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Choosing a Mortgage Broker
Choosing your Mortgage Broker is just as important as choosing
your new home. There is nothing worse than after going
through the feelings of comfort and joy, to find out that your
dream home turns out to be a financial nightmare.
The word Broker suggests that he/she will be able to provide you with a range of lenders, provide estimates well before closing known as 'good faith estimates' enabling you to make the best in time decision.
A good, reliable and trustworthy broker will be able to demonstrate to you why option A,B, or C will be good for you; by taking into account your financial circumstances now, for example in relation to your deposit. He/She would also consider how long you intend to stay in the house, your income and take account of liabilities you may have. There be distinct advantages of you not committing all of your deposit and paying down existing credit facilities.
The Broker must also consider for you, the opportunity of locking your rate to provide you the known costs per month. Variable rate loans fluctuate with the volatility in the markets on Wall Street. So locking you rate could be a way of fixing your month on month budget. It does have to be said though by locking your rate you cannot take advantage when the market adjusts downward, making you home loan cheaper. Conversely, not be penalized if rates move higher. This is an important part of securing the best home loan deal, as they tend to be long term, sometimes it is worth looking at the total cost of the loan over the typical term of 25 years, then make a decision.
Last but not least, the market is suggesting that there is value to be had. By that brokers are open to negotiate their commissions. Remember though, that this is about your long term stability not necessarily about a cheap deal. The most important ingredient is the quality of advice you receive and whether the above has been explained to you fully. The role of the Broker is also that of financial planner who should be looking to provide the best solution for now and considering your future.
The word Broker suggests that he/she will be able to provide you with a range of lenders, provide estimates well before closing known as 'good faith estimates' enabling you to make the best in time decision.
A good, reliable and trustworthy broker will be able to demonstrate to you why option A,B, or C will be good for you; by taking into account your financial circumstances now, for example in relation to your deposit. He/She would also consider how long you intend to stay in the house, your income and take account of liabilities you may have. There be distinct advantages of you not committing all of your deposit and paying down existing credit facilities.
The Broker must also consider for you, the opportunity of locking your rate to provide you the known costs per month. Variable rate loans fluctuate with the volatility in the markets on Wall Street. So locking you rate could be a way of fixing your month on month budget. It does have to be said though by locking your rate you cannot take advantage when the market adjusts downward, making you home loan cheaper. Conversely, not be penalized if rates move higher. This is an important part of securing the best home loan deal, as they tend to be long term, sometimes it is worth looking at the total cost of the loan over the typical term of 25 years, then make a decision.
Last but not least, the market is suggesting that there is value to be had. By that brokers are open to negotiate their commissions. Remember though, that this is about your long term stability not necessarily about a cheap deal. The most important ingredient is the quality of advice you receive and whether the above has been explained to you fully. The role of the Broker is also that of financial planner who should be looking to provide the best solution for now and considering your future.
Date Published: Jun 15, 2010 - 4:36 pm
China's Economy: Still Emerging or Major Player?
Enter the Dragon's den with your money and what could
happen? The tag still hags around China that its economy is
emerging. Investment experts consider it to be an economic
superpower. Think on, why would HSBC ( Hong Kong and
Shanghai Banking Corporation) move its Head Office out of London
back to the Far East? Well, they did in September 2009, and
its the World's largest international bank.
ETFs have been given a large vote of confidence as during the downturn, the Government stepped in to provide dollarsignr580 million stimulus package, even though people lost jobs, it is now clear that the package worked out. The US and China's economy are linked, like it or not China has been the one of the largest buyers of US debt. Despite various financial controversies, especially the ones surrounding China's accounting practices, it is emerging as a global force.
China has continued to look beyond its own shores for investment opportunities. Although now, the country's appetite is more in developing its own economy. Top officials have been spreading China's influence throughout the World with aid and loan packages in an effort to position itself as a global player. What does this mean? It means that China has economic confidence, growth and activity in order to sit at the top table.
It does suffer though through energy poverty, road and rail systems that are inadequate and communication systems that are way undeveloped. Its workforce and attitude of its people is flexible, accepting the need for progress. The labor force is comparatively cheap to employ and also flexible. Their planning laws favor progress despite the fact that someone may lose their home in the process. People feel it is their contribution to "national progress".
