Consolidate, Simply, Improve Your Finances

I have been helping a family member wrap her arms around her financial situation recently and thought I'd share my observations. Unlike the typical situation these days she has judicially salted away money every month for a very long time and therefore won't be wondering if she can maintain her lifestyle in retirement. But, her husband ran into some health issues two years ago and she had to take the reins of their finances for the first time in 20+ years. In their family, her accountant husband had a mind for numbers and had invested money with 15+ mutual fund companies, opening one or two funds at each. This caused paperwork nightmare for someone who is financially savvy, let alone someone who has problems balancing the checkbook.

The health situation opened her eyes and woke her up to the fact that if something happened again she wasn't sure she would even know where all their money was. Of course, having 20 different mutual funds doesn't mean you are diversified. It's also a huge hassle. I've been enlisted to help them consolidate their accounts, re-balance and simply things. They are also looking into working with a financial planner. I'm admittedly not an expert on equities, bonds, and the like, but as the financial meltdown of 2008-2009 has shown, neither are most of the people on Wall Street. I'll list the steps I have taken below. They want to take a mostly DIY approach to their investments so I've tried to not make things overly complicated while bringing their risk down.

STEP ONE. CONSOLIDATE

As noted above, my relatives had holdings at over 15 institutions. While they had some real quality companies working for them, I question whether each of the offerings at T.Rowe Price, Vanguard, and Schwab have significant enough differences to spread your money around everywhere. This is especially true with the number of non-transaction fee funds and ETF's available at most full service discount brokers.

a) Where to consolidate?

This is essentially a personal preference since many of the brokers have similar offerings these days. My personal favorite is Fidelity, though Schwab is a close second. Both have a solid offering of branded no transaction fee funds, charge no annual fee, have relatively low minimums, and charge lower trading fees than many of their competitors. There are cheaper options for trading and lower minimums elsewhere, but these two have very good customer service in my experience which is worth the extra dollar or two on trades (since they are mostly invested in mutual funds).

There are also some very good mutual fund companies such as Vanguard and T.Rowe which basically have a brokerage account tacked on as an afterthought to their fund offerings. Both are great companies, but have thin offerings outside their branded funds.

After laying out the options they have decided to go with Fidelity.

b) Making the Move

One of the reasons that we settled on Fidelity was that quite a few of their funds were part of Fidelity's NTF network, so they could be rolled and moved into the brokerage account essentially unchanged. A number of the other offerings will be liquidated and moved into a similar offerings from the Fidelity branded funds, NTF funds Fidelity offers, or comparable ETF's. The whole process can be initiated online and finalized by mailing some paperwork to Fidelity. It is a fairly pain free process, but takes a little while.

STEP TWO. SIMPLIFY

Asset allocation is the single most important factor in this process and I haven't been able to find any online tools that I feel confident with. This is especially true given the huge differences in allocations each recommended. My relatives are about 5 years from retirement, so they will need a more conservative allocation than someone like me. I have recommended that my relatives visit a financial planner who charges hourly and schedule an appointment to review their goals and get a plan figured out. A few hundred dollars is a small price to pay for solid advice.

STEP THREE. IMPROVE

While things haven't been finished yet. They are off to a good start. The final pieces will fall into place once they meet with the financial planner. I believe they will benefit a great deal from having the vast majority of their investments under one umbrella and just a few funds at another broker. Now, if something happens at least all their money will be in one place and accessible if necessary.

I'm interested to hear if you have had an experience good, bad or otherwise moving things under one roof. Do you have any other advice for them? If so, email me.

Image Credit: Ben30 @ Flickr

Asset Allocation Made Easy

As a DIY investor without a broker, I have been looking around (for a while now) trying to find a tool that will help me allocate my investments in different asset classes and help me rebalance them occasionally. As I will probably elaborate on in an upcoming post, I haven't really been happy with any of the tools that I've tried so far. The tools have either been too simplistic, way too complicated, or the numbers just don't seem to add up. I should note that I have been trying out free tools, when I probably just should have broke down and pay for some advice.

