Refurb Bargains

Posted by Tad Johnson - Feb 21st, 2008 at 10:02

Refurbished (adjective): industry parlance for new-but-not-quite-new products. See also, fantastic bargain.

If you’re in the market for a new pricey tech gadget (computer, HDTV, iPod, etc.) you can find some great bargains by shopping refurbished. Companies like Apple, Dell, and Klipsch, all have online clearance or refurbished sales. Look around the websites of other companies as well, as they usually offer some sort of discount selection.

Refurbished simply means that a product has been remanufactured and sold again as like-new. These are usually returns from store inventory (often unopened) and are always inspected and freshened up to ensure they’re in pristine condition. Most companies will honor the same product warranty as well.

For a vicenarian who’s looking to upgrade some equipment, shopping refurb can be a great way to save 15-30% off the cost of new, and without the risk of buying something used. The only downside is you’ll be buying last season’s hot product. I think the savings are worth it.

http://store.apple.com/1-800-MY-APPLE/WebObjects/AppleStore.woa/wa/RSLID?nnmm=browse&mco=44BD9AA6&node=home/specialdeals

The Apple Store (U.S.) - Special Deals via kwout

The Little Book That Beats the Market

Posted by Tad Johnson - Feb 18th, 2008 at 19:02

Joel Greenblatt makes a bold claim : using his simple stock picking strategy (referred to as the magic formula) you can beat the market average with less risk. In his own words,

I believe that using the magic formula and the principles behind the formula to guide your future investments will remain one of your very best investment alternatives. I believe that if you are able to stick with the magic formula strategy through good periods and bad, you will handily beat the market averages over time. In short, I believe that, even after everyone knows the magic formula, your results will continue to be not only “quite satisfactory,” but with a little luck, extraordinary.

Not surprisingly, this little book has caused a bit of a stir in the investment community since it was published a few years ago. A walk through Yahoo’s investment forums will yield an active community of magic formula practitioners. And I’m awfully tempted to become one myself.

I’m now on my second reading of the book, and the theories behind the magic formula are very enticing. Of course, the difference between writing about the book and actually investing real money is great. So far I haven’t done the later.

If nothing else, Greenblatt’s book is an entertaining (and brief) explanation of the basics of stock investing. I would highly recommend reading it.

Zecco + ETFs = No minimum Roth IRA

Posted by Tad Johnson - Feb 10th, 2008 at 14:02

I’ve heard a few comments from friends and readers of this site that most of the big banks require too high of account minimums for mutual funds in a Roth IRA account. Fidelity requires a minimum of $10,000; Vanguard’s is $2,500. This is a problem for the vicenarian investor with $500 to $1000.

Solution : Zecco.com + ETFs

http://www.zecco.com/default.aspx

Zecco.com - Free Stock Trading & Investment Community via kwout

Zecco.com offers free stock trades (10 per month) for accounts with $2500 or more, and very reasonable $4.95 trades for accounts with at least $1. By way of comparison, Scottrade charges $7, E*Trade $12.99 and Fidelity $19.95. Zecco offers regular and retirement accounts, including the Roth IRA.

ETFs (Exchange Traded Funds) work like a mutual fund but trade like a stock. So instead of enforcing account minimums, you can buy any number of shares at any time. You buy ETFs through a broker (such as Zecco) and you’re charged a trading fee on the buy and sell (unless you’re using Zecco and you have $2500 in your account).

There are hundreds of ETFs available in every imaginable market sector. For the vicenarian investor, I think it’s wise to use market index funds for your core retirement accounts. Vanguard (known for low cost funds) offers a total stock market index (ticker VTI) that charges a mere 0.07% expense ratio.

If you’re looking to start a Roth IRA and don’t meet the account minimums for the big banks, consider using a service like Zecco. You can always transfer your account to one of the big banks in the future, so this can be a great way to get started.

Annual Credit Report

Posted by Tad Johnson - Feb 4th, 2008 at 19:02

A few years back, the US government passed a law allowing consumers to get a free credit report once per year from each of the three main credit reporting bureaus. You must go through the official (and aptly named) site, www.annualcreditreport.com. Don’t be fooled by the dozens hundreds of sites claiming a similarly “free” credit report–these invariably will try to charge you for a monthly reporting service.

annualcreditreport.jpg

Your credit report holds a trove of personal financial data: your credit card, loan, bank account, and bills show up, including your payment history for each. (This is yet another reason to be extra careful not to miss any payments.) Every time you apply for a new account, they will request a copy of your report to decide if you’re a suitable customer. (Each of these requests also shows up on the report.)

One of the key areas for you to monitor as a vicenarian is your credit/debt ratio. For credit cards, this is the ratio of credit limit to monthly balance. If you have multiple credit cards, it’s an aggregate of all the accounts. Try to keep this number below 50%, and aim for under 30% if possible. An easy way to reduce it is to request a higher credit limit (provided, of course, you don’t ratchet up your spending at the same time).

If you are planning to buy a home or car in the next 5 years, it is critical for you to keep a clean credit rating. The information stored in your credit report can be the difference between a 6% loan and an 8% loan (or worse, no loan at all!). Even if you’re not planning on making a big purchase, it’s wise to get your free report yearly to make sure everything is accurate up to date.

Stash some cash (online)

Posted by Tad Johnson - Feb 3rd, 2008 at 12:02

You’re young, you’re employed, and you’re making some money. Good for you!

You’re paying down your school and credit card debt, and you’re contributing to a retirement account. Great!

Do you have an emergency cash supply? Is it enough to float you for 3-6 months? We have some work to do.

It’s always a good idea to have a 3-6 month supply of cash that you can access quickly in case of emergency. This could be something like losing your job or something worse–heaven forbid–like a car accident that leaves you injured and in need of a new vehicle. Even if you have medical or auto insurance, there’s often a period of time between your spend and the insurance company’s reimbursement. For emergencies like this, you don’t want to take on additional credit card debt. This is where the emergency cash supply can really save you.

cash.jpg

When I say cash, I am not talking about a shoebox full of 20’s under your bed. Your emergency cash fund should sit in a high interest rate savings account, helping it grow (or at least counter inflation). One of your best bets for high interest rates is an online bank. These have become very popular in the last few years, since the bank’s low costs are passed on as high interest rates. And don’t worry–they’re safe. Just like a brick & mortar bank, your online savings are backed by the FDIC (aka Uncle Sam).

There are a few caveats to keep in mind:

1. It will take a few days (usually 2-5 business days) to transfer money into or out of the account. This is fine for you, since the cash is for emergencies only.

2. You can only make 6 withdrawals per month. Again, this is fine for your needs. (And I believe it applies to offline accounts as well).

3. You need to link your online bank account to a traditional brick & mortar account for easy access (and check writing, ATM access, etc.)
* Note that some online banks will give you an ATM/debit card, but caveat #2 still applies.

The key feature to an online bank is the high interest rate. During the high-flying days of 2006/2007, you could fetch 5% on these accounts. With recent interest rate cuts, these accounts are down to 3-4%. Shop around a bit and find the best rate. (Keep in mind that the rates can change at any time, and watch out for the fine print–like minimum balance requirements or temporary teaser rates).

Plan on saving 3 months worth of your current take-home pay (minus your monthly savings amount). If you are married or have children, double that amount.

With a reserve of cash, a minor (or major) setback won’t throw you into debt. Rest easy, knowing your emergency fund is safe, secure, and earning a healthy interest.

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