By its economic nature China requires large commodity purchase to fuel its manufacturing which could impact the trade balance. It is therefore, vulnerable to rising commodity prices. Having said that, most economies will have their challenges.
Outperforming the S&P 500 by 30% - 40% a year in 2005 -2008, the Chinese indexes are now closely following the American ones in the recovery. However, this trend is believed to break soon as China is coming back as a giant, growing, and developing its own home economy. The Chinese household is thrifty making it a country of low debt and high savings. Watch this Dragon fly.
Investment opportunities through ETFs are ishares FTSE Xinhua China 25 (FXI), Power Shares Golden Dragon Hatter USX (PGJ), SPDR STP China (GXC), Claymore/Alpha Shares China Small Cap (HAO).
ETFs have been given a large vote of confidence as during the downturn, the Government stepped in to provide dollarsignr580 million stimulus package, even though people lost jobs, it is now clear that the package worked out. The US and China's economy are linked, like it or not China has been the one of the largest buyers of US debt. Despite various financial controversies, especially the ones surrounding China's accounting practices, it is emerging as a global force.
China has continued to look beyond its own shores for investment opportunities. Although now, the country's appetite is more in developing its own economy. Top officials have been spreading China's influence throughout the World with aid and loan packages in an effort to position itself as a global player. What does this mean? It means that China has economic confidence, growth and activity in order to sit at the top table.
It does suffer though through energy poverty, road and rail systems that are inadequate and communication systems that are way undeveloped. Its workforce and attitude of its people is flexible, accepting the need for progress. The labor force is comparatively cheap to employ and also flexible. Their planning laws favor progress despite the fact that someone may lose their home in the process. People feel it is their contribution to "national progress".
By its economic nature China requires large commodity purchase to fuel its manufacturing which could impact the trade balance. It is therefore, vulnerable to rising commodity prices. Having said that, most economies will have their challenges.
Outperforming the S&P 500 by 30% - 40% a year in 2005 -2008, the Chinese indexes are now closely following the American ones in the recovery. However, this trend is believed to break soon as China is coming back as a giant, growing, and developing its own home economy. The Chinese household is thrifty making it a country of low debt and high savings. Watch this Dragon fly.
Investment opportunities through ETFs are ishares FTSE Xinhua China 25 (FXI), Power Shares Golden Dragon Hatter USX (PGJ), SPDR STP China (GXC), Claymore/Alpha Shares China Small Cap (HAO).
Date Published: Apr 23, 2010 - 2:24 pm
Prudent Investors Eye India's Growth Through ETFs
Is India still full of Eastern promise? Is the economy on
the rise or would you be throwing good money after bad?
In short, this economy is sizzling. Despite the slowdown, Indian economy was largely insulted from toxic assets. In the boom years growth was compounded with cash and investor injected money, from overseas into the country. The 2008 -2009 reductions resulted in a slowdown in construction projects. and shrinkage in the job market. Today, when these calamities are over, India's BSE Sensex outperforms the S&P500 by about 20% margin over the last year.
The 7th of April 2010 signified a 25 month high in Indian Stock Market. The economy still continues to boom and this is great news for ETFs and your money. Its pillar of strength is its 'home' consumption, a 1 billion population explains why. Another significant fact is the country's low dependence on exports. International Monetary Fund remains very confident about India. Worth to mention is the fact that the middle class of India is larger than the entire population of the US and therefore there are likely to be less spikes in its balance of trade. This is the opposite to the US which is dependent on importing much of its consumer goods.
Consider this, by 2025 it is expected that India will upstage the US economy with growth rates of 14% commencing in 2014, manufacturing being the catalyst. The only downside is that even with an dollarsignr8.7 billion investment in infrastructure projects, it was commented that 'It is not a question of money, it is a question of can we get it started?'
Good for your money? Yes as the right fundamental ingredients exist. The ways to invest are through Power Shares India (ticker - PIN), WisdomTree India Earnings (ticker - EPI) and iPath MSCI India Index ETN (ticker - INP).
