Stocks and trands

Money origamy

2009-06-17T06:41:00.001-07:00

Moneygami is origami made from banknote

2008-02-06T00:11:00.000-08:00

A little while ago we showed you Moneygami and why they exist and now we’re back with new pics of Moneygami - origami made from banknote.

Money that we see every day transformed into something unique and unexpected.

2007-12-26T08:49:00.000-08:00

Moneygami is origami made from banknote; the subtle genius lies in the way the artist incorporates the prints on the money bills into the facial characteristics of the finished figures.
This is called money folding. Sometimes also called bill folding, or banknote folding, or other such derivative terms. I'm not really sold on the Moneygami name- there's a real trend lately to do such things, primarily because people figure out "oh, that must be money origami" or something to that effect.
Actually "moneygami" name is a little dumb because the "gami" (kami) part means "paper", and the "ori" (oru) part means "to fold". So we're talking "money paper" here as a meaning. "Orimoney" doesn't quite roll off the tongue the same way, though, so I guess it's unavoidable. Loan words from other languages and how they eventually get sqeezed into new boxes is an ever-interesting phenomenon).

Financial Slang From A to Z

2007-10-15T22:34:00.001-07:00

What is slang? It is a social term technically defined as the lexicon (set of words) used in an esoteric (specialized) field. It is what we’re talking about when we say “I don’t get all that medical mumbo-jumbo” or “The mechanic said something about the air injection and radio compressor having electrical issues.”
For those of us in the business of holding on to our money, these phrases sound like gunshots. Are you sure you trust your professional not to rip you off? How can you tell if you don’t have a clue what they’re saying? The more different fields and professionals you have to deal with, the more vocabulary you need to know.
For many of us, financial words are the furthest removed from our daily lives. We know checkbook, balance, credit, and debit, but what about near money, escrow, or tick? David Bach has compiled a list of (at least) 1001 Financial Words You Need To Know. I think he has a point, but instead of listing all of the words in his lexicography (dictionary), I’ll list 26: one from each letter of the alphabet, his definition, and where I got / could get / could see someone getting it wrong. Ready?

A. Actuary: n. As opposed to someone with a job between an accountant and an assessor to a private individual or company, this person analyzes statistics to determine insurance risks.

B. Balloon Payment: n. I have been under the impression that a balloon payment is merely the last payment at the end of the term, typically larger than the others. I had been missing that this payment is outstanding principal as all of the interest had been paid. This is kind of frightening: 15 years of not paying off my house? (I’m upping my mortgage payments.)

C. Capitation: n. As the only image I had before I read the definition was of heads rolling, I was amused at the irony to find this meant the sum paid to an institution per capita, for example, an allowance per student in attendance.

D. Dematerialize: n. Upon hearing this word before, I imagined something to the effect of liquidation. Quite differently, this is the move of a business from paper to electronic recording.

E. Escrow: n. In a recent purchase, I had to struggle to comprehend the value of a third party holding my deed, trust, or account. It seems this is a security measure.

F. Floater: n. This type of insurance is supplementary to a homeowner’s policy, covering what is has easy mobility, like stereo equipment. These things are covered without any regard to location. It has nothing to do with flood insurance, so make sure you’re covered if you need that.

G. Golden Parachute: n. Not an overgenerous severance payment to high executives, this is actually similar to prenuptials. If a business is taken over, an executive who may be dismissed is promised this sum.

H. Hedge: n. This is not hiding your money from tax collectors, but instead is real estate or other asset held as a security measure against financial loss.

I. Impute: v. To assign a value to something based on the value it has as part of a whole is to impute its value. This seems to me an opinion, possibly used to calculate losses and damages incurred by an employee or equipment failure. We’d love to have these imputed independently, and the insurance company would prefer to send their own.

J. Jobber: n. Though it may seem short for “odd-jobber,” this actually refers to two kinds of workers: one who works occasionally, and a wholesaler.

K. Kaizen: n. From the Japanese, this is a philosophy of continuous improvement, both industrial and personal.

L. Load: n. Though this may refer to the size of one’s bank roll, this term is also used to describe the commission on a mutual fund. Be warned that these may be opposites.

M. Melon: n. Knowing that this refers to profit, this metaphor does not mean an artificially inflated number (mostly water), but an actual large profit to be shared among several.

N. Near Money: n. Not quite “readily available,” this term refers to the next best thing to liquid, something that can be liquid quickly (like government bonds).

O. Oligopsony: n. It could be construed as a mispronunciation of oligopoly, which is not quite a monopoly. However, it is the inverse: a market with a limited number of buyers instead of sellers. I imagine model-specific car part manufacturing fits into this category.

P. Perpetual: adj. I once believed a perpetual bond, one without a fixed maturity date, meant it would never stop accruing value. However, the language in this definition jolts me from that fantasy: “irredeemable”. I think I can equate it to a pick-five lottery ticket where they don’t tell you exactly when they are going to draw the numbers.

Q. Quantity Theory (of money): n. My first impressions included the relationship of supply and price of goods, and demand and price of manufacturing. Alternatively, this is more of a relationship between the cost of goods with the actual supply of money to purchase those goods.

R. Reconcile: v. I formerly associated this as simply matching my checkbook to my bank statement; however, to reconcile accounts includes all the complicated calculations of the invisible/uncleared transactions in both accounts that will make those accounts match. These accounts could be business to bank, business to business, business to personal, all much more than personal to bank.

S. Silent Partner: n. As opposed to a business owner who defers all major decision making to the other(s), this is defined as someone who abstains from working in the business, with no mention of decision making.

T. Tick: n. A tick is the smallest unit of measure of price fluctuation of securities or futures. It is not a periodic account of that price, a definition derived from “ticker” where several prices in cyclical progression are displayed at that moment’s value.

U. Untaxed: adj. For something to be untaxed is for that something to be exempt from having taxes paid on it. The word has been used incorrectly to describe a level of underground tax evasion.

V. Visible: adj. This word is not simply goods vs. services, but more confined to imported and exported goods vs. services.

W. Warrant: n. Potentially the definition of this could be derived from warranty: a manufacturer/ servicer’s document of guaranty of workmanship. However, a warrant is more inclusive: it is any document used to entitle someone to goods or services. A rain-check might fall into this category.

X. XD: adj. & adv. An abbreviation of ex dividend, this term does not refer to funds excluding all dividends, but only excludes the next one.

Y. Yield gap: n. Though it sounds like the difference between expected something’s yield and its actual yield, a yield gap is the difference between government securities’ yield and ordinary securities’ yield.

Z. Zero-based (budgeting): adj. This word does not mean that this budget’s value of an asset is no different than in last budget’s, but that for some exterior reason it is advantageous for the business to use the benchmarked value of that asset than to use a value based on the last budget’s valuation.

October 15, 2007
financial alphabet By Ann Hartter

13 Tax Jokes and Quotes

2007-08-02T12:18:00.000-07:00

Like death, paying taxes is inevitable. In the case of most Americans, tax season is just around the corner. If only paying taxes was so easy.

As you begin pulling out those receipts, the eraser and reading plain English tax instructions that Einstein couldn’t figure out, you’re going to need a good laugh. Here you go:

I am proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money.
People who complain about taxes can be divided into two classes: men and women.
Like mothers, taxes are often misunderstood, but seldom forgotten.
The best measure of a man's honesty isn't his income tax return. It's the zero adjust on his bathroom scale.
Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.
A tax loophole is something that benefits the other guy. If it benefits you, it is tax reform.
Few of us ever test our powers of deduction, except when filling out an income tax form.
What's the difference between a mosquito and an IRS agent? One is a bloodsucking parasite, the other is an insect.
It would be nice if we could all pay our taxes with a smile, but normally cash is required.
The government deficit is the difference between the amounts of money the government spends and the amount it has the nerve to collect.
Taxes: Of life's two certainties, the only one for which you can get an automatic extension.
What Mae West said about sex is true about taxes. All tax cuts are good tax cuts; even bad tax cuts are good tax cuts,
The federal income tax system is a disgrace to the human race. - Jimmy Carter

If nothing else, it is good to know that a former President of the United States feels the same way about taxes as you. If only someone would agree to a flat tax, millions of Americans could dispense with the aggravation and stress of filing taxes each year.

About the author:
Richard A. Chapo is with BusinessTaxRecovery.com
- providing information on taxes.

Choosing A Stock Broker

2007-07-02T23:35:00.000-07:00

Unless you are a stock broker yourself, you might need to hire a broker to handle your investments for you. Brokers are the people who work for brokerage houses and can buy and sell stock on the stock exchange. A lost of people wonder if they really need a broker. The answer is yes. You must have a broker if you plan to buy or sell stocks on the stock exchange.

Most brokers have a background in business or finance, with a Bachelors or more advanced degree. In order to obtain their license, stockbrokers are required to pass two different tests, which are pretty difficult.

Often times people don’t understand the between a broker and a stock market analyst. A stock broker is only there to follow your instructions to either buy or sell stocks; they do not analyze stocks. On the other hand, an analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform.

Most brokers earn their income from commissions on sales. When you tell your broker to buy or sell a stock, they earn a certain percentage of the transaction. Many brokers charge a flat ‘per transaction’ fee.

There are two kinds of brokers: Discount brokers and full service brokers.
Discount brokers typically do not offer any advice and do no research – they just do as you ask them to do, without all of the bells and whistles.
Full service brokers can usually offer more types of investments, may provide you with investment advice, and is usually paid in commissions.

When it comes to brokers, the biggest decision you must make is usually whether to use a full service broker or a discount broker.

If you are new to investing, you may need to go with a full service broker to make sure you are making wise investment decisions. Full service brokers offer you the skill that you lack at this point. On the other hand, if you already have enough knowledgeable about the stock market, all you really need is a discount broker who will make your trades for you.

By: Andrew Walker
The author is a freelance writer. He has written articles for financial websites
such as Cash Advance Guide cashadvance101.com, Mortgage Guide etc.

Indian stocks: What to enter and what to exit

2007-05-16T23:27:00.000-07:00

The markets opened with modest gap up today on account of some buying seen in the Sensex heavyweights like SBI, Reliance, ONGC and Infosys. Market breadth was seen positive.Sensex was up 80 points at 14009 and Nifty was up 20 points at 4140. Experts who spoke to CNBC-TV18, had Banking, Steel and Sugar sectors foremost on their minds. Here's how they view the sectors:

Sugar Sector

Sugar sector has been news for quite some time owing to the political upheaval in Uttar Pradesh. On sugar, Anand Tandon of Gryffon Investment Advisors says that there are no fundamental reasons to buy sugar yet. “There could be political reasons and some expected sops but that aside, the companies cannot make money on selling sugar at least in the near-term”

Sudarshan Sukhani of Technical Trends is long on Bajaj Hindustan and Balrampur Chini. He believes that the ideal time to buy is when the sector is in the dumps and when all fundamental analysts will say that sugar will never go up. However he adds that “This is not a trading call, this is something that I am looking at for the next one or two years”

Steel Sector

On this sector Anand Tandon feels that the outlook is somewhat mixed with the international prices being reasonably firm and the general outlook of the companies also continuing to remain firm. “From that point of view maybe there is a reason to hold on to some of these stocks but you have to remember that all said and done, it is a cyclical industry,” warns Tandon.

However, Atul Suri of Marathon Trends puts his bet on this sector. "I think steel has been one of the really quiet performers, no one talks about it but lot of wealth has been created" he states.

Banking Sector

Banking is another sector which have been doing well for the past few trading sessions. Q4 numbers from the banking industry were in line with street expectations. Net interest income and net profit for the banking sector as a whole increased by 25% and 15.3% respectively in Q4 FY07. A lot of people have been arguing that more value is found in PSU banks right now and for the first time people have started believing that it is better place to be in than private sector banks.

Anand Tandon seconds this thought saying that the PSU banks have had the biggest knock and therefore suffered the most with the fears of interest rates going up. “From that point of view therefore offer significant value” The private sector banks on the other hand will be in play over the next few quarters as it becomes clearer that some of the international players maybe allowed to invest in India.

