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They've also added a community sentiment graphic to show a bullish or bearish sentiment on a stock. Where they get the information to run this, I'm not entirely sure. It appears they track how many Zecco customers have bought and sold a particular issue for the past 5 days, and present it in a dashboard style interface. It will also graphically show where a particular stock lies on 2 scalers, worst performing - best performing, and least held – most held. They also have added a paperless option so you can opt to receive trade confirmations and statements by email, with no printed documents sent through snail mail.

To learn more, click here.

Posted by debtblog at 01:12 PM | Permalink | Comments (0) | TrackBacks (0)

For example, say you hold 1,000 shares of Microsoft (MSFT) corp that you bought at $10.00 a share. You can tell your broker to sell those shares if the stock ever drops below a price that you feel comfortable with, for example $7.50. That way you limit any potential losses on your position.

There is a problem with a traditional stop loss order however, and I’m sure you’ve spotted it already. What happens if Microsoft corp shows impressive gains for a year, say it increases its share price to $18.00? That’s great, but your stop loss order is still set at $7.50, so if MSFT corp’s stock then drops back down you’ve protected yourself against a 25% loss in your original position, but you haven’t protected your gains at all.

A trailing stop limit changes that for you. A trailing stop limit order actually changes the number at which it goes into effect as the stock price changes. That buys you a very important benefit as an investor. It protects you against loss, but also allows you to make a nice profit while doing so. Basically it mitigates a certain measure of risk while maximizing your investment returns. Anything that mitigates investment risk while allowing an investor to generate potentially explosive returns is a great thing.

For example, say you have the same position in MSFT that you got into at the same $10 / share price, but this time you used a trailing stop limit. If you used a 25% trailing stop limit, it would increase so that any time the stock dropped 25%, a sell order would be triggered. That way when the stock went to $18.00, then dropped back down, much of your profit would be preserved. Your loss would be limited to a maximum of 25% of the stock’s highest market price. In this example, your sell order would have been triggered at $13.50 / share.

So, instead of your position being liquidated at $7.50 and you losing all your profit on the stock’s increase, plus part of your original stake, you would lock in some profit, in this case a 35% gain. When setting up a trailing stop limit order you can usually specify either an trailing amount or a percentage. In this example you could have chosen the 25%, or you could have chosen an actual dollar amount, such as $1.50. If you chose to use the dollar amount, your sell order would have been triggered at $16.50.

If your broker offers both options you’ll be free to choose whichever suits your particular position and mental state the day you make the order. If you’re setting the trail using a dollar amount, you’ll typically have a limit price and an optional offset. The limit price moves up and down with the market price and that’s what’s used to trigger the sell order. The offset, if you use one, is an additional amount that’s subtracted from the trailing limit, say .25, to arrive at your actual sell order price.

Using a trailing stop limit can generate explosive gains for your portfolio because you will maximize gains in your stocks, while minimizing losses. Any time you can do that, you’ll be retired on a beach in Maui that much sooner.

Posted by debtblog at 01:49 PM | Permalink | Comments (0) | TrackBacks (0)

For example Essex, Suffolk, and Norfolk counties in Massachusetts showed an average year over year increase in their foreclosure rates of almost 44% in Q2 of 2005. Consulting firm Global Insight prepared a report in mid 2007 estimating the foreclosure problem, coupled with declining home values, could cost the U.S. as much as 1% of the GDP, due to decreased economic activity.

A group of banking industry regulators and 10 state AGs calling themselves the State Foreclosure Prevention Working Group has been working on the problem for over a year now. The have discovered some interesting aspects to the problem that can go a long way to help understanding foreclosures. It's interesting to note, for example that:

• Payment resets on hybrid ARMS have not been the primary cause of foreclosure problems in many areas. Despite the news coverage that could lead one to believe otherwise, mortgage holders with resetting ARMs was not the cause of many foreclosures. In fact, many (the report didn't mention the exact number, only that it was a significant percentage) sub-prime borrowers were behind on their mortgage payments before their ARMs reset.

  That says to me that many of these mortgage borrowers took on loans which were beyond their abilities. Weather that was due to fraud on the part of the applicant, lenders pushing prospective borrowers toward mortgages that were beyond their capabilities from the outset, or more recent economic factors, such as job loss, is unknown. It could possibly be a combination of those factors and more.