See you in the next 24.
In short, this economy is sizzling. Despite the slowdown, Indian economy was largely insulted from toxic assets. In the boom years growth was compounded with cash and investor injected money, from overseas into the country. The 2008 -2009 reductions resulted in a slowdown in construction projects. and shrinkage in the job market. Today, when these calamities are over, India's BSE Sensex outperforms the S&P500 by about 20% margin over the last year.
The 7th of April 2010 signified a 25 month high in Indian Stock Market. The economy still continues to boom and this is great news for ETFs and your money. Its pillar of strength is its 'home' consumption, a 1 billion population explains why. Another significant fact is the country's low dependence on exports. International Monetary Fund remains very confident about India. Worth to mention is the fact that the middle class of India is larger than the entire population of the US and therefore there are likely to be less spikes in its balance of trade. This is the opposite to the US which is dependent on importing much of its consumer goods.
Consider this, by 2025 it is expected that India will upstage the US economy with growth rates of 14% commencing in 2014, manufacturing being the catalyst. The only downside is that even with an dollarsignr8.7 billion investment in infrastructure projects, it was commented that 'It is not a question of money, it is a question of can we get it started?'
Good for your money? Yes as the right fundamental ingredients exist. The ways to invest are through Power Shares India (ticker - PIN), WisdomTree India Earnings (ticker - EPI) and iPath MSCI India Index ETN (ticker - INP).
See you in the next 24.
Date Published: Apr 22, 2010 - 2:53 pm
How to Invest in the World's Fastest Growing Economy
Out of all BRIC countries Russia presents an unbeatable growth
opportunity. The Russian analog of Dow Jones, the RTS index, is
up 300% from its lows a year ago, which is more than any other
BRIC country was able to achieve. This comes due to a higher risk
in the youngest of the four economies.
Russian economy is dominated by commodities as oil, natural gas,
metals, and timber account for more than 80% of Russian exports
abroad. Since 2003, however, exports of natural resources
decreased in importance as the internal market started to
strengthen. Additionally, significant effort has been made to
diversify the country's economy into non-commodity sectors, such
as telecommunications and nanotechnologies. Russian currency, the
Ruble, has been troubled by the 2008 crisis, but stabilized after
the oil prices stopped falling.
According to Bank of America's recent report, Russia’s economy is poised for the "biggest bounce" in the world this year as companies rebuild stocks and resurgent consumer demand boosts output. The Bank's analysts raised expectations for Russia's 2010 GDP from 5% to 7%. Only in the first quarter the country’s GDP already gained 6.5% and inflation is slows down to 6%, the report says.
According to Bank of America's recent report, Russia’s economy is poised for the "biggest bounce" in the world this year as companies rebuild stocks and resurgent consumer demand boosts output. The Bank's analysts raised expectations for Russia's 2010 GDP from 5% to 7%. Only in the first quarter the country’s GDP already gained 6.5% and inflation is slows down to 6%, the report says.
Market Vectors Russia ETF (ticker - RSX) is the
oldest and most traded ETF on the market. The fund's goal is to
replicate the DAXglobal® Russia+ Index by investing at least 80%
of assets in stocks and Depositary Receipts of Russian publicly
traded companies. It normally invests at least 95% of assets in
securities that comprise the index. The ETF can by well used by
those, who want to invest in Russian stock market without
actually leaving the US domain.
CurrencyShares Russian Ruble Trust (ticker - XRU) tries to replicate, net of expenses, the movements of Russian Ruble relative to US Dollar. The price of this ETF does not match the exchange price of the Ruble, but the variations do. Even though one can use this ETF in a traditional sense making bets on Russian currency, its better use is to hedge your exposure to Ruble if you are invested in Russian assets such as RSX or other Russian stocks.
The SPDR S&P Russia ETF (ticker - RBL) is the youngest ETF of the Russian family. RBL will seek to track the performance of S&P Russia Capped BMI Index, a float adjusted market cap-weighted benchmark consisting of Russian publicly-traded companies. Currently traded at very low volumes, the fund quickly gains more exposure, and is expected to directly compete with the major player RSX.