Today I came across the marketriders.com website. The site offers advice on asset allocations in a few flavors. In its most basic form you can pay a $9.99/mo fee for automated advice by answering questions about your time horizons, appetite for risk and age. If you prefer, for $399 you can talk to an advisor who will walk you through things. Or, if you need more help yet you can move your portfolio over the Market Riders and pay them a .50% commission. The company has based its philosophy on the idea that if you get your money in a low cost investment (preferably an ETF that tracks an index) and have the right allocation there's really no need for an expensive broker. They seem genuine when they say they really prefer if people do the investing themselves and don't hire them as their planners. They even impose a requirement that you fire them each year and decide if you want to rehire them.

I think its a good concept. I haven't tried their service out yet, but since they offer a free 30 day trial I will be soon and will post a full review at that time. Market Riders apparently has a database that has over 700 ETF's and provides users with a sample portfolio of ETF's to meet their respective allocation. Why ETF's? Because as counter-intuitive as it may sound, they generally beat the experts. The company also monitors the performance of the investments and will send you an email when it is cost effective to rebalance things. In this sort of market that could prove to be some valuable advice.

Does anyone have experience with Market Riders? I like the concept a lot, we'll see how the model plays out in the service itself. I will report back once I have a chance to kick the tires. I wish them the best, it's about time there was some solid unbiased advice at a fair price.

Link: MarketRiders.com

Image Credit: The New Fine Art's Lab @ Flickr

Keys to Financial Success as Told By Mark Cuban

I personally don't have a problem with Mark Cuban, but I know he rubs many people the wrong way. For those of you who don't know, Cuban founded Broadcast.com and sold out to Yahoo at the peak of the tech bubble for about $5 billion dollars, he then went on to buy the Dallas Mavericks and dabble in some other ventures like HDNet and potentially buying the Chicago Cubs. For certain, the guy is emotional, opinionated, and undoubtedly rich by any standards... oh yeah, he likes the enjoy his money.

This week Cuban posted an article on his "blog maverick" site titled "How to Get Rich." The article raises some interesting points that run counter to conventional wisdom. In a nutshell Cuban says, 1) keep money in cash, 2) don't take shortcuts, 3) stop using credit cards, and 4) find a job you love.

I have to admit I was really skeptical when I received the link from a friend yesterday, but Cuban gives some solid advice. I whole-heartedly agree that there are no shortcuts to building wealth. It's a slow process that for most people requires sacrifices and SAVING MONEY. Bottom line, you have to put more money in the bank or securities than you blow on entertainment, luxuries or other disposable expenses. I also strongly believe that for many reasons loving your job is important. People spend more time at work than just about anywhere else. If you hate your job, chances are you are either a) not good at it, b) overqualified, or c) would be a lot better at something else. There's an untold number of people out there who made fortunes in weird niche industries and businesses. The person who created the temporary tatoo, hackey sack, or spork probably all flew under the radar -- and didn't live way beyond their means. They probably all also ended up with more money in their estate than you or I will. Even if it doesn't necessarily contribute to your bottom line right away, doing what you love will make you a lot happier.

I would disagree with Cuban on his keep your money on cash and don't use credit cards opinions. Historically the stock market is not as risky an investment as he makes it out to be. Yes, it is driven by emotion and not closely correlated to actual market conditions, but earning 3-4% in a CD won't cover inflation most of the time. You can no longer buy a stock and hold it for 30 years (if you ever could) and need to actively monitor things by diversifying your asset and portfolio allocation but averaging a conservative 6% is almost double what short term CD's pay. Having a sizable position in cash or bonds makes sense, but keeping all your money in cash is foolish. Also, although most people use credit cards irresponsibly, there are plenty of people who don't carry a balance and get some cash back rewards in the process.

Does anyone have other ideas to add to the list? I'd like to compile my own list and post it sometime in the future if anyone

Worst Wall Street Months in History

Floyd Norris had an article two days ago that listed the worst months for the market in U.S. history. I'm not a believer that the stock market is a barometer for the overall health of the economy (I think the stock market operates on momentum and emotion, where the economy tends to slog forward or backward with fewer rapid ups and downs), however it is interesting to see how this crazy month has stacked up historically. It should be noted that the

1. October 1987, -21.8%
2. August 1998, -14.6%
3. September 2008, -13.8%
4. September 1974, -11.9%
5. November 1973. -11.4%
6. September 2002, -11.0%
7. November 1948, -10.6%
8. March 1980, -10.2%
9. September 1946 -10.2%
10. August 1990, -9.4%