  For all the hand wringing and hollering by the media and consumer groups, it seems as though many homeowners simply wanted a more expensive home than they could really afford, and were willing to bet that continued real estate appreciation would render their decision a good one. For too many that was simply not the case. For these homeowners taking advantage of record low mortgage interest rates and conventional 30 year fixed mortgages, coupled with homes that were more within reach would have been a much better choice. Now the piper has come a calling.

• Refinance options have, as the report so eloquently states, “nearly evaporated”. One thing that the media has gotten right is that refinancing out of a rising house payment is not an option that remains open to very many borrowers. In the past it was a relatively simple matter to grab a lower house payment by refinancing. That's no longer the case.

• 45% of homeowners that have taken the step of contacting their lenders are working toward some type of mortgage modification. That speaks volumes. It isn't in the best interest of the lender to enter into foreclosure. They lose money on every one. As with any business, they're not in business to lose money. Instead of foreclosing on a home, they'd rather get a long term stream of interest income.

  The fact the almost half of all mortgage holders that have spoken to their lender were able to work toward some type of mortgage modification shows why contacting the lender early is so important. Unfortunately some lenders will only agree to such steps once your loan is already in default, but early contact, not avoidance is still the most important step that you can take if you feel foreclosure is imminent.

  There may be some pending legislation that can help with mortgage modification. Currently H.R. 5579, titled the “Emergency Mortgage Loan Modification Act of 2008” is being debated in Congress. It has been placed on the calender, but is still in committee and has yet to be voted on. According to it's description it is “To remove an impediment to troubled debt restructuring on the part of holders of residential mortgage loans, and for other purposes “ what exactly that impediment is, I am unsure.

  It's possibly the treatment of the forgiven portion of debt as income by the IRS. Currently if a portion of your soon to be foreclosed upon home's mortgage is forgiven by the lender the IRS treats that as ordinary, taxable income. It's their equivalent of hitting you when you're down.

  Since the report was released a few months ago, more lenders have taken the step of allowing borrowers to modify their mortgages so the 45% figure is probably higher now. Mortgage modification could be the “new refinancing”.

Nationwide the firm RealtyTrac reports that foreclosures are up 112% year over year for Q1, 2008. The top 5 states in terms of foreclosure filings were:
1 – Nevada
2 – California
3 – Arizona
4 – Florida
5 – Colorado

The bottom 5 were:
46 – Mississippi
47 – South Dakota
48 – West Virginia
49 – North Dakota
50 – Vermont

You'll notice that the top 5 were those states that experienced a rash of investors trying to capitalize on skyrocketing property values, now not so skyrocketing. The bottom 5 on the other hand experienced lower property value gains over the last 5 years. Because they were not as attractive to investors, who ostensibly would be much quicker to become over extended and then jump ship, they have higher foreclosure rates. The other reason is that in certain areas property values went up so fast that the average homeowner had to resort to all manner of unconventional mortgage products to simply buy a home at all. Maybe renting would have been a better idea, but hind sight is 20/20. Hopefully this will provide a bit more information to help in understanding foreclosures. For more help, see my previous post on how to avoid foreclosures.

Posted by debtblog at 01:58 PM | Permalink | Comments (0) | TrackBacks (0)

My post on the Dangers of Reverse Mortgages was featured in the 152nd edition of the Carnival of Personal Finance. Check out the carnaval for a number of great posts.

Also, my post on Investing for Kids was featured in the Festival of Stocks num 88

Thanks!! 

Posted by debtblog at 02:22 PM | Permalink | Comments (0) | TrackBacks (0)

For the rest of you, here is the reason that gas prices are so high. There is a little known office, high atop an office building in mid town Manhattan. In that office, on the 3^rd Tuesday of every month, there is a meeting of an even lesser known group of people, almost exclusively older, white, men by the way, who shape the future of world economics.

In these meetings they discuss how to separate the absolute maximum amount of money from the poor and downtrodden to enrich themselves, hopefully at the expense of all that is good and decent. The name of this secretive organization is the Commission for the Maximization of Oil Derived Revenues (CoMODR). They have been known to resort to all manner of tactics to not only achieve their stated goal of keeping gas prices, and other petro product prices, as high as possible.