CurrencyShares Russian Ruble Trust (ticker - XRU) tries to replicate, net of expenses, the movements of Russian Ruble relative to US Dollar. The price of this ETF does not match the exchange price of the Ruble, but the variations do. Even though one can use this ETF in a traditional sense making bets on Russian currency, its better use is to hedge your exposure to Ruble if you are invested in Russian assets such as RSX or other Russian stocks.
The SPDR S&P Russia ETF (ticker - RBL) is the youngest ETF of the Russian family. RBL will seek to track the performance of S&P Russia Capped BMI Index, a float adjusted market cap-weighted benchmark consisting of Russian publicly-traded companies. Currently traded at very low volumes, the fund quickly gains more exposure, and is expected to directly compete with the major player RSX.
At the time of writing the author had no position in any of
the securities mentioned.
Date Published: Apr 21, 2010 - 2:38 pm
Should Brazil ETFs be Re-evaluated Now?
As growth at home flattens, Brazil offers an interesting zone to
consider. Projected to grow by 4.7% in GDP this year, with
moderate unemployment (7.4%) and low inflation (4.3%), it has all
the potential to deliver superior returns within the next
years.
The Government with the help of Central bank has controlled debt, both personal and corporate. By introducing high taxes and higher rates, making borrowing hugely unattractive, Brazil has managed to avoid the toxic debt that caused the downturn. Private banks through having to set aside cash were effectively blocked from jumping into the sub-prime loan market.
In the past, Brazil has suffered from bouts of high inflation, high interest rates and an unstable economy. In recent years inflation has posed less of a threat and therefore allowed interest rate cuts. Public spending, previously a hindrance to the economy has dropped below 40% of GDP and is under control. (2009/2010).
Foreign currency borrowing in the past caused further fluctuations in the economy, though having been exchanged for the Real, the country has amassed a dollarsignr200 Billion reserve to defend its national currency.
A rising star? Demand for commodities is still strong, copper, oil, gold, silver, iron ore, and coal - Brazil has them all. Brazil’s benchmark stock index, the Bovespa has made its roundtrip in the crisis, and is now approaching new highs – something that S&P 500 still has a long way to achieve. The major Brazil ETF (EWZ) has outperformed the S&P 500 by 30%.
If all these fundamentals remain in place, Brazil will continue to grow. Plan for some dollarsignr200 Billion dollars worth of infrastructure improvements, social programs and education confirms the confidence and the new found stability, though we continue to say check the balance sheet before you invest.
The main iShares MSCI Brazil ETF (EWZ) and Market Vectors Brazil Small Cap ETF (BRF). Currently for March 2010 trending upward (see graph).
EWZ is the most liquid Brazil-specific ETF today, tracking the benchmark iShares MSCI Brazil Index. Traded at volumes of 20 million shares/day, it’s the easiest way to invest in one of the World’s most promising eonomies.
The Market Vectors Brazil Small Cap ETF (BRF) is a newer fund that’s only been around for a year. Its name speaks for itself, and it represents a Growth / Medium size strategy.
For those willing to play more risky strategies LBJ (Direxion Daily Latin America Bull 3X shares) and LHB (Direxion Daily Latin America Bear 3X shares) are the way to go. These are the new Direxion provided triple leveraged funds that allow you to bet in reverse directions. Be careful, though, their trading volumes are shallow, so limit orders only! Also bear in mind that these funds only match index returns during the day, and nothing is guaranteed overnight.
See you in the next 24.
At the time of writing the author had no position in any of the securities mentioned.
The Government with the help of Central bank has controlled debt, both personal and corporate. By introducing high taxes and higher rates, making borrowing hugely unattractive, Brazil has managed to avoid the toxic debt that caused the downturn. Private banks through having to set aside cash were effectively blocked from jumping into the sub-prime loan market.
In the past, Brazil has suffered from bouts of high inflation, high interest rates and an unstable economy. In recent years inflation has posed less of a threat and therefore allowed interest rate cuts. Public spending, previously a hindrance to the economy has dropped below 40% of GDP and is under control. (2009/2010).
Foreign currency borrowing in the past caused further fluctuations in the economy, though having been exchanged for the Real, the country has amassed a dollarsignr200 Billion reserve to defend its national currency.