Sudarshan Sukhani feel that the charts of the private sector banks suggest that the final up moves are still to come. Though he adds that "I am a big fan of PSU banks so to me all the charts looks good,”

Media sector

Lately there has been a lot of activity in the media and entertainment sector. With Brokerage firms like UBS are betting on the Indian media sector, they feel that the Indian media stocks will continue to trade at premium valuations, given their high growth potential over the long term and strong growth in the near to medium term.
Anand Tandon feels that valuations are not cheap but looking at growth, the valuations have to be factored in and the numbers, which are fairly large, will take some years from now. That is what the media companies are reflecting at this stage.

Tehran Stock Exchange ( TSE)

2007-03-27T17:28:00.000-07:00

The idea of having a well-organized stock market and to speed up the process of industrialization of the country dates back to 1930's when Bank Melli Iran started a study about the subject. A report completed in 1936 worked out the details for the formation of a stock market and laid down the preliminary foundation to proceed with the plan.
The outbreak of the World War II and subsequent economic and political events delayed the establishment of the stock exchange upto the year 1967 when the Stock Exchange Act was ratified.

The Tehran Stock Exchange opened in April 1968. Initially only Government bonds and certain State-backed certificates were traded in the market. During 1970's the demand for capital boosted the demand for stocks. At the same time institutional changes like the transfer of shares of public companies and large private firms owned by families, to the employees and the private sector led to the expansion of the stock market activity. The restructuring of the economy following the Islamic Revolution expanded public sector control over the economy and reduced the need for private capital. At the same time the abolishment of interest-bearing bonds terminated their presence in the stock market. As a result of these events, Tehran Stock Exchange started a period of standstill.

This stop came to an end in 1989 with the revitalization of the private sector through privatization of state-owned enterprises and promotion of private sector economic activity based on the First Five-year Development Plan of the country. Since then the Stock Exchange has expanded continuously.
The TSE Council is the highest authority in the stock exchange. State officials as well as the private sector representatives and specialists are members of the Council. The Governor of the Central Bank presides over the Council. Other constituent organs of TSE are Acceptance Committee, Arbitration Board and Brokers Organization. The Board of Directors of the latter is the highest policy-making authority in TSE and appoints the secretary general as the chief executive officer, CEO, for a period of two years. Re-appointment is permitted without any restriction. There are two Senior Deputies acting under the Secretary General who are responsible for economic and technical affairs and administration and finance respectively.

Trading in TSE is based on orders sent by the brokers.
Trading hours are 09:00-12:30 Saturday to Wednesday, with the exception of public holidays. A CDS is operating in TSE and clearing process is automated.
TSE Services Company, TSESC, who is in charge of computerized site, supplies computer Services. Presently,TSE trades mainly in securities offered by listed companies. The introduction of project-based participation certificates that bear a fixed annual return during the period of the project and promise the final settlement of the profit at the date of its completion, has diversified the market.
TSE is a full member of FIBV, a founding member of Federation of Euro-Asian Stock Exchanges (FEAS). TSESC is a member of ANNA

Top 10 Proven Oil Countries

2007-03-12T18:55:00.000-07:00

10.Nigeria - 35billion of barrels
Nigeria is the largest oil producer in Africa, and is a major oil supplier to both the United States and Western Europe. Proven oil reserves are expected to be expanded to 40 billion barrels by the year 2010.

9. Libya - 39billion of barrels
Though sanctions against Libya had been removed by United States President Bush and also by The United Nations, some Libyan authorities caution foreign optimism about prospects in the country's socialist driven economy. Nonetheless, the removal of sanctions allows Libya to drive forward.

8. Russia - 60billion of barrels
Russia has the world's largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. The country is the world's largest exporter of natural gas and the second largest oil exporter. Reorganization of the Russian Energy Sector has shown improvements in the industry over the last few years.

7. Venezuela - 79billion of barrels
According to the Oil and Gas Journal (OGJ), Venezuela has 77.2 billion barrels of proven conventional oil reserves, the largest of any country in the Western Hemisphere. In addition it has non-conventional oil deposits similar in size to Canada's - at 1,200 billion barrels approximately equal to the world's reserves of conventional oil. About 267 billion barrels of this may be producible at current prices using current technology.

6. United Arab Emirates - 97bilion of barrels
At one time an underdeveloped region, by 1985 the UAE had the highest per capita income in the world. The largest areas of petroleum production occur in two of the seven constituent parts of the UAE; these being Dubai and Abu Dhabi. Abu Dhabi qualifies as a oil state in the same sense as Kuwait.

5. Kuwait - 102bilion of barrels
Kuwait hopes to step up oil production to reach capacity of 4 million bbl/d by 2020, but since Burgan was found in 1938 and is getting very mature, this will be a challenge. Furthermore, according to data leaked from the Kuwait Oil Company (KOC), Kuwait's remaining proven and non-proven oil reserves are only about half the official figure - 48 gigabarrels.

4. Iraq - 115bilion of barrels
Iraq has the fourth largest reserves of conventional oil in the world at 112 gigabarrels. Despite its vast oil reserves and low costs, production has not recovered since the US-led 2003 invasion of Iraq. Constant looting, insurgent attacks, and sabotage in the oil fields has limited production to around 0.5 gigabarrels per year at best. Political risk is thus the main constraint on Iraqi oil production and likely to remain so in the near future.

3. Iran - 126bilion of barrels
Iran has the world's second largest reserves of conventional crude oil at 133 gigabarrels, according to the CIA World Factbook, although it should be noted that both Canada and Venezuela have larger reserves if Non-conventional oil is included. Iran is the second largest oil holder globally with approximately 10% of the world's oil.

2. Canada - 179bilion of barrels
Canada's Athabasca Oil Sands Project is what puts Canada on the map in this list. Current surface mining techniques and in-situ methods to extract bitumen from the oil sands make for an overwhelmingly positive future for Canada's oil industry.

1. Saudi Arabia - 264bilion of barrels
With one-fourth of the world's proven oil reserves and some of its lowest production costs, Saudi Arabia produces over 4 gigabarrels of oil per year and is likely to remain the world's largest oil exporter for the foreseeable future. However, there are serious political risks involved in Saudi Arabian domination of the world oil market. In spite of recent increases in oil income, Saudi Arabia faces serious long-term challenges, including rates of unemployment of at least 13 percent, one of the world's fastest population growth rates (its population has tripled since 1980), and the need for political and economic reforms. According to the Oil and Gas Journal, Saudi Arabia contains 262 gigabarrels of proven oil reserves, around one-fourth of proven, conventional world oil reserves. Although Saudi Arabia has around 80 oil and gas fields, more than half of its oil reserves are contained in only eight fields, and more than half its production comes from one field, the Ghawar field.

Oil prices end down after stock market fails to rebound

2007-03-04T17:24:00.001-08:00

Oil prices end down after stock market fails to rebound

Oil prices settled lower Friday as traders watched the stock market decline even further, renewing concerns that economic growth may stall.

The tenuous stock market saga overshadowed tightening gasoline supplies that helped push oil's Thursday settlement price to a more than two month high.

Light, sweet crude for April delivery fell 36 cents to settle at $61.64 a barrel on the New York Mercantile Exchange. Earlier, the contract fell to an intraday low of $61.35 after the Dow Jones industrials dropped by more than a 100 points. The Dow was trading at 12,158.08, down 76.26 points, in afternoon trading.

Brent crude for April lost 3 cents to settle at $62.08 a barrel on the ICE Futures exchange in London.

“Oil is a horse that wants to break out of the gate, but can't until the stock market figures itself out,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Tim Evans, an energy analyst with Citigroup Futures Research, pointed out that trading was light on Friday and most investors typically don't take on new positions ahead of the weekend.

“I think the stock market is one issue among many,” Evans said. “Certainly, as a comparison, the oil market is showing good underlying strength in the face of a weak stock market and commodity markets.”

On Thursday, crude oil rose 21 cents to settle at $62 a barrel – its highest settlement price since Dec. 22 – following a rally in gasoline futures, which rose on reports of a glitch at a Valero Energy Corp. refinery. Valero said operations at its Port Arthur, Texas, refinery were normal, despite the reported outage of a unit.

Gasoline failed to hold onto gains it made on Thursday and slipped less than a penny to settle at $1.9018 a gallon.

Market participants were also focusing on the outlook for gasoline supply entering the peak spring and summer driving season. Problems at U.S. refineries have reduced output and cut into petroleum product supplies.

On Wednesday, the U.S. Department of Energy reported that stockpiles of gasoline and distillates, which include heating oil and diesel fuel, dropped last week by a larger amount than analysts had forecast. Meanwhile, demand for products over the last four-week period rose by 7.5 percent from the same period last year.

U.S. crude inventories climbed 1.4 million barrels to 329.0 million barrels last week. But gasoline inventories fell by 1.9 million barrels to 220.2 million barrels, and distillate inventories fell by 3.8 million barrels to 124.5 million barrels.

Worries over Iran's persistent refusal to suspend its nuclear program remain on oil traders' minds too, analysts said.

“There's a lot of focus on what's happening with Iran. Tensions over any possible sanctions are obviously positive for oil prices,” said Andrew Harrington, an analyst with ANZ Global Natural Resources in Sydney.

Washington is pushing for tougher U.N. sanctions on Tehran over its failure to comply with demands to halt its uranium enrichment program that the West fears could be used to build a nuclear weapon. Although the United States has said it has no plans to strike Iran militarily, it has also refused to rule out any option.

In other Nymex trading, heating oil futures fell nearly a penny to settle at $1.7682 a gallon, while natural gas prices fell 4.5 cents to $7.243 per 1,000 cubic feet.

By J.W. Elphinstone ASSOCIATED PRESS

Iran touts nuclear prowess with new banknote

2007-03-03T12:54:00.000-08:00

The rial (ریال in Persian) is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting.

Iran is to issue a new high-denomination banknote marking the country's achievements in nuclear technology at a time of mounting tension with the West over its atomic programme, the IRNA agency reported Saturday.
The new 50,000 rial note -- at around five dollars worth more than twice the value of any other note in circulation -- sports a picture of the standard nuclear insignia of electrons in orbit around an atom.
"If the science exists in this constellation, men from Persia will reach it," says the calligraphic legend beside the atomic orbit, quoting a saying (Hadith) they attribute to the Prophet Mohammed.
On the front of the note is a picture of the Islamic republic's founder, the late Ayatollah Ruhollah Khomeini, which according to the law must be on all Iranian currency.
Iran has defied UN demands for a halt to sensitive nuclear activities and instead has pressed on with its atomic programme which has become a source of national pride.
The head of printing at the Islamic republic's central bank, Jalal Jalilian, denied there was any link between the issuing of the note and rising prices of basic foodstuffs in Iran.
"Bank notes are a medium of exchange and (their printing) has nothing to do with depreciation of the national currency," he said.
The government of President Mahmoud Ahmadinejad has been criticised by economists for expansionary policies that risk fuelling inflation. Prices of poultry, red meat and vegetables have risen in recent months.
The official rate of inflation is put at around 13 percent although unofficial rates put the figure much higher.
Jalilian said that the new notes would be circulated on March 12 ahead of the Iranian new year which commences on March 21.
"In the first phase six million bills will be printed and before the end of the year another six million notes will be printed. Its printing will continue next year too," Jalilian said.
The note is the first new bill issued since February 2004 when Iran's Central Bank introduced a 20,000 rial bill. A dollar is now worth roughly 9,300 rials. Prior to the 1979 Islamic revolution it stood at 70 rials.

Asian shares close mostly lower on Chinese fall yesterday; Shanghai rebounds

2007-02-28T09:22:00.001-08:00

Feb. 28, 2007

Shares across the Asia-Pacific region closed mostly lower after the steep drop on Chinese markets yesterday followed by the fall on Wall St overnight -- although the Shanghai markets bounced back today on bargain hunting, dealers said.

