1]

Forex.com also offers the chance to trade for free with a free practice account with $50K in virtual money that is very important in building experience as that is what is really needed most. But there is some difference in trading virtual money as compared to real money especially when it comes to your reactions and how you care about your trades. In other words, nobody is going to lose sleep over $10K in virtual money so it isn't good enough practice.

Important tips to Avoid Identity Theft

There are several simple steps you can take to avoid your identity from being stolen.

Identity theft happens every day. It is a horrible thing to go through and can take years for a person to fix. There is no sure way to avoid this happening to you, but there are several key steps you can take to do your best to prevent it from happening. If someone steals your identity, they will most likely rack up large debts in your name. You must then prove that the debts were created by someone else. The process to rebuild your credit is very complex and can literally take years.

Want a regular cash inflow with minimal risk? Fixed Income Securities are your answer

There are really three types of investments that a person can make - bonds, preferred stock and pensions.

I have discussed a lot about stock trading and other financial instruments on this blog. Today, I wanted to look at investments from a retirees’ point of view. I did some research, but was unable to come up with the exact figures on how many people actually retired last year. However, it is generally agreed upon that the number is in the millions.

When looking at fixed income securities, I guess there are really three types of investments that a person can make. They are bonds, preferred stock and pensions. All of which guarantee the owner fixed income. But there are also more exotic instruments like credit derivatives. For now, let’s take a look at each of the three basic types of fixed income products and what the market is offering.

Bonds can be government bonds or corporate bonds. Corporate bonds offer a higher yield because they are seen as a risky investment in comparison to government bonds that are a risk-free investment. Investors should look at the Fitch rating of a bond before deciding whether they should put their money in it. Anything rated below BB is known as junk bond or high-yield bonds which are usually avoided by somebody looking for a regular cash inflow with minimal risk.

Vocabulary Lesson of the Week | Real Estate Lingo

Realtors and other people in the know have a tendency to talk in acronyms. Apparently, we are so rushed for time that we cannot bother to say the whole word or phrase. And, time is money, you know. So, without further ado, here is a brief list of some of the more popular time-savers.

1.    MLS: This stands for Multi-Listing System. Basically, it is the internal database that all realtors use to access information on homes for sale. You need to be a licensed realtor to use it, but online sources like realtor.com can pull certain information up to share with consumers.

How Much Do You Really Need in Your Emergency Fund?

My husband and I were discussing the importance of our emergency fund yesterday, and speculating about how much you really need to have in an emergency fund.  The general advice is to have six months’ of living expenses saved up at all times.  While this may work for some families, those hit hardest by this economy may argue that more savings would be wiser.

What are some top mutual funds investing their money on?

The Wells Fargo Advantage Growth Fund is managed by Thomas Ognar and it seems to be bullish about Apple Inc. (NASDAQ: AAPL) which I was raving about in my post about the best five stocks to invest in 2012 on the Investment Talk blog on this site. The fund has Apple stock as its largest holding and has already picked a big time winner this year with railroad operator Kansas City Southern that went up 42 percent through November due to some pretty good earnings growth.

Why Hiring a Buyer's Agent Is So Important

A Buyer’s Agent. What? Who? Why do I need one of those? I’ll just wing it on my own; it’ll save me money.

Ack! Where to start…

1.   A Buyer’s Agent is the realtor in a transaction that represents the interest of the Buyer. He/she works for no one else. Their sole purpose in life is to get you the best deal on the house you want. Period. If they do the job well, they hope that you will give them a call in 5-10 years when you buy the next one.

Re-think Your Cell Phone Plan

There are countless other cell phone plans you can get that won't break the bank.


Do you really need the $80 unlimited data smartphone plan? Or event he $50 plan for that matter. Unless you need a smartphone to make a living, then you may not even "need" a smartphone. I said "need" not want".

There are countless other cell phone plans you can get that won't break the bank. Take that extra $40 to $70 a month and use it to pay off debt, save, or take a well-needed vacation.

New Book Reveals The Unpleasant Truth About Microfinance

The darling of venture philanthropists may not be all it's cracked up to be

Microfinance has become one of those philanthropic buzzwords of the last decade in which small loans are granted by poverty-prevention organizations (through the cooperation of banks, of course) to people in extreme poverty. Findings in the last several years laud microfinance institutions for pulling millions out of poverty and for their incredibly high repayment rate, which is actually higher than that of regular banks. In fact, microfinance has garnered a kind of golden halo in the world of philanthropic venture capitalism, and has become the golden idol for do-gooders with means the world over. Perhaps that’s why a new book by David Roodman of the Center for Global Development, a critique of micro-financing based on a three-year exhaustive study called Due Diligence, seems to be raining on everyone’s parade.