Yes, I Am Still Upbeat For The Future: Things Will Get Better In Time

Wow, what a roller coaster ride of a month in terms of the stock market. One minute the Dow is breaking past the psychological 10,000 mark and soaring to new bullish heights – the next, the entire stock market is sinking like a rock. In terms of economic volatility as a function of gains and losses, the last few weeks have definitely not been ideal for the emotionally squeamish short term traders out there. But for those that truly call themselves long term investors, I really don’t think there is anything to fear in this market but fear itself. Back in Fall 2008 and Spring 2009, there were serious questions about the ability of the American financial system to survive the ongoing subprime mortgage meltdown. The economy, on the verge of total collapse and teetering on the brink of a major economic depression, was clamoring for immediate stimulus and decisive federal government intervention.

But what a difference a year makes. There are still lingering concerns about the economic health and ability of consumers to start spending money again to stimulate the economy, and there are still trepidations about the plight of the current housing market – but I think the absolute worst case scenario has passed. We are now in a gradual economic recovery phase. To repair the American economy and restore all of the lost jobs that vanished subsequent to the credit crisis fallout will take time, but the healing will come to fruition in due time. Meanwhile for stock market investors, there are bound to be periods of extreme volatility and shocking price swings. But as I’ve championed many times before in past personal finance blog posts, if you can take a certain amount of risk now and hold on for the long haul, you are bound to come out hugely ahead when we finally emerge from this recessionary nightmare – whether that be 12 months, 2 years, or even 5 years from now. Recessions are terrible things to behold, but the great thing about them – is that they don’t last forever. The federal government, and the American people with its never ending entrepreneurial spirit will find a way. Don’t invest recklessly and take un-calculated, un-thought out risks, but I do encourage readers to be bold if they can. Place your stock market and real estate bets today in this down economy and reap what you sow today in the not too distant future.

This month, despite the fact that the market viciously tanked and dealt out a pretty severe lashing of my stock investment portfolio, I intend to stay the course and fight against my instinctive nature urge to pull out. For now at least, any short term losses due to market price volatility remains mere paper losses – so long as I don’t sell. My small legal practice remains healthy and my persistent efforts to make money by blogging online continues to yield positive dividends. As my monthly income remains stable and I have sufficient cash savings and credit card options for emergency fund purposes, I thankfully have ample financial resources to ride out the market doldrums. I don’t see it as overly-risking or gambling my life savings away – but rather, I see it as a pure exercise of my faith and belief that in the long run, things will be okay.

My Current Net Worth and Financial Status Update Compared To Last Month

Being Greedy When Others Are Fearful: Investing For The Long Term

If you want to save money and invest wisely for the future, it’s important to learn from the best – one of them being renown Billionaire investor, Warren Buffett. The gist of my own current trading strategy and approach towards investing can be summed up in this famous 2001 Warren Buffett quote:

• “Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

My attempt to be sunny and optimistic at the present time despite the uncertainty and fear that still permeates the economy is not because I’m foolhardy or desire to get rich quickly – but rather I believe it’s during such periods of pervasive fear and pessimism that great wealth can be made. After sitting on the sidelines and hoarding my cash in high yield savings accounts and certificate of deposits for many months while the economy suffered its worse collapse in decades, I finally pulled the trigger recently and started investing again. If your gut sentiments are like mine and you also believe that the worse has passed but that the positive feelings have not yet been properly reflected in stock market prices, then now may be a good time to start investing again.

New investors and those who have been cautiously staying away from the action for some time may now want to open up an investment account with a reliable and affordable discount broker, and start evaluating potential investment opportunities. In case you’re not sure which brokerage firm to go with, here are a few recommendations. I’ve complied a list of online brokers that have consistently received accolades and praise from the financial experts and have enjoyed favorable reviews among new investors and advanced traders alike. In the list, I particularly like TradeKing, Etrade, and Scottrade.

Progress and Status Report Of My New Single Family Home Construction

As I’ve been reporting for months now, my new home is currently under construction. I visit the construction site every few days or so to walk around the lot and take photos to document the construction progress for my own personal photographic archives. After all, it’s not everyday that we get to see the construction of our own home and witness the transformation of a simple pile of dirt into a free standing structure that will one day be called home.

Currently, the concrete and rebar mixtures for the home foundation are in the process of being laid. Once the foundation has been properly poured and allowed to harden, the wooden housing structure usually goes up pretty quickly. Barring any unforeseen hindrances to construction activity by inclement weather, the house is expected to be built and delivered sometime in February 2010. For now, I’m in the active process of applying for a home mortgage loan. Because I’ve been tracking my free credit reports and my free credit score updates on a consistent basis for some time – not to mention I’ve also been taking concerted actions to keep my FICO score persistently high, I anticipate being able to ultimately qualify for a top mortgage interest rate of 4.75% APR or lower on a 30 year, 20% down home loan, give or take depending on interest rate conditions at the time of home delivery.

Continuing To Make Money Online As A Part Time Blogger

As should be pretty evident from the advertisement banners and occasional affiliate links that pepper this website, I blog to make money online and engage in Internet affiliate marketing as part of my home office business. I also earn some nice change on the side with online paid surveys and a couple of other online money making methods. While I do operate a small attorney practice as well and earn additional income through a small collection of other income sources, my blogging income is steadily becoming a larger and larger part of my total income stream. One of these days, perhaps I will transition into a full time problogger and run my collection of income producing websites as a full time job. But for now, I prefer to see it as merely an integral cog in my total overall income diversification plan. After all, in this sluggish economy and in this period of unpredictable layoffs and economic implosions, you never know when your primary breadwinner source of income will suddenly dry up. It’s best to diversify one’s financial life with a varied mixture of both active and passive income streams if possible.

Source URL: October 2009: Net Worth, Stock Loss, and New Home Update

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Back when I first started getting serious about investing during college, E-Trade was one of the very first online brokerage firms that I opened a trading account with. My inaugural entry into the world of investing occurred around the time of the dot com bubble in 1999 – when E-Trade wasn’t exactly known for its cheap commissions or discounted fees. At the time, one couldn’t really consider E-Trade a true discount broker – as back then, the firm catered more to the savvier advanced traders who were willing to pay substantially more for exclusive access to premium research and stock tracking tools. But over the years, with the rise in the popularity of Internet based discount brokers offering supremely low cost options for cheap stock trades, E-Trade’s fee commission structure has gradually fallen to where it is now today. Fortunately, despite the fall in pricing over time, the firm has not sacrificed any of its premium account features but rather has continued to grow and steadily outpace its competition in terms of building a better online product for typical do-it-yourself investors like you and I.

Today, while ETrade isn’t the cheapest discount brokerage around, it’s one of the top online investment solutions for those looking to reap the maximum product offerings available without having to fork over the rip off fees and hefty commissions levied down by most of those big name full service brokerages on Wall Street. If you’re primarily a self directed, do-it-yourself investor who wants all of the beginner and advanced trading tools from a single console without having to turn to multiple online sources for all of your financial needs – E-Trade Financial might be exactly what you need.

While there are other broker options that offer much cheaper rates, ETrade does provide its account holders a tremendous amount of value for their money. The company’s services are very ideal for those looking for a complete, one stop shopping source for all of their investing and banking needs. Other popular and recognizable discount brokers like TradeKing, Scottrade, and even Zecco offer perhaps cheaper rates for stock and option trades, but they are somewhat outmatched by E-Trade’s completeness and comprehensiveness in the account tools and resources department. Unlike many of its financial peers and rivals that focus squarely on either investment or banking services exclusively, E-Trade’s primary allure stems from its ability to offer a mass appeal of products from a singular inter linked and centrally managed financial platform. With features for both long term passive investors and active day traders alike, E-Trade touts everything from stocks, bonds, mutual funds, IPO’s, foreign currencies, foreign stocks, and exchange traded funds (ETF’s) – to its bank based products like high yield savings accounts, checking accounts, money market accounts, certificate of deposits (CD’s), and even Etrade branded credit cards.

Best Discount Broker Overall According To Online Brokerage Reviews

I’m just a regular guy who has some amateur experience with stock market investing and who also currently trades with an E-trade account. I really like E-Trade a lot, primarily for its all-in-one packages – but then again, you certainly don’t have to read my discount brokerage reviews and just take my word for it. Take a look around at what others are saying about the online broker. Even objectively speaking, ETrade is one of the most highly touted “Best of Breed” financial firms in the market today and has received numerous awards and accolades for its features and highly regarded customer service reputation. Out of numerous highly ranked brokers, and for the third straight year since 2007 and 2008 – the publishers at SmartMoney (A Wall Street Journal magazine) again picked Etrade as the overall top discount broker for year 2009. E-trade ranked high in almost every category including customer service, trading tools, research tools, banking services, and selection of mutual fund & investment products. Even Barron’s Magazine, in its 2008 online broker survey – rated Etrade in its top 10 best online brokers, awarding it 4 out of 5 stars – for categories such as trade experience, trade technology, usability, range of offerings, research amenities, portfolio analysis & reports, customer service & access, and costs.

E-Trade Pricing: Low Cost Commissions and Investment Brokerage Fees

Like I mentioned earlier, although it’s not the absolute cheapest of all of the discount brokerages, E-trade’s rate fees and commissions are pretty competitive considering all of the account features and tools the company provides to you at your disposal. Etrade’s commissions for stocks and option trades are dependent on how frequently you trade and the balance amount invested in your account. As evidenced by the pricing chart above, the standard base pricing rate is $12.99 per stock trade trade and $0.75 per options trade. Those with balances of $50,000 or more in their linked Etrade brokerage and banks accounts, or engage in more than 30 equity trades per quarter enjoy a lower commissions rate via enhanced Power E-trade promotions at $9.99 per trade. Those who trade even more frequently at 1,500 trades or more per quarter (such as by day traders of penny stocks for example) and those with substantial assets – may qualify for super cheap pricing of $6.99 per trade or lower.

All-In-One Brokerage: Etrade Complete Banking and Power Etrade Investing

Voted as “Best In Breed” by Money Magazine for its popular banking services, E-Trade is not only a big time brokerage, but also a popular provider of FDIC insurance protected savings and CD options such as the following:

• High interest Max Rate Checking Account
• High yield Complete Savings Account

While APY interest rate offerings by Etrade’s checking and savings accounts could use a boost of late, they do provide brokerage account holders additional choices beyond just leaving their un-invested cash sitting idly in their accounts. Because the Etrade bank and brokerage services are so interconnected and linked, many account holders utilize the higher APY rates offered by their Etrade online savings accounts as primary cash sweep solutions for their idle brokerage cash. This compatibility between the brokerage and banking platforms make monetary transfers between the two quick and easy via free instant transfers and affords a tremendous degree of FDIC insured flexibility for optimizing your cash investments. In terms of maintaining real life access to your Etrade banking funds, although the firm’s banking arm only offers a tiny handful of actual brick and mortar based retail locations across the United States, it does offer customers the convenience of unlimited ATM fee reimbursements and refunds from any machine, any bank, nationwide.

Premium Online Tools For All Individual Investment and Retirement Accounts

When aspiring investors sign up for an online brokerage account with Etrade, they are buying into Etrade’s Complete Investment Account program which provides what the firm calls – an integrated investment and cash management system, with its unity of investment, banking, loan, and even credit based services at once source. Those retirement minded investors out there looking for the best IRA broker might want to give an Etrade-managed account a try. The firm is a popular fit for those seeking the necessary resources to help them in achieving their long term individual retirement account planning objectives.

• Open an Etrade IRA or Roth IRA account - Retirement accounts offer excellent tax deferred benefits and tax deductions for maximum compound interest rate growth. Don’t miss out on building your financial future today.

In terms of looks and appearances, Etrade’s online website layout is not only professionally designed and intuitively simple to use, the online platform that it provides is easy to navigate and tinker with. Compared to some of the other discounted brokerages out there such as Scottrade, Etrade ranks much higher in aesthetic appeal and graphical design in my opinion. But it’s not just the surface features either as Etrade’s inner workings boast a pretty powerful array of real time trading tools and sophisticated market research material. Along with all of the stocks and bond investments available, Etrade also provides a variety of automatic investment plans, exclusive alerts to initial public offerings that other brokerages don’t offer, as well as superior access to more than 7,000 leading mutual funds, including 100’s of Morningstar top-rated funds, and every ETF sold. Among the fund choices, there are also more than a 1,000 no load, no transaction fee mutual funds to invest in. To help beginners and advanced experts alike wade through the pile of investment options available, Etrade provides plenty of online explanatory help with all types of stock screeners, customizable charts, and download-able software applications for your iPhone or Blackberry handheld devices – that you would need to pick out the winners.

If you’re an active trader, you might be able to qualify for lower trading costs, get better prices, and gain access to more advanced research tools through an Etrade program for advanced traders. E-Trade Complete Investment Accounts are automatically upgraded and qualified for an enhanced Power E-Trade Account when an account holder makes at least a minimum of 30 stock or option trades a calendar quarter. The enhanced Power Etrade tools offer frequent investors more advanced charting features and more in depth technical stock screeners for better viewing of complete marketing activity.

As for the universally dreaded account maintenance and inactivity fees that many brokerages impose, Etrade imposes none for retirement accounts such as IRA and Roths, and levies no monthly maintenance fees for new individual investment accounts for the first 12 months. Thereafter, so long as you maintain a brokerage balance of at least $2,000, maintain a linked Etrade bank and broker balance of at least $20,000, or execute at least one or more stock, option, or mutual fund trades per quarter – then you will avoid having to pay the quarterly assessed account service fee of $40. Etrade has apparently dropped the minimum balance required to avoid the quarterly assessed inactivity maintenance fee from the previous $10,000 in years past to the present, more manageable minimum balance of $2,000. As such, if you are a new investor with very little money to invest (less than $2,000 to play with), I’d recommend going with another brokerage firm like TradeKing or Scottrade. None of those two broker alternatives impose any maintenance or inactivity fees whatsoever. While Etrade’s account features and premium resources are much better than that provided by most other heavily discounted brokers, the fees and account maintenance terms and conditions of Etrade are much better paired up with those self directed investors who attend to trade more regularly or have more than minimal assets.

Source URL: ETrade Online Broker: Discount Brokerage Account Review

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Despite the fact that historically, the month of September has traditionally been a down month for stock market investors – after months of sitting on the sidelines and hoarding online savings account cash, I’ve finally pulled the trigger and re-entered the market en masse. Rather than take the often advised path of investing in small bite size chunks through dollar cost averaging, I decided to plow all of my investment cash into long term equity positions simultaneously. I don’t plan to pull out of my newly invested positions anytime soon and am very determined to stay the course for the very long haul – in excess of 5 years or longer. Despite the recent run up in the market, stock market prices are still at historical once-in-a-lifetime lows – and I have every intention to double or triple my investments in the next 5 years. The irrational fear and gloom of pending economic depression that gripped the whole world back in spring 2009 has mercifully passed and it now appears the beaten down economy is finally back on the track towards recovery.

Of course, this is not to say that we are anywhere close to experiencing a traditional bull market anytime soon that’s punctuated by rising employment numbers and increased consumer spending, but at the very least, the specter of a crippled financial system kamikaz-ing into an irreversible death spiral has disappeared – and replaced by faint glimmers of hope. Who knows if President Barack Obama’s second economic stimulus package truly worked or whether any of the resuscitative measures implemented by Congress such as the increased FDIC insurance limits, the Cash For Clunkers Bill, the $8,000 Federal Housing Tax Credit for first time home buyers, or even the appointment of new Treasury Secretary Timothy Geithner really did much to jolt the economy back to life in a sustained way. But at the very least, these measures have at least reassured formerly scared to death and shell shocked investors like myself that the federal government is finally ready, willing, and able to do whatever it takes to get this economic ship steaming full speed once again. That seemingly firm commitment, as evidenced by the number of quick and decisive emergency measures the federal government has thus taken – is enough to assuage my once irrational fears, and encourage me to think about a more optimistic future once again.

While I do not know where we will all be economically 12 months from now, I’m starting to have more faith that things will be okay in the coming years. With the possibility of a disastrous economic Armageddon finally out of the way, I’m willing to finally start placing long term economic bets for the future, and allow the normal economic tensions of fear and greed to put the market back to normal equilibrium once again. True economic recovery may be months or even years away, but as savvy investors like Warren Buffett will agree – it’s during the worst of times that enormous amounts of wealth are created by those willing to take on a measure of calculated risk. For the next few weeks and months, I intend to take advantage of every dip in the market to invest more. As I continue to make money blogging and generate income through my small legal practice, I intend to plow all upcoming profits into this market while prices are still attractive. Price dips from here on are all potential buying opportunities in my investment opinion.

Do you agree or disagree that the economic recession is nearing the end? Remember, the stock market is a forward looking entity, and has historically attempted to project what economic reality is to come an average of 6 months in advance. Optimism in terms of increased consumer spending and job growth numbers won’t likely be experienced by ordinary American consumers until the second half of 2010. Personally, I think the very sign that mergers and acquisitions are finally creeping back into the marketplace again is an extremely and exceedingly bullish sign that overwhelmingly overrides any of the current negative lagging indicators like low employment rates or even struggling consumer sentiment statistics.

My Current Net Worth and Financial Status Update Compared To Last Month

Picking Out Final Options To My New Construction Single Family House

As I mentioned in previous networth updates, I’m in the process of finalizing the purchase of my very first home – a 2,300 square feet, 4 bedroom, 4.5 bath, single family new construction house. After weeks of persistent meetings with my real estate agent and the home builder, I’ve finally completed the process of choosing and pricing all of my optional upgrades. After much thought, I decided to ditch the cheaper carpet route and go with all hardwood floors – even in the bedrooms. Despite the fact that hardwood costs substantially more in the way of optional upgrades, I think the cleanliness and maintenance conveniences of hardwood floors greatly outweigh the dirt and dust accumulation headaches of carpet floors.

With all optional upgrades including finished basement costs, upgraded hardwood flooring, a hardwired security system, and stainless steel appliances tossed in, the total price of the home will be around $620,000. I’m sure some of you who live in the Midwest or the South will be shocked at how much a mere 2,300 sq ft (excluding finished basement) home costs, but remember, I live in the state of Maryland – deemed by CNN Money to be the current wealthiest state in the United States, with high state wide income rates and high home prices to match. Pricey real estate in the general Washington DC, Virgina, and Maryland region is just a way of life for us. The ever present availability of federal government jobs here and the presence of highly ranked schools in my state make this area pretty desirable for singles and families alike.

In terms of good news in the real estate networth department, I’m pleased to note that my future home has already gained in home equity value, even though the home foundation has yet to be laid. Most recently, due to surging demand for up scale single family homes in my future neighborhood, the home builder who will be constructing my future house has decided to increase the base selling price for my home model by $9,000. At least in my future neighborhood (a pretty upscale D.C. suburb area of Maryland), the home resellers and new home builders are feeling extremely bullish about future housing demand.

With fingers crossed, I hope this is a portent of greater things to come in terms of future home appreciation. As I noted many times in past blog posts, I’m forever thankful that I was not unwittingly snagged by the housing craze of the last few years. By purchasing a home in 2009 after national home prices have collapsed by more than a third or even a half in certain regions, I’m in a much better position than many to experience the upside of home value appreciation. My prediction is that home prices will steadily rise from here on – certainly not at the crazy and outrageous pace that we all flabbergastically witnessed following the 2000 dot com crash, but I think home prices overall will very slowly but steadily trend upwards from here on as trepidatious home buyers return. The demand for housing never really abated, but the drastic plunge in home prices in recent years did scare away many prospective buyers, and force wannabe home buyers like myself to hold off until now. Remember, when prices are falling, consumers frequently ask themselves, “why buy now when I can buy later for less” as I myself did until very recently. But when buyers finally realize that there is indeed light at the end of the tunnel and that overall home pricing declines have significantly decelerated and are on the verge of  stabilizing, they will invariably return.