Tokyo shares ended sharply lower. Dealers said some investors showed an appetite for buying, so reducing the losses, while others stayed on the sidelines, waiting to see how the markets in Europe and the US perform tonight.

The blue chip Nikkei 225 Stock Average finished 515.80 points or 2.85 pct lower at 17,604.12, off a low of 17,382.79 and a high of 17,843.61.

The TOPIX index of all first-section issues dropped 58.59 points or 3.23 pct to settle at 1,752.74, off a low of 1,719.15 and a high of 1,785.05.

Hiroichi Nishi, equity chief general manager at Nikko Cordial Securities, said investors had been 'waiting for some trigger for adjustment.' A sharp rise in the yen also weighed on the market, he said. Nishi said that after a slight rise in the Shanghai market today, the Tokyo market had recouped some of its losses, but investors were waiting to see how the US and European markets performed.

Australian shares closed sharply lower following an 8.8 pct slump on the Shanghai market yesterday and the fall on Wall St, dealers said.

Dealers said few Australian companies avoided the negative sentiment today, including the index leading resource stocks BHP Billiton (NYSE:BHP) and Rio Tinto which have large exposures to the Chinese resource-led boom.

The S&P/ASX 200 closed down 161.3 points or 2.69 pct at 5,832.5 - now well below Monday's record close of 6,044.0. The index managed to end above the day's low of 5,786.8.

Over February, the key index remained up 59.1 points or 1.00 pct despite today's sell-off and continued to hold a 162.7 point or 2.9 pct gain for investors so far in 2007.

Hong Kong shares were sharply lower in afternoon trade in response to the falls in mainland China and Wall St, dealers said.

They said the budget speech of Hong Kong Financial Secretary Henry Tang provided good news with tax relief measures but failed to lift the market due to prevailing concerns over US and China bourses.

At 3.45 pm the Hang Seng Index was down 460.82 points or 2.29 pct at 19,687.05.

In mainland China, A-shares in Shanghai and Shenzhen closed sharply higher on the back of bargain-hunting after yesterday's slump, with property, telecom and power stocks leading the gainers, dealers said.

Nearly 200 companies closed up by their daily limits of 10 pct.

'The market was boosted by bargain-hunting interest after yesterday's plunge, as investors were reassured by the government's denial of a rumored tax on stock investment gains,' said Wang Mingzhi, an analyst at GF Securities.

According to the rumors, the government was to impose taxes on capital gains from stock investment income. The Ministry of Finance and the State Administration of Taxation announced today that there are no plans to levy such a tax.

Analysts said the slump yesterday is temporary and it will be a matter of time before the market picks up again.

'The slump is only a temporary thing. Soon people will realize that nothing has changed - liquidity is still abundant, the yuan is still rising and corporate earnings are still growing, so the long-term prospects are still promising,' said Wu Dazhong, an analyst at Shenyin Wanguo Securities.

The Shanghai A-share Index was up 114.99 points or 3.95 pct to 3,025.75 and the Shenzhen A-share Index was up 29.06 points or 3.94 pct at 767.35.

Seoul shares closed sharply lower on broad sell offs, with sentiment undermined by the sharp corrections seen across global stock markets, dealers said.

The market tumbled by nearly four pct to fall through the 1,400 point level at one stage, with downbeat current account and industrial output data fuelling the decline, they added.

The KOSPI index closed down 37.26 points or 2.56 pct, at the day's best level of 1,417.34. The low was 1,393.96.

Handy Personal Finance Spreadsheets

2007-02-23T17:15:00.001-08:00

Handy Personal Finance Spreadsheets

Good personal finance spreadsheets are hard to find on the web because sploggers monopolize the search results. Still, I’ve managed to collect links to a stack of them that I’d like to share.

Spreadsheets more useful than web-based calculators because:

You can modify the fields and formats to meet your own needs,
You can create “what-if” scenarios by making copies of a sheet, and
You can save the data for later use.

The following links are all real sites from real people with real useful information to share.

I mentioned PearBudget in a previous entry. It’s an excellent (though elaborate) budgeting spreadsheet.
If you find PearBudget intimidating, this morning Lifehacker pointed to another spreadsheet-based budgeting system. It’s bare-bones, which may appeal to some.
Foxway offers a budget tracker spreadsheet that is somewhere between the previous two in complexity. It keeps all expenses for a single year on one page. (For some reason the file has an .XLR extension; you’ll need to change it to .XLS to open it.)
Bankrate offers its own budget spreadsheet, though I don’t find it as useful as the others.
If, like me, you’re following the debt snowball method of debt reduction, check out Mr. Peanut’s Debt Snowball Calculator.
Patrick Holt has created a ginormous spreadsheet filled with all manner of personal finance calculators. This thing is mammoth.
It’s Your Money offers 22 different personal finance spreadsheets, including several related to auto expenses.
As one might expect, Microsoft offers many excellent personal finance spreadsheets for free download. These are more polished than most of the home-brewed spreadsheets I’ve listed, though not necessarily as useful. (Addendum: more here.)
Ask the Builder has a column about saving for a rainy day so that home repairs don’t take you by surprise. There’s no downloadable spreadsheet here, but there’s brief mention (and an image) of one that you can easily recreate on your own. (Besides: this is an excellent column for homeowners.)
Num Sum has a huge collection of spreadsheets, but most of them are junk. If you have patience, you can sift through to find some gems, such as this home maintenance schedule. Note that Num Sum spreadsheets are not downloadable, and that registration is required to use them.
And from Get Rich Slowly, you can download Vintek’s power of compounding spreadsheet and the default Excel amortization table, a useful loan calculator. (Vintek sent me a generic revised version of his spreadsheet, which I’m dubbing the magic of compound returns spreadsheet.)

There must be thousands of other great personal finance spreadsheets out there. I’ll share the best of those I find.

FX Trading The Martingale Way

2007-02-21T17:21:00.001-08:00

Imagine a trading strategy that is practically 100% profitable - would you be interested? Most traders will probably reply with a resounding "Yes", especially since such a strategy does exist and dates all the way back to the eighteenth century. This strategy is based on probability theory and if your pockets are deep enough, it has a near 100% success rate. Known in the trading world as the martingale, this strategy was most commonly practiced in the gambling halls of Las Vegas casinos and is the main reason why casinos now have betting minimums and maximums and why the roulette wheel has two green markers (0 and 00) in addition to the odd or even bets. The problem with this strategy is that in order to achieve 100% profitability, you need to have very deep pockets - in some cases, they must be infinitely deep. Unfortunately, no one has infinite wealth, but with a theory that relies on mean reversion, one missed trade can bankrupt an entire account.Also, the amount risked on the trade is far greater than the potential gain. Despite these drawbacks, there are ways to improve the martingale strategy. In this article, we'll explore the ways you can improve your chances of succeeding at this very high risk and difficult strategy.

What is Martingale Strategy?
Popularized in the eighteenth century, the martingale was introduced by a French mathematician by the name of Paul Pierre Levy. The martingale was originally a type of betting style that was based on the premise of "doubling down". Interestingly enough, a lot of the work done on the martingale was by an American mathematician named Joseph Leo Doob, who sought to disprove the possibility of a 100% profitable betting strategy.
The mechanics of the system naturally involve an initial bet; however, each time the bet becomes a loser, the wager is doubled such that, given enough time, one winning trade will make up all of the previous losses. The introduction of the 0 and 00 on the roulette wheel was used to break the mechanics of the martingale by giving the game more than two possible outcomes other than the odd vs. even or red vs. black. This made the long-run profit expectancy of using the martingale in roulette negative and thus destroyed any incentive for using it.
To understand the basics behind the martingale strategy, let's take a look at a simple example. Suppose that we had a coin and engaged in a betting game of either head or tails with a starting wager of $1. There is an equal probability that the coin will land on a head or tails and each flip is independent, meaning that the previous flip does not impact the outcome of the next flip. As long as you stick with the same directional view each time, you would eventually, given an infinite amount of money, see the coin land on heads and regain all of your losses plus $1. The strategy is based on the premise that only one trade is needed to turn your account around.

Trading Application
You may think that the long string of losses such as in the above example would represent unusually bad luck, but when you trade currencies, they tend to trend and trends can last for a very long time if you are caught in the wrong direction. However, the key with martingale when applied to trading is that by "doubling down" you in essentially lower your average entry price. In the example below, at two lots, you need the EUR/USD to rally from 1.2630 to 1.2640 to break even. As the price moves lower and you add four lots, you only need it to rally to 1.2625 instead of 1.2640 to break even. The more lots you add, the lower your average entry price. Even though you may lose 100 pips on the first lot of the EUR/USD if the price hits 1.2550, you only need the currency pair to rally to 1.2569 to break even on your entire holdings. This is also a clear example of why deep pockets are needed. If you only have $5,000 to trade, you would be bankrupt before you were even able to see the EUR/USD reach 1.2550. The currency may eventually turn, but with the martingale strategy, there are many cases when you may not have enough money to keep you in the market long enough to see that end.

Minding the Risk
As attractive as the martingale strategy may sound to some traders, we stress that grave caution is needed for those who attempt to practice this style of trading. The main problem with this strategy is that oftentimes, that sure-fire trade may blow up your account before you can turn a profit - or even recoup your losses. In the end, traders must question whether they are willing to lose most of their account equity on a single trade. Given that they must do this to average much smaller profits, many feel that the martingale trading strategy is entirely too risky for their tastes.

25 Rules to Grow Rich By

2007-02-09T19:31:00.001-08:00

Follow these guidelines and feel confident that you'll be making the right financial decisions.

1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
The return on investment on a mid-range bath modernization is 102% of its cost. Kitchens can add about 90% of their costs to the home's value.

Another home improvement that can pay off is window replacement. Not only does this job return about 90% on investment when the house is resold, it saves on energy bills every year.

As a rule, upscale improvements pay off at lower rates than mid-range or inexpensive ones. And making a house bigger and more luxurious that those of your neighbors will also cost a lot more than they'll return when the house is sold.

2. It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
There are transaction costs and fees involved in any refinancing that must be either paid out of pocket or added to the mortgage principal. Some of those costs can be considerable. Title insurance can easily run into four figures and broker fees can be expensive as well.

Like many things in life, timing is everything here. Is your job likely to relocate soon? Will you need a bigger house in the next couple of years? Unless you're planning to stay in the home for a while, the benefits of a lower monthly bill may not be worth the additional expenses that refinancing generates.

3. Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%.
Many buyers in recent years have stretched the limits of affordability, and have bypassed the traditional 20% down model. But make a smaller down payment, and most lenders will require you to have private mortgage insurance (PMI), which adds a minimum 0.5% of the loan amount to your mortgage payments, about $1,000 more a year on a $200,000 principal.

4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
These guidelines include payment on all loans, such as school and auto loans and credit card debt.

Also remember to take into account other home-related expenses to judge a house's affordability. Property and school taxes, home insurance and energy costs and requirements can vary considerably around the nation.

Try to estimate future maintenance costs and work them into your budget. Some homes, especially older ones, may require more regular upkeep than homes built with more modern materials. Roofs, siding and heating, cooling, plumbing, and electric services may have to be replaced within a few years of purchase.

5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Even if these contractors aren't scam artists, they may lack licensing and insurance. If a worker gets hurt on your property it could wind up costing a lot more than you bargained for.

Instead, get contractor recommendations from friends, neighbors or relatives. Check references and get documentation of insurance coverage.

And don't put more than 10% down for the job. Mete out the payments gradually as work is done and withhold the final 25% until you're satisfied with the completed project.

6. All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
One of the keys to saving for the long run is keeping as much money as possible shielded from taxes. A 401(k) gives you that and more: You also get an immediate tax break, because contributions come out of your paycheck before taxes are withheld. And there's the possibility of a matching contribution from your employer – that's free money.

The federal limit on annual contributions has been increasing gradually, and is $15,000 in 2006. If you're 50 or older, you may contribute an additional $5,000.