Not only that, but more than a few good people have died trying to penetrate the inner workings of their organization, all to no avail. As can be seen when you drive by any corner gas station, gas prices are still going up, largely thanks to the efforts of these men. Thanks to modern technology and good old fashioned greed, their efforts to drive up gas prices are more successful than ever. Once, the thought of $125 barrels of crude oil and $4.00 gallons of gasoline were but pipe dreams to these men, something they could only hope to achieve.

Okay, so that’s all a total load of crap, but you would probably find that story a pretty easy sell to at least some of the aforementioned 203 million American drivers and the burgeoning crowd of conspiracy theorists spawned by ever increasing gasoline prices.

So, why is gas really so high? Is it all due to a secret conspiracy, or reckless oil company profiteering? Actually the reason gas prices are so high is a bit more simple than that.

As noted there were 203 million drivers and 244 motor vehicles in the U.S. in 2006. Worldwide, there were an estimated 850 million vehicles (Organization of Arab Petroleum Exporting Countries figures). Contrast that to 1973. In 1973 the U.S. had approximately 122 licensed drivers and 126 million motor vehicles. Worldwide, OAPEC estimates reveal about 298 million vehicles in 1973.

According to the International Energy Studies Group at Lawrence Berkeley Laboratory, the average fuel economy of U.S. driven, light duty, motor vehicles, the group that includes the cars and light trucks that are the predominant transportation resource for American drivers, was only 13.3 mpg. In 2006 that figure had increased to 21mpg (EPA figures). The fuel consumption figures will improve even further in the U.S. due to recent legislation, and the higher price of gasoline and diesel pushing consumers toward more efficient vehicles.

So fuel economy has increased, but not nearly enough to offset the increase in the number of drivers and motor vehicles. This is especially true when worldwide fuel usage statistics are considered. As the world economy has improved and population has increased, so has the demand for petro-products, including gasoline.

Here is the underlying reason why gas prices are so high.

Total U.S. refinery capacity (approximate):
1973 – 13.5 million barrels / day
2004 – 17.5 million barrels / day
This reflects a refinery capacity increase of 29.6%

World Wide Crude Oil Production (U.S. DOE):
1973 – 55.68 million barrels / day
2006 – 73.45 million barrels / day
This reflects a crude oil production increase of 31.9%

World Wide Crude Oil Consumption (U.S. DOE):
1973 – 57.24 million barrels / day
2006 – 85.01 million barrels / day
This reflects a crude oil consumption increase of 48.5%

Consumption increase far outstripped production increase for the period from 1973 – 2006.

U.S. Crude Oil Production (U.S. DOE):
1973 – 9.21 million barrels / day
2006 – 5.14 million barrels / day

This represents a crude oil production decrease of 55.8%

Total U.S. transportation related petroleum consumption:
1973 – 9.05 million barrels / day
2006 – 13.98 million barrels / day
This represents a transportation related crude oil usage increase of 64.7%

Also note that in 1973 U.S. refinery capacity exceeded transportation related demand by 49.2%, while in 2004 (transportation related crude oil demand was 13.76 MBD) they exceeded demand from the transportation sector by only 27%. As 100% of refinery capacity is not available at any given time for a variety of reasons, this, coupled with the fact that demand for motor fuel has risen, while U.S. capacity has been slashed by about 40%, means that we now import much of our gasoline, rather than producing in excess of our demand, as we did in 1973.

You may note that according to U.S. DOE figures worldwide crude oil consumption exceeded supply in 2006 by an average of 11.56 million barrels per day. I triple checked the figures on that, because it seems patently impossible that world wide consumption could outstrip supply by such a large margin.

That would mean that in 2006 the world used 4.2 billion more barrels of crude oil than it produced. Is there a giant tank of crude oil somewhere that I’m unaware of, or are these figures calculated using different methods. If those figures for supply and consumption are indeed true, that’s the reason for gas prices to be so high and be prepared for them to rise even further.

 Here is a post on some Tips to Save Gas.

Posted by debtblog at 08:58 PM | Permalink | Comments (0) | TrackBacks (0)

That is part of the reason for the economic troubles we’re facing these days. People want to get mortgages to buy houses, they have shown that they are trustworthy and historically are fairly unlikely to miss payments. However, many lenders (or their investors) are so skittish that these folks are being denied the opportunity for a mortgage in many cases.