Paying Estimated Taxes For Self Employment, and Factoring In My New Home Deposit Into Real Estate Net Worth

This month, as I do every 3 months, I paid out a large chunk of my business profits in the way of quarterly assessed tax payments that likely deflated this month’s improvement in financial networth. Because my monthly revenue from my blogging business, legal practice, and other small business ventures are fairly significant, I pay out a tremendous amount of money every three months in the way of mandatory federal and state income taxes. Obviously, I’m hoping President Obama will be keen on keeping universal federal tax brackets low as he ought to, but with his apparent crusade to crack down on high income earners and push through his health care social agenda, I’m bracing for the worst in terms of future tax rate increases.

In terms of real estate networth, because I also paid out a $25,000 new home construction lot deposit this month that will be payable towards my future mortgage down payment, I intend to treat this $25,000 figure as home equity for now (as reflected in the table above). Eventually when my mortgage loan application goes through and I get a more finalized home valuation number, I’ll include the home value and mortgage numbers into my net worth calculations.

Back In the Stock Market Again As A Bull Market Investor After A Year Long Hiatus

After being away from the market due to excessive fear of the unknown, I’m finally back. This month, I plunged the vast bulk of my cash savings into aggressive stock market positions, primarily investing my money into popular exchange traded funds (ETF) with great future upside like the Financial Select Sector SPDR (XLF) and the iShares MSCI Emerging Markets Index (EEM) among others. Both are admittedly rather risky and considered to be more volatile positions, but like I mentioned earlier, I’m now in it for the long haul. Even if the market drops or dips 5-10% lower, I intend to hold on for the ride down and hold my breath for the swing back up again. I never feared normal stock market price fluctuations. It’s always been the catastrophic 30-75% price drops that scared the bejesus out of me -  the type of market plunges we witnessed from September 2008 of last year to March 2009. But with financial markets back on the mend and with irrational panic and economic hyperventilation among the masses finally in check, the risk of future major bank failures or collapses of major financial institutions to trigger another massive and prolonged sell off seem less likely now. Of course, anything can always happen from hereon, but the probability of such a return to the brink of disaster has drastically diminished.

Those on the sidelines may want to now consider opening up an online broker account for cheap stock trades and start investing again, or for the first time. If you haven’t opened a Roth IRA brokerage account, now may be the best time to do so. I know it seems like a cliche thing to say, but prices really are quite low at the present time, particularly for long term investors willing to buy and hold for 12 months or longer.

Source URL: September 2009: Net Worth Update and Stock Market Investing

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Anyone who has ever invested in the stock market before knows that one of the biggest potential drains on one’s rate of return is the amount of money spent on expensive commissions and trading fees, paid out to brokerage firms. Regardless of whether one only performs equity, option, or bond trades a few times a year – or engages in heavy duty non stop day trading – broker fees have a nasty and rather surreptitious way of chipping into one’s investment profits over time.

Back in the day when I opened my Roth IRA account and started investing for the very first time, brokerage commissions for equity trades were in the $20-30 range. That was how much I paid in the way of transaction fees for a single stock transaction back then – for an account that barely broke $500 at the time. These days, with the emergence of deep discount online brokerages like TradeKing and Zecco – for the same amount of money, one can now buy, sell, and transact securities two to three times over.

Of course, while many of these emerging top online brokers are able to offer their customers extremely low fees and discounted charges for investment transactions, bear in mind that they can do so because they offer their account holders substantially less in the way of investment tools, premium research material, and customer service support. While  not always the case, you generally get what you pay for. Premium high end brokerage firms such as Fidelity Investments, Charles Schwab, Bank of America, and even Wells Trade charge more for the brokerage services they provide, but in exchange they offer their customers more attention, provide them more expert investment advice, and back up their services with reputations that have been honed for a greater period of time. But even with that said, if you are a beginner to investing and are primarily interested in the major index funds, or if you are an experienced investor who doesn’t need the extra hand holding that more expensive full service brokerages provide – then going with the cheapest discount stock brokerage may still be the best option for you.

Personally, I own and retain accounts with most of the major big name brokerages (a few opened just for experimentation purposes). For my fund investments, I invest primarily in established mutual funds run by top fund brokerages like Fidelity, Vanguard, T.Rowe Price, and Charles Schwab. However, at the same time, I also balance my fund-heavy portfolio out with a number of individual stocks, and exchange traded funds (ETF’s) that trade like ordinary stocks. Savvy investors who want to maximize their investment returns may want to do the same – utilize popular mutual fund brokerages like Fidelity and Vanguard for no load, no transaction fee (NTF) mutual fund investments – but take advantage of discount online brokerages that offer cheap stock trading rates for individual stock and ETF purchases.

List Of The Top Value Discount Brokers With The Lowest Commission Costs

While going with a cheap stock broker that offers basement prices for equity trades may seem like the natural way to go for the cost conscious investor, I would advise readers to not overlook the importance of value. Sometimes, paying a tiny bit more might be worth it if what you’re getting in return in the way of a better trading experience outweighs the cost. After pouring through a large number of excellent online brokers and researching their commission structures and fee tables, here are the results of my findings. For comparison purposes, I’ve also included the cost per stock trade numbers in parentheses below.

1) Zecco ($0.00 per trade): Zecco customers enjoy a special recurring offer of 10 free stock trades every month so long as they maintain a $25,000 minimum balance or make at least 25 trades each month. However, even if an account  is unable to satisfy the requirements to get the free trades, the regular Zecco commission rate is only $4.50 per trade – still an extremely good deal for even the most price sensitive of investors. For no load mutual funds, Zecco charges $10.00 per trade. With its tandem promotion of free online stock trades and regular low cost commissions, Zecco will likely appeal to active traders the most. While the gimmicky brokerage firm does not offer the best all around package in the way of investment research features or advanced trading tools for its account holders, those who are willing to perform the bulk of their stock and mutual fund research elsewhere should be able to easily overlook this nominal downside – in favor of Zecco’s super cheap rates.

2) OptionsHouse ($2.95 per trade): Charging only a mere flat rate of $2.95 per stock trade, and a flat rate of $9.95 for option contracts, OptionsHouse is one of the most affordable discount online brokerages in the market today. With OptionsHouse, there are no monthly minimum balance requirements and no maintenance fees to contend with. Ranked #1 with an award of 4.7 stars by Barron’s in its 2009 Online Broker Survey as the best choice for options traders, the brokerage firm’s offerings are not limited to just options. Despite its name, with OptionsHouse, you can trade stocks, ETF’s, no-load networked mutual funds, options, spreads, and invest in most of the usual host of financial products you’d expect from any other major discount brokerage firm – but without the high commission cost. Currently, OptionsHouse is running a host of exclusive online promotions, such as offering a free $100 bonus rebate when you switch to OptionsHouse from your current broker, as well as extra $50 OptionsHouse referral bonuses for when you Refer-A-Friend to the firm.

3) TradeKing ($4.95 per trade): Bottom line, Tradeking is one of the best discount brokerage firms out there, and one of my personal favorites. Whether online or broker assisted, trades via the popular brokerage firm are incredibly affordable at a mere $4.95 per equity trade for both market and limit transactions. With TradeKing, there are no minimum balance requirements and no account maintenance fees. The very highly ranked company has won numerous accolades and high praises from major publications like Barron’s, SmartMoney, and Kiplinger’s for its award winning account features – something that should offer great appeal to both beginners and experienced investors alike. But perhaps TradeKing’s most commendable feature is its highly touted and highly regarded customer service reputation. Whether you desire extensive customer service support via a live representative or need technical support via phone or email, TradeKing is there to deliver the support you seek. Currently, the firm is offering a bonus deal of $150 for new account transfers and $50 for each new account referral. For a more detailed overview of my personal experience with the firm, please see my TradeKing review.

4) Scottrade ($7.00 per trade): Scottrade is probably a pretty well established and recognizable brand name to most American consumers, as the firm advertises heavily on mainstream media networks like CNBC, CNN, and elsewhere online. In terms of fees, Scottrade really shines – charging only $7.00 per online trade with no account maintenance or inactivity fees, and low balance requirements. While phone and broker assisted trades do cost more, they can be easily avoided by simply sticking with online trades exclusively (as everyone ought to anyway in this day and age of Internet based brokerages). For mutual fund investors, Scottrade offers a broad selection of  NTF funds that are completely devoid of fees, as well as a broad selection of out of network funds at a price. But for the majority of retail investors, Scottrade’s greatest appeal will likely be the large number of physical branch offices that the company maintains and operates. While most online broker investors will undoubtedly conduct the majority of their investment transactions via the Internet, Scottrade’s incredibly large network of branch offices nationwide is there when you need to tap into it. Check out my Scottrade review for my personal analysis of the popular discount broker’s pros and cons.

5) TradeMonster ($7.50 per trade): As a subsidiary of options trading brokerage firm, OptionMonster – TradeMonster is a relative newcomer to the discount brokerage scene. Despite its relative newish stature, the company’s reputation has already been rapidly lauded and reviewed by financial publications such as Barron’s, recently awarding the brokerage firm 4 stars for review categories such as trade experience, usability, research amenities, and portfolio analysis reports. Offering a pretty impressive online trading interface for its account customers, TradeMonster’s pricing structure is also quite competitive – at just $7.50 per trade up to 5,000 shares, and a mere $0.50 per options contract. For mutual funds, the company charges $15.00 per purchase and nothing for sales. Trade Monster also offers all of the usual investment products and possibilities, including stocks, options, ETF’s, mutual funds, bonds, traditional IRA’s, and Roth IRA’s. Although new, this low cost brokerage is worth a hard look.

6) E*Trade Financial ($9.99 per trade): E-Trade has been around since the advent of discount online brokerages. In the early days, the company was one of the first to offer an integrated all in one power trading and Etrade banking service for online investors, and one of the first to offer continuously streaming quotes and regularly updated news reports for its customers. Since then, the popular online broker’s services and features for account holders have only continued to expand. While ETrade is by no means the cheapest brokerage option in the market, the firm brings forth a tremendous amount of value. The company has won an impressive number of accolades over the years, including the very coveted number #1 ranking for the best overall online discount brokerage firm according to the 2009 SmartMoney best broker survey. In the editorial review, E-Trade received extremely high marks for almost all facets of the firm’s offerings, snagging extra praise for its top notch customer service, excellent banking features, and highly regarded research tools. If you want the very best in the way of financial research material and investment calculation tools, you really can’t go wrong with E-trade. In terms of fees and charges, Etrade’s offerings are decently competitive – charging just $9.99 per equity trade for those who make at least 30 trades a month or maintain $50,000 in account assets, and charging the standard rate of $12.99 per trade otherwise. Currently, ETrade is also offering a limited time bonus offer of 100 commission-free stock and option trades for new accounts.

Source URL: Best Online Discount Brokers For Cheap Stock Trades

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

One of the most highly touted low cost brokerages in the market today is Scottrade, a brokerage firm with which I have retained an investment account with for years now. While certainly the company’s website design and palette choices aren’t exactly the prettiest or most intuitive around, the firm’s online trading tools and statistical reporting features are more than sufficient to satisfy the discerning needs of most run of the mill investors.

Scottrade’s Best Features: Low Broker Commissions, Low Account Minimums, and No Hidden Maintenance Fees

Compared to all-in-one brokerage giants like E-Trade or Charles Schwab that offer one stop shopping for all of one’s banking and stock trading needs, Scottrade focuses exceptionally well on its primary niche – individual stock traders and mutual fund investors who want to enjoy the benefits of deeply discounted fees and rates without having to pay extra for the premium services they never use. Striking a decent balance between quality and value, Scottrade offers a fairly robust line of investment products, differentiated online trading platforms for different types of investors, and enhanced market research tools for those that desire exceptional control over portfolio performance – all without breaking the bank in the way of fees.

Scottrade’s trading fees are exceptionally low, even when compared to the rates touted by other online discount competitors – charging only a flat $7 fee for trades priced over $1. All equity and option trades, whether they be market or limit orders – are only a simple $7 per trade. This type of low and straight forward flat pricing not only should comfortably suit the needs of long term buy and hold investors, but also should greatly appeal to day traders and active investors who execute frequent buys and sells. Of course, do bear in mind that while $7 flat fee trades apply to all online Internet based transactions, if you choose to execute trades over the phone – it will cost $17 for phone based trades and $27 for broker assisted trades. Take my advice – regardless of which discount broker you ultimately decide to invest your money with, learn to make trades online – you’ll save a bundle over your lifetime.

Both advanced traders and entry level beginners to investing will greatly appreciate the low minimum balance requirements for new accounts. Currently, Scottrade only requires $500 minimum to open a new account. The online broker also imposes no inactivity charges and levies no hidden maintenance fees as well. Leave your investment account idle for as long as you wish – there is no charge. For the convenience and freedom of its brokerage customers, Scottrade also imposes no account closure or transfer fees. Investors looking for a simple brokerage option that offers straightforward cost competitive pricing without anything tricky will do well with a firm like Scottrade.

Scottrade’s Online Customer Support and Branch Offices Are Well Regarded and Highly Ranked

With over 400 local branch offices across the United States, a live Scottrade representative is definitely reachable when you need the prompt assistance of one. As someone who has called the Scottrade customer support phone line numerous times (800-619-7283) in the past, I’ve never encountered difficulty in obtaining assistance. It seems Scottrade strongly prides itself on its ability to deliver prompt personal attention to its customers. I recall when I first signed up for Scottrade online, within a few hours of registering for an investment account and even before I had set up my initial fund transfer, a Scottrade representative was already calling me up to introduce himself and ask if he could help me in any way or answer any questions I might have. From where I’m from, that’s called excellent customer support and the start of a good relationship.

But then, you don’t have to take my word for it. For many years now, the J.D. Power and Associates global marketing firm has consistently ranked Scottrade #1 overall in its Online Investor Satisfaction Survey – giving it the number one award for the “Highest In Investor Satisfaction With Self Directed Services” from 2001 through 2008. In another highly touted editorial review of the best discount brokers online, the SmartMoney best broker survey for 2009 awarded Scottrade 4 stars for its impressive array of investment products, online trading tools, and highly commendable customer service. Similar praise and reputational accolades have also been bestowed by Kiplinger’s Finance and Barron’s as well.

In terms of the firm’s own employee satisfaction ratings, Scottrade has consistently been ranked by publications like Fortune Magazine and ComputerWorld as one of the best places to work at. While not totally pertinent to investor satisfaction, perhaps it’s contagiously true – happy employees beget happy customers.

Scottrade Investment Account Features and Online Trading Tools

Like most online broker firms, Scottrade offers the usual array of investment products – such as stocks, options, mutual funds, IRA’s, exchange traded funds (ETF’s), Coverdell education accounts, bonds, CD’s, U.S. Treasuries, and various fixed rate annuities. While Scottrade’s online trading tools are pretty basic without much in the way of heavy hitting premium research material, they’re more than adequate for most investors and traders.

In terms of Scottrade’s online tools, the firm offers several options depending on how you wish to trade and how much investment control you desire. The vast majority of people will find the basic Scottrade website’s research and trading tools more than sufficient for their investment needs. More experienced traders will likely gravitate towards the ScottradeELITE advanced trading platform, which is equipped with fancier tools like enhanced news tickers, higher performance stock scanners, improved graphical chart functions, and access to Level II quotes that help active investors react more quickly to market opportunities that present themselves. New entrants to option trading will find the Scottrade OptionsFirst platform quite easy and intuitive to get a hang of. Those of you equipped with iPhones and various smart phones who wish to perform stock research and stock trades on the fly may find the Scottrade Mobile platform quite useful.

My complaints regarding Scottrade are few as the company’s pricing and customer service features make up for what shortfalls the firm has. But if I had to nitpick, my only dissatisfaction with Scottrade centers around the brokerage’s lack of an automatic dividend reinvestment function and the firm’s comparatively lackluster rates of return on un-invested sweep account cash balances.

I also wish the discount broker offered a more integrated and obvious way to engage in Scottrade ACH transfers for deposits and withdrawals. Presently, the firm offers MoneyDirect as a way to make one way electronic deposits via a bank account into a Scottrade brokerage account. However, account withdrawals require the submission of a request for a paper check of the balance desired. There is presently no similarly easy way for all participating Scottrade customers to withdraw such deposited funds online and on demand. The only current workaround is to qualify for check writing privileges by developing a brokerage balance of at least $5,0000. Only with check writing privileges enabled can one gain access to a checking account number and routing number that can be ACH linked to other banking institutions for easy electronic transfers. But despite the above mentioned gripes with Scottrade, none of these issues are significant enough to overshadow its pluses and discourage me from recommending Scottrade as a top online broker.

Source URL: Scottrade Review: Discount Online Stock Broker

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

While I have written about the best online discount brokers in the past – reviewing what I believe to be the top brokerage companies out there for new stock and fund investors – it’s always good to check out what the financial experts have to say on the subject. For almost two decades now, the editors at SmartMoney Magazine have been reviewing and releasing their annual list of the best stock brokerage companies, thoroughly researching and comparing the candidates based on a variety of key competitive factors. For customers and broker firms alike, their award wining list is always a popular read.

In this year’s 17th annual broker survey, SmartMoney updated its ranked list of the best and worst brokers after conducting a variety of performance based tests and undercover research as well as reviewing the responses to surveys by the online brokerages themselves. As the folks at Smart Money remarked in this year’s review – “no detail was too small” – as they poked and prodded the various available trading tools and features, even going so far as to go incognito – calling customer support lines and posing as prospective brokerage customers, while jotting down comments in regards to the quality of the phone service they received. For new and seasoned investors, this list serves as an excellent jumping off point for those on the fence and not sure which investment broker to go with or to switch to. While the exact sequencing order of the rankings is always debatable, the list gives a great overview of who’s hot and who’s not in terms of touting the complete package in all facets. The table below is self explanatory, but I’ll comment on a few names that I feel merit some mentioning.

E-Trade Is Selected As the Best Overall Online Broker

To absolutely no one’s surprise (certainly not mine), E-trade was chosen as the top discount broker for year 2009 by SmartMoney. Ranked high in every category, with excellent customer service and an affordably low $9.99 commission structure to boot, the E-Trade brokerage company definitely deserves the top spot. One of the best features of E-Trade is its status as a true one-stop shopping destination for brokerage and online banking services. Along with its highly rated broker conveniences and extremely broad portfolio of mutual funds, stocks, bonds, and ETF’s to choose from, ETrade also offers a wide array of FDIC insured products with its highly recommended E-trade banking service, complete with high interest savings accounts and high yield certificates of deposit.

Special Offer: ETrade is currently offering 100 free trades for new customers.

TradeKing Remains A Solid and Legit Top Tier Brokerage

Despite dropping one spot down from its previous 2008 Smart Money ranking, TradeKing remains a consistently solid high performer. Compared to E-trade, Fidelity, and Charles Schwab – TradeKing offers the lowest commission fee rate by far at only $4.95 per trade. Only Just2Trade, SogoTrade, and Zecco Trading (with its free monthly stock trade deal) offer lower prices, albeit with much lower reputational scores. They only major downside with TradeKing is its lack of a fully developed and integrated online banking system for those who want their banking and brokerages services in one place. But those who simply want a deep discount broker that features a wide selection of extremely user-intuitive trading tools with an impeccable customer service reputation can’t go wrong with Trade King.