With a Roth IRA, you get no immediate tax break, but withdrawals in retirement will be tax-free. You can make at least a partial contribution to a Roth if your modified adjusted gross income is less than $110,000, if you're single, or less than $160,000, if you're married and filing jointly.

7. To figure out what percentage of your money should be in stocks, subtract your age from 120.
Since 1926, stocks have returned an annual average of 10.5 percent, long-term government bonds returned 5.1 percent, and "cash," measured by Treasury bills and other short-term investments, has returned just 3.1 percent. In other words, if you're investing for the long-term, stocks are the place to be. But in the short term, the stock market can be downright dangerous, with much more severe drops than the bond market has.

That's where this rule comes in - the younger you are, the more time you have to recover from stock-market crashes. As you get older, you should gradually move money out of stocks and into bonds.

8. Invest no more than 10% of your portfolio in your company stock - or any single company's stock, for that matter.
In a bear market, it's tough to find a safe-haven – a lot of the stocks in your portfolio will be sinking too. But don't compound the risk by holding too much in any one stock.

The most recent dramatic example of just how serious this "specific-stock" risk can be is Enron, which imploded after its executives allegedly engaged in various acts of malfeasance. But a company with perfectly honest management might fall on hard times too.

And if it's your employer's stock, you're in an even worse position – not only will your portfolio be decimated, but your job could be at risk too.

9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
Running a mutual fund isn't free – companies have to pay for research, managers' salaries, and so on. Those costs are borne by the investors in the funds and get deducted from returns. A percentage point here and there may not sound like much, but a fund manager needs to pick a lot of great stocks to make up for those costs.

10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.
So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million. This rule is based on the amount that you can safely withdraw from your nest egg in retirement.

The single most effective thing you can do to ensure that your money will last is to start out with a low withdrawal rate of 4 percent, then raise that amount annually to compensate for a cost-of-living increase or inflation.

The reason is that if a bear market hits early in retirement, an enormous loss can put such a big dent in the portfolio that it won't be able to recover in time to benefit when the market rebounds.

11. If you don't understand how an investment works, don't buy it.
There is no shortage of investment products out there. In addition to stocks and bonds, there are exotic hedge funds and insurance products.

Fortunately, you don't have to try and make sense out of them. In fact, you can construct a sensible portfolio with just two index mutual funds – one stock and one bond.

To reach your goals, you don't need to shoot for spectacular returns. Individual investors can outpace the market with moderately above-average returns in good times, as long as they don't lose too much money in bad times.

12. If you're not saving 10% of your salary, you aren't saving enough.
The earlier you start saving, the less you'll need to set aside every year to meet your goals. That's because you allow your money more time to grow -- the gains on your invested savings will build on the prior year's gains. That's the power of compounding, and it's the best way to accumulate wealth.

Saving at least 10% of your annual salary for retirement is recommended, but the older you start saving, the more you'll need to save. If you start at 50, you may need to put away 30% a year and still postpone retirement by a few years.

13. Keep three months' worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
An emergency fund is a hassle to build, but you'll be glad you did next time your transmission sputters or your boss hands you a pink slip. Besides curbing spending where you can and setting aside a small amount of your pay every two weeks, there are several ways to build your cash cushion. Some sources to draw on:

A bonus or financial gift from a relative
Money you get back from a flexible spending account, a transportation reimbursement account or an insurance claim.
An extra paycheck. If you're paid every two weeks, you'll get 26 paychecks a year. So in some months you'll get three instead of two. If your fixed monthly expenses don't change, you might be able to set aside one paycheck a year.

14. Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or use some of your income to help out when your child is in college.
Most parents have trouble saving enough for their retirement. But they still want to help their children pay for college.

In the struggle to feed your 401(k) and your child's 529, the 401(k) should win out. That's because there are no scholarships for retirement and your children have a lot of funding options, including financial aid, loans and a job. They also can go to an excellent, but less expensive school.

And when they're in college, if you have some extra cash after contributing to your retirement accounts, you can help them pay some of their expenses with it.

15. You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.
Life insurance lets surviving family members maintain something close to the standard of living they enjoyed prior to you or your spouse's death. Stay-at-home spouses also should have life insurance, since they do all sorts of things that you would need to pay someone else to do in their absence.

There are two types of policies:

Cash-value: These cover you for your entire life and includes an investment component.
Term: These cover you for a specific period of time and provide a death benefit only.

For most people the choice is a no-brainer - the premiums on a term policy are much lower.

16. When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
It's the open secret of the insurance game: File a claim, your premiums go up. For that reason, it's in your interest – as much as possible – to shoulder small damages out of pocket.

For home insurance, raising your deductible from $500 to $1,000 could save you 25% on premiums, according to the Insurance Information Institute.

17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.
If you carry a balance, you may pay a variable interest rate as high as 19%. And if you've been late with payments or used up too much of your credit limit, you may be hit with a penalty rate, which can run north of 30%.

Credit card penalty fees, meanwhile, have been on the rise for years. The average late fee in 2005, for example, was $34, up 162% from $13 in 1995, according to the Government Accountability Office. Over-the-limit fees, meanwhile, were $31, up 138% from $13 during the same period.

So no matter how many airline miles or cash back rebates a no-fee rewards card offers you, it won't be enough to compensate you for your very expensive credit card habit.

18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
It also helps to pay off debt rather than moving it around because the ratio of your credit card balance to your credit limit is key.

Say you owe a total of $2,000 on four credit cards, each of which has a $2,000 limit. Your total credit limit is $8,000, of which your total balance ($2,000) accounts for 25%.

If you transfer all your balances to two cards and cancel the other two, your total credit limit is reduced to $4,000, and your $2,000 balance now accounts for 50% of that limit.

Also, don't open new accounts when applying for a loan if possible.

19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.
The scam artist's goal is to steal your money, steal your identity or both. In fact, don't carry anything with your Social Security number on it, and don't offer it to anyone unless it's for tax, employment or credit purposes.

There are other ways scammers and identity thieves can get your valuable financial information – for instance, by hacking into a merchant's system and lifting your (and hundreds of other customers') debit card pin numbers.

So be sure to monitor online bank and brokerage accounts a few times a week, and if you see any suspicious withdrawals or charges, report it to your financial institution.

20. The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
Don't believe your father's old-fashioned warnings about buying used. Buying a "pre-owned car" means you've let someone else drive those expensive early miles.

Do your research, of course, and look for a reliable model. But today's cars can generally be expected to rack up six-digit odometer numbers before experiencing major mechanical breakdowns.

Check ConsumerReports.com for detailed reliability information. Sites like Edmunds.com and Kelley Blue Book's KBB.com can help you narrow down the price you should pay.

21. Lease a new car or truck only if you plan to replace it within two or three years.
Keeping a car at the end of lease-term can cost you thousands more than it would have to simply have bought the car from the get-go.

Leasing does have its place, but it's not right for most people. If you're absolutely certain you don't want the car long-term, leasing keeps your monthly payments low. That's because the payments are based on the actual value the car loses during the time you're driving it. Instead of making payments then getting some money back when you trade the car in, as you do when you finance a purchase, with a lease you just don't pay that money out to begin with.

22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
As with cars, electronics cost the most for those who must be first with the latest cool thing. Let the gadget freaks get their fill, then go shopping when the market has calmed.

Also, those first-in-line buyers can have the fun of discovering the annoying bugs, disappointing features and poorly designed interfaces. You can check the user reviews on C-Net and Amazon.com later to find out for yourself without having spent the money.

23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
Airlines would love it if every passenger would reserve their seat as far in advance as possible. That way, they'd always know how many flights they actually need for each route. So they make it as attractive as possible for people to book early. To punish procrastinators, ticket prices get higher as take-off gets closer.

Up to a point, at least. In the end, the airline just wants to fill every seat. So, if there are a few seats left open at the last minute, you can sometimes find a bargain deal. If you really have to fly, though, don't count on that. Airline bean counters have gotten pretty good at knowing just how many seats they need.

24. Don't redeem frequent flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
You typically need 25,000 miles for a domestic round-trip ticket. If the ticket costs less than $250, you're probably better off paying cash.

Airlines push redeeming miles online and will charge $5 to $15 to speak to a person. But it may be worth it: the airline representative has access to additional inventory on partner airlines.

Your miles stretch further on international flights, which typically require 40,000 to 60,000 miles or more depending on the destination. You want to aim to get $2 worth of airfare for every 100 miles. In other words, for a $1,200 flight to Paris, you'd be getting your money's worth using 60,000 miles.

25. When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.
Most electronics, like PDAs and MP3 players, have few moving parts that are prone to wear. If there's anything defective, you'll probably find out about it within the first few months.

Laptops, on the other hand, have parts like hard drives and big screens that can actually fail over time. Plus, laptops can cost thousands of dollars to replace.

10 Websites For Online Stock Traders

2007-02-06T07:20:00.000-08:00

CNNMoney.com provides up–to–the–second news on the stock market, technology, jobs and economy, personal finance and more. The site also has articles and commentary that discuss strategy and investing tips from the popular magazines “Fortune,” “Money,” “Business 2.0” and “FSB”.

CBS.MarketWatch.com has the latest news on market data, portfolios, mutual funds and personal finance. You can join a discussion and share information with other investors or look at the Tools and Research page for the statistics on any given stock.

Investopedia.com is a database built for investors. Here you will find articles, a dictionary, tutorials and even a stock trading simulator.

NYSE.com
This is the official website of the New York Stock Exchange—a comprehensive resource for investors and issuers looking for news and information.

AMEX.com
This is the official website of the American Stock Exchange with all of the current information and news.

NASDAQ.com
The official site for the National Association of Securities Dealers Automated Quotations. Here you’ll find investor tools, news and more.

StandardandPoors.com
Standard & Poor’s is the world’s leading contributor of independent credit ratings, indices, risk evaluation, investment research, data and valuations.

StockCharts.com offers ShartCharts tools to create attractive financial charts, the Scan Engine instantly provides the market’s best investment opportunities and the Chart School is full of educational articles. Though some of this information is only accessible with a paid subscription, this is still a valuable source if you don’t have a subscription.

MoneyCentral.MSN.com
MSN’s MoneyCentral has articles and information on investing basics for the new investor and resources for the seasoned pro. Here, you’ll find current news, market reports and quotes. You can also watch business news clips from CNBC.

Forbes.com —“Home page for the world’s business leaders.” This is a vast library of up–to–date information. You can find anything from stock reports to information on travel to a guide to philanthropy.

Top 25 Web 2.0 Apps for Money, Finance, and Investment

2007-01-25T17:22:00.000-08:00

How do you manage your money? Investments? Do you remember what your roommate owes you, or what you owe someone else for lunch when they picked up the tab? Can't keep track of where you're spending all your money? Pulling your hair out after paying for your medical bills? Need to cut back, so that you can save and find a nice home? Or maybe you'd rather spend your lucre on a vacation for the best price.

The smart way to money management, personal finance, and investing is to use the right tools — tools that aren't so intimidating that you'll ignore them after a while. This guide to the top 25 web 2.0 applications should help you with the above will come in handy when it comes to managing all your money concerns. [If you're not familiar with "web 2.0", read: what is web 2.0, or the compact definition.] Many of these apps have a community nature to them, so if you need some friendly advice from members, or wish to give it, you can.

Applications are listed approximately in alphabetical order within each grouping (except when two apps are described jointly.) Most of the services covered here are either free or have a free component or trial.

Lending, Borrowing This group of applications refers to those in which money actually changes hands electronically, either as part of a loan or as some form of payment (but not as part of an investment). Mobile applications have been left out, as the term web 2.0 hasn't yet been widely extended to smart phones and PDAs.

Prosper

Prosper offers social networks for peer-to-peer community loans and financing. A group leader can create a new group and invite people to become members. An individual can register as a borrower and loan prospects can build a profile for themselves. Loans from a lender can be distributed to a single person or divided amongst several borrowers. A borrower's loan might come from a single lender or several, to reduce risk, and borrowers can choose from whom they select loans, based on the interest rates offered.