If you are one of those that gets through the net and is in the position to be offered a mortgage, you shouldn’t just take whatever then lender is offering. There are some questions you should be asking first, even though you may just feel damn lucky to get a mortgage at all.

Here are mortgage questions to ask when analyzing your mortgage offer.

Mortgage Question to Ask – 1
What is the interest rate?

That is numero uno. The interest rate will have the greatest impact on how much you’ll pay every month and how much you’ll end up paying over the term of the loan. (For mortgages of the same amount, obviously.)

Mortgage Question to Ask – 2
Is this an ARM or a fixed rate mortgage?

In a survey of mortgage holders last year, over 30% of respondents were unsure of what type of mortgage they had. That amazed me so much I did a post on it. (Type of mortgage post) How so many could fall into this situation still amazes me, but don’t end up being one of these borrowers.

If you don’t know the difference between the different types of mortgages, here it is in a nutshell. A fixed rate mortgage is basically what the name implies. The interest rate will stay the same over the term of the loan. On the other hand, an adjustable rate mortgage (ARM) will change, or adjust, the interest rate at various times throughout the term of the loan. Rest assured the interest rate adjustment will be up, and so will your monthly payment. For more on this, see a post I did last year on how to select a mortgage.

Mortgage Question to Ask – 3
Are there prepayment penalties?

This is of huge importance. The majority of borrowers keep their mortgages for 5 years or less. That means you’ll pay off the mortgage and either get another one for your existing home, or you’ll buy a different house. In any case you’ll hold the mortgage for less than the full term. If you are charged a prepayment penalty it will cost you a hefty premium to do this.

Prepayment penalties are charged by lenders to help mitigate the risk that they’ll not get the entire revenue stream provided by the loan going full term (sounds like a pregnancy). Typically prepayment penalties expire after the first 2 – 5 years, but in some cases can persist longer than that. The penalty is monetary, you’ll not be asked to pledge your first born or classic ’57 T-bird. The normal prepayment penalty is about 2 – 3% of the outstanding balance at the time of the loan payoff.

You may be offered some consideration for agreeing to a prepayment penalty, such as a lower interest rate. On the other hand, you may be required to agree to one if you have bad credit, although at the present time few borrowers with really bad credit are able to get a mortgage at all, unless they have absolutely huge down payments.

A prepayment penalty may apply to a refinance only, in which case it is termed a “soft” penalty. If it applies to both a refi and a payoff of the mortgage, it is called a “hard” prepayment penalty.

Mortgage Question to Ask – 4
How much will this mortgage cost me in addition to the principal and interest?

Paying fees and closing costs for your loan are completely normal. There are a myriad of fees associated with securing your loan, such as appraisal fees, title insurance, documentation fees, recording fees imposed by the county for recording the deed, prepaid insurance, notary fees, application fees (try to negotiate your way out of that one), and so on.

You are required by law to be informed of any and all such fees and closing costs within three days of your loan application being received by the lender. These fees and closing costs can vary widely so it bears checking up on. Be aware that any such fees that are rolled into your mortgage will cost you a substantial amount of money after you’ve paid interest on them for 20 – 30 years.

Mortgage Question to Ask – 5
How long will it take to close the loan?

Closing is when you actually receive the proceeds for the loan. When it closes can affect your house deal, so you have to know how long it will take to happen. About 3 – 4 weeks is normal.

Mortgage Question to Ask – 6
Are you charging me points?

Points are an interest rate buy down. If you are charged points, you will pay a fee to the lender in exchange for a lower interest rate on the mortgage. It’s important to know this when comparing different mortgages, because if for example, one lender quotes you a 5.9% mortgage and another a 6.4% mortgage, you aren’t making an apples to apples comparison if the lower rate was obtained by your paying points to buy it down.

Points on a mortgage are equal to 1% of the mortgage amount. So a point on a $350,000 mortgage would cost you $3,500 up front. See the specific term of the offer to see how much each point is worth in terms of rate reduction. Normally it’s only a good idea to buy points if you are going to stay in your home and not refinance for at least 5 years, probably longer, otherwise you will not have time to recoup your added costs.

These are some of the most important mortgage questions you should ask when comparing different mortgages and before you sign your loan agreement. Before going into the process, make sure you have all your ducks in a row, they’re easier to shoot that way. Get all your required documentation in order, such as bank statements, tax documentation, check stubs, and anything else the lender may ask for. Also, you should have any offer reviewed by a good real estate attorney before you sign it. Here’s to hoping you get that mortgage!

