The Money Post

On the front page of Digg.com a week or so ago, was a story about Google before they had their IPO. The story was about how they wanted to protect their employees from stock brokers and money managers who would try to separate all the new Google millionaires from their money. Google’s senior VP Jonathan Rosenberg, brought in some of the most revered names in investment theory to teach them about the fine art of personal investing. Stanford University’s William (Bill) Sharpe, Burton Malkiel and John Bogle. All three had basically the same advice… don’t try to beat the market. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow.

After reading this, as well as several other articles regarding passive investing, index funds and exchange traded funds (ETFs), I thought I would write about some of the benefits of investing in ETFs.

• Cheap Diversification: When you first start investing, diversification can be cost prohibitive if you’re using traditional mutual funds, which frequently have a minimum investment of $2500 or more. Because ETFs have no minimum investment, they are a good vehicle for diversified investing. Diversified investing = lower risk.
• Tax Efficiency: Upon redemption, mutual funds must sell its underlying securities, and the capital gains are then distributed to the owners of the funds. Since ETFs trade on an exchange and investors are selling to other investors, no underlying securities are sold, and no capital gains are distributed. If the makeup of the ETF changes it will, occasionally have to distribute gains, but it should be less frequent than with traditional mutual funds.
• Lower Fees: Low cost is a key to ETFs’ appeal. Because ETFs are passively managed - they all track indexes of one sort or another - annual management fees are minimal. According to Money.com, the average ETF has a 0.41 percent expense ratio, vs. 1.35 percent for an actively managed mutual fund and 0.74 percent for an index mutual fund. ETFs are no-load funds, and you won’t be slapped with a redemption fee when it’s time to liquidate your position.
• Liquidity: The exchange-traded structure of ETFs generally allow for liquidation of a position faster than a mutual fund, which must be liquidated at end of day. Further, the ability to set a limit order allows flexible trading that no investor could get from a mutual fund.
  
• Intraday Pricing: Because ETFs are traded on active stock exchanges, purchases and sales happen at market prices, rather than end-of-day Net Asset Value, which mutual funds use. As a result, one may purchase ETFs at a premium or a discount to the value of the underlying assets.

As always, before investing, make sure to do your homework. You can do a good amount of research on ETFs on Money.com, and Yahoo Finance.

I do a lot of reading. This probably keeps me from working sometimes, but I do get a lot of good advice on how to be more productive when I do get to work. Whether it’s something I see on TV, read in Men’s Health, or just a tidbit I see online, I thought I would start sharing these tips on here instead of just filing them away in the back of my mind. Here’s an interesting tip I saw in Men’s Health today.

Slouch in your office chair and you won’t just look like a slacker–you may become one. How you sit can help make or break your work performance, say Colorado College researchers, who found that male students with the best sitting posture scored significantly higher on a logic exam than those who slouched. An upright posture makes people feel dominant and successful, which in turn improves their ability to relax and focus on problems, says Tomi-Ann Roberts, Ph.D, the lead study author. To fine-tune your posture, sit and tie a string from an upper shirt button to your belt buckle so that the string is taut when you sit tall. If the string goes slack, you’re slouching.

I’ll admit, the reason I bring this up is because I catch myself slouching quite often. Since there are literally millions of people who sit and work in front of a computer each day, this tip may come in handy.

As I’m sure a lot of other people do, I get credit card solicitations on a daily basis. I only hold one credit card, and that’s the one tied to my checking account for overdraft protection. I find these offers annoying, but sometimes interesting based on what they offer. So how do you know which credit cards have a decent rewards program?

There is a good article from Bankrate.com about how to spot unrewarding reward cards. A few of the reward card traps they mention that I thought were particularly important are:

• Annual Fees - Although the fees vary, if they charge an annual fee, consider whether the benefits outweigh the cost. Looking at your current spending habits, do you anticipate charging enough to offset that yearly pinch? If not, look for a card without an annual fee.
• Expiration Dates - Some rewards cards put expiration dates on rewards earned. Comb the fine print for that important restriction, because it may mean you won’t have enough time to earn and use the points.
• Low Caps - The issuer may also limit the amount you can earn, called a cap. If you spend a good amount on the card, you obviously want a card with a higher cap limit, or none at all.
• Cumbersome rewards redemption - When you’ve spent enough to earn some cash back, will you automatically receive a check in the mail or will you have to initiate the redemption process? Also, some issuers only provide rebates annually, so find out how long you must wait before redeeming rewards.

The full article can be found HERE at Yahoo Finance.

I’ve been seeing a lot of ads for short sale websites lately. Then, after going back to my old stomping grounds and reading Yahoo Finance, I saw, “What is a short sale?” was the top question on Yahoo Answers.

So what is a short sale?

A short sale occurs when a mortgage company agrees to accept a mortgage payoff amount that is less than the mortgage balance. When a mortgage holder falls behind on payments, or is going to fall behind on payments and is unable to sell their house for enough money to payoff the existing mortgages, then a short sale may be an option that would allow the homeowner and bank to avoid a lengthy foreclosure process. However, not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose.

If you are looking to buy a short sale property, it would be wise to consult both a real estate attorney, and an accountant for legal and tax issues.

Valentine’s Day is almost upon us. This corporate holiday, pulled from thin air in order to sell more stuff, that says we should be romantic on a certain day. I mean, if you have a significant other, shouldn’t you try to do nice things for them all the time? Anyway, this is my first Valentine’s Day without a girlfriend in quite some time. I always hated the idea of it, but I always celebrated in some way or another. If you are looking for a way to impress your valentine without spending much (or anything at all), check out this list of ideas.

• Skip the card. Instead, write a letter highlighting the good times you’ve had throughout your relationship.
• Create a spa night at home. Lower the lights, light a bunch of candles, put on some soft music… you get the idea.
• Show up at their workplace, meet them as they take a break, and whisk them away to a park to have a picnic lunch.
• Set up a treasure hunt. Find a bunch of inexpensive but thoughtful gifts, and hide them around the house.
• Skip the restaurant, and instead order in or cook at home. Valentine’s Day at a crowded restaurant doesn’t exactly say romance.
• Do something nice for them around the house. Doing something unexpected like cleaning his/her car, or doing something around the house that you normally don’t do and don’t like doing, shows that you care.
• Make a coupon book filled with things like massages, breakfast in bed, a night out, and other things you think they may like.

Hopefully some of these ideas can help you show that you care while not spending a lot. It’s not about the money you spend, but the thought you put into it.

A girl I know came up to me the other day asking if she should contact Sprint about dropping a $220 fee she incurred for cancelling one of the two lines on her account. She’s been a Sprint customer for nearly 5 years, and is planning to stay with them, she just doesn’t need the second line anymore.

Now negotiation, I will admit, is not one of my strong suits, but I was a little puzzled. My response was, “Of course you should contact them, what do you have to lose?”

Good negotiator or not, you should always request fees to be dropped, interest rates lowered, etc., especially if you have been a customer of that company for a while. If you are the customer, you have the power. Chances are, there are lots of companies that can provide the service/product you are looking for. It is easier for you to switch providers, than it is for them to pick up another good customer.

Just remember when it comes to negotiating you can always ask for less, but if you don’t ask at all, you won’t get anything. What do you have to lose?