Investing Curiouscatblog

Tag: Tips

  • Five Consumer Laws You Really Ought to Know (for the UK)

    Five consumer laws you really ought to know if you live in the United Kingdom.

    To mark National Consumer Week, here are five laws the canny shopper should be using in their battle to get stuff that actually works. There is a war being fought between customers and many of the firms they have to deal with. It is an asymmetric conflict – the little man versus the faceless, bad customer service monoliths.
    …
    Your iconic white MP3 player, the totemic centre of your life, breaks down precisely 366 days after you bought it. The large electronics firm that sold you the MP3 player says that because the one-year guarantee had elapsed, there’s nothing they can do to help you. You’ll just have to buy another one.
    …
    if the player has been lovingly treated and has still conked out that suggests something may have been wrong with it at the very beginning.

    It works like this. For the first four-five weeks you have a “right of rejection” – if the item you’ve bought breaks down, you can demand a refund.

    For the next six months, you are entitled to replacement or repair of the goods. It is up to the retailer to prove there was nothing wrong with it if they wish to get out of having to do the work. And then after six months, there is still a duty to replace or repair faulty goods, but the onus is on you, the consumer, to prove that there was something wrong.

    And the key time span is six years. That’s how long goods may be covered by the Sale of Goods Act. It all depends on what “sufficiently durable” means. If a light bulb goes after 13 months, the consumer is not going to be overly gutted.

    Extended warranties are general a very bad personal finance move. I never purchase them. Many companies push them on customers because of the large profit margin and because they don’t want to provide value to customers.

    Related: 10 Things Your Bank Won’t Tell You – Ohio Acts to Protect Citizens from Payday Loan Practices – Save Money on Printing – Don’t Let the Credit Card Companies Play You for a Fool – Student Credit Cards

  • It is Never to Late to Invest

    I like to buy stocks cheap and then hold them as they rise in price. This is not a unique desire, I know. One thing this lead me to do was find a stock I liked but hold off buying it until I could buy it for less. When that works it is great. However, one thing that happened several times is that I found stocks I really liked and they just went up and went up more and kept going up. And I never owned them.

    I learned, after awhile, that is was ok to buy a stock at a higher price once I realized I made a mistake. Instead of just missing out because I made a mistake and didn’t buy it at a lower price than I needed to pay today (which made it feel really lame to buy it now at a higher price) I learned to accept that buying at the higher price available today was the best option.

    I have seen two types of situations where this takes place: one I realize I was just way off, it was a great deal at the price I could have bought at – I just made a mistake. And if it was still a good buy, I should buy it. Another is that the stock price goes up but new news more than makes up for the increased stock price (the news makes the value of stock increase more than the price has increased).

    I missed out on the Google IPO, even though I really wanted to buy. Then the price went way up and even though I had learned this (don’t avoid buying a stock today just because you made the mistake of not buying it at a lower price earlier) tip I wanted to buy it for less than the current price and so kept not buying it (emotion is a real factor in investing and that is another thing I have realized – you need to accept it and deal with it to be a good investor). Then Google announced spectacular earnings and it was finally enough to get me to buy the stock a few days later at $219 (which was well over twice the price 6 months earlier). But it was a great buy at $219 and losing that just because I should have bought it at $119 is not wise – but something I did many times in the past.

    In March of 2009 I bought some ATPG at $3.20. In August I bought more at $11. The news was bit better but really it was just a huge huge bargain at $3.20 and I should have bought a lot more. In the last 5 trading days ATPG was up $5.12 (16.78 – 11.66). A nice gain. Right now, it is up another 68 cents today at $17.43. Now this is a volatile stock and until I sell it may not turn out to be profitable investment, but the odds are good that it will.

    It is also hard to know when to sell – in fact for many selling at the wrong time (either selling too late – after it collapses [for good or sell it after a collapse only to see it recover], or too early missing out on huge gains) is the biggest problem they have in becoming a successful investor). One trait of many successful investors is holding the right investments for huge gains. A few stellar performances can lift the entire portfolio to long term investing success. And if you sell those stocks early you miss huge opportunities.

    Holding on for the huge gains is a mistake I do not want to make – and so when the opportunity is there for such gains I am willing to risk losing some gains for the potential of a much larger gain. Right now the balance is keeping me from selling any ATPG, though I am likely to sell some if it increases (while continuing to hold some of the position).