Posted by debtblog at 01:56 PM | Permalink | Comments (0) | TrackBacks (0)

What are some of the dangers of reverse mortgages?

Reverse Mortgage Danger Num. 1 -
Well, in the first place you should be aware that the amount you receive will probably be less than you are shown in the initial calculations. This is because unlike a traditional mortgage, where the taxes, insurance, and fees are paid by monies you paid into an escrow account when you write your mortgage check. With a reverse mortgage on the other hand, it actually works, drum roll please, in reverse. The money for those items is subtracted from the amount the mortgage holder receives for their monthly payment, thereby reducing the net amount of the money you'll get each month. Be aware of this when you are making your calculations.

Reverse Mortgage Danger Num 2 -
Another danger of a reverse mortgage goes to the actual structure of the loan. As it is stated in most of the loan documentation, you will retain use of your property as long it is your primary residence. The problem is that, as reverse mortgage holders are senior citizens, the chances are fairly great that they may do one of two things that could cost them their home.

One is to be confined to an assisted care facility. At this point the home is no longer their primary residence and the bank will come for their money. If the balance is less than the home equity, the home will be sold and the equity beyond what is owed on the reverse mortgage will be given to the homeowner. If the balance is greater than the home will simply be forfeit to the lender to satisfy the terms of the loan.

The other condition that could trigger the primary residence provision is that the homeowner could move for much of the year to a second home. This is very common for seniors living in northern states. They will purchase second homes in warmer climes, such as California, Florida or Arizona, where they can relax in the sun. If they take their relaxing a bit too seriously however, they could find themselves in a situation where their home is no longer considered their primary residence.

Reverse Mortgage Danger Num 3 -
Another danger of a reverse mortgage is getting sucked into paying high fees or getting bad ARMs. Many reverse mortgages are adjustable rate mortgages. Many people are well aware of the dangers of these type of mortgages as they've occupied more than their fair share of the evening news for the last year. The same problems can apply for reverse mortgages as for traditional mortgages. You can easily be risking your security with the uncertainty of a reverse ARM. Personally, I may just be too conservative, but I like the old fashioned way, fixed.

Another point to be aware of is that the FHA will charge a 2% fee to insure reverse mortgages. But the real thing to watch out for is that you may be asked to pay even higher fees and closing costs than you would with a traditional mortgage. Don't do that, because many lenders will offer basically the same fee structure with a reverse mortgage.

Reverse Mortgage Danger Num 4 -
Another danger of reverse mortgages is that they let you spend your home's equity on just about anything you want to. This could cause a problems if you need those funds for an emergency down the road. While there's nothing wrong with living it up a bit in one's golden years, be aware of the temptation to splurge with all your reverse mortgage payments on trips to Mexico or a new Prevost to impress the folks in Arizona. Keep your eye on the future and remember that the money from the reverse mortgage could allow you to keep your independence at home should you or your spouse's health take a turn for the worse in the future.

A reverse mortgage can be a great financial vehicle to carry you through your golden years in relative financial security. Just be aware that there are dangers to reverse mortgages, just as with any other financial products

Posted by debtblog at 02:03 PM | Permalink | Comments (0) | TrackBacks (0)

First of all, as they are minors, children can't actually buy and sell stocks themselves. They can however take advantage of the Uniformed Gift to Minors Act (UGMA) that enables minors to legally own property. It does this by allowing the establishment of a trust for the minor's assets. There is a trustee for the UGMA that is typically the parents. Unlike more complicated trusts, UGMA related trusts are statutorily established in the individual's state of residence. That's nice because you don't have to rack up a mountain of legal fees to establish a UGMA trust, as can be the case with many other trusts.

What the UGMA allows is the gift to a minor child of an amount of money with no tax consequences as per the limits of the gift tax exclusion. The exact amount of the annual gift tax exclusion can vary from year to year, according to IRS regulations, but currently it's $12,000 from one individual to another. There is no actual contribution limit for a UGMA, but there will be tax consequences if the contributions to the account are greater than the current year's exclusion limit. You can establish a UGMA trust for your kid's investment whims at your broker's office or bank by simply filling out a few forms and choosing a custodian.