A rising star? Demand for commodities is still strong, copper, oil, gold, silver, iron ore, and coal - Brazil has them all. Brazil’s benchmark stock index, the Bovespa has made its roundtrip in the crisis, and is now approaching new highs – something that S&P 500 still has a long way to achieve. The major Brazil ETF (EWZ) has outperformed the S&P 500 by 30%.
If all these fundamentals remain in place, Brazil will continue to grow. Plan for some dollarsignr200 Billion dollars worth of infrastructure improvements, social programs and education confirms the confidence and the new found stability, though we continue to say check the balance sheet before you invest.
The main iShares MSCI Brazil ETF (EWZ) and Market Vectors Brazil Small Cap ETF (BRF). Currently for March 2010 trending upward (see graph).
EWZ is the most liquid Brazil-specific ETF today, tracking the benchmark iShares MSCI Brazil Index. Traded at volumes of 20 million shares/day, it’s the easiest way to invest in one of the World’s most promising eonomies.
The Market Vectors Brazil Small Cap ETF (BRF) is a newer fund that’s only been around for a year. Its name speaks for itself, and it represents a Growth / Medium size strategy.
For those willing to play more risky strategies LBJ (Direxion Daily Latin America Bull 3X shares) and LHB (Direxion Daily Latin America Bear 3X shares) are the way to go. These are the new Direxion provided triple leveraged funds that allow you to bet in reverse directions. Be careful, though, their trading volumes are shallow, so limit orders only! Also bear in mind that these funds only match index returns during the day, and nothing is guaranteed overnight.
See you in the next 24.
At the time of writing the author had no position in any of the securities mentioned.
Date Published: Apr 18, 2010 - 8:28 am
Focus on BRIC ETFs
Welcome to our series of Articles on BRIC ETFs (Brazil, Russia,
India and China Exchange Traded Funds) discussing why they should
be an important addition to your investment portfolio, as well as
weighing their pros and cons.
As the U.S. investors have traditionally favored home grown, in bound investments, the Global markets are changing this trend more and more. We are now observing more interdependent economies where one can't grow without another.
During 2003 until 2007, the emerging economies' growth was staggering and funds investing in these zones managed to deliver over 70% annual returns. Attracted to such lucrative gains, more investors are considering to add emerging market equity to their portfolios. The simple way to do that today is to invest in ETFs focusing on the regions. These ETFs have opened a gateway to invest in emerging economies without actually leaving the US domain. Traded on US exchanges, ETFs represent portfolios of equity pooled together and managed by a professional investment managers.
The main emerging economies today are considered Brazil, Russia, India, and China, or simply BRIC. These four countries are among the biggest and fastest growing markets today. Mexico, South Korea and Singapore are comparable to BRICs, but their economies are considered already more developed.
The BRIC acronym was introduced by Jim O'Neill of Goldman Sachs in 2001. Analysts at Goldman Sachs published an opinion that these economies combined could become the four most dominant economies by the year 2050. The BRIC countries possess over 25% of the World's dry land, 40% of the World's population, and produce a combined 15 trillion dollars of GDP (PPP). On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg (Russia), and issued a declaration calling for establishment of a multipolar world order.
In this post crisis era, investor trends are leaning toward pursuit of higher returns, diversification and spreading risk exposure. ETFs have made this relatively easy without the personal investor having to make 'guesses' as to where to invest their dollars. With volume of 50-70 mln shares /day EEM, the main emerging markets ETF tracking the MSCI Emerging Markets Index, is already among the 5 most traded ETFs on the market.
In the days to come we will be examining the BRIC - Brazilian, Russian, Indian and Chinese - economies and ETFs that provide you the opportunity to take advantage of the extreme growth that these economies provide. See you in the next 24.
As the U.S. investors have traditionally favored home grown, in bound investments, the Global markets are changing this trend more and more. We are now observing more interdependent economies where one can't grow without another.