Results Of Smart Money’s 2009 Broker Survey (Rated On A Scale Of 5 Stars)

Compared to the previous year’s 2008 Smart Money rankings, this year’s 2009 broker survey featured top five results that stayed pretty much the same, albeit with a slight shuffling of the deck. In 2008, the top five in ranked order were E-Trade, Fidelity Investments, TradeKing, TD Ameritrade, and Charles Schwab. This year, Charles Schwab, with its new and improved website, hopped up from 5th place to beat out TradeKing and Ameritrade for the coveted 3rd place finish. Etrade and Fidelity, with their robust and huge mix of product offerings and funds remain solidly in 1st and 2nd place respectively. As the table above clearly demonstrates, with the top 5 brokers securely entrenched, the up and coming basement-dwelling brokerages still have quite a ways to go.

OptionsXpress – Excellent Online Tools, But Only Average Customer Service

As the Smart Money review noted, OptionsXpress rated well and received high marks for its online trading tools. However, the online brokerage retailer was docked points for providing only limited hours for phone based customer support. The editors also remarked of at least one instance where testers were put on hold for a longer than desired period of time when they called in for assistance. While OptionsExpress offers a large array of powerful investment analyzers and online technologies for stocks, futures, mutual funds, and bond trades that cater to savvy statistic-loving investors, its customer service offerings can still use some work

ShareBuilder (ING Direct) – Great Bank, But Brokerage Needs Improvement

Previously stuck at the bottom of the pile, ING Direct’s ShareBuilder discount brokerage firm has jumped up three spots after finally adding a large selection of mutual funds into its investment product lineup. However, its requirement of extra fees for access to premium research that other broker alternatives offer for free keeps it from advancing further in terms of ranking. Currently, one of ShareBuilder’s biggest selling points is its unique automatic investment feature, which allows online customers to buy stocks, mutual funds, and exchange traded funds (ETFs) on a regular basis so they can take advantage of dollar cost averaging as stock prices change and fluctuate over time. For now at least, ShareBuilder seems content in its marketing approach of appealing primarily to hands-off type investors looking for a low cost, almost automated brokerage solution without all of the added cost of having extra bells and whistles attached.

Zecco Trading – Free Trades Cater Only To Individual Stock and ETF Traders

Smack near the back of the bus is Zecco. You might won’t find Zecco at the top of any best brokerage list. In fact, the company is almost dead last on the list due to its lack of sophisticated fund selections or premium research material for investors – despite its unique reputation as a super deep discount commission fee provider. For now, the company seems all too comfortable nestled in its niche as a purveyor of free commission trades to those who who primarily dabble in individual stocks and ETF’s with little need for extraneous research material. While Zecco used to shine and dominate the deep discount brokerage market with its unlimited free stock trades, this deal now requires a minimum $25,000 balance to qualify for – and only for a recurring 10 free trades per month. Customer service has improved with faster response time, but I don’t think Zecco is going to be leapfrogging E-Trade, Fidelity, Charles Schwab, or TradeKing anytime soon.

Source URL: List Of The Best Online Brokers By Smart Money 2009

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

I decided to open a Zecco.com free trading account a few years ago back – at a time when the deep discount brokerage was still offering free online trades with no catches and no account minimums. Since then, the company has undergone numerous changes and developments of its free trading policy, not to mention weathered quite a bit of critical commentary and press regarding its underlying free trade business model. I think it’s time I conducted a Zecco broker review and evaluated my Zecco trading experience as it currently stands. While I still use Zecco Trading and recommend it as a top online broker for individual stocks and exchange traded funds (ETF) to this day, due to some notable drawbacks, I have not yet made it my primary all in one broker account. But due to the attention that Zecco continues to receive among personal finance blog readers and new entrants to stock market investing, the low cost brokerage provider is worth a close review.

In case you were wondering, Zecco.com’s rather unusual name is actually derived from the phrase – “Zero Commission Cost”. The company is a low cost online brokerage that burst onto the discount broker scene several years ago vowing to change the brokerage landscape forever, while touting its unique offer of free monthly stock trades with no hidden catches or gimmicks. To this day, the Zecco Trading firm still does indeed offer zero-cost and commission free trades on stocks and ETF’s for both market and limit orders, albeit now with account minimum requirements. But at its heyday and for quite some time, Zecco seemed to show up on the radars of every financial website and finance blogger’s list of the best online stock brokers.

When it comes to low cost trading, it’s frankly hard to do any better than an offer involving free stock trades. With aggressive marketing and promotion of its free monthly trades, Zecco has always greatly appealed to low cost seekers and active traders looking for the ultimate way to cheaply trade and invest in the stock market. But as a victim of its own success and popularity, the early years saw performance of Zecco’s online trading platform greatly plagued by slowdowns and loading issues due to surging online customer demands and the technological limitations of its trading platform. Presently, the company is reportedly working to revamp its online investment website, improve its much to desired customer service, and retool its business model to comport better with the realities of today’s market. Since its initial web 1.0 beginnings, Zecco has made many  improvements and innovative enhancements, such as adding an online Zecco trading community for like minded investors to share investment tips and swap portfolio building advice, as well as greatly adding to its exclusive online library of educational materials. Much publicity (both good and bad) continues to surround Zecco’s dubious decision to utilize and promote its collection of financial educational videos with the hosting assistance of the company’s rather attractive and seductively alluring band of Zecco Sirens. While Zecco has probably not improved its credibility among serious investors with its use of extremely attractive girls to host its Zecco marketing material, this obviously gimmicky approach probably has helped them earn more than a few new customers (translation: sex sells).

Free Online Stock Trades and Low Commissions With Zecco.com

Despite any of its possible shortcomings, Zecco stands as the king of the low cost brokerages with its unique offer of free monthly trading privileges for those who satisfy certain account minimum requirements. Previously in the recent past, Zecco account holders received 10 free trades per month if they maintained a minimum balance of $2,500. Do to the difficult economy and realities of financial circumstance, free Zecco trades are now limited to account holders who maintain at least a minimum balance of $25,000 in their trading accounts, or make at least 25 online broker trades per month. For savvy savers, it’s worth to note that even after the allotment of free trades are exceeded, stock trades are still only a mere $4.50 per trade. Even if one failed to meet the $25,000 minimum to qualify for free monthly trades, Zecco is still one of the deepest discounters around in terms of cost per trade. Option trades with Zecco are also priced very low – currently just $4.50 per trade and $0.50 per contract. Mutual fund trades are tabbed at $10.00 each.

Those who don’t trade frequently will be pleased to know that with ordinary individual accounts, there are no account minimums or hidden inactivity fees to contend with. While, there is a $30 annual fee for retirement accounts like Roth IRA’s and traditional IRA’s, one ought to evaluate this cost in light of the greater potential savings one will receive from the free monthly stock trading privileges. For such a low cost and cheap pricing structure, Zecco Trading packs a pretty competitive package with its arsenal of respectable trading tools, investment research materials, and large social media community of like minded users and investors. But as with all seemingly great offers, one has to wonder – what’s the catch with Zecco.com? If Zecco’s free stock trades are so great, why isn’t everyone and their uncle kicking down doors to become a Zecco customer?

According to Zecco sources and based on my personal observation, the catch with the free monthly Zecco trade offer is simply that the account customer must either maintain a minimum balance of $25,000 in their account or trade at least 25 times every month to continuously qualify. Furthermore, the free trading offer only nets you a total of 10 free trades per month. It’s not like you are reaping a huge windfall of unlimited stock trades. With ordinary Zecco equity trades priced at a low $4.50 per trade to begin with, the monthly cost savings associated with the free trading promotion isn’t exactly substantial or exceedingly astounding. However, for ordinary consumers looking for a way to invest on the cheap, every little savings helps in the long run. Zecco’s automatic free trade offer is genuine and real – you just have to be aware that qualification requires you to meet certain conditions every month.

The other possible catch or limitation with Zecco involves its recent struggles with customer service response. Due to the crushing weight of its own success, the broker has been working feverishly to improve its customer service reputation and overcome the growing pains of keeping up with heavy demand for its free trades. Along with customer service issues, Zecco also has limitation issues in regards to advanced trading tools and premium research access – features that full service and bigger online trading sites offer, but Zecco does not. But as always in life, you get what you pay for. Those who don’t mind paying a bit more for the peace of mind that established customer service brings may want to look into other popular discount brokerage alternatives like TradeKing, a consistent winner of numerous online accolades for its outstanding customer service year in and year out (read my TradeKing review to learn more). At  just $4.95 per trade for TradeKing compared to Zecco’s $4.50 per trade, both are actually quite comparable in terms of price.

Is Zecco.com A Scam, Or Is It A Legitimate Online Broker?

What started out as an extremely liberal free stock trading offer by Zecco has morphed a bit over the years. Originally, the company built its brokerage firm on the premise that it could sustain its free stock trading model off of the interest rates and margins that it earned from customer accounts. But with interest rates at historical lows due to the recession and American brokerage customers trading less and less these days due to lingering market uncertainty, Zecco has had to alter the terms of its basic marketing pitch to meet the demands of reality. However, though qualification minimums for the free stock trading offer have been increased, Zecco has staunchly stuck by its cornerstone free stock trading feature, raising the collective eyebrows of many who perpetually wonder how the company continues to offer free trades for customers and still manage to make money and stay viable. As such, Zecco.com’s practice continues to raise little red flags among the skeptics. But supporters simply note that the company is still in its growth phase and sustains itself through regular injections of stable venture capital funding, which has continued to be forthcoming. For the foreseeable future at least, it seems Zecco is relatively stable and has settled into a marketing niche of sorts (although I suspect further tweaks in its promotional terms and conditions in the coming years).

Those wondering if their money is safe with Zecco will be pleased to know that Zecco is indeed a registered member of the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for all securities firms doing business in the United States. It’s also a card carrying member of the Securities Investor Protection Corporation (SIPC), which insures and protects brokerage account customers and securities investors from financial harm in the event of a catastrophic broker dealer failure. The SIPC is the brokerage account equivalent of FDIC insurance, which protects bank based deposits. While investors are not insured for potential loss due to ordinary price fluctuations in the stock market, Zecco.com’s status as a bona-fide SIPC member protects account holders from loss in the event Zecco goes bankrupt or goes out of business. In the event Zecco Trading fails, the SIPC provides insurance coverage up to a maximum of $500,000 of the customer’s net equity balance, including up to $100,000 in cash. Excess SIPC insurance coverage of Zecco customer investment assets is also additionally provided through the Lloyds of London insurance company. Thus, the answer to the question of whether Zecco.com is a scam – is no. Your portfolio money is safe with Zecco.

Zecco Trading/Research Tools and Customer Service Review

The first thing you’ll notice with Zecco.com’s online trading interface is that the company is absolutely in love with the color pink – bright neon pink in particular. Despite this very questionable color palette choice on the surface, internally, Zecco offers a pretty robust trading platform with all of the basic investment bells and whistles you’d expect from your run of the mill discount broker. Overall, the Zecco Trading interface is pretty straight forward and fairly intuitive to use. Equity trades are made under the Trading Center tab where customers access their Account Overview and investment options, as well as receive their real time quotes and trades on market price, opening price, highs and lows, volumes, and price changes.

In terms of investment options, Zecco gives investors the opportunity to purchase individual stocks, ETF’s, index funds, mutual funds, and options, for both limit and market orders. At this time, Zecco does not offer access to Treasuries, bonds, or CD deposits. Individual retirement accounts like Roth IRA’s and traditional IRA’s are available to Zecco customers (although note the $30 annual fee to manage IRA’s). Zecco does offer dividend reinvestment but currently only permits whole share purchases – leftover dividend payments unable to purchase a whole share are deposited into your account as cash. Idle cash for Zecco accounts can be swept into a money market sweep account for higher interest rate yields, however customers need to affirmatively request this feature to enable it.

Unlike a few of the other deep discount brokerages in the market today, Zecco also offers a currency trading feature via its Zecco Forex trading platform. This is a nice bonus trading perk for those seeking a consolidated one stop shopping source for their diversified trading needs.

In terms of investment research, stock trading analysis, and financial education, Zecco provides users free online access to most of the basic investment research sources that you’d expect from low cost brokers. There are a variety of premium tools available, but many of the premium research and online analysis tools are only available via extra monthly or annual fee subscriptions. My recommendation is to utilize Zecco for trading purposes only due to its extremely low cost perks for individual stock and ETF trades. However, get your stock and fund research elsewhere. Zecco’s educational videos for beginners are amusingly worth looking into however. If not just to admire or gawk at the rather gratuitous Zecco ladies that host the Zecco video shows, they are somewhat educational and informative, particularly for newbies to the world of investing. If the Zecco Sirens don’t answer your introductory investment questions, you may want to visit the ZeccoShare Community online forum  for answers or some socially assisted enlightenment. There is wide berth of information and active stock market discussions going on in the ZeccoShare Community forums, groups, and blogs. Surprisingly, I found the ZeccoShare forums to be remarkably free of pumpers and dumpers – spammers trying to spread misinformation to affect stock price movements. The same can’t be said for other popular stock market forums like Google or Yahoo Finance’s message boards.

Zecco’s weak point centers around its somewhat infamous customer service reputation. Most of the online complaints and negative reviews you’ll read about focus on the broker company’s customer service reputation. Due to its rapid explosion in growth, the company has not devoted sufficient resources to improving its customer service, although I will concede, it is gradually improving. During my years as a Zecco customer, I have only had a handful of customer service interactions with Zecco and during those times, I’ve never really encountered any substantial problems worth remarking on. However, I’m sure there are plenty of Zecco customers with strong viewpoints willing to share their thoughts (both positive and negative). Zecco offers e-mail informational support and telephone customer support through its toll free line at (877) 700-7862. The company is currently pushing out a new live chat support feature but the online tool seems to be still in the troubleshooting phase at the time of this writing.

Zecco’s New Online Broker Account Opening Process

As is the case with most online brokerages these days, the Zecco new account opening process is remarkably quick and efficient. The Zecco online application for new trading accounts is pretty straightforward and easy to follow. Be prepared to enter all of your personal information, including notations about your employment details, stock trading experience, and investment goals. These details are all pretty standard fare with brokerage account registrations nowadays.

In terms of new account funding, you can start up your Zecco Trading account with a check, money transfer, or via a recommended ACH transaction through your existing bank account. Those that want to fund their new Zecco account via an electronic ACH transfer from their bank account will need to undergo the customary two small deposits verification test. The deposit verification process ensures proper ownership of the transferring bank account and greatly expedites future ACH fund transfers from the same account. The bank account link up process takes 2-3 days, but it’s worth it.

Overall, Zecco is a pretty competitively priced discount broker ideal for individual stock and ETF traders and investors. Even without its offer of free stock trades, Zecco remains one of the cheapest deep discount online stock brokerages out there today. Although frankly, if you are willing to pay a tad more in the way of commissions and fees for a more advanced and highly rated platform, I’d recommend either TradeKing or ING Share Builder (remember to take advantage of ShareBuilder promo codes for new account bonuses). But if low cost trading is your game and you seek an online community to bounce stock ideas off of, discount broker Zecco is worth a look.

Source URL: Zecco Review: Free Online Stock Trading

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

The first thing you’ll notice right away with online discount broker TradeKing is that the company has received quite a number of accolades and praises over the recent years for various high performing aspects of their popular investment brokerage business. In fact, when it comes to acknowledging the awards, the company is definitely not bashful about flaunting the coveted certificate of merits, and proudly name drops them whenever they can.

A quick visit of their website reveals numerous mentions and displays of graphical award banners from popular sources of financial critique and reviews. The Wall Street Journal’s SmartMoney Magazine voted TradeKing the #1 Discount Broker in 2006 and 2007, and the #1 Customer Service broker with 5 stars in 2008. Kiplinger’s Finance voted TradeKing as having the best Top-Rated Customer Service in 2008. Even Barron’s, in its annual surveys of the Best Web Browser-Based Online Brokers awarded TradeKing 4 stars for its outstanding investment tools, customer service, social media offerings, usability, and cost factors in 2007 and 2008 – and further tabbed it as the Best For Options Traders in 2008 and 2009.

I suppose when you’ve developed a quality product that’s getting attention and praise from the critics and product reviewers, there’s no sense being overly modest about a good thing. After having used online brokerage TradeKing for more than a year now as one of my major discount brokerages for cheap stock trading, I personally have to agree with the majority sentiment – TradeKing’s a recommended keeper. The online brokerage firm isn’t perfect in all respects, but it packs a pretty good punch as top discount brokers go. Beginners new to stock market investing and trading really can’t go wrong with TradeKing – as it’s one of the best brokers out there in terms of overall quality and value.

Also, one of the very attractive practices of discount broker TradeKing is its well known propensity for offering lucrative promotional deals and offers to first time customers – frequently rolling out new account bonuses of $50, $100, and even $150, to lure customers of competing online brokers to the TradeKing platform. If this is your first introduction to online stock and mutual fund investing, you may be curious as to what the hubub with TradeKing’s all about. For your benefit, I’ve provided a summary overview of the pros and cons of TradeKing below.

TradeKing’s Best Online Brokerage Features: Low Fees & Commissions and Great Customer Service

Discount broker TradeKing has numerous standout features – but the two that get the most press and attention are its low fees for stock trades, and the highly touted quality of its customer service. While I think we can all pretty much unanimously agree that low trading cost is very important, some may disagree on the importance of having great customer service. Those readers who downplay the importance of customer service reputation, and focus solely on the online trading tools and investment options of the online brokerage – are rather short sighted. As a long time stock market investor and user of web-based trading tools, there have been countless number of times when I’ve had to contact customer service for account related issues – whether they be problems related to account set up, complicated investment fee structure questions, or technical issues related to website troubles. Sometimes, I’m just too lazy to look up an answer to my detailed trading or account question from TradeKing’s self help pages and prefer to fire off a time saving direct question to one of Trade King’s customer service reps for the definitive answer.

The fact is – trading and account problems do routinely arise and it’s good to know that with a brokerage like TradeKing, their customer service response is one of their best features. TradeKing’s online representatives communicate with customers via real time live chat, phone calls, email messages, and through the online TradeKing website community. If you want access to full service branches and live banking offices, you may want to look elsewhere, but just remember, you’ll likely pay commissions that are twice or three times as high as that offered by TradeKing.

TradeKing offers cheap $4.95 stock trades for all equity transactions, whether they be market or limit trades, stocks or bonds, or whether they be online or broker assisted – each investment trade is only a flat $4.95. The TradeKing commission rate structures are not tiered so all accounts get this standard fair rate regardless of account balance or trading activity. Option trades are also priced very low, at just $0.65 per contract. Mutual fund trades are priced higher at $14.95, but this seems to be in line with what other discount brokers are charging for fund transactions as well. If your investment goal is to purchase mutual funds from one particular type of brokerage company, like a Vanguard or Fidelity fund, I’d recommend going through them directly rather than buying them from TradeKing due to the higher cost of mutual fund transactions at TradeKing. But those looking to engage primarily in individual stock and index fund trading will do quite well with TradeKing, from a commissions fee standpoint.