You can do all the investing you want with the funds in the account, as long as you don't things like gambling as investing. Any realized gains or losses will be reported under the child's SSN. At the age they cease to be minors, either 18 or 21 years of age depending on the state of residence (although some states allow you to move the age from 18 to 21 if you so desire), the funds in the UGMA trust revert to the ownership of the minor. Hear this, you will lose every once of control over these funds at that time.

This bears a bit of thought, because no matter how responsible or irresponsible your kid, you'll have a trust fund baby on your hands if you establish a UGMA. The difference is that you can not prevent the minor from gaining control of the funds through special terms of the trust as you can in other trusts. They are all set up according to the state's statutes, remember? (There are other trusts that you can set up as custom as you would like, but these will usually cost more to establish than a UGMA trust).

Something else to know about a UGMA is that they reduce the child's eligibility to receive student financial aid. Apparently the Feds feel that if your kid is sitting on a half a million dollar trust fund the taxpayer shouldn't foot the bill for their education. The point is that any assets in a UGMA established trust account are considered the child's assets when applying for financial aid, so they will have an impact on eligibility. That's something to consider when setting up a UGMA so your kids can dabble in the markets.

Another thing to consider is that transferring any funds from the UGMA into another vehicle, such as a 529, will cause you to be liable for capital gains taxes on the transfered amount. That's because the assets can't actually be transfered directly. They must be sold, then the proceeds from the sale are used to fund the 529 account. The other issue is that 529 plans are actually adult owned, so the funds must be transferred back to the parents, possibly incurring other tax consequences. 529 plan assets are not used for calculating financial aid eligibility though.

What if you child just wants to invest for an education. Not to fund their education, but to learn how the markets work, and get an actual financial education. That is a great thing, because the vast majority of children today have absolutely no idea about anything financial. If your child is responsible enough to actually want to spend their time investing their assets, rather than spending them at the mall or on smoking dope, you probably have less to worry about than many parents. Most kids would rather spend their money on new games for their PS3 than on shares of the Visa IPO, so if your's doesn't , congratulations.

Posted by debtblog at 01:34 PM | Permalink | Comments (0) | TrackBacks (0)

Lessons About Investing – 1
The first thing to determine when you're beginning investing is why you're investing. What are your goals? Only once you've determined your goals can you develop a plan to achieve them. Are you looking to create a future income stream to fund your retirement, do you want to invest as a business to create income for the present, or are you trying to fund a specific goal, such as college for your children. The other option is that you could be investing for fun, and investing can be an enjoyable hobby (when you do it right).

So, your first lesson is to set your specific investing goals before you begin investing. Be specific when you're doing this. For example, it's not enough to say “I want to fund my retirement”. You have to actually know how much money it will take to do so. One of the most common mistakes beginning investors make is failing to invest in such a way that will meet their goals, because they haven't really set any. So, if you're looking to invest as a retirement funding mechanism, your first task is to decide just how well you'd like to live when you stop working.

If a Jed, pre-Beverley Hills lifestyle suits you just fine, then you'll have an easier time than if you would like to retire and earn the same as your pre-retirement income. If you can feel comfortable at 75% of your pre-retirement income, that will give you a specific monetary goal. Obviously you'll have to know what your pre-retirement income will be to do this. Unless you spend time down at Zoltar's, you'll have to rely on a bit of educated guessing.

This is a bit more difficult now than your parent's day, because of the mercurial nature of most people's careers in our brave, new century. In any case, look at your career path, and determine how much your income will realistically increase over your working life. If for example, you are pretty sure you can count on roughly a 5% raise every year, use that number in your calculations.

Lessons About Investing – 2
Your second lesson about investing is to invest in vehicles that will meet your investing goals while taking into account other important factors. The two most important of these are probably your personal risk tolerance and time horizon. For example if you're risk averse, you will want to stay away from high risk investments, no matter if they promise high returns.

Looking at your time horizon is extremely important to help ensure that your investments will have the funds you need when you need them. Some investments tend to be fairly volatile, meaning they go up and down in fairly large swings. Volatile investments may generate pretty high returns over time. The problem arises if you are close to the time when you may need to begin withdrawing funds. If the investment has wide swings in value you risk it being in a trough, rather than a peak when you need the money. Not a good situation.