Article @ NYTIMES

Image: ralphunden

Oil Falls Sharply... For Once

Today a couple interesting things happened in the markets that have been rare occurrences in the markets.  For starters the NYSE rallied up more than 200 points (of course it later gave the gains back and then some which is not all that unusual of late).  Also, oil fell to $105 per barrel before settling back just under $110 per barrel.  Third, the dollar ended slightly stronger rising .8% to 1.4501 dollars per euro.  Don't get too excited about a bottom or that we're out of the woods yet.  Come next week it will probably again be "Oil rose on fears of _______ (insert war in a little known country, natural disaster somewhere without running water or any other reason you'd like).  

While the relief in oil prices is great, consumers probably won't see relief at the pump here until refiners ramp up capacity or the vertically integrated oil companies start taking a smaller cut over every step of the supply chain (unlikely to say the least).

Photo Credit: freewine @ flickr

Stats:  Oil Price Plunge @ NYTIMES

Consolidate and Close Accounts to Keep Better Tabs on You Financial Situation

One of the great things that a steady stream of new entrants into the online brokerage arena had the effect of doing is to make companies compete harder for your business. There are now plenty of good places to hold your investments and with that said I'm a big believer of consolidating your investments and holding them at a handful on institutions rather than have assets all over the place. Below are the reasons that I think this outweighs the minimal benefits you may find from using a number of providers.

1) Reduce Fees: Many providers reduce or even eliminate fees and commissions once you hit a certain threshold of assets. Some investment houses will throw in free trades, free research, or advisory services if you increase your holdings to a higher tier.

2) Increase Your Sensitivity to Fees: With life being busy and time short, I find that I'm more likely to carefully inspect my monthly or quarterly statement if I have two or three to look at rather than 5. I also am more sensitive to being nickeled and dimmed with fees when I see multiple fees on the same statement rather than one from each investment company.

3) One statement: Many investment companies will provide you with one consolidated statement which makes record keeping a breeze and reduces hassles associated with tracking down important information.
4) Availability of Options: Nearly all the well known brokerage companies have been beefing up their no transaction fee mutual fund offerings which makes it easier for you hold a Janus fund in a Fidelity account or an Ariel fund in a Schwab account. This makes for one stop shopping and as stated earlier one statement. The rise of exchange traded funds (and more and more niche EFT's that act more like mutual funds) allows small and large individuals to level the playing field and diversify without the strings some mutual funds attach.

5) Get a Clear Picture of Your Financial Health: Pooling your investments with one provider is a quick way to see your net worth and if you are meeting your financial goals, whatever they may be.

6) Organize Your Affairs in the Event Something Should Happen to You: No one wants to think about death or serious injury, but if you were hospitalized would a family member or friend be able to track down your money to pay bills? Are your investments spread over 10 fund families held in 10 separate accounts plus your 401(k), Roth IRA, and traditional IRA? If you have a financial power of attorney in place you representative will have an easier time tapping funds that may be needed to settle your affairs or care for you.

Things to note. It should be noted that you want to consider FDIC and SIPC insurance limits that may be applicable to the funds you hold at a single institution. There are plenty of good discount brokers like Fidelity (the king of investment houses), OptionsXpress (a newer discount broker that has grown quickly and has no minimums, T.Rowe (one of the biggest discount fund shops), and Charles Schwab (the big time discount broker).

Many of these providers like Schwab and Fidelity have added high yielding checking account and other banking options to their typical securities offerings (read more here). While the new accounts have big benefits over the brick and mortar checking accounts, most people need somewhere to deposit money in person from time to time. I would suggest that if you are interested in consolidating financial holdings that you keep a completely free checking account at a bank close to your house so you can quickly deposit the occasional check (ask, because your bank will probably try to lead you to an account with minimums and/or fees). Once the money is deposited in your local bank account you can easily move the funds through the ACH system to your other account. This method is much faster than mailing a check to the financial institution.

Sharebuilder $50 Free Offer

ING has started to market the Sharebuilder service that it acquired. This isn't terribly exciting new, but ING is currently offering a special deal where you can receive a $50 credit to your account by entering the code SHARE50 -- hey a free $50 is a free $50. As with any deal there is fine print. It looks as though you need to purchase a security and the credit will post within 4 weeks of the transaction.