Zopa

Zopa is a lot like Prosper. It serves as a potential alternative to expensive short-term loan rates, ideal for managing some of your consumer debt. Zopa does differ slightly from Prosper in some regards however. Zopa has nuances in the way loans are qualified and applied. Also note that Zopa is currently an UK-based system, however, they are "coming to the United States".

Personal Finance, Money Management, Expense Sharing

These applications deal specifically with tracking your personal finances and expenditures, paying bills, etc.

DimeWise

DimeWise lets you define multiple accounts (savings, checking) and enter and track your transactions, including future expenses. Each expense can have a category tag as well as a note. Expenses can be exported or imported (OFX format, aka Microsoft Money 2002+, Quicken 2004+), set as recurring (daily, weekly, monthly, yearly), and even plotted as a chart to help you determine where your money is going. They have a 30-day free trial.

Foonance

Foonance bills itself as a flexible way for individuals, couples and families to manage their personal finances. You can track your net worth over what they call "money stores", import your bank statements, "transfer" amounts between stores, "schedule" transactions and categorize them, and view pending transactions and money store balances. There don't appear to be any report capabilities, unlike DimeWise.

iOWEYOU

iOWEYOU is described as an expenses sharing calculator that roommates or friends can used to keep track of who owes what. The service is free for groups of up to five people. While no money changes hands, it might be great for that insane roommate of yours who calculates rent to the fourth decimal, based on an actual square footage ratio of your room compared to the entire place... Uh, you know what I mean.

NetworthIQ

NetworthIQ is the recipient of an SEOmoz.org Web 2.0 Awards Honorable Mention in "Business, Money, and eCommerce" and was declared #6 in the Top 10 Innovative Web 2.0 Applications of 2005. It's a free personal finance manager that allows you to monitor your net worth, debts, assets, etc. You can share your net worth publicly with other members, and view theirs as well. No private contact information is displayed, though a few PF (personal finance) bloggers do have a link to their website.

Wesabe

Wesabe is a web-based personal finance tool where you can manage your finances. They've also added acommunity component where you can share your experiences with money, your saving tips, and your personal money goals. [While Wesabe isn't the only place to share goals, it seems that what was once taboo (publicly declaring your worth and your goals) is now encouraged.] Wesabe actually interacts with your bank accounts, so it's more than just a tracking tool. There are a few tiers of membership, including "free", as well as a free promo on Pro accounts through 2007. This appears to be amongst the most robust of the "personal finance management" tools being offered online at present, and there are many more features than what's covered here.

Stock Market, Investing, Tracking, Portfolio Management

These applications are specifically for tracking stocks and discussing with community members, managing a portfolio, and conducting actual trades.

BullPoo

The name BullPoo itself is enough to warrant a look at this investment community where you can "share and collaborate on investment information." It has a rich interface, but possibly a bit intimidating, where you can organize your portfolio, store trade history, set an avatar, write or read blogs on whatever stock, make forecasts on a stock to see how you compare to other members, and loads more. For someone with the investment bug that wants to be part of a community, this site could be a positive "timewaster".

CAPS (Motley Fool)

The Motley Fool's CAPS application is similar in nature, if not appearance, to BullPoo. At least from a superficial view. It's not so much about tracking your investments as participating in a community and predicting or viewing predictions of stock outcomes. There's a lot here to be absorbed, but it seems like quite a diversion from regular Motley Fool financial advice in that it seems almost frivolous.

DigStock

DigStock is a Digg-like list of stock market + investing articles. Members submit a synopsis of an article from elsewhere (with the URL) and other members vote for the stories they like. Each story, instead of being tagged with a topic category, is tagged with the appropriate stock ticker symbols. The assumption is that because the article ranking is community-based, active members will help define what type of stories are desirable. And of course, there's the obligatory stock charts.

FeelingBullish

FeelingBullish is very similar to CAPS in functionality, and also follows a community model of sharing and communicating with other investors.

GStock

GStock is "a virtual supercomputer" for stock market analysis. It runs on a grid computing model and claims to test over one billion investment strategies per stock. Then it emails you BUY/ SELL (B/S) alerts for major US-traded stocks in your portfolio. They also claim that 70% of trades based on their BUY/SELL alerts make profits. Navigation, though, is extremely sparse. Enter a stock ticker symbol in the search field to get a chart with B/S indicators. Then apply common sense as to whether you should take the action offered, based on your price for that stock.

MoneyTwins

MoneyTwins is not Forex (foreign exchange) trading per se, but rather, if you have foreign currency and want to exchange it with someone for other currency, you can do so with community members instead of a bank - thus reducing commission costs.

SaneBull

SaneBull is customizable web interface with movable components that let you track specific stocks by symbol and market, as well as browse news feeds from several financial websites. It uses a number of web 2.0 technologies including AJAX.

StockTickr

StockTickr is another social investing application. You can watch animated stock tickers change in real-time, or subscribe to the RSS web feed. Trades are categorized by popular, profit, long, short, open, closed, and alerts. Though what you are watching is based on the portfolios of members. That is, all watchlists are shared amongst the StockTickr community.

Wikinancial

Wikinancial is a financial community where watchlists are shared, as are discussions in the forum — each stock has its own. In addition to the obligatory market and stock charts, there's also an archive of articles, presumably written by members. They have something called the "chat" box, though it's not an integrated IM (Instant Messaging) client, merely a form for starting a new discussion thread. Though provision for real-time chatting, text or voice, might add another dimension to the community, provided some controls such as group moderation were implemented.

Zecco

Zecco combines two popular features — a financial community and free online investment trading. That's right, free, as in no commissions and no hidden fees. This bold move garnered them thousands of new accounts on launch day, an event that was covered by CNBC TV. To actually trade, you have to provide banking information, employment information, and a government ID, all of which have to be faxed after account confirmation.

Real Estate

These applications help you to find, sell or just manage your real estate properties.

Homethinking

Homethinking is a real estate application with a difference. They take an Amazon/ eBay approach in that you can find agents and see "reviews" of that agent, as well a list and a map of what properties they are handling at present. Details of how many properties they have sold are also provided, including location, house details, and asking and final prices. A random query for Atlanta showed a list of agents for whom no reviews were present. However, Homethinking claims over 1.5 million listed agents and nearly 2.5 million transactions.

iiProperty

Have real estate in your investment portfolio? iiProperty offers numerous features to help you manage your properties online: advertise properties for sale or rent (allows pictures), send notices to tenants or rent invoices, track rents and leases, view status indicators and alerts, manage income and expenses. iiProperty is a fairly comprehensive package with 5 price points, including Lite (free), which lets you advertise properties, post to Craigslist, and track online ads, leases, tenant records, rent due + received, and more.

Rentometer

Need to get away from your insane roomate who calculates rent to mad decimal places? Use Rentometer, which is part of iiProperty. It lets landlords determine if they are not charging enough rent for their area, and tenants can find out if they are being charged too much. A random test for a $1000/m studio apartment in Sandy Springs (Atlanta), Georgia showed that, just down the street, there's an similar unit for only $525. Move, and you can put the savings into stocks, or loan it out on Prosper.

Trulia

Trulia is a real estate search engine for the United States that gives you the option of specifying price range, property type, # of bedrooms and bathrooms, and square footage. You can specify region by city or zip code, and a search produces not only a list of properties and a link to the appropriate seller, but a Google map of the region with icons marking each. They also offer interactive heat maps which show price trends. So if you are interested in investing in one or more properties, Trulia gives you a birds eye view of what's available that fits your criteria.

Zillow

Zillow has a database of millions of residential properties that buyers can browse, along with maps, estimates of a property compared against nearby properties, advice on loans, and a loan calculator. Sellers can get an estimate of their home and keep it private or make public. They can also compare profiles of nearby properties. Current homeowners who are neither buying nor selling can get an estimate of their home and compare it to other properties.

Miscellaneous

These are applications that have a web 2.0-ish aspect to them but do not fall into any of the above categories.

cFares

cFares lets you specify desired trip details such as from/to locations, departing/returning dates, time of day (morning, noon, afternoon, etc.), and ticket class (economy, business, first class), and finds you the lowest airfare in their database. They'll also check nearby airports around your from/to locations, to provide alternates. For example, a trip from Boston to Atlanta on Dec 13, returning Dec 20, economy class returned Delta and American Airlines flights ranging from $149 to $199, plus taxes in some cases. While searching is free, these rates are only available to cFares members. Membership allows you to purchase a ticket online.

MedBill Manager

MedBillManager, as the name suggests, lets you manage all your medical records (providers, bills, etc.) online, track payments owed to you, and track medical expenses for easy reporting to the government, insurers, and employers. You can compare your medical costs against that of other members. While MedBillManager is a fairly robust, complex application, they've done a nice job with the explanation page and the sample screens, so it's easy to see the scope of the application.

PayScale

Want to know whether what you are earning for your job compares to others? Need to know if you are paying an employee fairly? PayScale has a database that spans numerous countries and breaks them down into regions (states, provinces). An interesting thing about PayScale is that it appears to build its database from members. Not exactly accurate if there's false data being entered, but over time, the information will probably become more accurate. They offer you a free salary report as an incentive to fill out your details. In addition, they also have resources (links, articles, etc.) for job seekers.

Additional Sources

Additional (general) sources used for the items above include:

yourcreditadvisor.com

How Not to Ruin Your Life

2007-01-22T15:54:00.000-08:00

A Home Truth about Real Estate Investing

In 1978, my wife and I bought an adorable little condo near Palm Springs as a spot to relax and play with our Weimaraner dog, Mary.
It was a tiny place, but we loved it. We paid $100,000 or so for it. Four years later, we got bored with the place and sold it for about $125,000. That was in 1982.
Now we have a place nearby that we enjoy, and were looking for a smaller place in which to put up our guests. By complete coincidence, a condo very similar to the one we sold in 1982 came on the market and I went to look at it. A lovely spot, to be sure. But the asking price? $345,000.

The Buts and What-Ifs

That means the house has kept up with inflation -- barely.

In fact, when I do the math, I realize that it hasn't fully kept up with inflation. Plus, the owner would have had to pay rental fees (it's on land leased from a Native American tribe), condo fees, taxes, and insurance. Granted, he would also have gotten the great pleasure of living there, but it wouldn't have been a great investment at all.
On the other hand, if the same person had bought the Dow in 1982, he would've made roughly 10 times the money by now, not counting dividends, which would have meant he would've made close to 20 times the money.
There are lots of "buts" and "what ifs" in real estate, to put it mildly. There are neighborhoods along ocean fronts, lake fronts, and in New York City and San Francisco where anyone would've made a fortune buying real estate in 1982.
Prices in some parts of Manhattan, along Florida's coasts, and in Malibu have gone up substantially more than in Palm Springs. Usually, the key to low real estate price growth is an abundance of land to build on, such as in Phoenix or the Palm Springs area. The key to high real estate growth is a prestigious neighborhood or an extreme shortage of space, such as ocean front in Malibu.

Taking Stock

Still, my wife and I bought our house in Malibu for $600,000 in 1990. It might have gone up by 150 percent since then, but in that span, the stock market has more than tripled on the Dow, counting dividends. Other indexes such as foreign stock indexes have gone up vastly more than that.
Now, more "buts" and "what ifs": There are long periods when the stock market doesn't make you much money. The S&P is still lower than it was seven years ago. Stocks adjusted for inflation lost about 80 percent of their value in the slump of the 1970s and part of the 1980s. So nothing is a slam dunk.
Professor Robert Shiller of Yale has demonstrated, however, that over very long periods homes barely keep pace with inflation. Stocks, over very long periods, beat inflation by a large margin. (Please remember that "over very long periods" part. You can easily buy at a peak and not see that peak again for many years. But barring war, you will see it -- and zoom past it.)
There are many, many good reasons to buy a home -- and a vacation home -- besides price. There's much joy to be had in living inside a house that's yours on land you own (or lease from the Morongo Indians). But as an investment, homes -- unless bought with an eye to scarcity or in prestigious neighborhoods, and even those sometimes don't work -- are to be lived in, loved, and passed on.
I myself love houses, and own a lot of them. I get immense joy from them. But for long-term gains, broad indexes (also called indices) of stocks are where you want to be.