Lessons About Investing – 3
That leads into lesson about investing number 3. It's one that even the best, most experienced investors can have trouble learning. Don't try and time the market. That's it. Trying to guess exactly when to buy and sell in order to maximize your returns is not a trivial task even for the pros, most amateurs will just get killed trying it. Guess right and you'll make out like a bandit, but the more likely scenario is that you'll be wrong much more often that you'll be right and end up taking a bath.

Lessons About Investing – 4
This a lesson that can be very expensive if not learned. You have to diversify your holdings. If you are a fund investor much of the diversification will be handled for you, unless you invest only in sector funds in a limited scope of sectors. You want to avoid putting all your eggs in one basket, lest you end up in the situation Enron employees found themselves in. Actually this often happens to investors that mainly invest in their employer's stock. While that can be a great experience, just ask Google employees over the last few years, or Microsoft employees in the '90's, it can also be a horrifying ride if you're forced to watch you retirement funds evaporate.

Diversification is an investor's best defense against such a catastrophe. If you're well diversified, a calamity in a certain industry or sector will have much less of an effect on your portfolio, because you have holdings in other areas of the market that will, in theory, be unaffected.

Lessons About Investing – 5
An investing lesson you should learn early is to always do your due diligence. You should know all the factors about your investments that could come back to bite you if things go wrong or you need access to the money. You should know about tax and withdrawal consequences, fees, and other things that can affect your investments. In addition you should know as much as possible about the companies you're invested in, their businesses, and the economic factors that could affect them.

These are 5 of the top lessons you should learn before you start investing. The money you make (or save) will be your own.

Posted by debtblog at 02:08 PM | Permalink | Comments (0) | TrackBacks (0)

These days times are tough and probably no one is experiencing that more than small business owners. According to the 368 page SBA report on small business released in December of 2007, there are over 6 million non-farm small businesses. That means well over 6 million of you out there are small business owners. Because so many are owned by more than one person, it's probably closer to 10 or 12 million.

Many of these entrepreneurs are constantly operating on the ragged edge of profitability and trying to keep their heads above water, so uncollected accounts can threaten their very existence. Few small business owners have the expertise, time or temperament to be effective debt collectors and yet allowing the debts to remain uncollected can sink their ship. Speaking from past experience, the financial stress of irregular cash flow can keep you awake at night, especially when you're staring payroll in the face. One position you never want to be in as a business owner is having to tell your valued employees that they'll have to wait to deposit their paychecks.

In the majority of cases, the cash flow problems are created by debt you can't collect in a timely fashion. Late and delinquent payments will ruin your cash flow. You may be profitable on paper, but your accounting won't pay your bills, only an influx of cash can do that. As a business owner there are times when you may have to hold your own paycheck in order to pay your employees. That doesn't go over too well on the home front, I can assure you.

You have some alternatives. You can just hope your accounts will pay, which sometimes just isn't very realistic. After all, in many cases your accounts are other small business owners just like you, and they're having their own financial problems. You have to make sure paying you becomes one of their top priorities. When cash gets tight, most business owners will pay their employees first, then the lease, and then vendors and other debts. Key vendors get pushed to the front of the pay line, while less important vendors are moved farther back.

If you don't have the skills to get your account moved to the front of the payment priority line, you'll need to hire someone who does. As I mentioned before, that expertise can come with a hefty price tag. An alternative is to use one of the online debt collection agencies that have come with the dawn of the Internet. For many of the same reasons other industries can become low cost service providers by becoming virtual, so can debt collection agencies.

This alternative can offer some advantages to you as a business owner. Typically the cost will be lower than a traditional debt collection agency, which helps preserve much need cash for you. In addition, you will usually have to pay no up front fees, which you may be in poor position to do. Basically the online agency will send collection letters from an official source for a set fee per letter, typically from $5 - $30. As you may have noticed, that's far lower than the 30% - 50% fee you may face when using a traditional debt collection agency. To be fair, a traditional agency will normally have a larger breadth of services available than does an online collection agency. For example, they may add phone calls to their repertoire.

You can have the entire process handled by an online debt collector, which could provide you with substantial cost savings. If they are unsuccessful you will have lost only a very small amount, and can turn to more traditional agencies. If they collect your outstanding debt, the money will be sent directly to your business. You will have much needed cash and can concentrate on what you really want to do, running your business, not collecting debts.

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