During 2003 until 2007, the emerging economies' growth was staggering and funds investing in these zones managed to deliver over 70% annual returns. Attracted to such lucrative gains, more investors are considering to add emerging market equity to their portfolios. The simple way to do that today is to invest in ETFs focusing on the regions. These ETFs have opened a gateway to invest in emerging economies without actually leaving the US domain. Traded on US exchanges, ETFs represent portfolios of equity pooled together and managed by a professional investment managers.
The main emerging economies today are considered Brazil, Russia, India, and China, or simply BRIC. These four countries are among the biggest and fastest growing markets today. Mexico, South Korea and Singapore are comparable to BRICs, but their economies are considered already more developed.
The BRIC acronym was introduced by Jim O'Neill of Goldman Sachs in 2001. Analysts at Goldman Sachs published an opinion that these economies combined could become the four most dominant economies by the year 2050. The BRIC countries possess over 25% of the World's dry land, 40% of the World's population, and produce a combined 15 trillion dollars of GDP (PPP). On June 16, 2009, the leaders of the BRIC countries held their first summit in Yekaterinburg (Russia), and issued a declaration calling for establishment of a multipolar world order.
In this post crisis era, investor trends are leaning toward pursuit of higher returns, diversification and spreading risk exposure. ETFs have made this relatively easy without the personal investor having to make 'guesses' as to where to invest their dollars. With volume of 50-70 mln shares /day EEM, the main emerging markets ETF tracking the MSCI Emerging Markets Index, is already among the 5 most traded ETFs on the market.
In the days to come we will be examining the BRIC - Brazilian, Russian, Indian and Chinese - economies and ETFs that provide you the opportunity to take advantage of the extreme growth that these economies provide. See you in the next 24.
At the time of writing the author had no position in any of
the securities mentioned.
Date Published: Apr 16, 2010 - 4:35 pm
Protect Your Investments From Inflation and Win on Taxes!
Stocks advanced yesterday approaching a 52 week high (Dow Jones
+0.41%, S+P 500 +0.51% and NASDAQ +0.88%). The market was
calmed amid fears of a raise in the base rate, however, the
Fed kept lending rates down. As more Investors have
increased their holdings the markets have risen in value, which
poses the question of rising inflation and how you protect
yourself against the possibility of diminishing returns.
Those who are employed can ride an inflationary period through salary increases, but the fixed income retirees are most at risk from this erosion of income and spending power. Deflation was mentioned by economists as a danger to the US economy, however, due to the fiscal stimulus package and growth in the Far East, inflation is the more likely result of these economic events, long term. Thus, reevaluating portfolios is a necessary step in financial stability.
One of the recommended vehicles is through TIPS (Treasury Inflation Protected Securities) and iBonds. They are a useful addition to your portfolio in negating the fluctuations in other markets and protecting your capital investment. They also offer an opportunity to become Tax efficient, (please refer to your Tax Adviser for personal circumstances).
Those who are employed can ride an inflationary period through salary increases, but the fixed income retirees are most at risk from this erosion of income and spending power. Deflation was mentioned by economists as a danger to the US economy, however, due to the fiscal stimulus package and growth in the Far East, inflation is the more likely result of these economic events, long term. Thus, reevaluating portfolios is a necessary step in financial stability.
One of the recommended vehicles is through TIPS (Treasury Inflation Protected Securities) and iBonds. They are a useful addition to your portfolio in negating the fluctuations in other markets and protecting your capital investment. They also offer an opportunity to become Tax efficient, (please refer to your Tax Adviser for personal circumstances).
The iBonds, for example, are US savings Bonds and pay interest in
2 ways. First is fixed when purchased; the second is
variable, which changes twice a year based on inflation measured
by the CPI. The most recent iBond is paying 3.76%
composite, based on a fixed rate of 1% and 2.67% varaible
annualized.
Up to dollarsignr5,000 can be invested in any calendar year (Source: Treasury Direct) purchased at a local Bank or electronically through Treasury Direct. You may also invest a one time only lump sum of dollarsignr20,000. You must hold the bond for a minmum of 12 months, 3 months redemption of interest is charged if you cash the bond before 5 years. Careful selection is required to ensure that you are making income that is not being eroded by taxes and this vehicle may not offer protection to those in higher tax brackets.