While TradeKing’s low $4.95 stock and bond trades are not as comparatively low as some of the new offerings coming from deep discount brokers like Zecco, which is currently offering free Zecco trades, it is still substantially cheaper than the fees and rates demanded at other popular brokerages like TD Ameritrade, E-Trade, Fidelity Investments, and Charles Schwab.

On top of the already low cost commissions and fees for TradeKing, there is also no minimum deposit required to open an account, no hidden maintenance fees, no hidden inactivity fees, and no limits on minimum balances – ideal traits for new investors and those seeking a truly hassle free investing experience. Those desiring to open up a retirement fund and start maxing out their IRA contribution limits will also be pleased to know that TradeKing imposes no extraneous fees or maintenance costs for such tax deferred accounts.

Review Of TradeKing’s Online Investment Tools and Community Self Help Forum For Simple and Complex Investing

Don’t be fooled by TradeKing’s cheap stock trading prices and get the impression that the deep discount broker scrimps on investment features and trading options – TradeKing is a fully stocked investment juggernaut. Okay, calling it a juggernaut’s a bit of an exaggeration, but the broker comes complete with all of the fancy bells, whistles, and widgets you would expect from most full service premium brokerages.

For starters, TradeKing offers all the basic investment choices including stocks, options, index funds, ETF’s, and mutual funds. The broker also offers access to various bond products such as corporate, agency, municipal, strips & zero coupons, and new issue fixed-income securities. Certificates of deposits (CD’s) with a whole range of maturity dates are also available to brokerage account holders. In terms of account types, new TradeKing customers have plenty of options to choose from. They can open an individual account for ordinary trading purposes, open up a Roth IRA or traditional IRA account for their retirement needs, or even set up a tax deferred college fund for their children. In terms of investment mechanics, customers can choose to invest manually, or opt for automatic investment by taking advantage of TradeKing’s auto trading tool which automatically places trades for you based on your pre-set parameters at no extra charge. Those looking to automatically reinvest their stock and mutual fund dividends will be happy to know that TradeKing offers free automatic dividend reinvestment, with the ability to purchase fractional shares as well.

In terms of investment tools, stock fund research, and trading interface, TradeKing provides a wide selection of practical tools to enable any trader or investor to carry out his or her desired investing strategy. These tools include financial calculators, automatic alerts, advanced stock charts and graphs, as well as streaming news. The discount broker also offers a useful free TradeKing Maxit Tax Manager service that serves as a tax reporting tool and online tracker of one’s gains, losses, and cost basis statistics. The Maxit Tax Manager program helps customers stay better informed about any potential losses or gains in their portfolio with major tax implications.

But overall, one of the aspects I really like about TradeKing’s website is its intuitive and streamlined setup. While some of the other brokers require you to jump through multiple hoops and clicks before accomplishing your trading objective, TradeKing speeds certain transactions up by letting you perform multiple transactions via the same page. One example would be in the case of writing a covered call option. Rather than require you to go out and buy the stock and then execute a request to sell the call manually, TradeKing provides you a very handy and efficient Options Trading menu where you can seamlessly execute a variety of fancy option trades on the fly, such as covered calls, protective puts, and even butterfly options.

If you are a beginner investor or someone who needs a wealth of educational handholding, TradeKing provides a tremendous library of free investment and financial education materials for your learning pleasure, including how-to videos, demo tutorials, expert articles, and audio lesson seminars. More self help trading tips and investment advice can also be further gleaned from TradeKing’s community group forum called the Trader Network, which encourages the sharing and exchange of personal financial advice among TradeKing customers. The whole social media and community aspect of investing is a feature that seems to distinguish online brokerages like TradeKing from other sites, as not many other broker services offer or facilitate a similar forum based sharing of ideas, except perhaps low cost discounter Zecco.

Opening A Trade King Account – Bonus Promo Offers For New Customers

Opening a TradeKing account literally only takes few minutes, even with a close read of all of the associated terms and conditions. You’ll need to provide the standard registration information required by all brokerages such as your name, address, social security number, employer information, and indication of your level of investing expertise.

Like most brokerages, Tradeking allows customers to link a bank account to TradeKing to deposit and withdraw money via free electronic ACH transfers. Unfortunately, at the present time, TradeKing only allows you to link up a single bank account to your broker for ACH transfer purposes. For most people however (myself included), this isn’t that big of a deal since most individuals utilize only a single primary bank account, but it can be a mild nuisance for some multiple bank account holders. The other slight knock on TradeKing concerns the mandatory trading hold of 5 business days before recently deposited funds can be used for trading purposes, and the 10 day freeze before deposited funds can be withdrawn. As these account limitations are quite prevalent among most online brokerages I’ve come across, they’re more minor nuisances to be aware of than anything else.

Those looking to sign up for a new TradeKing account really ought to take advantage of the various TradeKing promotions available. For account customers of other brokerages, TradeKing offers a very attractive, no-expiration date – $150 account transfer bonus to reimburse new customers who switch to TradeKing and incur transfer fees with their former broker. If you are unable to locate a current working $50, $100, or $150 bonus offer, you may want to try calling or initiating a live chat session with them and asking if there are current promotions available. Simply visit the main TradeKing.com website and access “Live Chat” at the top (in tiny print).

Thoughts and complaints about your TradeKing experience are always welcomed! Please share your comments below.

Source URL: TradeKing Review – Best Online Broker

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Burn those get rich quick books and ditch the late night infomercial gimmicks. Whatever you do -  don’t waste your money on useless junk. True personal finance knowledge is not something that can be acquired overnight, but is a lifelong marathon pursuit that requires the constant absorption of old (proven and established) and new (innovative and efficient) approaches to money management.

Embarking on what some refer to as a personal finance makeover requires an improved understanding of the basic mathematics and psychology behind income generation, responsible savings, and long term investing. But as previously indicated, there are no easy quick fixes to some of life’s complex financial woes. Such pursuits of a better way of life require a self motivated determination to become more financially educated and experienced through the testimonies and learned mistakes of others.

I have heard some commentators cite the declining popularity of newspapers as the reason why book reading is no longer a necessary and relevant activity in today’s technological age. However, I think this line of thought is seriously misguided. Reading books is important because the way that information is consumed through a book is different from the way it is received online. Unlike book reading where consumption is complete and systematical, online consumption is keyword search driven, prone to interruptions, and deprived of full and proper attention. The idea that you can fully understand the nuances of the world, let alone personal finance and proper money management, in small bite size chunks without extended periods of thought is foolish.

There Are Lots Of Great Books About Money But A Few Really Stand Out

When it comes to books, I select books the same way I pick my movies – by reading consumer reviews and getting a consensus opinion from the critics and experts. Admittedly, it’s not the most original or ingenious of methods, but thus far it’s worked well without fail as I have yet to purchase or borrow a personal finance book from the public library that I have not enjoyed or found somewhat interesting.

Coming up with a list of the best personal finance books about money was not easy. The topics they cover vary greatly and their writing styles appeal to different types of readers. Some are more suited for hardcore technical investors looking for statistical theory, while others are more geared towards single moms who just want to know how to pay off their ballooning credit card bills. Some of the authors and titles listed below may sound familiar but that’s because they’ve stood the test of time – and have become bestselling classics and literary blockbusters among avid personal finance consumers.

Remember, the list of books I have read and reviewed below are only the ones that have worked for me, as everyone’s specific needs and life stories are quite different. I own quite a few of them and each holds a special place in my personal finance library. Together, they offer everything a student of personal financial planning could want about saving money, investing in the stock market, debt management, and self motivation. You may notice that I left a few titles out. That’s because I found them either too tediously technical for the average reader or I found them too boring and coma-inducing to personally stomach. Certainly not all personal finance bestsellers are great reads, but I think the following list represent the top titles. All of the book titles listed below provide related links to Amazon.com where you can find more detailed book reviews from those who rate books for a living and by ordinary readers like yourselves.

Do you agree or disagree with my selections? How about sharing a few of your personal five star favorites not mentioned here, or perhaps even offering up some of the bad ones you’ve come across? I’m curious to know more!

List Of Highly Rated Bestselling Money Books That Will Change Your Personal Financial Life

1) The Total Money Makeover by Dave Ramsey – This book is absolutely essential for those who want to get started on the path to financial freedom. If you are up to your neck in credit card debt and struggling with pay check to paycheck living, this easy to read book by famed radio and TV talk show host Dave Ramsey was written for you. In this book, he talks about the importance of taking baby steps through his system of working hard, paying what you owe, and staying out of debt. Ramsey is an anti-credit preacher and is constantly imploring his readers to use cash for everything (while I don’t quite agree with his sentiments about credit card usage, I can certainly appreciate it on a practical level). If you are struggling with debt, you will want to take a look at the Dave Ramsey snowball debt payoff method. The snowball debt repayment method is not the most mathematically logical way to pay off debt, but it harnesses the power of human behavior and personal motivation to accomplish its debt free ends.

The book is sprinkled with many of Dave Ramsey’s own personal and devout Christian morals and practices, but even those who are not overtly religious can still appreciate his advice and recommendations such as adopting a “gazelle intensity” behavioral system to stay ahead of the financial game. The Total Money Makeover is very inspirational and not technical – definitely an easy read.

2) Your Money Or Your Life by Vicki Robin & Joe Dominguez – In this updated and revised version of a personal finance classic, the authors continue as champions of the simplicity movement. In Your Money Or Your Life, readers are implored to sit down and really re-evaluate the priorities in their lives, especially when it comes to their jobs and relationships. The book is a bit new age-ish but not controversial. It examines numerous financial truths about the interplay between life and money, encouraging readers to break out of the doomed cycle of forever trading time for money by pursuing passive income sources. If you are unhappy with your financial life and want to learn how you can break out of your current rut and live a more time efficient and value orientated life, this money book is a must read. It will change your perspective on money and life – and help you understand that it’s not just about working and buying more stuff (not exactly a shocker, but the authors really hammer the concept home).

3) The Millionaire Next Door by Thomas Stanley & William Danko – If you are a shopaholic or one who is obsessed with acquiring material possessions, the core message of this book will fly at you like a punch in the face (in a good way of course). The book is quite fascinating as it profiles and surveys the characteristics of very ordinary millionaires (you won’t find hip hop stars or athletes in this book). In their research of the lives and habits of everyday millionaires, the authors of Millionaire Next Door discovered that true millionaires don’t act, eat or even dress like millionaires, as most of them blend quite well into ordinary society due to the surprisingly frugal and cost effective lives that they live. Much of their wealth was developed by simple practices of living below their means and by making smart decisions with their money.

Other than the advice that it’s important to find the right high income producing job, you won’t find any information here on how to make money or increase your cash flow. The book is extremely pro-frugality and cites saving money and delayed gratification as the pinnacle keys to accumulating wealth. The book focuses a bit too strongly on the importance of frugality in my opinion, but the testimonies and stories on the need to vigilantly resist materialistic peer pressure and fight the urge to earn and spend are eye openers for anyone who’s ever wanted to become wealthy, financially free, and possibly even become a millionaire one day.

4) The Money Book For The Young, Fabulous, and Broke by Suze Orman – I highly recommend Suze Orman financial books for beginners. For those who don’t already do so, I also recommend watching the Suze Orman Show on CNBC every week (her show is actually more entertaining than Dave Ramsey’s show in my opinion). Some people criticize her for the way she berates her readers and viewers on the bad financial decisions they make, but I think I think it’s frequently well deserved. None of Suze Orman’s advice is ever ground breaking or particularly inspirational, but she does a great job of making difficult to understand subjects palatable for beginners and newbies to personal finance.

This particular book focuses almost exclusively on the financial needs and situations of young adults – addressing the needs of students and young adults in their 20’s and 30’s, struggling with credit card debt, credit reports, and student loans. However, with its emphasis on introductory financial topics, the book is also quite suitable for even older readers looking to dip their feet into personal finance. Click on the title link above for more Suze Orman books on a variety of introductory financial subjects, pre-chewed and presented for your reading pleasure.

5) The Bogleheads’ Guide to Investing by Larimore, Lindauer, & LeBoeuf - The title of the book – “Bogleheads” – refers to folks who admire John Bogle, founder of the world renown Vanguard mutual fund investment company. If you want to educate yourself on the most important fundamentals of stock investing, this book will deliver that to you. While not particularly earth shattering for personal finance veterans, the book’s lessons are must reads for those new to investing and those who are currently too scared to get started. The book’s main themes focuses on the investment advice and philosophies of legendary John Bogle and addresses the long term investment benefits of diversification, asset allocation, low cost and low fees, and index funds. I know the book’s subject matter sounds rather techy and dry, but the financial advice it offers up is excellent and the writing style is remarkably entertaining and easy to read – making it one of the most definitive but yet accessible personal finance books on investing out there.

6) The Automatic Millionaire by David Bach – As the title makes clear, the author is a big proponent of the need to automate one’s financial life. After reading this book, one of things I came away with is that there are really no secrets to becoming wealthy and no special get rich schemes that can get me there quicker. All that’s really required is a bit of money saving common sense, the ability to live within your means, and the understanding that you must “pay yourself first”. One of the most crucial and emphasized principles of Automatic Millionaire is the need to avoid the so-called “Latte Factor”. To have the ability to save up enough to make contributions towards a retirement plan or savings account, one must make the affirmative decision to stop racking up debt and reduce spending on day to day expenses such as on frivolous and wasteful items like coffees, lattes, and cigarettes. This book is highly recommended and a must read for those looking to start saving for the future and those interested in starting up a retirement account by opening a Roth or IRA. The advice David Bach offers is quite excellent and recommended for both beginners and seasoned personal finance readers looking for a refresher course.

7) Debt is Slavery by Michael Mihalik – The message of this poignantly titled book is exceedingly clear – money is a powerful and liberating tool, but it can also shackle you and bind you into a life of miserable servitude. The philosophies that author Michael Mihalik writes in this book are succinct and direct but all are designed to force you, the reader, into a call for action to gain control of your finances and get rid of the shackles of bad debt. In fact, one of the most interesting and somewhat controversial concepts in the book is the author’s distinction between good debt (loans that will produce value – college student loans or loans to start a business) and bad debt (loans such as credit card debt accrued to fund an unsustainable and unaffordable lifestyle).

If you want a personal finance book that will help you understand and respond to the terrible problem of consumer debt, turn to this easy to read book. Perhaps the next time you pull out that trusty credit card to make a purchase, you’ll be reminded of the mantra – “debt is slavery” (* insert loud thunder crack *).

8) The Joy of Simple Living by Jeff Davidson – This book is a perfect resource for someone like my mother. As I have griped in prior blog posts, my mom is a chronic lifelong hoarder and a person who seems to find more and improved ways to make her life more complex and difficult. For someone like that in your life (maybe that person is you), this nice yellow book contains over a thousand very actionable methods, broken down into specific topics, to simplify all aspects of life and home. Rather than merely share philosophies and theories of frugality and simplicity, The Joy of Simple Living offers specific tips and techniques on how we can all eliminate clutter, streamline our work habits, save money, organize our possessions, and ease our mind to eliminate stress. It’s a handy book.

9) The Only Investment Guide You’ll Ever Need by Andrew Tobias – When it comes to sound investment advice, some things never change. Andrew Tobias helps you navigate the convoluted world of treasury bills, municipal bonds, mutual funds, and Roth IRA accounts without making the subjects too dry or difficult to understand. The crux of his preachings encourages readers to save as much as possible, and put those savings into safe, no load, and diversified mutual funds for the long term. Don’t go around betting and speculating on individual stocks because all that will lead to is you losing your money.

I didn’t expect it to be, but the book was actually a pretty entertaining read, although sometimes Tobias’ witty writing style and jocular side commentaries had a tendency to cloud up the personal finance message intended. But overall, the book is an excellent introduction to the nuances of personal finance and does a great job of keeping the reader attentive and continuously interested.

10) Real Money By Jim Cramer – Straight from the crazy CNBC financial guru/lunatic who got famously hammered on the air by Jon Stewart – comes Real Money, by the emotional booya man himself – Jim Cramer. I know some say that Jim Cramer has lost all credibility in the eyes of serious investors due to his propensity and history of offering dubious advice, but the fact of the matter is that while he is definitely starting to attract a growing cadre of haters, he still attracts a very loyal investor following and knows a lot about the business. Honestly, individual stock picking isn’t for everyone, but if you’ve ever wanted to know more about the science and psychology behind this somewhat risky business, you might as well learn it from a very entertaining author on the subject.

The reality is that there is no one out there who has a perfect stock picking record and frankly, such an activity is really an educated crap shoot. But Jim Cramer’s Real Money and his other books are still fairly decent guide books chocked full of very good investing advice – tidbits such as, you shouldn’t risk your life savings in the stock market and most definitely not in any single stock. It’s one of the few books out there where you may just wind up loving and hating it at the same time. Try it for a spin.

11) The Richest Man in Babylon by George Clason – When I first started reading The Richest Man in Babylon, like many people, I was initially taken back by the compactness of the book and the weird story. But after having read it, I must say, I really enjoyed it. This book should be read by everyone from high school students to corporate executives alike – it’s that enlightening and all encompassing. Essentially the book contains a series of parables set in ancient Babylon. It teaches all the principles of basic personal finance and money management through the use of these classic life lessons. By reading the very entertaining stories, you gradually begin to see parallels in your life and gain a better understanding of how good and bad habits affect how one spends, lends, budgets, and invests money. This book was originally written in the 1920’s, but the fictional stories and life lessons imparted are still very relevant today.

12) The Wealthy Barber by David Chilton - If you enjoyed the preceding title, The Richest Man in Babylon, then you will definitely enjoy The Wealthy Barber as well. This book is written as a novel built around a central story plot set inside of a barber shop, with personal financial self help lessons sprinkled throughout. Some of the stories have characters engaging in discussions regarding important financial concepts such as proper saving habits, investing strategy, and tips on buying a house. The book offers the usual rehashed financial advice that other books offer, but with clear practical examples and in narrative form. If you are intimidated by traditional financial books about money, then this book’s conversational story book form will definitely appeal to you. It’s a great book about money and life for beginners to the subject.

13) The Intelligent Investor by Benjamin Graham & Jason Zweig – Praised by billionaire Warren Buffet as the best book on investing ever written, The Intelligent Investor by Benjamin Graham is that good. This current revised edition contains additional modern day commentary by author Jason Zweig who applies the classic principles to modern day relevance. If you are a speculative day trader looking for short term trading tips, look elsewhere. This book focuses exclusively on the fundamentals of long term value investing and the importance of buying undervalued stocks of great companies for the long term. This book offers a tremendous amount of investment wisdom but is rather dense and comprehensive. Some say it’s a bit technical, but I didn’t find that to be the case (but I’m pretty comfortable with occasional numbers).

14) What Color is Your Parachute? by Richard Bolles – Year after year, the author releases a new updated revised edition of this bible of sorts for job hunters and career change seekers, one that is always chocked full of new advice and resources. The current edition was clearly written with job loss sufferers of the current economic recession in mind as it contains plenty of advice on how to cope and save money in difficult times. This book is an excellent read for anybody who is actively searching for a job or contemplating a career change. The book services as a career guidance counselor that helps you discover your true aptitude, based on your skills, talents, and interest – to help you find a profession that maximizes your potential. The author’s writing style is very thorough and complete, and some people might be slightly turned off by the way he painstakingly hand holds the reader through every explanation in great obvious detail. But regardless, the Parachute series of self help books is a great resource and offers great advice on how to approach prospective employers, tackle interviews, and discover your true calling.