For those of you not familiar with ShareBuilder, the company allows you to purchase fractional shares of securities. You can set up an automatic savings plan and have the company purchase $35 of stock each month and you will receive the applicable fraction of shares that the $35 will buy you at that time.

The company advertises that they have buy fees as low as $4, but that is for people who have an automatic savings plan set up. A full fee schedule can be found here.

Direct Link to Offer at ShareBuilder

Photo: goat_girl_photos @ Flickr

Stock Market Flirts with 14,000

The market finished at a record high today, although not quite at 14,000. It had traded earlier in the day at that level but did not reach that peak before closing. The market is up over 12% for the year and now some analysts are forecasting 15,000 before the end of the year. When you look at the statistics it is a little bit astonishing. The market moved from 13,000 to 14,000 in a mere 57 days. Additionally, the market has closed at a record 57 trading days this year. This is pretty amazing since oil has been marching upwards.

Of course there are still people losing money in the market and hedge fund pros getting paid gobs of money to lose money for their clients. I think now is still a good time to get into the market although I'm not about to steer you astray and offer stock tips.

If you are looking to get in the market you can open up a brokerage account by tomorrow and start investing. Fidelity and Charles Schwab are perennial favorites, while brokerages like TradeKing and OptionsXpress don't have minimum account balances or service fees.

Head over to the library or half.com, there are plenty of good investing books that can school you in what a P/E ratio is and teach you how to tell if a stock is overvalued. Or pick up "The Intelligent Investor," the book that Warren Buffet has said is one of the best. After you get your feet on the ground with the basics you can read up on what the pro's are doing. For those of you who have cable (and can stomach his personality) Jim Cramer's Mad Money is a solid show for beginners run by a guy who made a killing by running a hedge fund.

Finally, you can see what the big institutional investors are doing for free by checking out what are the most active options. Head over to Yahoo!Finance and Market Watch which are tremendous resources to get you started.

Have something to add? Leave a suggestion in the comments or email me.

Image Credit: Helico

Free Stock Trades?

When I was checking my email last night I came accross an adsense ad for free stock trades. So what you say, I get about 150 of those a week in my spam folder. Well maybe so, but having some spare time I clicked it anyways and it turns out yet another company is trying to use the web to shake up tired business models.

Zecco promises to give you 10 free trades a day or 40 free trades a month for free. After you reach 40 it charges $3.50 per trade (which is still less than most online brokers). The company also does not charge a minimum account balance or maintenance fees unless you are trading on margin. The company has a matrix that lines its fees up against the competitors here.



The interface doesn't look like anything out of the ordinary or too spectacular, but you can't beat the pricing...

Has anyone tried this yet? I haven't used this service at all, but love the premise. I assume (which is always dangerous) that the way the company can keep costs so low is that it fills both sides of the orders clients place. In other words if at all possible waits to find another Zecco customer that is selling what you're buying before it closes the order. However, this isn't uncommon and every broker tries to do this.

I am guessing though that Zecco trades are less than instantaneous - although I haven't heard anything to the contrary, but for me it wouldn't be a big deal. I'm not a day trader and those of you who are day traders are probably using a more robust service anyways. Plus, if you are buying and selling you should be using the good ol' market limit so you can lock in the prices you want to buy or sell at anyways.

I'd love for this service to succeed or at least cause a little disturbance in the pricing structure of the bigger players. If you have used Zecco email me and let me know what you think.

Link:
Zecco.com

Sell in May and Go Away?

The Big Picture has an article that suggests long term the axiom "sell in May and go away" may ring true. The site claims that it also holds true for world markets. During "good periods" (Nov-Apr) the S&P 500 has historically returned 8.5% per year during , while the "bad periods" (May-Oct) returned 3.2% per year. Still not terrible, but not great either. Head over to see the full story @ The Big Picture.


Link
Sell in May @ The Big Picture
Image James & Viliga @ Flickr

Signs It's Time to Sell Your Stock

The Motley Fool has an article that goes a little outside the box for advice on when to sell your stock. The research was done on factors outside company performance alone and boils down to two findings. 1) Once a visionary founder steps down that is a clear sign that the stock is headed for trouble (see Gates, Dell, & Bezos). 2) Once a CEO starts buying an estate and fancy cars complacency sets in and the company is headed for trouble.

