101 Investing Tips

11) Earning a high return requires more risk, but does not necessarily lead to a higher return.
Remember to ask, “What happens if I am wrong”. If you lose 100% of your investment in one stock, it greatly affects the performance of the rest of your portfolio.

12) You can’t know how much risk you can tolerate until you’ve tasted real losses.
Until you have gotten sick to your stomach and can’t eat you do not know what it means to lose.
More to come!

101 Investing Tips

9) Dollar cost average.
Regular commitment is a great way to eliminate emotional decisions from your investing.
10) Rebalance.
This is closely tied to asset allocation and dollar cost averaging.

More to come!

101 Investing Tips
7) Remember regression to the mean.
Exceptional past performance does not mean the same is true for the future. Anytime the CEO is on the cover of a major magazine, “Watch out”.

8) Don’t pull money out of the market trying to catch highs or lows.
Trading the markets has never proven to be successful for most investors. Focus on your asset allocations. This probably holds true for real estate as well as stocks.

More to come!

101 Investing Tips

5) Diversification is the wonder drug of the investing world.
Enron will show what happens by putting all your eggs in one basket. Remember to ask, “ What happens if I am wrong”.

6) Over the long term, stocks have returned more than bonds, and bonds more than cash.
There is a certain order in the universe and the short term oscillations will always track the long term trends. Long term equity will return more than debt.

More to come!

101 Investing Tips
3) You can retire comfortably without ever learning how to pick a stock.
Put your confidence and money in index funds and you will probably outperform most investors. 60% stocks and 40% bonds has passed the test of time.
4) All investing involves taking risks.
Just believe it!

More to come!

101 Things to Know About Investing
The following series is a compilation of some of the smartest and most common sense rules of investing that I have seen put in one place at one time. The original article was published in Money Magazine March 2004. The headings are verbatim from the article The commentary is mine.

1) You have an advantage over the pros.
Professionals must think short term to compete against the market quarter by quarter. Individuals can focus on the long terms Benjamin said long ago.

2) Asset allocation is more important than trying to find the next Microsoft.
Over the long haul stock and bond returns will track the averages. Your view of the future will dictate how much you commit to each area. The fine-tuning comes later.

Perfect solution to a lingering problem

Maybe I have been watching too many CSI programs, but when will a DNA test on Anna Nichole's baby and each of the doting fathers solve this question. Of course, the list is so long that process could take months just to collect the samples.

I sure hope the news channels soon realize there are other more important issues to cover than 20 hours a day of a has-been bimbo.

Video Lottery Terminals

Before I proceed, understand that I do not own a racehorse or racetrack, and the chances of me putting money in a slot machine are next to nil. Outside of Vegas I have never been in a casino except for Lousiana and Europe and that was was because they happened to be where I was at the time.

Rep. Ismael Flores of Texas introduced a a bill Tuesday to allow Video Lottery Terminals (VLT) at racetracks. This is an age old controversy which I am not going to argue. I am not particulary concerned about the religous, moral or ethical implications of gambling. It is an entertainment or vice depending on how it affects you.

What we do have is a perfect example of how politics and lobbying play out for individuals and an industry. The horse iondustry in Texas is staggering. It is a several billion dollar industry that employees thousands of Texans. The race industry is just a portion of the horse business. From the centuries old ranching era to backyard horse owners, the Horse is vitally important.

The fact is that all of the surrounding states allow some form of casino type gambling. The hard result is the owners of race bred stallions and mares are exiting Texas at an alarming rate. The answer is a simple matter of economics. You race in other states and win more money because the purses are enhanced by a small percentage of the amounts wagered not only on the horses but also on the VLT's in that state. As I understand it, this percentage is used to supplement race purses and promote the equine industry in Texas, or state where the wager took place, regardless of its relationship to racing or gambling. Just imagine part of the dollars spent by gamblers being used to provide college scholarships and do equine research in other states.

The reason for this exodus is Texans by the thousands travel across the state lines to spend the money they earn in Texas. This is not just gambling but lodging, food, entertainment, etc.

