May 15

Let’s start this week with the latest and greatest from my fellow Money Mavens – first Craig Ford explains Mutual Fund Investing Vs. Index Fund Investing. Craig will teach you the important distinctions that can help maximize your investments.

Monevator discussed Pay off the mortgage or invest? A well-reasoned, balanced discussion on this topic. The decision isn’t always so clear cut.

At The Military Wallet, Ryan offer the Best Military Credit Cards. I think as long as you pay the card off in full, credit cards are a great tool to help manage your finances. Not quite the devil’s tool The Dave makes them out to be.

Tom Drake, my Maven friend to the north wrote What To Do With Your Tax Refund. A great list of ideas for your refund or really, any found money, a bonus check, inheritance, etc.

Back on the subject of mortgages, Len Penzo wrote The 15-Year vs. 30-Year Mortgage Debate: Why 30 Is Better. Lot’s of comments on that controversial idea. For a multitude of reasons, I’m in agreement with Len.

Another article I enjoyed – 6 types of purchases you should always charge on your credit card. The anti-card gang ignores some of the protection that most good credit cards offer you.

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Nov 21

Another Great week of reading to share. Let’s start with Miranda Marquit’s article at Good Financial Cents, The Dangers of Using Credit Cards as an Emergency Fund. Miranda explains why you need a ‘real’ emergency fund to keep from getting caught in a debt spiral.

At Monervator, I learned a bit more about ETFs Vs index funds: The ultimate battle of the trackers. Some subtle differences really worth understanding.

Money Energy helps us understand The Difference Between Deflation and Disinflation. The economy is in some strange times right now, this article would help you understand some of the Fed-speak you may be hearing.

At Steadfast Finances, we’re invited to view an interview: Jon Stewart: the Financial Crisis Occurred Because of an Idiot Shortage. This is a video of Jon Stewart interviewing Bethany McLean & Joe Nocera authors of the book “All the Devils are Here: The Hidden History of the Financial Crisis”. A great interview. Now I want to read this book, glad to have this brought to my attention.

My friend Kevin at Out of Your Rut asked, Is the American Dream Dead now that Housing is in the Tank? Kevin puts these times in perspective and helps us clarify what was meant during the depression when people used the term “American Dream.”

Stew at Gather Little by Little asks Do you always give your kids what they want? Tough to say no to our kids, especially when then see there are things we can afford. But as Stew says,”too much of a good thing can be bad.” Interesting article to reflect on as we head into Thanksgiving week.

Joe

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Jan 22

When we talk about frugality, the easy targets come to mind, eating out, buying the $5 latte, spending on clothes, etc. All good places to look to save, but today, I’ll discuss one that’s often overlooked. Investment expenses. The annual expenses for mutual funds run from about .2% to as high as 2% depending on the fund. Think about this. A 2% per year fee adds up to take half your money over a 36 year time span. As many will have a 40 year investing horizon, this puts a sharp edge on these numbers. You toil, but the fund manager skims half your money over your lifetime? ETFs have provided a nice alternative, but with one main issue, as they are traded like a stock, there’s a commission each time you buy or sell shares. Even a $5 cost doesn’t lend itself to a plan to dollar cost average over time.

Now Schwab has announced its Schwab ETFs which it will trade for its customers at no transaction cost. The Broad Market ETF and the Large Cap ETF both Trade for .08%. This multiplies to 2.84% over that same 36 year period. Not bad. Other domestic funds they offer are a still reasonable .15%.In the end, expenses matter.

Disclaimer – This post is my opinion and observation. I happen to be a Schwab client, but I have not received any compensation for this post. I don’t think they read me.

Joe

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Jun 24

I’ve always respected Vanguard founder Jack Bogle, he is considered to be the “Father of the Index fund” and has saved investors many billions of dollars in fees by creating low cost index funds, starting a new industry within the financial services market.
The natural follow on to index mutual funds are the ETFs which are now also commonplace. Vanguard recently announced that if you hold a Vanguard Index fund for which they also offer an ETF, you can now swap the fund for the EFT with no tax consequence, and only a nominal fee ($50). Here is the Q&A from the Vanguard site:

Can I convert conventional Vanguard mutual fund shares to Vanguard ETFs?

Shareholders of Vanguard stock index funds that offer Vanguard ETFs may convert their conventional shares to Vanguard ETFs of the same fund. This conversion is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain. (Bond ETFs do not allow the conversion of bond index fund shares to bond ETF shares of the same fund.)

Vanguard will charge $50 for each conversion. (This fee is waived for Flagship clients.) Your brokerage provider may charge an additional fee for this service. For more information, contact your brokerage firm, or call 866-499-8473.

Once you convert to Vanguard ETFs, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to Vanguard ETFs.

When the market is up from where you bought in, this can let you make the swap without having to declare capital gains. In this down market, it can benefit you by not forcing you to declare a loss when it may not be advantageous to do so.

If you are looking for a broker check out Craig Ford’s How to Find an Online Discount Stock Broker, a great read.

Joe

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Apr 13

It’s been nearly a year since my post “On my Death, Please, Take a Breath.” In that post I relate a story about how a fellow who inherited an IRA within a trust panicked, and lost nearly 25% of it to taxes. Instead, he could have taken limited distributions and paid little to no tax at all. I don’t know who advised this person, but all the work his sister put in to the planning of her estate evaporated.

Recently, I received a comment on my “Suze on Variable Annuities” article from last July. A woman wrote that she was advised by her bank to put the money in to an annuity. Now, whether you like or don’t like annuities isn’t really the issue. I’d be just as angry if she said she was put into an S&P ETF, but then went on to state she had no idea what that meant. I do feel that bankers are drifting (have already moved?) into the same category as most other scam artists preying on the uninformed. I am still waiting for her reply to tll me what, exactly the product is so I might take the time to read the prospectus and explain to her what she now owns. The fact that her ‘banker’ did not do this is criminal.

I recall a number of years ago, I was making a deposit at my local bank, and as I stood to write out the ticket, I heard an old person ask about T-bills vs CDs, the T-Bill happened to be slightly higher that week. The banker sitting at his desk told her, “The CD is a little lower, but it’s FDIC guaranteed. There’s no guarantee on the T-Bill.” And another sale was made. I don’t know on what planet the “full faith and credit of the US treasury” doesn’t trump the FDIC, but I thought better than to disrupt the place, and provoke a fight.

Joe

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