I think the article is probably right on, but I'm not sure how you make this into an investing strategy. I mean you could dump a stock as soon as a founder or CEO steps down, but it's more difficult to figure out the complacency part of the equation. Take for example Apple, aside from their recent run on iPods, it is really Steve Jobs that people are investing in. He is the conductor that made the company innovate its way out of the funk it was in. You can also look at Google. Larry, Sergi & Eric are willing to take the risks that have made the company just dominant in its field. Both companies will struggle quite a bit when new management takes over eventually.

In the end, investors are buying a stake in the people of a company (unless you are investing in natural resources - mining, petroleum co's where is maybe not so important). If you can find a company with a Jack Welch (Fmr. CEO GE) or John Bucksbaum (Gen. Growth Properties), hold on to it and ride it out. It may not be as sexy as investing in the newest IT thing, but it is a lot more practical - which we at thegoldenparachute.com are big fans of.

Links
Motley Fool - When to Sell Your Stock
Forbes - Best Performing / Worst Performing / Highest Paid CEO's

Free Money... (Well Stock)... No Honestly

I'm always looking for a way to save or make a little money (so long as it is legit and not the slightest bit shady). How does $50 sound... Like there is a catch right? Not exactly, but let me explain. Sharebuilder (a website that lets you buy as little as $1 worth of a share of stock), has a promotion running where they will give you $50 when you open an account. I did this a while back and opened up an account, purchased a couple risky penny stocks (its free money after all) and am sitting back waiting to retire on the beach 30 years from now.

How it works:

• Head over to Sharebuilder.
  
• Enter one of the codes below (all were working at the time of this post) and open up an account.
• Make a trade and 4-6 weeks after your trade is made your $50 bonus gets deposited in your Sharebuilder account.

Code: CAMPUS50
Bonus: $50
Exp: None Found
Link: Link to Open Account

Code: UFALUMNI45
Bonus: $45
Exp: None Found
Link: Link to Open Account

Code: IPLANGIFT
Bonus: $50
Exp: None Found
Link: Link to Open Account

Code: ENTERTAIN40A
Bonus: $45
Exp: None Found
Link: Link to Open Account

Code: SMFALL50
Bonus: $50
Exp: None Found
Link: Link to Open Account

Code: UWALUMNI45
Bonus: $45
Exp: None Found
Link: Link to Open Account

One other thing to consider is if you are a CostCo Member Sharebuilder has a deal where they will give you a $55 bonus if you enter your membership number when signing up. If you are an "Executive Member" you get the $55 bonus plus 25% of your Sharebuilder fees credited back to you. If you are a "Gold Star or Business Member" you can get the $55 bonus plus 10% of your transaction fees credited back to you. If you are interested and a Costco member you can find out more about the offer here.

FYI:

1. I have heard that once your $50 bonus posts you can electronically withdraw that bonus cash without fees once it hits your account, but I haven't done it myself.
   
   
2. You can open additional Sharebuilder accounts and still receive the bonus cash, but space them out by a week or two and use a different code, if you open over 3 accounts you are going to run the risk that they prevent you from opening additional accounts.
   
   
3. Sharebuilder has a pdf form that you can print off and fax to them that will allow you to combine accounts at a later time.
   
   
4. If you are thinking about cutting and running quickly after you receive your bonus be warned that to close your account and transfer all or part of the funds out of your account ShareBuilder charges fees (see the fee schedule below).
   

Links
ShareBuilder

Sharebuilder fee schedule
Fees

CNBC Million Dollar Challenge

Want a million dollars? Yeah, don't we all you reply. Well if you know something about stocks are lucky you could be in the running if your portfolio performs well in the CNBC fantasy stock game. I don't pretend to be a market beater or investing whiz-kid, but looking for short gains like you need to win at the CNBC game let's consider some of the things you could look for when making picks.

• Put the majority of your fantasy money in 1 or 2 stocks that you think will move big.
• Look for a stock that has recently been beaten up with the market "correction"
• Look for a small company that will report earnings soon (these usually swing big with good news, but unfortunately do the opposite with bad reports).
• Penny stocks can be your friend for obvious reasons.

Any other tips? Feel free to share them in the comments.

Note: I know this contest is already underway, but due to my domain issues this has only been able to be posted now.

CNBC Million Dollar Challenge