TIPS are similar to iBonds, are guaranteed by Uncle Sam and are exempt from local and state tax. You will be liable to personal income tax because of the bi-annual interest you receive plus the 'phantom income' you receive from adjusted inflation. It is significant that you could be paying more in tax than you are actually earning, this despite the fact you do not receive this income until the bond is redeemed. TIPS though are an excellent vehicle for those who are in a lower tax bracket, who live in a state with high tax rates and are an ideal addition for inclusion in taxable accounts or Roth IRAs. They are easily purchased, commission free, normally with starting prices of around dollarsignr1,000 and up to dollarsignr5M.
To further hedge your portfolio you may also consider purchasing commodities, at the very top between 5-6% of your portfolio. Be cautious in your approach in buying as timing is everything. Look at dollar cost averaging before you purchase. A mistimed buy could easily be dented by inflation. Do not discount that you may already 'hold' commodities in the form of energy stocks; energy prices, oil, coal and gas form a major part of the commodities market. Particularly relevant when prices in developing economies are heavily reliant on selling raw materials.
Stock market investment is by far the most visible way of preventing erosion by inflation. Companies with a history of solid dividend returns are worth owning and inflation will have a lesser effect on these returns than say, bonds. A good source of data relating to the above can be found at the Vanguard Dividend Appreciation. For Government Bonds call 0800-4US-BONDS.
Up to dollarsignr5,000 can be invested in any calendar year (Source: Treasury Direct) purchased at a local Bank or electronically through Treasury Direct. You may also invest a one time only lump sum of dollarsignr20,000. You must hold the bond for a minmum of 12 months, 3 months redemption of interest is charged if you cash the bond before 5 years. Careful selection is required to ensure that you are making income that is not being eroded by taxes and this vehicle may not offer protection to those in higher tax brackets.
TIPS are similar to iBonds, are guaranteed by Uncle Sam and are exempt from local and state tax. You will be liable to personal income tax because of the bi-annual interest you receive plus the 'phantom income' you receive from adjusted inflation. It is significant that you could be paying more in tax than you are actually earning, this despite the fact you do not receive this income until the bond is redeemed. TIPS though are an excellent vehicle for those who are in a lower tax bracket, who live in a state with high tax rates and are an ideal addition for inclusion in taxable accounts or Roth IRAs. They are easily purchased, commission free, normally with starting prices of around dollarsignr1,000 and up to dollarsignr5M.
To further hedge your portfolio you may also consider purchasing commodities, at the very top between 5-6% of your portfolio. Be cautious in your approach in buying as timing is everything. Look at dollar cost averaging before you purchase. A mistimed buy could easily be dented by inflation. Do not discount that you may already 'hold' commodities in the form of energy stocks; energy prices, oil, coal and gas form a major part of the commodities market. Particularly relevant when prices in developing economies are heavily reliant on selling raw materials.
Stock market investment is by far the most visible way of preventing erosion by inflation. Companies with a history of solid dividend returns are worth owning and inflation will have a lesser effect on these returns than say, bonds. A good source of data relating to the above can be found at the Vanguard Dividend Appreciation. For Government Bonds call 0800-4US-BONDS.
Date Published: Mar 23, 2010 - 5:54 pm
Strategies for Negotiating With Debt Collection Agents
Imagine someone owed you dollarsignr1,000
and didn't pay for a long time. Wouldn't you be happy if you
could at least get a portion of that money back? Let's say
dollarsignr700 or even dollarsignr300. That's exactly what the
banks think of defaulted borrowers. After a customer defaults,
his loan is considered impaired, and is passed on to collection
department, or even sold at a discounted price to collection
agencies. In either case, one thing is certain: the bank will be
happy recovering only a portion of the loan.
If you defaulted on a loan, you can turn this to your advantage. Many collection agencies will offer you a 30%-60% discount off your original loan if you are ready to pay. The exact discount depends on the length of delinquency and the type or loan. However, it also critically depends on your ability and preparedness to negotiate with the collectors. Call the collectors and ask what it will take to close your defaulted loan. When doing so, take into account the following factors.