A Living Investment

Again, I don't want to disparage real estate. As you know, I usually write about how to make money, usually by investing but sometimes also by improving your human capital. But spending money is also a part of life, and buying things you like and get a lift from is a big part of life. The only things I know of that can do both are homes.
Yes, I realize I wrote above that they weren't a great investment compared with stocks on broad indexes, and they're not. But they'll keep their value a lot better than cars or jewelry or clothing or trips to Hawaii.
They'll also give you a fabulous sense that you have a fortification against landlords, neighbors sending yucky cooking smells into your apartment, and a lack of control over your own dwelling.

Great, But Not Perfect

Maybe it's just me, but I get great joy from knowing that I'm within my own four walls, owned jointly only by little old' me and the bank. As far as I can tell, houses -- or condos -- are the only items you can both own and enjoy as a consumer good and also as an investment.
Moreover, if you land in the right neighborhood or hit the right swing in the cycle, they can even be a great investment. Now is a very nice time to start owning, with prices way down in most of the United States.
Again, you won't make as much in the long run as you would on stocks, but no one I know can live inside a stock, make love inside a stock, read a story to a child inside a stock, or lie in bed reading next to their dogs in a stock.
So, yes, real estate rules. It's a good, even great, investment -- just not the perfect investment.

Ben Stein

Tax and loans do's and don'ts

2007-01-22T15:22:00.000-08:00

Tax and loans do's and don'ts

Question 1: I am 27 years old and want to buy a house by age 30. I am starting to finally put a dent into my credit card debt. However I won't have money for a house down payment. Is it so terrible to buy a house with no money down?

It's great that you're able to pay off some of that debt. But putting no money down on a home is not advisable. And remember, it's not only the down payment you'll need, but also closing costs, says Greg McBride of Bankrate.com. Don't lose sight of the goal to pay off your credit cards, but make saving an equal priority. Have some of your paycheck automatically funneled into a savings account or a CD. Getting into the habit of saving is the surest way of reaching your goal.

Question 2: I have just paid off 7 credit cards. Would it be wise to close them now? Will this raise my credit score or lower it?

Good job paying off those cards. It's in your best interest to close some of those cards so you aren't tempted to run up your debt again. And although closing these accounts won't automatically raise or lower your FICO score, mortgage and auto lenders still gauge your credit risk by your credit limit. So, reducing that credit limit is a real positive. For more on what affects your credit score, you can go to myfico.com.

Question3: What is an old fashioned home equity loan and how does it differ from a HELOC?

A home equity loan is really just a second mortgage. The interest rate is fixed and your monthly payments remain the same. Taking out a home equity loan is a good move if you plan on using the money in a lump sum - like, paying for college or paying off medical debt. A HELOC - or a home equity line of credit works like a credit card.

It carries a variable rate and you can tap into it whenever you need to. You can adjust your monthly payments with a HELOC and you'll be able to benefit if interest rates decline. A HELOC can be a great way to pay for debt that comes in stages, like home improvement projects or for emergency funds if you lost your job.

Question 4:Can I take money from a taxable account and put it into an IRA to take advantage of the deduction? Then, can I put the money back into the taxable account after I've gotten my refund?

The sad fact is that you're going to pay taxes on your money sooner or later. So whether you shelter it in your IRA or you pay taxes on it now is up to you. But keep in mind that if you're younger than 59 and a half years old you'll have to pay taxes plus a 10% penalty if you withdraw money.

Gerri Willis

Auto loans: What you need to know

2007-01-22T15:18:00.000-08:00

Common financing missteps can cost you thousands on a new or used car. Here's how to get it right.

Few of us have the means to write a check for the full amount of a new - or even used - vehicle.
Unfortunately, car buyers, treating financing as an afterthought in the car buying transaction, can easily waste thousands of dollars.
Here are some tips on what to do and what to avoid.

Know your incentives

Web sites like Edmunds.com (which provides automotive data for CNN's Web sites) list available incentives in your area. Often there are low-interest, or even zero-percent, financing deals you might qualify for.
Don't assume you need perfect credit. Ford Motor Co. (Charts), for example, has recently opened up its zero-percent financing incentive to buyers with a few potholes in their credit history.

Don't go in empty-handed
Hybrid vehicles top fuel economy list

It's true that a car company's "captive finance arm," - for example, Ford Motor Credit or Toyota Motor Credit - will probably be able to offer you a better financing deal than an outside bank or credit union. After all, it's their job to help you buy one of their parent company's products.
But that's not automatic. It can't hurt to make them work a little for your business by researching the cheapest financing you can get before you go to the dealership. A credit union or an organization like AAA or USAA can sometimes offer you access to rates you couldn't get at a regular bank.
Companies like Capital One Auto Finance will even allow you to bring a check to the dealership without having to agree to take the loan. The loan doesn't start until you write the check, which can be up to a pre-approved amount. Until then, all you've done is arranged competitive financing. You can still take it or leave it.
Just don't forget that interest rates are negotiable. If you arrange financing at a car dealership, part of that interest goes to the dealership itself. The dealership's business manager also has an incentive to work with you to earn your business.

Don't get stretched

Before you go car shopping, you have to know how much car you can afford. That means you need to know how much of a down payment you can make, how much you're likely to get for your current car and how much your monthly payments will be.
It's tempting to just let the dealership work it all out for you.
In that scenario, you tell the salesman what kind of monthly payment you're looking for and show them your trade-in. They'll tell you whether you should stick with the entry-level model or if you can move up a step or two. And you'll probably be pleasantly surprised that you can drive a much nicer car than you thought for monthly payments that fit your budget. Yes, the loan stretches out for six years but... look at this car! Feel those seats. Listen to that big, strong V8. Come on, if you can afford it each month, who cares how long the loan is?
Well, obviously, another year or two of payments means thousands of extra dollars out of your pocket. It's just being removed more gently.
Then there's another problem you might find out about years later. The longer your car loan is, the longer you'll be "upside down" in your car payments. In other words, a longer loan extends the period during which you'll owe more on the car than the car is worth.
So figure out your payment situation and know what you can afford before you start shopping.

Do your own math

Once the deal's all figured out, there's one simple step a lot of people forget to take. Get out your pocket calculator and figure out how much that car is really costing you.
Just multiply your monthly payment by the number of payments you'll be making. Then add on your down payment and the value of your trade-in. If you were fortunate enough to qualify for zero-percent financing, there shouldn't be any surprises.
If you're paying interest, especially if you've taken out a long-term loan, you might be shocked by how much that car is costing you.
For example, a six year loan at 7.9 percent on a $35,000 car would cost you almost $10,000 more than the same vehicle if you were paying no interest, according to Edmunds.com.
Then you can decide if that car is really worth almost $45,000.

Peter Valdes-Dapena

5 serious taxpayer problems

2007-01-22T15:14:00.000-08:00

National Taxpayer Advocate Nina Olson submits her annual report to Congress, criticizing the AMT, the tax gap, IRS use of private debt collectors and more.

The most serious problem facing taxpayers today is complexity, and no tax represents that complexity better than the Alternative Minimum Tax, according to National Taxpayer Advocate Nina Olson in her annual report submitted to Congress on Tuesday.
The National Taxpayer Advocate is appointed by the Treasury Secretary and is charged with representing taxpayer interests before the IRS and Congress.
Olson's report outlines for lawmakers what she considers to be 21 of the most serious taxpayer problems - not a conclusive list by any means, as she notes in her report.
Here are five that Olson details:

Alternative minimum tax

First imposed in 1969, the AMT was intended to ensure that the wealthy few paid their fair share of tax by preventing them from exercising too many loopholes, many of which have since been closed.
Today, because its income exemption levels were never adjusted for inflation and because it disallows key breaks allowed under the regular tax code, the AMT threatens to capture millions of primarily married couples with kids and incomes in the middle- to upper-incomes range.
Now, Olson writes, "the AMT is left to punish taxpayers for engaging in such 'classic tax avoidance behavior' as having children or living in a high-tax state."
To make matters worse, it's hard for taxpayers to figure out if they owe AMT, which imposes a higher bill than they would pay under the regular income tax code. And if they find out they do, they may also be subject to a penalty for failure to pay sufficient estimated tax if they didn't count on having to pay AMT.
"'Gotcha' taxation is not good for taxpayers or the tax system," Olson writes. She recommends that lawmakers repeal the AMT as it pertains to individuals.
Leading tax writers in the House and Senate have said they would make AMT a priority issue this year, but given the high cost of repeal - estimated in the neighborhood of $1 trillion over 10 years - repeal is a tall order.
More likely, but in no way guaranteed, are possible reforms to the AMT - such as indexing income exemption levels for inflation. (Here's a closer look at the AMT and whether you may be subject to it.)

Tax gap

Every year, $290 billion in federal taxes owed are not collected. The biggest reason for this "tax gap" is the under-reporting of income, but not all of it intentional. The IRS has noted that confusion over how to comply with complex tax laws also contributes to the gap.
"It is a problem for taxpayers because the average taxpayer is paying thousands of dollars in extra tax each year to subsidize noncompliance by others," Olson writes.
To close the gap, she recommends a number of things, including a move toward fundamental tax simplification, greater third-party information reporting, and better IRS compliance efforts that respect taxpayer rights.

Costs and benefits of private debt collection

Olson has come out strongly against the IRS's recently instituted practice of farming out some of its past-tax-owed debt collection cases to private agencies.
The initiative was intended to be cost-effective, but Olson writes that the IRS has acknowledged it can deal with delinquent accounts more efficiently than private companies, and the Taxpayer Advocate Service has found a high number of complex cases assigned to private companies, instead of the less complex ones which they were originally intended to get.
"The IRS has a nearly $2 billion collection budget with thousands of collection employees. In contrast, (private collection agencies) PCAs at this stage of the initiative are using 75 employees to collect on these accounts , and the IRS is using 65 employees to monitor them," Olson writes.
What's more, she says, the Taxpayer Advocate Service has observed "poor customer service to multilingual taxpayers, (private collection agencies') operational plans being withheld from public disclosure, and PCA collection scripts through which PCA employees attempt to manipulate taxpayers."
Her recommendation to lawmakers: Repeal the IRS's authority to use private debt collectors.
In a six-page response to Olson's charges on private debt collection printed in the report, the IRS noted that two of the three private companies it uses have bilingual staff and the third is in the process of arranging assistance for non-English callers.
In general, the agency said, "Given the backlog of IRS receivables and our limited collection resources, [this] initiative allows the IRS to ensure that more delinquent taxpayers are personally assisted in meeting their obligations. ... [A]nd we will continue to make program decisions to protect the privacy and security of taxpayers while collecting outstanding government debt."

Transparency of the IRS

The IRS needs to do a better job of disclosing to the public its updates to procedures and IRS guidance, and the agency needs to make sure its employees as well as taxpayers and practitioners are aware of what is most current, Olson contends.
"Transparency in tax administration is essential to assure taxpayers that the tax laws are being administered fairly," she writes.
The IRS, in a written response to Olson's critiques, said it is "committed to improving the way it manages instructions to staff. We acknowledge we have experienced growing pains as we have moved towards electronic creation and delivery of the plethora of instructions to staff we produce."

Early intervention in IRS collection cases

Not dealing with delinquent accounts early enough "contributes to long-term financial problems for many taxpayers and costs the government billions of dollars in lost revenue," Olson writes.
And cases are left pending even when taxpayers have tried to settle their debts through installment agreements or offers in compromise, she notes.
Olson recommends that the IRS improve the way it prioritizes cases, initiate more personal contact with taxpayers and become more flexible in the way it provides realistic payment options for taxpayers who owe back taxes.
In its written response to Olson's critiques, the IRS said it agrees that early intervention is important, noted that it is analyzing the rates at which cases are deemed "currently not collectible," and stressed that "all of our processes are designed to reduce personal burden by directing taxpayers to the right treatment at the fastest possible time."