15) A Random Walk Down Wall Street by Burton Malkiel – Don’t be fooled. This best selling book is a must read for those who want to understand more about why it’s nearly impossible to beat the market and why following the advice of so-called stock picking gurus can be detrimental to your financial health. This book discusses the famed random walk theory and dives into the intricacies of behavioral finance, which studies the social psychology of investment decisions – with reviews and discussions of past historical stock market bubbles and investment crazes. The message of the book is clear – the market, while not perfectly efficient, is efficient enough to make it very difficult and extremely cost prohibitive to beat. At the end of the day, a savvy investor is better off holding an extremely broad basket of  all available market index funds for the long term than trying to seek out the undervalued stocks and hidden gems. This book will make you think twice the next time you blindly adhere to the financial tips that you glean from popular financial publications and financial quacks on TV. In most cases, picking individual stocks is really just a flip of the coin and a prayer. According to the author, these sources have absolutely zero predictive value in the success of individual stocks.

The book is somewhat more technical than some people might like, but I think the average reader can handle the basic charts, graphs, and ratios introduced in the text. The book is definitely not a short or quick read, but it will definitely make you think. I definitely recommend it.

16) The Complete Tightwad Gazette by Amy Dacyczyn - This book by Amy Dacyczyn, a self proclaimed “frugal zealot”, is the ultimate bible of frugality if there ever was one. Completely actionable, this detailed guidebook offers thousands of money saving ideas for everything imaginable, from the simple and common-sensical to the absolute extreme and borderline cheap. Unlike some of the other personal finance books that focus on intangible concepts and motivational philosophies, The Complete Tightwad Gazette is a step by step guide on how to save money in everything that you do in life. If you are already a thrifty guy or gal, this book will frankly blow you away in reverence. Her tips and advice on how to save money on food and household groceries are particularly useful in this current economy.

17) Rich Dad Poor Dad by Robert Kiyosaki – Almost everyone and their uncle who has ever been interested in personal finance or money has either read or heard about Rich Dad Poor Dad by motivational guru Robert Kiyosaki. In all of its controversial glory, it’s become quite a lightening rod for fans and critics alike. The book uses the story (the truth of this testimony is still up for debate) of two fathers, the author’s own dad, and his best friend’s father, each who dealt with money differently – to highlight the need for a new approach to achieve financial freedom and success in today’s climate.

Personally, after having read it a few times over the years, I continue to have mixed feelings about the book. It’s an admittedly motivational and rather fascinating read, but there are very few truly practical or actionable lessons in the book to take away. There is a call to action in the book, an urge to seek out higher income producing assets, but the author is rather light on specifics and makes such efforts sound too simplistic. One thing that readers must keep in mind is that the book was written during the whole real estate bubble and housing hype era. Much of the cash flow and passive income messages in the book center around Kiyosaki’s own successes in real estate purchases and sales during the booming era. Frankly, I have reservations whether those same sentiments are still entirely relevant in today’s depressed housing market. But despite its flaws, the book remains inspirational and a rather reluctant must read. Go read it and you’ll know what I mean.

18) How To Win Friends and Influence People by Dale Carnegie – The book was first published during the World War 2 era, but even today, it is still a dominant bestselling classic. Some things in life, particularly those that involve the interplay of human emotions and social interaction, remain timeless and forever relevant. Same species, different decade – know what I mean?

So why is this title included on a list of the best personal finance books you might ask? After all, this particular title is not directly related to the issue of money, fiscal responsibility, or investing. Well, I believe personal finance and the pursuit of financial freedom goes far behind just dollar signs and percentages. It also encompasses issues of psychology, life’s motivation, and emotional drive towards the pursuit of this ever elusive happiness. To acquire this happiness, the human and relationship elements are ever present. After all, financial success, as the author notes quite astutely, is mostly due to the “the ability to express ideas, to assume leadership, and to arouse enthusiasm among people.”

The book is filled with incredibly practical anecdotes that illustrate the best way to respond and maximize the relationship building opportunity in almost every situation. It doesn’t matter if you are a corporate tycoon, a church leader, or a college student on the rise, this book will guide you in your inevitable relationships and social objectives. The book is not exactly a thrilling page turner with exciting cliff hangers at every twist, but it’s an essential read for life long success.

Source URL: Best Personal Finance Books About Money – Reviews

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Happy New Year everyone! As much as I’d like to be forward looking, sometimes it’s hard not to recap the past. I think 2008 will go down as one of the worst years in American history in terms of the economy and national morale. Since the start of last year, there has been this gloomy gray cloud of recession worries and depression fears that has persistently lingered over the heads of all Americans. Despite our attempts to shake its clutches by turning our attentions to more exciting events such as the media circus and hype surrounding the historic presidential election of  Barack Obama, the first African American to be voted into the White House, it appears the ominous clouds will follow us into 2009 and beyond for the foreseeable future.

Who To Blame and Where To Go From Here

Those who want to take the easy way out by blaming the credit crisis and current economic woes on the Bush administration, or on the Democratic Congress, or even on the ongoing wars in Iraq and Afghanistan – have their sights on the wrong culprits. The primary blame should be placed on ourselves – the credit and home hungry American consumer who pushed housing prices to astronomical and unsustainable levels. Weaned on easy credit and driven to consume to great excess over the last few years, our abandonment of the age-old practice of saving and living within our means put us on the road to financial disaster that finally came to fruition during 2008.

While the spigot of credit offers and home mortgage loans flowed freely and easily, the destructive cycle of revolving debt and high risk investing was triggered. When housing prices finally halted its irrational surge and began to plummet, so too did the fates of dependent investment banks and mortgage lenders. The precipitous downfall took with it – former pillars of American financial might – companies like Bear Stearns, AIG, and Fannie Mae. In 2008 we saw the fall of major savings banks like IndyMac and Washington Mutual, and witnessed the catastrophic destruction of shareholder equity in financial giants like Citibank, Bank of America, and JP Morgan Chase. The domino effect of the housing collapse has caused the entire U.S. economy to pull back, leading to a decrease in consumer spending activity, triggering further scale backs in worldwide economic growth. With the ongoing deterioration and lock up of the credit and banking institutions, we are now entering an unstoppable economic recession, as massive in scale as our nation’s ever experienced, with no end in sight.

Certainly the federal government with its regulatory oversight powers have some share of the blame as it was their responsibility to ensure home mortgages were being priced fairly and sold at levels warranted by the underlying risk. The federal government’s overzealous housing agenda and eagerness to ensure that all Americans became homeowners (when a vast segment had no business ever becoming one), resulted in billions to trillions of dollars worth of risky subprime mortgages being offered to individuals totally unqualified for such loans. The Fed (with its infinite number of financial experts) still managed to fall asleep at the wheel and wind up negligently steering the great American ship into an economic iceberg. If it’s one thing that we hopefully have learned from 2008, it’s that even the most savvy and professional of financial experts fail to get it right sometimes – just ask any one of the trusting and savvy investors who invested their life savings with hell-bound scam artist Bernie Madoff and his $50 billion Ponzi scheme.

Without a doubt, 2008 was a terrible year for the economy. Many of my friends, particularly those in the financial and accounting sectors, now find themselves laid off and unemployed for the first time in their lives during what will likely go down in history as the worst economic recession since the Great Depression of 1929. But amidst the financial anger and desperation, I have faith that better times are ahead of us. Unless financial Armageddon is truly looming (and I don’t think it is), there is hope for better days in the years ahead. Until blue skies reign again, we’ll simply have to buckle down and adopt a more defensive financial and savings strategy to weather this economic storm. After all, we are all in this together – each feeling the economic pain in some way or another. We’ll get through the tough times in due time.

One Thing I Learned in 2008 – It’s Impossible To Predict The Direction Of The Economy and World Events With Any Real Precision

At the beginning of 2008, I posted a blog entry about my stock market projections and financial predictions for 2008. The purpose was to compare my plans for the new year with actual reality 12 months after. Well, after examining my predictions for 2008 and comparing my projections with what actually happened, I’ve come to the conclusion that I’m the worst soothsayer in the world. The great majority of my predictions were way off base, but then again, who could have predicted the current events as they ultimately turned out? It just goes to show that despite our best efforts, financial predictions are simply educated guesses at best. Here is how my predictions fared against economic and political reality.

1. In January 2008, I predicted the U.S. economy would be able to stave off a full blown recession during 2008, not realizing just how bad the financial and housing markets were and how much wealth destruction they would ultimately wreck on the overall economy. I was completely way off on this particular prediction. The economy ultimately nose dived into a severe recession and currently we are teetering on the brink of another cataclysmic wave of unemployment increases, surge in credit induced bankruptcies, and further drops in consumer spending. The collapse of the American economic engine due to unsustainable subprime mortgages and plummeting home prices has also managed to bring down down the economies of the rest of the world, as evidenced by staggering stock price wipe outs across the board in most of the U.S. and world stock markets. During the 12 month span of 2008, the Dow Jones Index plummeted 34%, the S&P 500 Index went down 35%, and the NASDAQ dropped 40%. Asian stock markets fared even worse as the Korean KOSPI dropped 41%, Japan’s Nikkei dropped 42%, and China’s FTSE/Xinhua FXI 25 Index plummeted a staggering 50%.
2. Interestingly, I predicted Presidential candidate Hillary Clinton would ultimately win the Democratic nomination and go on to win the U.S. Presidential election as I did not believe the Republicans could produce a sufficiently viable candidate who could sufficiently distance him or herself from President Bush and his administration to compete with the Democrats. A Democratic candidate ultimately did win the national election, but instead of Clinton, it was young Barack Obama who captured the hearts and minds of the American people, inspiring them to vote in the name of change for the nation’s first non-Caucasian president.
3. I’m not sure what to make of my prediction about the direction of oil prices. For 2008, I predicted that crude oil prices would not exceed $100 a barrel and that average fuel pump prices would remain steady at around $3.00. However, after blowing past the $100 mark and reaching highs of $125 during spring 2008, crude oil prices ultimately plummeted in a span of only 9 months due to drastic pullbacks in world wide fuel demand triggered by slowing world economies, eventually causing crude oil prices to plunge below $50 a barrel. Fuel prices now stand at less than $1.50 a gallon at many gas stations across the United States -  absolutely stunning levels we haven’t seen in some time. I suppose that’s one thing we can be thankful for these days – the availability of cheap gas.

In Terms Of the Stock Market, Gas Prices, the Housing Market, and the Economy, Here Are My Financial Predictions For  2009:

1) Doomed U.S. Auto Industry – Despite the vehement protests from a vast majority of American taxpayers, the U.S. President and Congress ultimately chose to ignore the public will and bail out the beleaguered U.S. automobile industry with a series of quick loans and a plan to buy shares in the companies. Unfortunately, I don’t believe the American auto industry as it currently exists today can be saved. Ultimately, I believe the big three car makers of GM, Chrysler, and Ford will need further governmental intervention at the risk of taxpayer expense sometime during 2009 to stay afloat, and will be back for more urgent federal bailout money. As it currently stands, the collective business model of the entire American auto industry is extremely flawed and the biggest crippling factor of the car makers’ ability to become profitable is the United Auto Workers (UAW) union. Unless the U.S. automakers can be freed from the high cost of its union strong-armed pension packages, health plans, and high wages, the U.S. auto makers will never be able to compete with their more financially efficient foreigner competitors like Toyota or Honda.

2) Low Gas Prices – I predict fuel prices will stay low for the entire extent of 2009 due to diminishing fuel demand and persistent economic drag attributed to the current economic recession. The only event that may trigger a significant increase in fuel prices sufficient to counter the recession effects would be some type of significant geo-political event such as an act of significant terrorism similar to that which occurred on 9-11 (which I don’t believe will come to fruition).

3) Continued Bad Economy and Recession – I believe the U.S. economy will get worse before it gets better. The first two economic quarters of 2009 will be absolutely horrendous as unemployment rates will surge and businesses will continue to lay off employees and shut down due to deteriorating conditions. In the latter half of 2009, during 3Q and 4Q, the U.S. economy will continue to suffer, although to a lesser degree than the first half. However, I don’t expect any type of notable economic recovery during 2009. Even if Obama pushes through his rumored $1 trillion economic stimulus plan complete with another round of tax rebate checks, the economy will still need a significant amount of time to work itself out. The banking industry and credit markets have simply suffered too much damage, and a new way of doing business must emerge before the economy will improve. Get ready for tough times ahead – grumpy bears are here to stay, and beat up bulls have left the building. I’m not predicting an outright economic depression, but it’ll be close to one.

4) Worsening Real Estate Market – Housing prices will continue to plummet in 2009 with no stability in sight. Certainly housing prices are ultimately local and regionally based, but nationally, I project average home prices to drop about 15% in 2009 and another 5% in 2010.  The current national glut of homes for sale is simply tremendous and the available housing inventory exceeds a 12 month supply. Furthermore, the rate of home foreclosures continue to increase and the ongoing credit crisis continues to make home mortgage refinancing difficult for most home owners. While mortgage interest rates for prime borrowers have dropped to lows of nearly 4%, the vast majority of prospective home buyers seem content to wait it out, knowing that time is on their side in terms of finding their dream bargain home in the next few years. I would know – I’m one of them. As a prospective single family home buyer myself, I’m in no hurry to buy a home anytime soon. I’m currently waiting for home prices in my area to drop another 20-25% before I step in. Knowing that many home sellers are refusing to sell their homes at present day low prices and are hoping to wait out the housing recession as well, it’s my belief that their collective refusal to sell at today’s low levels are only contributing to the worsening condition of the real estate market. Eventually, sellers will have to face the grim reality that home prices will not be returning to the highly leveraged levels of 2006 or 2007 for decades to come.

5) Gloomy Stock Market – Financial pundits frequently cite the truisms that the stock market is a forward looking beast and that it usually responds about 6 months before the actual economy does. Those two traits certainly may be true, but I don’t think the U.S. or world stock markets will be pricing in any type of economic recovery during 2009. The earliest we will likely see a bounce back will be sometime during 2010, at that’s being optimistic in my opinion. The high stock market prices of years past will not return again for many years. Remember, stock prices from 2002-2007 were buttressed through the power of leverage and debt financing via the unsustainable mechanisms of fancy mortgage backed securities and free flowing loans. With the current housing market destroyed, financial markets ruined, and banking institutions clutching their federal bailout money for life support and afraid to lend it out, it will be some time before we can expect stock prices to recover. Because investment and consumer sentiments are so pessimistic, and leveraged plays have all but disappeared, a quick V-shaped recovery is almost unthinkable. Perhaps it’s time to buy gold or save money in high yield savings accounts with the best banks online. For the majority of 2009, I plan to adopt a defensive turtle strategy and seek out protective investments such as FDIC insured savings accounts or high yield CD’s.

6) End Of Lucrative Credit Card Offers – With the recent passage of the new credit card rules by the federal government that greatly favor credit card consumers, scheduled for effect on July 1, 2010, major credit card issuers like Citibank, Capital One, Bank of America, Discover Card, and American Express will be forced to restructure their existing credit card agreements to respond to the new regulatory demands. During 2009, the major credit card issuers are likely to increase credit card interest rates for all consumers across the board, for both good and bad credit card customers alike. To compensate for the less favorable profitability standards of the new credit card regulations, formerly lucrative 0% balance transfer offers will be gradually be fazed out, with FICO credit score standards increased substantially to weed out those applicants with questionable credit ratings. While the new credit card rules don’t officially take effect until the summer of 2010, the credit card companies are likely to start implementing significant changes over the span of 2009. The era of the App-O-Rama and 0% APR balance transfer credit card deals is coming to an end.

Source URL: My Stock Market and Real Estate Predictions For Year 2009

Copyright Protected © 2009 Money Blue Book: Personal Finance Blog. All Rights Reserved.

Since its days as a leader in the do-it-yourself stock investing movement, E-Trade has grown and developed itself into a full service financial holding company with a wide array of banking and trading related services. Eager to shed and change its old image as merely a low cost discount broker, the company has  jumped into the online banking business. Hoping to change the public’s perception, E-Trade has heavily promoted its rapidly growing online savings and checking products in an attempt to leverage its established reputation as one of the best brokers into a similar position in the online banking market. Despite the presence of formidable competing online banks like ING Direct, HSBC Direct, and FNBO Direct, E-Trade seems to have thrived and undergone quite a transformation. Today, it’s not only one of the most popular discount brokers in the market, it’s also one of the best online bank options in terms of interest rate and website features.

The Combined E-Trade Savings Bank and Discount Broker Company Offers One-Stop Shopping For All Of Your Banking and Trading Needs

Today, not only can E-Trade customers buy, sell, and trade stocks, options, and mutual funds via its highly sophisticated electronic trading website, ETrade customers can also take advantage of a wealth of lending and bank deposit products like high interest checking, high yield savings accounts, certificate of deposits (CD’s), and even E-Trade branded reward credit cards. Because of its strong beginnings and expertise in the brokerage business (voted by SmartMoney as 2008’s best discount broker and a top 10 winner according to Barron’s 2008 online broker survey), E-Trade has also been able to successfully integrate its online broker and banking business together into a fairly seamless one stop full service financial platform for its customers – an important feature that is lacking and not always available with other online banks.

After much development, Etrade’s current banking centerpiece is comprised of two primary high interest bearing banking products:

• The high APY rate yielding Max Rate Checking Account
• And the high interest Complete Savings Account

ETrade Bank Offers High Interest Rates, and Fast Electronic Fund Transfers Between Banks, Brokers, and External Accounts

One of the combined E-Trade company’s most attractive key features is its consistently high interest rate offers. While the company does have a few banking and brokerage branches scattered throughout numerous states in the United States, E-Trade has always been primarily an online institution. Because of its website presence and ability to maintain substantially lower overhead costs compared to most traditional banks with regular branches, E-Trade has been able to pass on the cost savings to its customers in the way of consistently high annual percentage yields (APY) on its line up of checking deposits and savings accounts.

E-Trade Bank’s other strong feature is its well known ability to offer fast transfers. ETrade currently features on its online website the Free Quick Transfer service, an improved way for customers to make one click electronic fund transfers from one linked account to another without having to go through numerous pages of clicks. Electronic transfers between Etrade bank and Etrade broker accounts are instantaneous (a great advantage for those that use Etrade for both banking and stock trading). Banking customers also have the ability to link up all of their online financial accounts with their E-Trade platform, and transfer money around quickly as needed via ACH transfers at a comparatively rapid speed.

Opening and Funding An E-Trade Banking Account Is Quick and Easy, and Involves Only A Harmless Soft Credit Check

ETrade Bank offers a quick account opening process with minimal paperwork. Other than the nice welcome package you’ll receive via snail mail after getting your accounts approved, everything is done online. After clicking through the online application for your desired checking or savings account option, you’ll be required to verify your identity through a soft credit pull that is performed on your credit report. Fear not, the credit check is a soft inquiry for ID purposes and has no negative effect on your FICO credit score.

1) E-Trade Max Rate Complete Savings Account

After taking a look the interest rate offers promoted by other banks, I do not doubt E-Trade’s marketing claim that the APY interest rates of its Complete Savings Account has consistently stayed more than 8 times the national average APY for savings accounts. Its interest rate levels have indeed consistently remained one of the best deals out there for those seeking the best rate of return for their conservative assets. It is also interesting to note that the E-Trade Complete Savings Account has no account fees, no maintenance charges, and no minimum balance requirement to earn interest. The initial deposit requirement is only $1, something I think most of us can easily afford. All savings (and checking) deposits are also fully FDIC insured, up to the current federal coverage limit of $250,000.