    Related: Great Google Earnings April 2007 – Nicolas Darvas (investor and speculator) – Not Every Day is Profitable – Does a Declining Stock Market Worry You? – 401(k)s are a Great Way to Save for Retirement – Beating the Market, Suckers Game? – Sleep Well Fund

  • Financial Services for the Poor from the Gates Foundation

    The behavior of banks is despicable enough when they are merely trying to trick educated, financially secure people out of their money. Banks charged $38.5 billion in fees last year according to the Financial Times. But that behavior, toward the poor, by banks (paying millions to hundreds of executives for, I guess, getting congress to send the companies billions) is immoral.

    The Gates Foundation has decided to go into improving financial services for the poor. The are supporting micro-credit but also micro finance. Saving is key for poor people to get and stay out of poverty. Most already save money informally but want better, safer options. Setting aside money in a safe place will allow poor people to weather setbacks, build assets and financial security, and invest in opportunities for the next generation. Formal savings accounts also help them keep more of what they earn and easily access their money when they need it.

    The poor need better banking options in poor countries. But the poor need better banking options in at least one rich country (the only one I know is the USA and banks in the USA provide lousy options for the poor). Credit Unions are much more likely to actually try and provide value to customers. Unfortunately banks in the USA seem to operate on the principle that customer are suckers that exist to pay for Porches for the children of bank executives.

    Related: FDIC Study of Bank Overdraft Fees – Microfinancing Entrepreneurs – Incredibly Bad Customer Service from Discover Card – 10 Things Your Bank Won’t Tell You

  • Lazy Portfolios Seven-year Winning Streak

    Here is an excellent article on how to invest in the stock market. I personally tweak this advice a bit but it is much better than most advice you get. Basically keep costs down (don’t pay large fees) and diversify. Lazy Portfolios seven-year winning streak by Paul Farrell

    Greed drives this [mutual fund] industry. The “world’s largest skimming operation” has now lost over 50% of America’s savings in the decade since the peak of 2000. The track record of actively managed funds during the recent subprime-credit meltdown continues to prove that the industry is failing America. The only way to invest is with index funds, which make up just 14% of the total.
    …
    In short, even though we know that the average compensation of portfolio managers is often $400,000 to more than a $1 million, the hot-shot managers of these actively managed funds provided no value-added to their funds’ performance. Conclusion: Their investors would be better off investing in index funds.
    …
    Yes, the market was in negative territory the past few years, but still all eight Lazy Portfolios outperformed each of the six actively-managed funds.
    …
    Customize your own Lazy Portfolio following these six rules and you’ll win. More important, you’ll have lots of time left to enjoy what really counts, your family, friends, career, sports, hobbies, living.
    …
    2) Frugality, savings versus financial obesity. Tools like starting early, autopilot saving plans, dollar-cost averaging, frugal living and other tricks are familiar to long-term investors. Trust your frugality instincts — living below your means — it’s a trait common among America’s “millionaires next door.”

    Related: Lazy Portfolio Results (April 2008) – Allocations Make A Big Difference – 12 stocks for 10 years – 401(k)s are a Great Way to Save for Retirement

  • Managing Retirement Investment Risks

    The Society for Actuaries has published a good resource: Managing post-retirement risks.

    Experts disagree about when annuitization is a good strategy. Disadvantages include losing control of assets, costs, and inability to leave money to one’s heirs. Annuities without inflation protection are only partial protection against living “too long.”
    …
    Many investors try to own some assets whose value may grow in times of inflation. However, this sometimes will trade inflation risk for investment risk.
    • Common stocks have outperformed inflation in the long run, but are
    poor short-term hedges. The historically higher returns from stocks
    are not guaranteed and may vary greatly during retirement years.
    …
    Retirement planning should not rely heavily on income from a bridge job. Many retirees welcome the chance to change careers and move into an area with less pay but more job satisfaction, or with fewer demands on their time and energy.

    Terminating employment before age 65 may make it difficult to find a source of affordable health insurance before Medicare is available.
    …
    Insurance for long-term care covers disabilities so severe that assistance is needed with daily activities such as bathing, dressing and eating. Some policies require a nursing home stay; others do not. The cost of long-term care insurance is much less if purchased at younger ages, well before anticipated need.

    The full document is well worth reading.