Jeanne Sahadi

Maximize your financial aid

2007-01-22T15:03:00.000-08:00

Be the early bird
College applications may be out the door, but your work isn't done. Financial aid season starts
Get cracking. Is it 2007 already? Fill out the FAFSA (Free Application for Federal Student Aid) - which determines your child's eligibility for federal aid and is used by colleges to determine his aid package - as soon as you can after Jan. 1. Go to fafsa.ed.gov to get forms and info.

Roll with it. Schools with rolling admissions policies also distribute aid throughout the year. The best packages go to the earliest applicants; be sure you're at the top of the pile.

Don't rule anything out. Even if you're sure you won't be eligible for need-based aid, know that many schools also use the FAFSA for merit scholarships, so if you haven't filled out the form, you may jeopardize your kid's chance at getting any merit aid.

Work on your profile

It's not just the FAFSA. Some private and state-supported universities use an application called Profile, which determines eligibility for nongovernmental aid. Profile costs $18 to file with each school; download it at profileonline.collegeboard.com.

It's not just about you. While the FAFSA tracks one year of income data, Profile tracks three years and takes into account whether your family owns a home as well as the wealth of stepparents and divorced, noncustodial parents.

It's not always bad. Profile can result in a higher EFC (expected family contribution) than the FAFSA , but not always, since it considers such things as regional variations in the cost of living, notes Mark Kantrowitz, author of College Gold: The Step-by-Step Guide to Paying for College.

Know all the angles

Go to school. The National Association of Student Financial Aid Administrators holds free seminars nationwide offering professional help with the FAFSA. Find a seminar near you at collegegoalsundayusa.org. Web sites such as FinAid.org have calculators that enable you to get a ballpark figure of your expected family contribution without providing identifying information.

Watch for phony Web sites. The official government site where you can get free information and application materials is fafsa.ed.gov. A for-profit, commercial site with a similar Web address, fafsa.com, charges $80 to help complete the application. But why pay when there's good, free assistance available? FAFSA's help number is 800-4-FED-AID (800-433-3243).

Take a shot. Remember that there is no absolute cutoff figure for financial aid eligibility, so you've got nothing to lose by throwing your hat in the ring. Michael Fraher, director of financial aid at Vassar College, notes that roughly 50% of students are getting need-based aid at Vassar, where the median family income for those receiving aid is a little more than $80,000.

"Given federal and state tax liabilities, the number of people in a household and the number of kids in college at the same time," he points out, "it's not unusual to have over $100,000 in income and still get financial aid at schools like ours."

Barbara Bedway

Exchange-traded funds (ETFs): 5 smart strategies

2007-01-16T13:06:00.000-08:00

ETFs: 5 smart strategies
Exchange-traded funds can cut your investment costs, lower your tax bill and simplify your life. Just make sure you handle them with care.

When Exchange-Traded funds, or ETFs, came on the scene in the 1990s, they looked like the rarest of new financial products - one that actually made money for you instead of just your broker.

The earliest ETFs emulated the Standard & Poor's 500 and other broad stock indexes. They were like traditional index funds, only better, offering the same one-stop diversification but with lower fees and tax bills.

As more financial advisers and small investors caught on to ETFs' advantages, the companies that issue them began expanding beyond major indexes to narrower slices of the economy such as health care and technology.

Again, the benefits to you were clear: Avoid the high management fees of sector funds and lower the risk that comes with picking stocks. It's no surprise that investment pros were soon calling ETFs the coolest thing to come along since, well, index funds, and predicting that ETFs would revolutionize the way you invest.

And then things went from cool to, like, crazy.

Not content to limit themselves to major market benchmarks, ETF sellers began churning out dozens of funds aimed at ever smaller market subsectors, including leisure and entertainment, networking and semiconductors.

The number of ETFs has ballooned from just 30 with $34 billion in assets six years ago to more than 200 today holding more than $300 billion. ETFs are quickly becoming a means of turning long-term index fund investing on its head, providing an easy way to make risky investments in whatever slice of the market happened to be hot five minutes ago.

Wanna invest in a nanotechnology or clean-energy ETF? You can -- although it's debatable whether you should. Ditto for that euro ETF you can buy if you believe that the value of the dollar will fall.

That doesn't mean ETFs are now so dangerous that they're only for the foolhardy. You can still cash in on their original promise if you ignore the hype and instead focus on how they might fit into your long-term investing strategy.

With that attitude in mind, here are five smart ways you can make the most of ETFs.

PLAN 1: Put a windfall to work

Payoff:Save a bundle on fees ETFs can be an excellent way to invest a large sum such as a 401(k) or IRA rollover, a bonus or some other windfall. Use ETFs for the portion of the money that you want to put into U.S. stocks, where ETF annual operating expenses are typically lower than those of comparable index funds.

Yearly fees for ETFs that give you broad exposure to foreign markets, on the other hand, are higher than what you'd pay for an index fund, while fees for bond ETFs and index funds are about the same.

One caveat: Because ETFs trade like stocks, you buy them through a broker, which means forking over a brokerage commission. That can eliminate ETFs' cost edge if you're making frequent investments or putting in small amounts.

PLAN 2: Create the "me" mix

Payoff: Diversify across all your wealth-producing assets With ETFs you can customize your asset mix in ways that used to be possible only if you built a complicated portfolio from scratch - or paid an adviser to do so.

Say you work for a financial services company that gives you stock options as part of your pay package. Between your salary and your options, you've already got a big piece of your future riding on the financial sector.

Instead of buying a broad market index that would give you even more exposure to the banking industry, you can assemble a portfolio of industry sector ETFs that duplicates the overall market while toning down or even eliminating its financial component.

Similarly, ETFs allow you to stress a particular investing style. If you're in or nearing retirement, for example, you might want more exposure to value stocks since they tend to be less volatile than shares of fast-growing companies.

In that case you might consider adding an ETF that tracks an index of value shares. Conversely, if you're a younger investor willing to assume more risk for higher returns, you could invest in an ETF that focuses on growth stocks.

Sound confusing? It needn't be. The ETF Allocator tool at the iShares website (ishares.com) will help you create a customized mix.
PLAN 3: Go a little farther afield

Payoff: A safer portfolio Diversifying beyond the traditional asset classes of stocks and bonds is a way to dampen a portfolio's risk. If you wanted more protection from inflation, for example, you could add an ETF that invests in natural-resources stocks or in TIPS (Treasury Inflation-Protected Securities), government bonds whose payments rise with inflation.

You can also gain an extra measure of protection by buying ETFs that specialize in areas that may be quite volatile on their own -- such as gold and emerging markets stocks -- but that can actually dampen a portfolio's swings since they often zig when the stock market zags.

If, on the other hand, you want to get more current income from your portfolio, you can buy an ETF that homes in on dividend-paying stocks or REITs (real estate investment trusts).

Here are some options:

For inflation protection, try iShares Goldman Sachs Natural Resources Index and iShares Lehman TIPS Bond.

For income, try iShares Dow Jones Select Div. Index and Vanguard REIT VIPER.

For still more diversification, try Vanguard Emerging Markets VIPER and iShares COMEX Gold Trust .

PLAN 4: Round out what you've got

Payoff: Higher returns with less risk ETFs make it easy to plug gaps in your portfolio. Say you own a lot of big-company stocks but nothing at the small end. You know that properly diversifying your investments lowers your risk and raises your returns, but you're not up to sifting through thousands of small shares, or even hundreds of actively managed funds.

By buying a small-stock ETF, you instantly get all the small-company exposure you need for a bit less than you'd pay for an index fund.

Conversely, if you're a small-cap enthusiast who figures you won't find many compelling bargains among the well-researched ranks of big companies, you can buy a large-company ETF to fill out your portfolio.

Even if you like investing in individual stocks, ETFs may be able to play a role in your portfolio.

If you pick individual large-cap stocks... ...buy Vanguard Small-Cap VIPER.

If you pick individual small-cap stocks... ...buy iShares S&P 500 index.

PLAN 5: Harvest a tax loss

Payoff: A big deduction come next April 15 ETFs can also help you do some tax maneuvering. Let's say you're sitting on a $5,000 loss in Dell shares but you still like the company's long-term prospects. You want to sell your stock to lock in the loss for the tax write-off, but you don't want to lose any appreciation in tech shares during the 31 days that the IRS "wash sale" rules say you must wait before buying back the stock.

Here's what you do:

You own a tech stock at a loss...sell the stock for the tax savings...buy a tech ETF...wait 31 days...sell the ETF...buy back the stock.

Walter Updegrave

An experienced investor is confident in his diversified stock portfolio

2007-01-16T13:03:00.000-08:00

Get your bond fix - the easy way
An experienced investor is confident in his diversified stock portfolio - but where do bonds fit in?

NEW YORK (Money) -- Question: As aggressive savers and investors, my wife and I, who are 50 and 48 respectively, have accumulated a significant diversified portfolio of stocks. What we lack are bonds, and I have zero experience in this area. I put some money in a bond fund a few years ago, and it went down immediately. My wife and I are positioned to retire in five to 10 years, so I know we need some bonds to protect us in the event of a market meltdown. But I'm feeling intellectually paralyzed. Help! - Anthony S., Honolulu, Hawaii

Answer: I understand perfectly. When you were younger, so much younger than today, you never needed anybody's help in any way. But now those days are gone and you're not so self-assured. Now you find you've changed your mind, you've opened up the door.

Oops, sorry. That final plaintive plea at the end of your question hurled me into a Sixties time warp and suddenly I couldn't get the Beatles' "Help!" lyrics out of my mind. Not to worry, though. I'm happy to help you get your feet back on the ground - and your portfolio in shape for your looming retirement.

First of all, you should know you're hardly alone when it comes to being mystified by the workings of bonds. In many ways, the bond world is like looking through a Glass Onion where what we think of as economic reality gets distorted.

For example, most of us hate to see the economy go into recession. But the bond crowd, as the saying goes, likes a recession and loves a depression. That's because interest rates tend to fall in a stagnant economy. And since interest rates and bond prices are like two ends of a see-saw, falling interest rates mean rising bond prices - and rejoicing among bond investors (as long as companies and governments keep making those semi-annual coupon payments).

And then there are all those arcane terms: calls, premiums, discounts, coupon, zero-coupon, maturity, duration...it's enough to make you Cry Baby Cry.

Well, relax. There are plenty of ways to get the benefits you need from bonds without having to become a bond expert. That said, learning about how bonds work and what some of the lingo means never hurts. So before you do anything, I suggest you take a look at our MONEY 101 lesson on Investing In Bonds. You might also want to check out a bond site that, appropriately enough, is also called Investing In Bonds. Run by The Bond Market Association, the site has a lot of good tutorials and articles about bonds and plenty of data for people who want to get into the nitty-gritty of bond investing.

But let's Get Back to some specific Help! for you.

How much in bonds

Basically, between now and retirement you want to transition to a less volatile portfolio by dialing back the percentage of equities in your portfolio and increasing the amount in bonds. There's no specific figure for how much ought to be in bonds vs. stocks. But as a general rule, I'd say that by age 60 or so, you probably want somewhere between 40 and 50 percent of your portfolio in bonds.

As you age, you can then continue to increase your bond exposure, so that by age 70 your bonds represent 50 to 60 percent of your portfolio and by age 80 maybe 30 to 40 percent.

These are general guidelines. The figure that's right for you will depend on how much risk you're willing to take, what other sorts of resources you have (Social Security, other pensions, income from an annuity, etc.) and how much money you have (if you're really loaded and a short-term setback in the market won't seriously affect how much money you can draw from investments, then you can afford to be more aggressive, if you wish).

But the two most important things to remember are: first, you don't want to go into retirement with too aggressive a portfolio; and second, while there's a place for bonds in your portfolio leading up to and even after retirement, you still want to keep some of your savings in stocks in order to provide some growth to maintain the purchasing power of your portfolio.