2) E-Trade Max Rate Checking Account

As E-trade aptly puts it, the online bank’s Max Rate Checking Account is checking on steroids – due to its overabundance of account benefits. You can apply for the standard checking option, but if you want the most bang for your checking buck, you should select the Max Rate Checking offer when applying. Not only does its checking account offer a notable interest rate on checking deposits (something almost unheard of among most traditional brick and mortar banks like Bank of America or Citibank), its Max Rate Checking APY is more than 10 times the national average according to Etrade sources.

Its checking account perks include no ATM fees at any machine, at any bank, or anywhere nationwide, via (get this) unlimited ATM fee refunds. Max Rate Checking customers also receive unlimited check writing privileges, online check deposit images (so you don’t have to fumble with canceled paper checks), payment alerts, and free online bill pay reporting services. Free quick one click electronic transfers among verified and linked external financial accounts are offered as well.

While all checking deposits will earn the standard interest rate regardless of how much you have deposited, to receive the highest interest rate level requires a minimum balance of $5,000. A minimum checking balance of $5,000 is required to bypass the monthly $15 fee, but there are many ways to have this minimum balance requirement waived. By signing up for direct deposit of at least $200 a month, linking up your ETrade discount broker account with your bank accounts to maintain at least a totalof $50,000, or executing at least 30 stock trades per quarter, you can avoid the hassles of checking account minimums (which is how I personally have my monthly fee automatically waived every month with E-Trade).

Extra Information and Resource:

• ETrade ABA/Routing Number for direct deposits and ACH transfers: 256072691

Source URL: Review Of E*Trade Bank High Interest Savings and Checking Accounts

Copyright Protected © 2008 Money Blue Book: Personal Finance Blog. All Rights Reserved.

I don’t think it’s an over-emphasis to stress that proper money management is a very critical component of responsible living. Other than how you handle your family, friends, personal relationships, or perhaps religious views, how you manage your money probably has the greatest effect on the quality of your daily life. The abundance or the lack thereof of money can determine whether you live an existence of paycheck to paycheck living or determine whether you are able to live a life of complete financial freedom. It can also determine the type of home you can afford and the type of neighborhoods you can afford to move into. With its powerful trickle down effects, the way you handle your money also has far reaching influence on family relationships as well, affecting how your children are raised and possibly even determining their futures. Knowing how to calculate your current financial net worth and knowing how to track it on a regular basis will help you make better saving and investment decisions for yourself and your family. At the very least, it will force you to actively interact and stay abreast of your financial affairs, and stay knowledgeable and motivated about where you are on the road of life.

Calculate Your Personal Net Worth On A Periodic, But Continuous Basis

Your financial net worth is basically a snapshot of your current financial health at a moment in time expressed by a dollar denominated amount. In the world of personal finance, your personal net worth is akin to what corporations and accountants refer to as the balance sheet. Contrast that with something like a cash flow statement, neither your financial net worth statement nor your personal balance sheet contain numerical data like your salary or how much money you are spending on grocery expenses every month. However, such information is indirectly represented by changes in the net worth figures.

Net worth is simply the numerical figure you get when you take all of your assets, and minus all of your liabilities. Assets can be defined as everything you own that has value and can be expressed in terms of price or current market value. Liabilities can be defined as everything that you owe, including debt and payment obligations to another.

To calculate your net worth and determine the status of your current financial condition, you’ll need to add up all of your debt and liabilities into a single numerical number, and then subtract that from the total combined value of all the assets and financial accounts you possess.

1) Assets (Add Up All Of Your Cash Savings, Investments, and Fixed Assets) – The asset category is made up of the total amount you have in your bank accounts like checking and savings, the fund balances stored in your investment brokerage accounts, and the total value of your fixed assets which encompasses the fair market value of properties like real estate and vehicles. In general, your assets are made up of all your personal possessions and financial accounts that can be converted into monetary form in the event of a total liquidation sell off. It’s the total amount of money you could get if you pulled all of your money out of savings and sold off everything including your house and real estate properties for cash. To help you add them up, here is a basic breakdown guide:

• Step 1: Add up the value of your liquid assets (cash and bank accounts). Liquid current assets include cash, bank account deposits, checking accounts, savings accounts, money market accounts, Treasury Bills or T-Bills, and also the cash value of certain life insurance plans. These types of assets generally have the same value as cash as they are readily usable as cash or can be readily converted into usable cash form in a very short period of time. For example, the funds you have saved up in your online savings bank or stashed in your high interest savings account are both considered liquid assets as they are easily converted into usable cash form with a quick trip to the bank or ATM. Also, certain life insurance plans such as whole life and universal life insurance policies are regarded as liquid assets as well due to their convertible cash value, unlike term life insurance policies which have no cash value. Remember, we’re talking about the cash value of your life insurance policy, not the amount that would be paid out if you were to collect on the policy.
• Step 2: Add up the value of your investment assets (stocks and bonds). Investment assets tend to be less convertible into cash upon demand but nevertheless still make up your total asset count as they can be converted into cash within a reasonable period of time. Investment assets include certificate of deposits (CDs), stocks and bonds, mutual funds, and retirement accounts (401K, IRA, Roth IRA).
• Step 3: Add up the value of your fixed assets and personal possessions (real estate and vehicle). Fixed assets include the fair market value of the houses, condominium properties, and vehicles that you own. They also cover the market value of any other significant possessions including valuable artwork, expensive jewelry, or priceless household furniture. The actual decision of incorporating fixed assets into one’s financial net worth calculation is somewhat controversial as opponents argue that such assets are not appraised consistently and are not easily sold upon demand. Detractors to using the fair market value of real estate for example argue that incorporating home values frequently offer up an unrealistic and skewed valuation of true net worth. Particularly during a major real estate slump, homes are not always easily marketable and sold. Supporters obviously argue that incorporating home values into net worth calculations is important because home equity (the difference between the current market value of your home and the current balance of your mortgage) indeed has value as it can be converted into cash upon an earnest home sale and borrowed against during a time of need. For many, the fair market value of their primary residence comprises the bulk of their positive net worth and thus it would seem incomplete to not incorporate it into net worth calculation somehow. While I personally only add real estate and vehicle value into my calculation of net worth, disregarding the market values of other personal possessions like clothing and home electronics, I think the key is just to be consistent in what you include and what you leave out. It’s also particularly important to be very realistic when assessing fair market value, especially when it comes to home pricing. It’s probably best to under-estimate than to over-estimate the value of such fixed assets. You definitely do not want to give yourself the inaccurate illusion of being house rich with no other significant liquid assets to speak of. You’d only be fooling yourself.

2) Liabilities (Add Up All Of Your Personal Liabilities and Debt). Liabilities include any money that you owe from loans, or debt obligations you may have including credit card balances, car loans, home mortgages, home equity loans, lease obligations, student loans, personal debt obligations, and court mandated alimony or child support payments. Liabilities, whether current short term debt obligations like credit card debt, or long term liabilities like home mortgages and auto loans, must be added up and subtracted from the total asset number to come up with the complete net worth figure.

After you have added up the value of your total assets, take that number and subtract away the total value of all your liabilities to come up with your calculated total net worth. This will be the current snapshot status of your financial net worth number at this point in time. Whether you incorporate certain assets and liabilities into the calculation or leave certain factors out like personal possessions is not important. How you go about the details of tracking your financial networth is up to you – just be consistent from month to month. The ability to track your financial progress in a uniform way on a periodic basis is the most important factor.

Track Your Net Worth Using Online Account Aggregation Tools and Net Worth Calculators

For those not certain on how to go about tracking their financial net worth from month to month, I recommend using an online tool like NetworthIQ. While NetworthIQ’s progress charts are quite ugly (for the lack of a better word), the site’s a pretty popular choice among personal finance bloggers and those who want a simple networth tracking tool that is easy and a no-brainer to use. Just go create a NetworthIQ account and start posting monthly net worth asset and liability updates to get started. To keep actual tabs on the many bank, credit, and investment accounts you have in your financial portfolio, I suggest using an online tool like Yodlee. Yodlee is an online account aggregator service that powers the online account consolidation tools of popular financial institutions like Fidelity Investments (Full View), Bank of America (My Portfolio), and HSBC (Easy View). I personally use Yodlee powered tools through my brokerage at Fidelity and my bank account at Bank of America to help me track all of my account balances from one easy to view location.

Despite the disagreements on what ought to be and what ought not to be included into the calculation of net worth, don’t let that discourage you from attempting to track your own financial progress using your own preferred method. Questions such as whether married couples should keep their finances separate or combined for net worth calculation, and controversial issues arising from the inclusion of home equity or the value of one’s small business (like a blog business) into net worth calculation should not dissuade you from learning to track your personal financial progression. While I personally would include the total joint account balances for married couples into net worth, and personally would not include the market valuation of my home business into net worth calculation, to each his own. The key is just to be consistent so you can evaluate and chart your own personal financial growth from month to month. The goal is to give yourself the confidence and motivation to make the right changes and course corrections in your financial walk to help you achieve your long term financial goals.

Compare Your Net Worth To Others In Similar Situations

Net worth valuations may also vary greatly depending on the make up of one’s assets and liabilities. In general, assets comprised solely of liquid accounts and investments such as cash, bank account funds, and stock market investments tend to paint a more standardized and accurate picture of financial net worth. It’s when you get into vehicle and real estate valuations that the calculation of net worth gets a bit personalized and inconsistent for comparison purposes. Home valuation in particular is a tricky art and is not always entirely accurate and is highly dependent on who’s doing the appraising and the standard being used. Furthermore, just because a home is appraised at a certain price does not necessarily mean it can be sold at that high price. In a tough housing market, home buyers frequently demand closing prices well below supposed fair market value. Keep that in mind as you compare your own financial net worth with that of others. Remember that net worth calculations and standards are not always uniformly applied from person to person, and that net worth is highly relative. For example, a net worth of $100,000 for someone living in an expensive area like northern California or downtown New York City may not be as big of a deal as it would be for someone living in a cheaper state like Nebraska or West Virginia.

Other than using Net Worth IQ to track your financial net worth progression, you might also be interested in using the tool to run searches for the publicly available net worth profiles of others. For the sneaky voyeur in all of us, it’s an interesting way to view the financial health of those in similarly situated categories like age, income, occupation, education, country, and state. If you are dying to know – here’s my own publicly available Networth Profile.

Another good net worth comparison source is CNN’s Millionaires In The Making site where CNN regularly profiles singles and couples, documenting their individual stories to become a millionaire. The Millionaires In The Making site not only provides lots of great anecdotal financial planning tips, but it also provides the actual net worth breakdowns of all the individuals and families profiled. You might also want to try out CNN Money’s Net Worth Calculator tool, which ranks you according to how you stack up based on age and income. I’m not sure how accurate the tool really is and suspect the methodology is a bit off. However, it’s still an interesting comparison tool at your disposal. Just use it with a grain of salt.

Source URL: How To Calculate and Track Your Net Worth

Copyright Protected © 2008 Money Blue Book: Personal Finance Blog. All Rights Reserved.

For those who don’t know, the FDIC stands for the U.S. Federal Deposit Insurance Corporation, a federally run government organization that protects bank customers from the loss of their deposits in the event of a catastrophic FDIC-insured bank failure. The protection afforded by FDIC insurance is near iron-clad as it is backed by the full faith and credit of the United States government. There is no need for bank depositors to apply for FDIC insurance or even to request it as coverage is automatic. Below are the new and current FDIC insurance coverage limits for deposits at FDIC insured member banks. The new FDIC limits are effective starting October 3, 2008 and tentatively scheduled to expire on December 31, 2009. While the FDIC does not directly cover deposits held in credit union institutions, in response to the new FDIC limits, the National Credit Union Share Insurance Fund, or NCUSIF, has raised credit union insurance limits up to $250,000 through Dec. 31, 2009 as well.

Although the newly enacted FDIC insurance limits are slated to end at the end of 2009, I predict that Congress will more likely than not make the new coverage limits permanent after that time. Frankly, in light of the current financial crisis and deteriorating consumer confidence sentiment regarding the safety and security of our nation’s banks and credit unions, there is no reason the U.S. government should not allow the new FDIC limits to stay permanent.

The New Increase In FDIC Insurance Coverage For All FDIC Insured Deposits Will Help Improve Consumer Confidence In The Banking System

With the passage of the Emergency Economic Stabilization Act of 2008, the U.S. Congress has agreed to increase the previous FDIC insured limit of $100,000 by 150% to $250,000 through the end of next year until the last day of 2009. For those who argue that the new boost in FDIC insurance coverage is unnecessary and too high, keep in mind that after factoring in the effects of inflation since it was last increased in 1980, the current FDIC insured increase is perfectly in line with inflationary reality. Besides, desperate financial times require desperate measures. The U.S. and world economies are faltering and the major banking institutions are struggling to stay afloat during this terrible credit crisis. While the FDIC insured limit increase probably won’t have a direct effect on the credit crunch (I hate this phrase but everyone uses it) as the main problem in the banking sector is that banks are refusing to lend to each other rather than suffering from a direct shortage of bank deposits, having a higher limit will probably go a long way in instilling consumer confidence in the U.S. banking system again. In the long run, this should have a positive and stabilizing ripple effect on the economy at large.

Personally, I’ve been rather active lately in my banking transactions, opening new high yield savings accounts with the top online banks and shifting money around to make sure every single cent of my cash deposits are fully protected under the FDIC limits. As many concerned consumers have been doing, I have been seeking the shelter and safety of bank deposits during this time of financial and economic turmoil. As a small business owner I tend to carry around significant amounts of cash for payroll, accounting, and business investment purposes – much more than the usual consumer account holder. To ensure full FDIC protection for my bank deposits in excess of $100,000, I’ve been spreading cash around among multiple banks to increase my FDIC coverage limits by setting up separate single and joint accounts to take advantage of the separate FDIC coverage for each account category.

The new FDIC limit increase will allow consumers to keep more of their money at the same banking institution without having to scramble around desperately looking for other FDIC insured banking options to spread their funds around. While bank failures remain extremely rare, with the recent collapse of major banking institutions like IndyMac and Washington Mutual, the occurrence and possibility of such a reality has become all too real. The recent decision by the U.S. Congress to raise the FDIC limit on an emergency basis was long overdue and necessary to calm the public’s worry and reduce the number of irrational actions taken by those fearful of losing their money or investments. Ultimately the decision will help put a stop to the massive waves of bank withdraws due to panicky customers pulling their money out of banks in response to irrational concerns. The new FDIC insured limit will help prevent such desperate monetary runs on the banks and allow the banking system to continue operating as normal.

However, The New FDIC Coverage Increase Will Not Result In Higher Interest Yields Or Financially Affect The Vast Majority Of Banking Customers

While the new FDIC limit increase should help boost consumer confidence in banks and credit unions, and help stem some of the panic and fear in the marketplace, most consumers are unlikely to experience much of a difference. It’s mostly the wealthier individuals or small businesses who carry around significant amounts of cash in their checking or savings accounts that are likely to directly appreciate the new FDIC insurance cap. The great majority of average everyday banking customers do not have more than $100,000 in a single bank account anyway.

Furthermore, those who are hoping to see higher interest rates or yields on their high interest savings accounts or certificate of deposits (CD’s) will be sorely disappointed. There is a very real likelihood that as the perceived confidence in our banks goes up, the interest rate expectations may go down. Because the FDIC is financed through premiums paid by FDIC member banks, participating banks are obligated to pay periodic premiums for FDIC insurance coverage. As such, there is a high inevitable possibility that they may eventually have to pay more in the way of FDIC premiums for the new higher insurance coverage limits. With higher FDIC premiums to contend with, banks may ultimately pass on the cost to consumers by offering lower interest rates for their deposits.

In a move that probably will benefit smaller local and community banks more than the mega “too big to fail” banking giants like Citibank, Bank of America, or JP Morgan Chase, the new financial bailout plan also provides for unlimited FDIC insurance coverage for certain accounts. Banking customers of FDIC insured banks will receive unlimited insurance for money deposited into non-interest bearing accounts, a protection that primarily benefits small and mid size businesses that have bank deposits exceeding the new insured maximum of $250,000. This temporary, but extendable unlimited protection was enacted to stabilize business risk, and prevent the type of loss faced by many businesses when a bank or thrift savings institution failed. Under this temporary unlimited FDIC insurance plan for non interest bearing bank accounts, a typical small business will be able to keep $250,000 worth of interest bearing funds in a regular checking, savings, or CD account, and put the remainder in zero interest accounts for unlimited FDIC insurance coverage. Under the bailout plan, for the first 30 days of the program, all FDIC insured banks will enjoy this unlimited FDIC protection for their non-interest bearing bank deposits. After that, member banks must opt-out of the program if they no longer wish to offer this unlimited protection.

Source URL: New FDIC Insured Limit Covers Bank Deposits Up To $250,000

Copyright Protected © 2008 Money Blue Book: Personal Finance Blog. All Rights Reserved.

I know it’s not an unfathomable dream to have because I’ve seen the system work firsthand. The possibility is not just reserved for celebrities or the elite, but is very real and plausible for ordinary people as well. One of my close childhood friends is a multi-millionaire. And he’s only 30 years old. He’s not a self made millionaire as he inherited the vast bulk of his fortune from his parents, but it was his parents who put forth the gears of financial practice many years ago that brought their finances to what it is today. From the time my friend’s parents married, they lived a very frugal life. While they were by no means cheap, they avoided the peer pressures and temptations of living lavishly, opting instead for a humble home they could afford and limiting pricey expenditures like dining out to only rare occasions. They drove affordable American made cars and stayed away from buying expensive electronics and gadgets. However, at the same time, they by no means avoided the use of debt financing. Instead, they embraced its responsible use, viewing credit cards and balance transfer offers as the means to generate free credit card arbitrage income. Through the use of airline credit cards, they were able to finance family vacations and trips with free frequent flyer mile bonuses, and with business credit cards, they took advantage of high credit limit card financing and business spending rewards to earn cash back income. Quite a few years ago, the American Automobile Association (AAA) permitted its AAA credit card holders to enjoy interest and transaction free traveler’s checks charged as purchases to their credit cards. My friend’s parents frequently took advantage of this perk by depositing those checks into high interest money market accounts and high yield savings to earn free money – the early beginnings of what many now today call 0% balance transfer arbitrage (the ability to make money and generate net profit from a temporary price differential between two markets). However, despite their frequent strategic use of credit, they always made sure that they paid off their non-0% balances every month, thus avoiding high interest payments and late fees.

From their humble dual income paycheck beginnings, my friend’s parents loyally and consistently squirreled away the bulk of their wages into their high yield savings accounts, while always making sure they took full advantage of their respective employer’s tax deferred 401K retirement plans and matching programs. Every year, they maxed out their Roth IRA’s and their traditional IRA accounts as needed, while steadily plowing money into their stock market portfolio. Over the years and through the decades, in good times and in bad, they continued to invest, dollar cost averaging down as the markets dipped but continuing to strategically seek attractive investment opportunities as the markets rose. Their stock and bond portfolio consisted primarily of long horizon mutual funds and index funds, but they also purchased large positions in individual stocks as well. Instead of chasing performance or trying to time the volatility of stock prices, they patiently and wisely sought out long term positions in blue chip, value brands like Coca Cola, McDonalds, Disney, and even Berkshire Hathaway.

With their excess money, they purchased real estate. What started out as a single home, eventually blossomed into a housing portfolio comprised of several million dollar houses and a few very valuable condominium properties. As home values ebbed and flowed with the real estate market over the decades, they rented them out to help pay for their multiple mortgages. With the luxury of time and fiscal discipline, all of their multiple home mortgages have now been fully paid off.