    Related: Many Retirees Face Prospect of Outliving Savings – How to Protect Your Financial Health – Financial Planning Made Easy – personal finance tips

  • Manage Your Borrowing and Avoid Debt Negotiators

    Debt Negotiators May Give Little Relief to Consumers

    “They never told me that the money I was paying wasn’t going to my debt, it was going to them,” said Hopkins, 59, who quit work in January 2008 after a brain tumor led to surgery. He now receives $1,539 a month in disability checks. “You are better on your own.”

    Credit-card delinquencies are at record highs, according to Fitch Ratings, and the U.S. unemployment rate of 8.9 percent is the highest since 1983. As more consumers fall behind on bills, settlement companies often end up adding to the debt burden rather than offering a cost-saving solution, said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Maryland.
    …
    New York Attorney General Andrew Cuomo has begun a national investigation of settlement companies, and has sued two for fraud and false advertising. Illinois Attorney General Lisa Madigan has also filed two lawsuits against debt-settlement companies, alleging they “engage in deceptive marketing practices” and “do little or nothing to improve consumers’ financial standings.” Texas Attorney General Greg Abbott sued a debt settlement company in March, saying it engaged in “deceptive and misleading acts,” according to court documents.

    It is much better to avoid this problem by taking wise personal finance actions – don’t take on personal debt for minor purchases (for a mortgage then debt is fine, probably fine for a car – though avoid debt if you can). The “secret” is not very secret. Just don’t buy what you can’t pay for. It is very simple, many people just don’t want to follow that simple strategy. Also save money in an emergency fund, so when some emergency comes along you don’t go into debt. You just use your emergency fund.

    Once you are stuck in a bad situation with more debt than you can afford to pay back you have bad choices. Obviously many try to take advantage of you. Frankly they realize many that are stuck in bad financial position make bad financial decisions. Therefor it is a good place for those trying to rip people off to find people to take advantage of. The best way to deal with this is not to try and find the best debt negotiators it is to manage you finances well and not get in trouble.

    Related: Personal Saving and Personal Debt in the USA – How to Use a Credit Card Successfully – Credit Card Companies Willing to Deal Over Debt – Where to Keep Your Emergency Funds? – Americans are Drowning in Debt

  • Credit Card Charge-offs Increase to Over 7% of Accounts

    Punctual Payers Face Higher Rates From Card Companies

    His reward for paying on time was an interest rate increase to 19 percent from 12 percent.
    …
    The average interest rate charged on credit-card balances decreased to 13.4 percent in November from 14.4 percent a year earlier, according to the Federal Reserve’s December G19 report, which tracks rates for credit-card accounts. The prime rate has decreased to 3.25 percent from 6 percent last February. Most variable credit-card rates are linked to the prime rate, which follows the federal funds rate.

    Rate changes announced by New York-based Citigroup Inc., the biggest U.S. credit-card issuer, American Express Co. and Charlotte, North Carolina-based Bank of America Corp. are intended to raise revenue, said Woolsey, who is based in Austin, Texas.

    Citigroup’s charge-off rates of loans increased by 88 percent, climbing to 7.81 percent in December from 4.16 percent a year earlier, according to data compiled by Bloomberg. Charge- offs are loans the banks don’t expect to be repaid. American Express’s charge-off rates more than doubled to 7.23 percent from 3.32 percent while Bank of America’s rates increased to 8.45 percent from 5.24 percent, a 61 percent jump.

    You can avoid worries about credit card companies increase your interest rates by taking sensible financial precautions and avoiding credit card debt.

    Related: posts on credit cards – Don’t Let the Credit Card Companies Play You for a Fool – Legislation to Address the Worst Credit Card Fee Abuse – Incredibly Bad Customer Service from Discover Card

  • FDIC Study of Bank Overdraft Fees

    According to the FDIC study of bank overdraft programs during 2007, 75% of banks automatically enrolled customers in automated overdraft programs (which charge high fees). By contrast, 95% of banks treated linked-account programs as opt-in programs, requiring that customers affirmatively request to have accounts link (which are normally do not charge customers high fees).

    Automated overdraft usage fees assessed by banks ranged from $10 to $38, and the median fee assessed was $27. About one-fourth of the surveyed banks (24.6 percent) also assessed additional fees on accounts that remained in negative balance status in the form of flat fees or interest charged on a percentage basis.
    Fees assessed for linked-account and overdraft LOC programs were typically lower than for automated overdraft programs. Almost half of the banks with linked-account programs (48.9 percent) reported charging no explicit fees for the service. The most common fee associated with linked-account programs was a transfer fee; where charged, the median transfer fee was $5.