Which bonds to buy

Okay, so what should you buy to get whatever amount of bond exposure you feel is right for you?

You could go with individual bonds, but generally that's a hassle and can be expensive unless you're investing, say, $50,000 or more. The exception is Treasury bonds, which you can buy directly from the U.S. Treasury, but even there I'm not sure it's worth the effort for most people, especially if you want to reinvest your bond interest payments.

So for most people I think mutual funds are the investment of choice for bonds. With funds, you could put together a portfolio of your own combining funds with short- or intermediate-term maturities that invest in government or high-quality corporate bonds and maybe even some high-yield bond funds.

But the easiest way to go - and a way I think makes good investment sense - is just to go with a total bond market index fund. You get virtually the entire investment-quality bond market in a single fund. And since you're buying an index fund, the annual expenses are extremely low, which is always a plus but particularly so for bond funds since higher expenses exert a bigger drag on bonds' generally moderate returns.

(For recommendations of specific funds you might consider, see the bond funds in the MONEY 65.

You don't have to pull off this move into bonds all at once. In fact, you're better off making the transition over several years. You can start by putting any new investment dollars into bonds. If it appears this approach isn't going to give you enough bond exposure by the time you're ready to retire, you can always start selling some of your stock funds and plow the proceeds into bonds. You can do this as part of the process of annually rebalancing your portfolio.

To the extent you can, try to confine these moves to tax-deferred accounts like 401(k)s and IRAs so the Taxman doesn't siphon off any profit on the sales. But if you must sell stocks or stock funds in taxable accounts, then look for opportunities to mitigate the tax bite by selling shares that will trigger losses or only small gains.

If you do all this over the next five to 10 years, I've Got A Feeling things will Come Together quite nicely and, financially at least, you'll be Free as a Bird in retirement.

Walter Updegrave

Look beyond the biggest stocks in the biggest markets

2007-01-16T13:02:00.000-08:00

Time to see the world in a new way
International mutual funds can do a lot for you, but it's easy to head off in the wrong direction. Hint: Look beyond the biggest stocks in the biggest markets.

Until recently.

Nearly $130 billion has poured into overseas stock funds this year, more than five times the amount invested in U.S. equity offerings. A lot of that is just performance chasing, since foreign stocks have trounced domestic ones over the past three years thanks to faster overseas growth and a falling dollar.

But chances are you need to invest even more in foreign markets, and it wouldn't hurt to be a little more adventurous about it too.

Just as American tourists tend to flock to the familiar big names such as London, Paris and Tokyo, U.S. investors are sending almost all of their money to those markets as well. That's no way to really see the world - and it's no way to invest in it either.
Increase your stake

As recently as five years ago, many investment advisers recommended stashing just 10 percent to 20 percent of your stock portfolio in international funds. Most of us don't come close to that small amount. In a recent survey, for example, Fidelity found that two out of three of its 401(k) plan investors did not hold a single overseas equity fund.

That shortfall is especially worrisome today, when pros recommend putting 25 percent to 35 percent of your equity portfolio in foreign stocks. "The U.S. accounts for only half of the world's market capitalization," points out Anthony Ogorek, a financial adviser in Williamsville, N.Y. "And overseas economies are growing faster than in the U.S., so that's where the best returns can be found."

Foreign funds also give you a way to hedge against the U.S. dollar, since they hold companies that earn returns in overseas currencies. When the dollar is weak, as it has been lately, you get a boost when those returns are converted into U.S. greenbacks. The reverse is true when the dollar strengthens.

Look beyond large-caps

There is no question that large-cap overseas funds make great core holdings. By owning shares of huge multinational companies, these funds are a relatively safe way to play overseas markets, which is why they have become a staple of 401(k) plans. But if you stash your entire overseas allocation in large-caps, you won't get the full benefits of international diversification.

"In today's globalized economy, the financial markets of developed countries have become more closely tied than before," says Yale finance professor William Goetzmann. "So the stocks of big companies tend to perform in the same way, no matter where they're headquartered."

A U.S. money center bank such as J.P. Morgan Chase, for example, isn't all that different from Germany's Deutsche Bank. Both operate overseas, and they have similar reactions to global economic moves.

Moreover, if you restrict your international investing to large-cap funds, you will miss out on large swaths of the world's markets, as well as some of the best returns. That's because these funds invest the bulk of their assets in a few developed countries while holding little or nothing in emerging markets.

Get off the beaten path...

One way you can diversify beyond foreign large-caps, suggests William Rocco, a senior analyst at Morningstar, is to invest in a small-cap and midcap foreign-stock fund. These offerings mainly buy shares of companies with stock market values of $8 billion or less that trade in developed countries, although many invest a small stake in emerging markets as well.

Just as with U.S. small stocks, foreign small fry tend to grow faster than their large-cap siblings.

And because small companies typically get most of their sales locally, they are more closely tied to their country's economic growth than to global markets. That provides you with greater diversification.

Small-cap foreign funds are more risky than foreign blue chips, however, so put no more than 5 percent to 10 percent of your stock portfolio in one.

A top choice: T. Rowe Price International Discovery (PRIDX (Charts), which is on our Money 65 list of recommended funds. Recently the fund's top stakes included $2.5 billion Soitec, a French producer of silicon chips, and Financial Technologies, a $2 billion Indian developer of trading software.

...Or go even further

If you're the adventurous type, consider a diversified emerging markets fund, which holds the stocks of companies in developing countries. With these funds you have the potential for bigger returns - and bigger losses. It's not unusual for emerging markets to plunge by as much as 20% in a month, as they did earlier this year, before rebounding.

Invest no more than 5 percent of your equity portfolio in these funds. On our Money 65 list, we recommend SSgA Emerging Markets (SSEMX (Charts), as well as Vanguard Emerging Markets Stock (VEIEX (Charts), an index fund that is also available as an exchange-traded fund (VWO (Charts).

Once you have arrived at an asset mix that suits your goals, it's important to keep your expectations in check. Since overseas equity funds have had a tremendous run, chances are their returns will cool down, but no one can really say when. So be prepared to hang on.

And remember, experienced world travelers are ready to cope with any change in the climate.

By Penelope Wang, Money Magazine senior writer

Building a business

2007-01-16T12:56:00.000-08:00

This family has aggressive financial goals but a conservative mix of stocks and bonds. Their goal: retire from their corporate jobs in a decade.

NEW YORK (Money Magazine) - When Doug van Almelo's job as an airplane mechanic was transferred from Los Angeles to Indianapolis after Sept. 11, he and his wife Carole saw it as a chance to start over.

"With the high cost of living and the fast pace, it was hard to set aside money and time," says Carole, who runs her own Web design company.

Thanks to lower housing costs in the Midwest, the couple were able to use the proceeds from the sale of two homes in California to pay off all their debts and seed a $300,000 portfolio.

Determined to build up their investments even faster, they drastically cut their living expenses, hoping to save half of their six-figure salaries. Their plans hit another bump, however, when Doug was laid off in 2003.

Then, after working as a contractor for a year, he was called back to his old job - in Los Angeles. Now, Doug, 49, commutes home every three weeks for a two-day stay.

In two years, Carole and sons Alex, 15, and Nicholas, 11, will join him on the West Coast. "It's difficult, but we look at this as an opportunity to really save for all of our futures," says Doug.

Still, the van Almelos are eager to leave the corporate world behind and strike out on their own. Within 10 years, Doug wants to retire from his airline job. At that point, he and Carole, 48, hope to buy a small business or farm and work together in a second career.

Where they are now

Despite the fluctuations in their income over the past few years, the van Almelos have managed to build their total portfolio to $400,000, which includes $100,000 in 529 plans for the boys.

The rest of the money is spread among IRAs, 401(k)s and taxable accounts, with 35 percent in bonds, 39 percent in large-cap stocks and 20 percent in international equities. They also have $20,000 invested in a handful of individual stocks, including Google and Apple.

When they return to L.A., the van Almelos figure they'll buy a small condo, which should keep their housing costs roughly in line with what they are in Indiana.

Though he no longer gets a pension from his airline, Doug is socking away 20 percent of his pay in the company's 401(k), and Carole maxes out her Roth IRA. Luckily, Carole's parents have offered to help pay for the boys' school expenses, so they no longer need to add much to the 529s.

Carole and Doug have weathered several financial storms the past few years and have recovered admirably, says Indianapolis financial planner Walt Koon. But starting a new business at 60 is ambitious, especially considering that neither has a pension, Carole works for herself and Doug is in a volatile industry.

What they should do

The van Almelos' best shot at hitting their goal, Koon says, is to save as much as possible outside their retirement plans before they leave their traditional jobs - and to be far more aggressive in their investment strategy.

Right now about a third of the van Almelos' money is in Dodge & Cox Income (DODIX (Charts), a long-term bond fund. "A bond fund is for capital preservation. But at their age, they still need growth," says Koon, who recommends that they reduce bonds to just 9 percent of their portfolio.

He'd also like Carole and Doug to sell their individual stocks and pare back their stake in large-cap funds from 39 percent to 35 percent.

They should use some of that money to boost their stake in international stocks as well as mid- and small-cap domestic equity funds, which are more volatile than large-caps but historically have higher returns.

They can keep a lid on costs by selecting Money 70 index funds such as Vanguard Small-Cap (NAESX (Charts) and iShares MSCI EAFE (EFA (Charts).

"When it's crunch time, we've always been able to save money," says Doug. "I think we can stretch a bit more to fund our goals."

By Donna Rosato, Money Magazine staff writer

Oil plunges below $51

2007-01-16T12:41:00.000-08:00

Crude hits 19-month low after Saudi minister says cuts working, no need for an emergency OPEC meeting.

LONDON (Reuters) -- Oil prices plunged more than 3 percent back near $51 a barrel Tuesday after Saudi Arabia said OPEC production cuts were working well and that there was no need for an emergency meeting of the producer group.
U.S. light crude for February delivery tumbled $1.78 to $51.21 a barrel after touching $50.93, the lowest since May 2005, in earlier New York Mercantile Exchange trading. In London, Brent futures shed 82 cents to $52.30.
The price of crude has plunged more than 16 percent this year in part due to warm weather in the Northeast, the world's top heating oil market, in early January.
The selloff comes as some other commodities have come under pressure - which could lead to further selling down the road.
"We took measures in October in Doha and measures in Abuja (in December) and I believe these measures are working well. Inventories in the fourth quarter have come down ... which puts the market closer to balance," Saudi Oil Minister Ali al-Naimi said in New Delhi.
"Do not panic. Actually there is no reason for a meeting."
The Organization of the Petroleum Exporting Countries (OPEC) agreed to cut 1.2 million barrels per day (bpd) of output from Nov. 1 and then to cut another 500,000 bpd from Feb. 1.
There had been speculation OPEC could hold an emergency meeting before its next scheduled conference on March 15.
Venezuelan Energy and Mines Minister Rafael Ramirez has said oil prices had fallen "too much" and that he would favor an extra meeting.
Other commodities have also had a rocky start this year and base metals fell in early trading Tuesday before stabilizing around midsession.
"We should not underestimate the global mood on commodities," said Frederic Lasserre of SG CIB in Paris. "There is not as much appetite for commodities anymore."
He predicted oil prices would test $50 in the near term, but then fresh buying interest could emerge.
Analysts said OPEC would also brake the slide and deeper price falls could drive the cartel to implement further cuts.
"We don't really see a collapse in prices. The further it goes down, the more hesitant the market will be about going even further," said Eoin O'Callaghan of BNP Paribas. "OPEC still has an impact on the market."
Stocks of oil majors fell across the board Tuesday.
Shell (down $0.41 to $67.40, Charts) lost 0.6 percent;
Exxon Mobil (down $1.09 to $71.57, Charts) slid 1.4 percent;
ConocoPhillips (down $1.02 to $62.81, Charts) retreated 1.4 percent;
BP (down $1.52 to $63.12, Charts) was down 2.2 percent.