While my friend clearly benefited from the wise financial decisions his parents made, he has also learned to embrace their frugal financial practices for himself. Today, despite his tremendous wealth, my long time friend remains one of the most frugal and unassuming people I know. I often joke that he is the “poorest rich person I know” due to his incredible frugality and disdain for excessive spending. He truly is the millionaire next door as one can’t possibly guess simply by looking at him that he has such vast wealth at his disposal. Meanwhile, though he lives a life of comparative comfort today, he continues to actively practice the financial wisdom of his parents – always looking for ways to broaden his income streams and constantly trying to find new and improved ways to invest his savings.

The Process Of Becoming A Millionaire Is Not A Get Rich Quick Scheme, But A Patient and Systematic Approach To Earning, Saving, and Investing Money

The whole point of this long story about my friend and his parents is to show that with some concerted fiscal discipline through personal finance education and a dedication towards building long term investment positions, anyone can truly become a millionaire. Given enough time, and in his parent’s case – several decades, the amazing power of compound interest can grow any small sum of money and turn it into a significant amount. It is a grossly overstated myth and fallacy that only those who inherited their money, won the lottery, or developed a successful small business can acquire wealth and become a millionaire. While having a very high income, striking it big in the stock market, riding the housing boom to the top, or acquiring riches through the passing of wealthy relatives can certainly speed up the process, even for the rest of us white collar or even blue collar workers who collect weekly paychecks have the potential to reach the promised land of financial independence.

Becoming a millionaire is not an overnight process and there are no gimmicks, scams, get rich quick secrets, or infomercial packages you can buy or learn to turn you into an overnight millionaire. Please stay away from those trashy midnight get rich quick TV commercials. With their flashy salesman approaches to convince you to part with your money, all they will do is lead you further into debt as you spend large sums of money buying their pointless tapes and useless DVD’s. While a tiny portion do manage to offer some substance with their flair, the vast majority of these televised get rich quick programs are basically scams and repackaged junk. There are occasional real money making, wealth building secrets out there in the market, but chances are you won’t find much information when these temporary arbitrage opportunities do crop up. Remember the old adage – “those who can, do – and those who can’t, teach.” It is very true. I personally invest and dabble in several very lucrative income generating businesses, both online and through my legal practice. However I would never reveal the secret and crux of my approaches and methods, at least while the going remains good. Only after I have personally tapped out the financial gold mine opportunities would I contemplate sharing those supposed secrets with others. And only then would I start writing and selling how-to guidebooks to supposedly sell my secret method.

The 10 Automatic Steps To Becoming A Millionaire

Below are the basic ten steps to start you down the road to becoming a millionaire. Every journey begins with a series of fundamental steps. If you truly want to become financially liberated one day, it’s time to start making the commitment to educate yourself and start thinking like a millionaire. Remember, there is no gimmick and it’s a long, steady process, but these steps will put you towards reaching that goal someday.

Earn Money and Seek Out Opportunities To Save:

The 10 basic steps to becoming a millionaire are broken down into two primary categories. The first main series of steps (1 thru 5) involve making money and preserving it. The second series of steps (6 thru 10) involve pursuing income producing investment opportunities:

1) Educate Yourself In Personal Finance, and Develop The Drive To Learn - A few common traits that are almost universally found in full fledge billionaires, and bona fide millionaires is that they are all driven to learn and succeed, and are willing to put their ambitions into action to make things happen. Border line cocky and very confident, self made millionaires operate with a plan and are highly motivated. Most are extremely pro-active and driven to constantly improve their financial lives and earning potential, whether it be through the pursuit of advanced degrees or the taking on of a calculated business venture risk. In my case, I graduated from law school and worked as an attorney for numerous years before I eventually made the decision to get out of that profession. The work was terribly unsatisfying and so I made the affirmative decision to become self employed and start my own online business. The decision was  fraught with greater risk, but the move ultimately reaped much greater rewards.

Aspiring millionaires need to take it upon themselves to fully educate themselves on the nuances of personal finance and strategic financial planning. Even those who ultimately deem it more cost and time efficient to outsource their tax preparation and financial planning work to a so-called expert, it’s still very important to develop a personal groundwork in finance and business concepts. Without a fundamental grasp of how compound interest works or an understanding of investment terminology like stocks, bonds, Roth IRA’s, and short selling, aspiring millionaires may never reach their full potential. As an aspiring millionaire myself, while I can currently afford to hire a tax accountant, I still choose to file my own taxes every year. Eventually as my tax situation grows more complex I may choose to hire a tax preparation expert to make better use of my limited time, but at least I will have already developed a good grasp of basic tax law and the the nuances of capital gain taxation and business deductions. When it comes to personal finance, always learn to do it yourself before hiring someone else to do it for you.

2) Invest In Higher Education, and Pursue Jobs and Professions With High Incomes – Certainly when it comes to becoming a millionaire, the most important entry level step is to develop a steady and predictable stream of income. Unless you have a fixed injection of fresh income on a continuous basis for a good period of time, you won’t have any investment capital to work with. While it has been shown on blogs and websites like CNN’s Millionaire in the Making series that reaching the one million dollar networth mark doesn’t require individuals or families to rake in a high 6 figure salary annually, it certainly doesn’t hurt. Clearly, the more money you make and the higher your annual salary, the sooner you are likely to reach your goal of becoming a millionaire.

When it comes to making more money, proper higher education is key. It’s no longer possible to get by in this ultra competitive world on a college degree alone. In almost all cases of professional advancement, a graduate or professional degree is paramount to future financial success. While a small portion strike it rich without the benefit of advanced degrees, the vast majority of successful millionaires have post graduate degrees. But it’s not just any random degree in higher education either. Certain advanced degrees simply have greater potential to lead to higher income jobs than others – professional graduate degrees like MBA’s, JD’s, MD’s, and advanced certifications in engineering just to name a few.

While it’s true that some jobs and professions are overrated with financial rewards that have been greatly exaggerated, on the whole, certain majors and professions simply have it easier than others when it comes to future income prospects. While many teachers, nurses, administrative assistants, and paralegals have the potential to make good money and live a decent life, their road to millionaire status, with all other things being equal, is significantly more difficult than that of big firm lawyers, doctors, financial planners, and successful small business owners. While I’m sure areas of study like English, music, theater, and history are incredibly rewarding in their own personal ways, the reality is that they aren’t the best majors to have when you have your sights set on becoming a millionaire someday. The professions that they lead to simply aren’t as lucrative as those related to business, health sciences, or computers. Probably the most financially lucrative fields of study can be found in finance and business, advanced health care, and engineering. Those who want to vastly jump start their road to millionaire-hood ought to pursue these specific types of study during their college and graduate school years. It’s where all the high income producing jobs ultimately are.

3) Save Money By Making Financial Sacrifices When It Comes To Small Daily Expenses – An important tenant of becoming wealthy is not only the ability to make money, but the ability to save money by cutting expenses as well. Even those with substantial streams of income can quickly waste away their money through shoddy investments and lack of proper saving habits. Just look at all the formerly wealthy celebrities with money troubles. An important step to becoming a millionaire is to simply spend less than you earn. The less you spend, the more you have to save, and the more money you save, the more money you have to invest and make your money work for you. Aspiring millionaires understood fully, that an affordable sacrifice today will ultimately pay off in the future through the power of compound interest and the passage of time. Along with putting your money towards the building of an emergency fund, there has to be a systematic habit of saving and investing. For some, this requires setting up an automated savings plan that automatically transfers money from your primary checking account into a high interest savings account or makes regular contributions to a mutual fund. For others it means learning to save by cutting back on common expenses – swapping that manicure or new video game, for more interest generating money in your bank account.

Of course, this doesn’t mean you ought to sell your beautiful home or car, and start living in a canvas tent or resort to eating just one meal a day to save money, but you should most definitely live within your means and learn to make some sacrifices in your life. It’s important to recognize that the vast majority of your income is probably discretionary and non essential – probably more than 50%. If you are like most people, you enjoy spending your hard earned money by treating yourself to dinners at fancy restaurants, going to the movie theater, enjoying that daily Starbucks coffee, buying the latest expensive designer clothes, or constantly upgrading your cars and electronic gadgets for the latest model. But by choosing to spend and waste your money on such frivolous and fleeting common luxuries, you are taking money away from your future. There is no need to incessantly pinch pennies like a miser, but try cutting some of these non essential perks and you’ll be amazed at the amount of money saved. That $5 cup of premium coffee everyday may not seem like a lot, but multiply that by 365 days a year and multiply that by the frequency of other luxuries in your life and the amount quickly adds up into the thousands of dollars. Remember, because money saved has already been taxed, money saved is worth much more than money earned, which has yet to be taxed.

As a naturally frugal person, I refrain from chasing after the newest gadget releases. While fancy LCD and plasma high definition televisions have already come out for some time and prices have dropped significantly, I’m perfectly happy with my old bulky CRT television set. Unless my television set gets damaged in the near future, I don’t see the pressing need to upgrade to a flat screen anytime soon. Like TV sets, cars also have a tendency to rapidly depreciate in value within a short period of time. While I can easily afford to buy a fancy, expensive sports car or luxury performance vehicle, I’m quite happy with my modest fuel efficient Honda Accord. I just don’t see the need to upgrade. It’s just a frugal, cost savings mentality that I’ve always had, and a positive trait that I believe will one day help turn me into a millionaire.

4) Seek Out Free Money Offers, Sales, Discounts, and the Highest Interest Earning Opportunities – Aspiring millionaires ought to constantly hunger for savings and finding cheaper and more cost efficient ways of doing things. After all, a fundamental trait of becoming rich is the ability to make and save more than you ultimately spend. Even when you spend money, oftentimes there are ways to structure your actions to end up with a significantly lower net loss. For example, why pay full price for a pair of nice jeans or a new pair of shoes when you can order the exact same item online at a discounted price by using promotional discount codes and by shopping through an online cash back shopping site like Ebates or Fatwallet? Why not stop by your local mall or visit the desired store to try out the product you want, but order the item from your home computer to take advantage of online promo codes and Internet discounts when it comes time to buying. Surely you can wait a few days for shipping and handling for such non essential items. One time savings may not seem like much, but multiply that a few hundred times or even a few thousand times over multiple years, and the money rapidly adds up. These days, it’s significantly cheaper to order most things online, especially when it comes to electronics.

For those with good credit and the ability to properly manage debt obligations, I recommend the use of cashback credit cards to make all of your purchases. By using your reward credit cards as you would otherwise use cash to make purchases, you are able to earn free rewards and cashback savings that you would otherwise not enjoy. So long as your credit cards don’t unnecessarily encourage you to shell out more money than you would ordinarily spend, you’ll accrue attractive rewards and free money in the process. By ensuring that you always pay off your credit card balances every month, you’ll avoid any extraneous finance charges as well.

Savings should never be left idling in a low interest checking account. When not invested, excess money should always be placed into a high yield savings account or CD ladder to garner the highest annual percentage yield possible. While you don’t necessarily have to be a rabid bank interest rate chaser like yours truly, it doesn’t hurt to know where to find the best online savings banks and where to find the top high interest rate offers.

5) Become An Entrepreneur and Run Your Own Small Business – Many millionaires are both entrepreneurs and owners of their own small business. These days, small businesses are the primary drivers of wealth in the United States, and not inheritance. Oftentimes, great financial success comes from the effort and financial gamble of starting one’s own business. While the risks are very real and the stresses of managing your own business operations can be daunting, the financial payoff is potentially much greater than that of working for someone else for the rest of your life. When you work for someone else, you are at the whim of another person’s directive, and as such the fruits of your own labor are not truly your own. Your efforts and talents are used to benefit the company, which is owned and controlled by another, and thus the bulk of the financial rewards do not fully trickle down to you. However, when you run your own business, while the risks are fully attributed to you and your partners, the full tally of benefits are delivered as well. In most cases, becoming a self made entrepreneur requires the assumption of a calculated risk or initial upfront financial investment. However, success sometimes graces people who are simply able to find new and improved way of doing things.

Oftentimes, the best way to become a self made entrepreneur is to take whatever you are good at in your current job and turn it into a self run business. For example, I have a friend who used to work at a landscape company as a manual laborer. After receiving significant exposure to the business of landscaping and the administrative aspects of running such an operation, he ultimately chose to start up his own landscaping company, eventually earning decent profits in the process. As the Internet expands and online commerce grows in popularity, many entrepreneurs such as myself are turning to the web to find ways to make money online. Whether it’s making money on eBay, or generating pay per click and affiliate income with my personal finance or health and fitness blog, aspiring millionaires ought to find ways to break the traditional 9-5 cycle of forever working for someone else. The key to expedited financial independence is to someday get out of the perpetual trading hours for dollars cycle – through self employment and the diversification of alternative income streams.

Make Your Money Work For You:

After generating income and making smart financial decisions based on frugality, the second main series of steps to becoming a millionaire is to take your savings and make them work for you:

6) Start Saving and Investing As Early As Possible – When it comes to saving, the best time to start was yesterday. The second best time to start saving is today. For those set on starting down the path of becoming a wealthy millionaire one day, not only must you continuously enhance and refine your money making potential, you must also find better ways to save that money. Those that want to become rich must make saving money an extremely important priority in their lives and not allow the saving mentality to drift into an afterthought.

As is often mentioned in the lingo of personal finance writers, aspiring millionaires must always “pay themselves first”. Instead of paying down the daily and monthly expenses, and then somehow scrounge up whatever income is left to put into savings, savvy savers must approach savings the right way. The designated amount that you plan to save up each month must be thought of as an expense or bill that must be paid off first. If you wish to save $1,00, $1000, or even $10,000 a month, you must shift those amounts from your daily checking account into your high yield savings bank or your CD ladder savings account immediately before you start withdrawing money to pay off bills or use the money on discretionary expenses like trips to the hairstylist, shopping sprees, or family vacations.

If you can afford to purchase material things and spend your money on life’s little luxuries like your daily coffee or after-work trip to the bar, you most certainly can afford to pay yourself first and save a planned chunk of money as soon as you receive that regular pay check. The key to saving is to make it a systematic practice based on your understanding that delayed material gratification today will beget greater riches in the future as your saved income grows through the magic of compound interest. Remember, frugality and the saving spirit are two lifelong traits of a savvy aspiring millionaire and should never be abandoned.

7) Learn To Manage Debt Responsibly, and Don’t Be Afraid Of Credit - If you genuinely aspire to become a millionaire, you must learn to handle debt instruments responsibly, both long term loans like home mortgages and revolving debt like credit cards. Those who are millionaires are almost always proven users of credit cards and home mortgages – with excellent FICO credit scores to match.

It’s very important to adopt good credit usage habits early on before the bad habits set in. Oftentimes, initial exposure to debt for most people occurs during the early college years in the form of student credit card usage or the taking on of student loans. While these early years are often precarious times for most young people as credit card temptations abound, these are also critical times in a young person’s life when the seeds of fiscal responsibility towards credit and debt are sown. Adults and college students alike, especially those that aspire to become millionaires, must learn to habitually pay off their credit cards in full every month and avoid carrying high interest balances.

Only after you have developed the ability to manage your debt obligations and handle basic credit card usage should you engage in more advanced money making strategies – like the arbitrage use of credit card rewards and cashback programs. Those that know how to use credit cards responsibility should learn to use high reward earning credit cards for all of their purchases, like using a designated grocery credit card at the supermarket, a designated dining out credit card for restaurants and coffee shops, and travel reward credit cards for hotel and airline expenses. Those of you who are able to properly manage your use of credit cards and aspire for millionaire status must develop the continuous and active drive to seek out the best deals and highest free money savings in whatever you do. Millionaires are frequently good negotiators and have developed skills for getting the most bang for their buck. Instead of paying cash for everything and not receiving a single cash back reward or discount in the process, why not use credit cards to make your purchases and earn free cashback bonuses, frequent flyer miles, and reward points without any real significant effort? While it may not make you rich, the credit card rewards can be tremendous – in my case, it’s almost $2,000-$3,000 a year.

The added benefit of active credit card usage is the extra boost it can potentially give to your FICO credit score when used properly. With a higher credit score, you’ll be able to qualify for significantly lower interest rates should you ever decide to take on home mortgage loans or apply for additional credit card offers. While I’m an active participant of balance transfer credit card arbitrage, and have applied for a tremendous number of credit cards over the years, my current FICO credit score is absolutely pristine at 802 (the FICO credit score officially ranges from 300 to a high of 850). This was made possible due to my perfect credit card payment history and my strategic understanding of how credit scores are calculated, as well as my knowledge of what it takes to keep my FICO permanently high.

8) Take Full Advantage Of Tax Deferred Retirement Accounts – If your current employer or employment organization offers employees like you a 401K or 403(b) retirement plan with contribution matching up to a certain percentage of your income, you absolutely must take full advantage. Tax deferred retirement plans like the 401K allow employees to make pre-tax contributions to their special retirement accounts by taking portions of their wages and deferring them into their 401K investments. The great benefit of such retirement accounts is that oftentimes contributions are itself tax deferred as the amounts are taken from your wages pre-tax, and the earnings from your 401K account over its long life are completely tax free when held for the proper period of time.

Within the tax deferred retirement account, participants usually have the ability to invest their account money into a variety of designated stocks, bonds, and mutual fund investments until the time of their retirement. Especially if your employer has a matching 401K where your contributions are equally matched to certain levels by your employer, not taking advantage or making regular contributions to your plan is essentially giving up free money. For typical working class folks, the matching 401K plan is how many of them save and invest significant amounts of money for their retirement. Your goal should be to save up and contribute as much as reasonably possible to such accounts. While retirement may seem so far away in the minds of many young people, the earlier that one starts to save and invest, the better.

Those who are self employed or who do not have 401K’s through their employer but who still want to take full advantage of tax deferred retirement plans should invest in a Traditional IRA (Investment Retirement Account) or open a Roth IRA. These plans enjoy very similar tax benefits as 401K accounts but usually with lower annual contribution limits. In certain cases, those who contribute to a traditional IRA can even enjoy special tax breaks and tax deductions for their contributions, thus lowering their overall tax liability. For most people, the Roth IRA is most advantageous as withdraws in retirement along with the decades of compounded earnings are tax free.

9) Invest in The Stock Market – The stock market is how many people generate significant amounts of money by making wise investment picks and holding for the long haul. In the short run, stock market prices can be volatile and totally unpredictable, but over the span of years and decades (with emphasis on decades), the stock market has historically brought about average annual returns of 8%. Of course, there are bound to be significant stock market crashes and unexpected bull and bear markets during the course of many years, but over a significant amount of time, the vast majority of long term investors have made money. During economic recessions, such as the current credit crisis and housing depression we are undergoing right now, stock prices will inevitably face retrenchment and huge dips. But as billionaire Warren Buffet once remarked, success in the stock market over the very long haul requires an understanding of the interplay between investment fear and greed. As such, it’s very important to continuously seek out bargains and investment opportunities even during the worst of times. It’s how many aspiring millionaires make their riches, by being greedy when the whole world is fearful, and making strategic long term bets during the absolute worst of times.