    There really is no excuse (other than trying to gouge your “customers”) for these fee levels. Charging any money to just move money from a customers saving account to checking account is just making it obvious the bank doesn’t want to serve the bank wants to take money from you. The banks in the sample used by FDIC earned an estimated $1.97 billion in NSF-related fees in 2006, representing 74 percent of the $2.66 billion in service charges on deposit accounts reported by these banks.

    Consumer complaints about automated overdraft programs were received by 12.5 percent of banks that operated these programs, compared with consumer complaints from less than 1.0 percent of banks offering linked-account programs and 1.5 percent of banks offering overdraft LOC programs. Complaints about automated overdraft programs were more common for large institutions than for small institutions (21.7 percent versus 10.6 percent).

    A small fee when lending the customer money may be justified but the banks seem to just operate in order to have a big pool of people to catch them with big fees. The model seems to be if we get more “customers” we can catch more of them with one fee or another. It is not an honorable business model to try and catch your customers with huge fees for minor items.

    Make sure you have a free linked-account overdraft protection that will tap your saving account if your checking account falls below 0. If they don’t have such a free program, choose a bank or credit union that does. Also an overdraft line of credit might be wise. If the fee is more than $10, go somewhere where they are not so greedy. You also will owe interest on your borrowings (probably a ludicrously high interest rate).

    Related: Don’t Let the Credit Card Companies Play You for a Fool – 10 Things Your Bank Won’t Tell You – Hidden Credit Card Fees – FDIC Limit Raised to $250,000

  • Securities Investor Protection Corporation

    The Securities Investor Protection Corporation restores funds to investors with assets in the hands of bankrupt and otherwise financially troubled brokerage firms. The Securities Investor Protection Corporation was not chartered by Congress to combat fraud, but to return funds (with a $500,000 limit for securities and under that a $100,000 cap on cash) that you held in a covered account.

    With the recent Madoff fraud case some may wonder about SIPC coverage. What SIPC would cover is cash fraudulently withdrawn from covered account (if I owned 100 shares of Google and they took my shares that is covered – as I understand it). What SIPC does not cover is investment losses. From my understanding Madoff funds suffered both these types of losses.

    And I am not sure how the Ponzi scheme aspects would be seen. For example, I can’t imagine false claims from Mandoff about returns that never existed are covered. Therefore if you put in $100,000 10 years ago and were told it was now worth $400,000, I can’t image you would be covered for the $400,000 they told you it was worth – if that had just been a lie. And if your $100,000 from strictly a investing perspective (not counting money they fraudulently took to pay off other investors) was only worth $50,000 (it had actually lost value) then I think that would be the limit of your coverage. So if they had paid your $50,000 to someone else fraudulently you would be owed that. Figuring out what is covered seems like it could be very messy.
    (more…)

  • Kiss Your Phone Bill Good-bye

    All you need is a broadband internet connection and you can Kiss your phone bill good-bye:

    The Ooma service uses so-called Voice over Internet Protocol (or VOIP) technology to deliver calls to your existing phone using a broadband connection. Consumers need only to buy a $249 Ooma Hub (it was a hefty $399 when the service launched last year); all domestic calls are free. (Ooma charges a few pennies a minute for international calls to landlines and 20 to 30 cents a minute for overseas calls to mobile phones. Calls from Ooma box to Ooma box are free.)
    …
    Replacing your phone service is, of course, just the start for Ooma. In some ways, calling is the Trojan horse to get the box in your house and then figure out other services to sell, like enhanced network security or kid-safe Web surfing.

    One Year Later: Ooma by Michael Arrington

    I’ve been a happy Ooma customer for a year now. I also use Vonage, and Ooma’s call quality is better and there are fewer problems in general. If I didn’t have one I’d buy one now.

    I just ordered mine from Amazon for $203. I have been using Vonage for awhile and have been considering canceling it for awhile (and just using my cell phone) but I currently have a limited cell phone plan (because unlike so many people, I don’t feel a need to talk to someone every single minute of the day). I normally just use the cell phone if I am meeting someone or traveling. Otherwise, just leave a message, I don’t need to speak to you right now.

    Related: Save Money on Printing – Frugality Plus – Save Money on Food