1. Don't ever disclose how much money you have on hand before you hear an acceptable offer. If the collection finds out you have more than they are prepared to discount, they will not go down any further, and they will fight for the cash you have.2. Don't disclose your address, phone number, or where you work, before you have a deal with collectors. Don't sign any papers and don't make any promises. If for any reason you aren't able to pay the loan, the collectors will continue haunting you using the new information you provide. Only after you make a deal should you disclose the information. However, keep in mind, that if you have other unpaid debts, that information can be passed on to more collectors as a new lead.
3. The farther into default you are, the higher are your chances of getting a deeper discount from the collectors.
4. Don't accept their first offer, and you probably won't want to accept the second either. Realize, that from the collection's standpoint getting little cash now is better than not getting anything at all, so wait until they lower their requirement down to an acceptable number. Some inexperienced collectors might not realize that, and you might have to explain that you are offering LITTLE cash but NOW, as opposed to NO cash but in FUTURE.
5. Once you hear the offer, that seems acceptable, try to further bring the amount down by offering them cash today instead of a payment plan or a suggestion to wait for a month. But do it only if you have that cash on hand. "Cash today" has an enormous effect in any negotiation. Many negotiations fail every day only because the necessary cash is not available at the right time. However, when people know you have it, they can be ready for quite extensive concessions.
6. If the negotiation doesn't go your way, don't tell the collectors you can leave the loan unpaid forever. They know it's false, because otherwise you wouldn't have called. Being in the business, they've seen people, and they've heard stories, and they know precisely why you are calling. Just tell them you don't like owing money, you realize that the damage has been done, and given your resources you are trying to see what you can do to put that debt delinquency behind.
7. If you have separate defaulted loans, they might end up with the same collection company. Don't mention that to collectors, and try to negotiate best discount on each loan separately. If they go lower on one loan than the other, you will know how much is their best offer. Try to bring the discount on all loans to the same deepest level.
8. Make sure the collector agrees to report to credit bureaus as "paid in full" (even though you didn't pay the full amount). In some cases they go for "settled", which means you only paid partially, but still to their satisfaction.
9. Whatever deal you make, write the details down, and get them to fax it to you in an official letter.
10. The best time to negotiate with loan collectors is December. Collection agents are paid bonuses off the money they collect, and the results are measured at the end of the year. Many of them would go an extra mile to increase their cash results, so your position is clearly advantageous.
Over the past decade the banks have aggressively lent money. It wasn't always lent to the most creditworthy consumer, it wasn't always arranged by trustworthy agents, and it wasn't always the money the banks actually had (banks are leveraged, which means for every dollar they have, they borrow more dollars, which they then lend). As long as the banks hold on to a questionable lending practice, you should fight to defend your position as a customer.
Date Published: Mar 17, 2010 - 6:32 am
How Will Stocks Spend Their Holiday Season?
October was another month of struggle
for the markets. Dow Jones Industrial Average fighting for the
10,000 level, CBOE Volatility Index soaring to over 30 (hasn't
done that since July), weakening dollar, and oil prices
hesitating which way to go from dollarsignr70 a barrel. These are
just a few signs that market recovery is nearing its saturation
point, and market participants hesitate what to do next. In
search for the answer, we look how the markets performed in
different months in the past.
Date Published: Dec 01, 2008 - 7:08 am
Shopping for HELOC
Home Equity Line of
Credit or briefly HELOC is a line of credit which offers low
interest rates and uses your home equity as collateral. It offers
a flexible and convenient way to borrow against the equity that
you have accumulated in your home. Lines of credit have two major
differences from Home Equity Loans (HEL). First, a HEL provides
you with a lump sum, versus a HELOC, which allows the borrower to
take only as much credit as needed, up to the maximal approved
limit, i.e. works much like a credit card. In this way, you don't
have to take more credit than you need today, and have the rest
of the line conveniently available with no extra paperwork.
Second, HELOC comes with adjustable interest rates, while with
Home Equity Loans you can choose either fixed or adjustable
interest rate. Thus, shopping for a HELOC is not the same as
shopping for a loan, or mortgage. To make sure you get the best
deal, follow these easy steps.
Date Published: Oct 11, 2009 - 12:25 am
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