While stock market investors can participate in the purchase of stocks and options through their own low cost brokerage firms (view my list of the best discount online brokers), a great majority of investors get their primary exposure to stocks through their employer sponsored 401K retirement plans. Whatever the method of exposure, it’s important to invest for the long term. For those of you worried about unpredictable dips and spikes in the stock market, automatic investment plans, whether through your employer’s retirement plan or through automated bank to broker deposits into a mutual or index fund, the key is to keep investing continuously. Automatic investment plans have the added advantage of avoiding the mistakes of buying too much when stock market prices are high and not taking advantage of cheap prices when prices are low. Those that don’t want to deal with the hassle and risk of individual stocks should highly consider low cost no-load mutual funds or broadly diversified index funds that track major stock market indexes. As always, one should always adopt a diversified investment approach and never put all of one’s stock market investment eggs into one basket or company stock.

10) Buy A Home and Invest in Real Estate – While the housing market has been volatile lately, valuations have plummeted, and interest in real estate has waned as evidenced by the drop in house flipping shows on TV, in the long run, home prices have great potential to see positive returns. It’s during those gloomy housing depressions when opportunities and discounted bargains abound. Those that have wisely saved up their money will have the great opportunity to take advantage of such investments during down times through cheaper home prices and home foreclosure bargains. In such down times, it’s even more important to exercise your aspiring millionaire negotiation skills and work out real estate deals that provide for maximum gain. In addition to demanding low ball prices from home sellers, savvy buyers ought to demand significant financial concessions as well, so long as housing supply and demand permit. As always, your home will likely serve the dual purpose of shelter and investment, so you should still make sure you buy a home that fits your lifestyle. Buying too much home may result in the danger of payments that ultimately exceed your ability to pay depending on your mortgage plan.

While the financial and tax saving benefits of the home mortgage interest tax deduction have been greatly exaggerated and blown out of proportion over the years, it’s still an important way for high net worth investors and taxpayers to decrease their overall tax liability. You’re unlikely to find a millionaire who does not own his or her own home. Owning a condominium or a house has traditionally been one of the most proven ways for long term investors to increase their net worth. While in the short term of 10 years or so, home prices can rise and fall like the stock market, in the span of decades due to the finite supply nature of land, home prices inevitably will rise. Of course, the specifics of your real estate purchase strategy should depend on the length of your investment horizon and the remaining time you have left until retirement age.

Source URL: How To Become A Millionaire and Get Rich In 10 Steps

Copyright Protected © 2008 Money Blue Book: Personal Finance Blog. All Rights Reserved.

With the FDIC shutdown of major thrifts and banks like IndyMac and Washington Mutual, as well as the shakeup at Wachovia, even historically secure commercial banks are starting to feel the credit crunch squeeze. With the recent bank safety scares hitting Wall Street and now Main Street, bank deposit customers have been sent reeling and scrambling to check FDIC insurance coverage limits – calling their banks to arrange their affairs for sufficient coverage. When FDIC insured bank consumers are feeling uncertain and fearful, you know the confidence of the American people in their banking and credit systems have been significantly shaken. Many people have been left unable to sleep soundly at night, as lingering concerns of bank safety and security have paralyzed the American economy and investment psyche. So what’s a savvy investor and account depositor to do in this brave new world of financial bailouts and bank closures?

To Survive The Credit Crunch, Financial Crisis, and Housing Market Collapse – Seek Out Security, Stay Optimistic, and Look For Opportunities

Without a doubt, the financial, stock, and housing markets remain volatile as the subprime mess has paralyzed lenders, halting the once liquid credit markets. However, whatever you do, it’s best to avoid the “irrational exuberance” (quoting former Federal Reserve Board Chairman Alan Greenspan’s catch phrase) and stay clear of the overly extreme sentiments of certain doom and gloom naysayers. Remember, the economy will survive and the financial system will be repaired in due time – have a little faith.

Take our current energy crisis and oil supply depletion situation for example. Yes, it’s true the world’s supply of crude oil is steadily dwindling and gas prices have skyrocketed recently – however this doesn’t mean the world is going to come to a screaming halt as supply of our beloved dinosaur juice runs low. Even now, the American and world governments are actively advocating and promoting the advancement of new alternative fuels and alternative power sources such as nuclear, clean coal technology, solar, wind, and all types of clean, green energy. Society is infinitely resilient in the long haul and will adapt to changing times and life will go on as usual. Whatever you do, don’t resort to taking up ridiculous survivalist activities such as building a bunker, withdrawing all of your money from banks, giving up credit card usage, or stocking up on food, guns, toilet paper, and supplies to ride out some silly apocalyptic fantasy future that you irrationally conjure up. Unless you are already doing so, there is no need to start making plans to live off the land, move onto homesteads, and start milking your own cows because you anticipate the need to defend your community from the hordes of starving crowds who did not prepare for the supposed eventuality. The world as we know it will not disappear, so discard those wacky conspiracy theories and economic Armageddon notions immediately. Don’t be a nut. Instead, starting planning for a brighter financial future today for yourself and your family by making smart banking and wealth investment decisions for the long haul. When this economic malaise blows over in a few years or even in a decade, your smart financial steps today will reap dividends in spades. It’s during tough economic times that counter-intuitive minded investors profit in the long run, and it’s how future millionaires get made.

Despite the current market sentiment, I strongly advocate long term investors to not overlook continued portfolio diversification opportunities in the stock market through mutual funds and indexes, and to not neglect true long term bargains in real estate and housing. The age old truism and expression in the world of investing is true – that the greater the risk, the greater the return. This mantra is also strongly tempered by another financial axiom of billionaire investor Warren Buffet and his views on the interplay between investment fear and greed – that the smart investor should seek to be fearful when others are greedy and greedy when others are fearful. It’s how savvy long term investors ultimately pay off in their steadfast investment decisions today. In fact, Warren Buffet, who has successfully made billions of dollars by taking advantage of opportunities during the worst of times, has been actively practicing what he preaches, buying up significant value minded investment positions in severely beat down companies like Wall Street investment giant Goldman Sachs for $5 billion and forking over $3 billion for positions in mega technology services provider General Electric. Of course, during these turbulent economic times and periods of extreme stock market volatility, it’s best not to be overly emotional or make hasty decisions based on short term swings. The world is filled with chicken littles and emotional lemmings so it’s all too easy too succumb to hysteria and Street panic. But those who want to survive this economic downturn and emerge from the recession and credit crisis in stronger financial positions than before must maintain their wits and stay focused for the long term, spreading their financial wealth around through diversified investments and continuing to seek out potential opportunities.

But there is a caveat for this long term sentiment. While I personally have 2-3 decades to go before I need to hatch my retirement nest egg, with plenty of time to build up long term investment positions, as well as continuous steady income coming in to continue dollar cost average investing and taking advantage of interest compounding, not everyone is in a similar position. For many millions of people, the money they have at this present time is all the significant amount of money they will ever have and at their age and current stage in life, they simply can’t afford to risk further loss. These types of individuals are focused on asset preservation rather than opportunistic investing and thus for these investors, they need investment security and deposit safety today. For some, it’s also the need to preserve their cash from loss due to the fact they are close to retirement, or saving up for a specific upcoming expense such as a down payment for a new home. Or perhaps they need to maintain a stash of cash to give them confidence and financial safety net courage to continue investing for the long term, while weathering financial emergencies.

For the asset preservation types who want to ensure their current deposits and investments are shielded from bank failures and investment loss, safety is the paramount concern when it comes to selecting the securest place to put their money. But for the conservative types, they also desire a certain degree of liquidity and convenient access to their money. But with the diminished risk of loss at safer places like bank savings and money market accounts comes substantially lower rates of return. Such deposit and investment sources as the ones listed below will offer you more security for your money, but they will not earn you a lot of interest, and oftentimes will just barely keep up with inflation. Keep that in mind as you evaluate your options and perform your due diligence. Furthermore, while being cautious and putting your money into safe and secure investments will preserve you from drops in the stock and financial markets, you run the very real risk of missing out on major market rebounds and valuable long term opportunities.

For those determined to ride out the volatile economic storm by seeking safety, the following options are the best choices when it comes to answering this question – “what is the safest investment for my money to avoid the risk of loss?”

List Of The Safest and Most Secure Places To Save and Invest Your Money During A Recession Or Economic Crisis:

1) Bank Savings and Checking Accounts – Of all the ideal places to store your money during the worst of times, other than in U.S. Treasuries, the best place is in a traditional bank account. While the rate of interest return on bank account deposits will never beat the long term rate of return on a properly diversified stock portfolio, depositing your cash in something like a high yield savings account is the easiest and most practical solution for those worried about the safety and security of their money. For those searching for the best high yield savings accounts offering the highest annual percentage yield (APY) interest rates, here are the best online savings banks out there (all of the following recommended high interest banks are fully FDIC insured, and all account deposits are protected under the FDIC insurance coverage limits):

1. FNBO Direct – 3.50% APY
2. WT Direct – 3.31% APY
   
3. E-Trade Savings – 3.30% APY
4. HSBC Direct – 3.25% APY
   
5. ING Direct – 3.00% APY

In terms of safety, reliability, and liquidity, putting your money in a bank account is the easiest and most straight forward savings option. Not only is your bank deposit earning interest, it’s FDIC insured and easily accessible. The Federal Deposit Insurance Corporation (FDIC) is a federal government run enterprise that provides insurance coverage and protection for the deposit accounts of participating member banks, guaranteeing their insured accounts from unexpected loss. While FDIC insurance coverage limits vary depending on the number and type of account ownership categories you have at each bank, the rule of thumb to remember is that for each individual, the FDIC protects up to $100,000 in deposits at each banking institution for each ownership category. This means that at each FDIC member banking institution such as Citibank or Bank of America for example, each individual may be insured up to $100,000 for a single account and get additional coverage – like a separate $100,000 coverage limit for a joint account with his or her spouse. Furthermore, for retirement accounts like IRA’s, Roth’s, SEP’s, and Keogh’s held in a member bank in the form of a bank deposit (as opposed to something like a mutual fund), there is also an extra but separate $250,000 FDIC insurance coverage limit.

While skeptical investors and chicken little depositors might cite the recent failures of major commercial banks and thrifts like IndyMac and Washington Mutual as reasons to be wary of the safety of commercial banks, the reality is that in all of the recent bank failure scenarios, all of the FDIC insured deposit accounts that fell within the coverage limits were fully protected from loss. Even amidst the current mortgage crisis and credit crunch, the great majority of commercial banks are considered well capitalized. The possibility of a bank failure and the probability of a sudden FDIC takeover is extremely remote. However, even in the event that a bank does happen to fail, consumers would continue to enjoy uninterrupted and easy access to their FDIC insured bank money.

It is also interesting to note that since the FDIC was established three quarters of a century ago after the Great Depression, no banking customer has ever lost a single penny of their FDIC insured deposit at any failed bank. Your commercial bank may go out of business or suddenly be unable to continue operating as a viable banking institution, but Uncle Sam, bolstered by the virtually unlimited financial resources of the federal government will back up your money in full, up to the guaranteed FDIC insurance coverage limit. Even in the event that allotted FDIC funds become tapped out, the federal government can always authorize itself and the U.S. Mint to print emergency money. It is almost inconceivable to me to even fathom the possibility of the FDIC failing or the FDIC funds to somehow go bankrupt. Such a dire failure would probably require that the United States federal government suddenly cease to exist or be in such horrible shape that losing your checking or savings account deposit would probably be the least of your concerns. At that point of Armageddon, you’d probably be better off investing your remaining money in guns, canned food, and a nuclear fallout bunker. There is a reason why the whole world turns to the U.S. for economic, political, and militarial stability and guidance – we have the most powerful, tried and true system in the world. It’s not perfect, but it’s extremely resilient and will ultimately overcome struggles in the long run.

2) Laddered Bank CD’s – While putting your money in a high interest savings account is your best bet in terms of account safety and liquidity, those who seek a slightly higher APY rate of return may want to consider dabbling in bank certificate of deposits (CD’s). CD’s can be found and purchased through commercial banks and certain deposit brokers (view my list of the best online brokers), and along with regular bank deposits, are both considered very safe investments. Like checking and savings accounts, certificate of deposits are also insured up to $100,000. However, do keep in mind that for each individual customer at each banking institution, checkings, savings, and CD’s are lumped into a single FDIC insurance category for coverage purposes.

While CD’s tend to offer fixed interest rates that exceed that offered by checking and savings accounts, the catch is that unlike the variable interest earning bank deposits, your CD deposit is locked into a fixed interest rate at the time of investment. When purchased, the CD account has a set maturity date such that if withdrawn too early, the CD funds will incur an expensive penalty. When you buy a CD via your bank, you invest a fixed sum of money for a fixed period of time – anywhere from six months, one year, five years, or longer. In exchange for your agreement to keep the money invested and locked for the pre-arranged period of time, the issuing bank pays you a high interest rate, typically at regular intervals throughout the year. When you cash in or redeem your CD, you receive the money you originally invested plus any accumulated interest. But if you withdraw prematurely, an early withdrawal penalty may cause you to forfeit a chunk of your original investment.

While CD’s enjoy higher interest rates than traditional savings accounts, the potential hassle with CD’s is that once locked in, their rates of return have a potential to lag behind and become surpassed by variable high yield savings accounts if those interest rates rise. The best way to get around this problem is to ladder your CD investments by purchasing CD’s with staggered maturity dates. For example, for those buying CD’s for a period of just a year, one could purchase multiple CD’s, maturing at dates of 1 month, 3 months, 5 months, 7 months, and so forth, thus ensuring that you will always have money coming in and cash on hand at set intervals. CD ladders are a good idea for those wary about locking up their money for long periods of time, but you have to choose the lengths and maturity dates you’re comfortable with, otherwise you’ll toss and turn at night and stress about your lack of liquidity in case of a financial emergency.

3) U.S. Treasury Bills and Bonds – U.S. Treasury Bills, or T-Bills as they are often called, are extremely secure debt instruments issued by the U.S. federal government. They are mostly notably used by large institutional investors and individuals with substantial assets during times of economic crisis and societal instability when there is an instinctual flight to quality. However, I tend to stay away from these bond instruments and rarely invest in them. Their fixed rates of return are terrible and simply too low for my liking. While they offer rock solid protection backed by the full faith and credit of the federal government, the interest rate yields for U.S. Treasuries are often low and based on auction driven demand. Because Treasury rates of return are based on bidding demand that’s heavily influenced by societal factors, during times of economic crisis or political instability, rates of return on U.S. Treasury Bills and Bonds can plummet. During major economic depressions and recessions, U.S. Treasury yields can sometimes even go negative, that is, investors are willing to accept a small destruction of their investment to guarantee no larger destruction.

While U.S. Treasuries generally provide almost laughingly low rates of return on investment, they provide near iron clad safety and protection for your money. Treasury Bills are essentially “IOU” debt instruments issued by the United States federal government to any consumer, business, or institutional investor willing to buy them, and they are used to pay off the U.S. government’s own maturing debt paper and to pay off its own bills. By issuing short term U.S. Treasury Bills, mid term Treasury Bonds, and long term Treasury Notes to consumers, buyers essentially lend the government money in exchange for a fixed rate of return and a solid promise by the U.S. government that the debt investment will be repaid back in full upon maturity due date. Along with FDIC protected banking assets, the world also regards U.S. Treasuries as credit risk proof – the perfect place to store money for the extremely risk adverse.

U.S. Treasuries range in maturation from a few weeks for the short term T-Bills to as long as 30 years for the Treasury Notes. Of course, the longer the maturation date, the higher the fixed interest rate the U.S. debt instrument pays out, same as the case with ordinary bank CD’s. Same as with CD’s, for those who want to inject greater liquidity into their Treasury investments, they may want to consider laddering their Treasuries as well, by purchasing multiple U.S. Treasuries simultaneously offering different maturity dates. The recommended way is to purchase multiple Treasury bills and notes that will expire at regular set intervals and have them automatically rolled over into newly issued Treasuries for continuous interest earning effect, but still maintain a semblance of liquidity.

The simplest way to purchase U.S. Treasuries is to go through the federal government’s Treasury Direct website. There you can follow the instructions to open a new account for individual investors by providing your personal and financial information such as name, mailing address, Social Security Number, bank deposit account, and bank routing number. You can purchase as little as $100 worth of U.S. Treasury “IOU’s” (the current minimum investment) or you can purchase millions of dollars worth. While there is a competitive bidding process of yield prices, most ordinary non-expert individual investors can opt for the non competitive process and simply agree to the current spot offering rate. As such, the service is probably more beneficial to extremely wealthy investors unable to find full protection under the FDIC limits and needing to preserve their millions of dollars in extremely safe lock box type of accounts. There is currently no limit to the amount of U.S. Treasuries that may be purchased and interest income derived are exempt from state and local taxes.

4) Money Market Funds – Money market funds are conservative mutual funds that invest in short term, stable debt instruments, high quality securities, and other forms of top rated short term commercial paper that can be easily sold, making the likelihood of any loss of principal extremely rare. Unlike traditional mutual funds and index funds, asset preservation minded money market mutual funds do not invest in stocks, which while lends itself to greater stability, also results in a much lower rate of return compared to their growth oriented counterparts. While most mutual funds, particularly those that invest in riskier stocks and investments are not all that safe and secure from investment loss as they ebb and flow with the economic cycle and the plight of underlying corporations, money market mutual funds tend to substantially more stable.

However, while money market mutual funds have been traditionally regarded as solid and reliable investments, they are not without a tinge of risk, depending on the composition of the money market fund’s portfolio. While the great majority of these funds have never lost money or failed, recent money market fund events in the news have sent a chill through the financial world. Recently, the Reserve Primary Fund, a giant money market mutual fund, announced its investors would lose money. Instead of each money market fund share being worth the customary $1, each would now be worth 97 cents, essentially “breaking the buck” in the process, forcing investors to eat a 3% loss. The loss was triggered by the fund’s purchase of debt securities issued by Lehman Brothers with a face value of $785 million that ultimately became worthless, as Lehman Brothers ultimately spiraled into bankruptcy and ended up on the chopping block for sale due to failed investments in subprime mortgages.

The moral of the story in terms of flight to quality is to seek out high yield bank accounts and U.S. Treasuries for safety first before seeking out money market funds. While money market funds are significantly more secure than stock based mutual funds and are generally still considered decently safe places to invest your money, in today’s dangerous and ever shifting credit markets, they simply do not offer the same 100% protection as that offered by savings accounts, CD’s, and U.S. Treasuries.

5) Gold Investments – This is most definitely not a recommendation but rather the raising of another interesting alternative way to hedge against economic risk, inflation, and the weakening dollar. I hesitated to even mention gold and such hedged investments against risk, but everytime the economic and credit markets head south, the subject of buying and investing in gold always comes up. Gold, silver, and other valuable commodities are tangible material investments that always skyrocket in value during difficult economic times. When there is political and social instability due to frozen credit markets or news of terrorist attacks that shake up the financial system, the housing market, or the stock market, the value of commodities not tied to a variable money system but that is instead linked to underlying rarity based on exchange driven supply and demand goes up.

But remember, buyers beware – one thing to keep in mind is that gold is just like any other investment – it’s still a bet against economic times and prices do fluctuate with great volatility. Like with any other educated bet, your gamble may pay off big or backfire significantly. While prices of gold are almost certain to remain high as the economy flirts with a full blown economic recession and the financial markets continue to flounder, prices of gold have the potential to decline significantly should there be signs of an economic recovery. Thus for the conservative investor who is seeking a flight to quality in his or her investments with pure asset preservation in mind during times of economic instability, I would recommend treading with great caution when it comes to investing in gold. Unless you have experience with gold investments, stick with Treasuries, high yield bank accounts, and CD’s instead.

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