Texas now offers billions of dollars in tax incentives to attract business to Texas, but will not make a simple decision to keep what is already here, established, and a Texas tradition.

Interesting article...
http://www.statesman.com/news/content/news/stories/local/12/23/23horsesgone.html

Who are they kidding?

I listen to the news and see Diane Sawyer's interviews from Iran. Who in their right mind believes anything that those so called leaders of Iran and North Korea, as starters, is the truth unless it served their purpose. They are liars and will renege on any agreement as soon as the ink dries.
Unfortunately they know the U.S. is waivering under the barrage of press and panty waist complaining of the Democrats and even worse many of the Republicans. We are playing right into the Terrorist's hands. This includes the other nations that are supporting the terrorists.

Financial Rules of Thumb 4

10) Monthly payments on installment debt shouldn’t exceed 20% of your take home pay
That is pretty confining to look at only installment debt. Look at your total debt and try to stay under 40% of your take home pay.
11) As long as you have a nest egg $1 million, you can retire comfortably
A million dollars is not what it used to be. My personal opinion is that there is not a ROT because your net annual requirement to maintain a standard of living is the goal. Work backwards from this to determine how much income you need then how big a nest egg.
12) Don’t buy a house that costs more than 2.5 times your annual income
Dumb idea. Your home is probably the major investment in your life. It is to big a decision to limit the choice to a ROT. Focus on whether it is good investment. One of the smartest guys I know went years before he bought a home because he did not think it was a good investment. A wife and family made him change his mind.

Financial Rules Thumb 3
7) A Roth IRA is always better than a traditional IRA
All the people I have talked with or read agree that it is. The problem currently is that if you are above a certain income threshold you cannot make a contribution. One possibility is, if you can manage your income to allow one year to be below the threshold, then convert a portion of you regular IRA to a Roth. This is fairly complicated so check with an expert
8) Save 10% of your income each year
That would be a minimum in my estimation, if you truly want to have a secure financial future. Just run the numbers relative to compound return to see the tremendous impact on your net worth thirty years out.
9) Don’t buy long term care insurance if you have less than $30,000 in annual income or more than $1 million in assets.
We have long term care insurance and I feel that it is a great investment for almost any level of net worth. A notable exception would be Warren Buffett. My caveat is be sure to do your homework concerning the carrier and terms

Financial Rules of Thumb 2
4) Buying a car is always cheaper than leasing
I have never leased a vehicle because I drive them a long time and can do a lot of my own maintenance. Your time horizon coupled with financial situation can give the insight needed.
5) Always go with a fixed rate mortgage – especially when interest rates are rising
There are way to many factors and options to consider to say this is a good rule. Selecting you loan is based on your cumulative projection of interest rates, ownership horizon and financial ability to pay. Be sure to consider “What Happens if I am Wrong”
6) Your life insurance coverage should equal six times your annual income
I think it should be more, but for some people they do not need any at all.

Financial Rules of Thumb

These “Rules” are just some that I have either heard or seen used. A Rule Of Thumb is great as long as you realize every situation is different and there is no law of nature that provides for Rules of Thumb to be correct or even close.
1) Close credit accounts you no longer use
This is absolutely wrong if you need your credit score to be as high as possible. The rating services such as FICO look at past activity, amount of credit available, and your utilization. A good account can help even if you do not use it.
2) Set up an emergency fund to cover three to six months’ worth of expenses
This is probably a good number. I would lean to the six-month figure if possible. You never know when something major can go wron and you always underestimate.
3) The percentage of stock in your portfolio should equal 100 minus your age
Your financial position dictates what this should be. If you are 65 and only 35% of your investable assets are in stocks or some vehicle that at least has a chance of beating inflation you are cutting your throat if you live to 100.

THE POST OFFICE SUCKS
This is time for my semi annual complaint about the U.S. Postal Service. Realizing that most people probably know that the post office is not open on Saturday, I did not. However, seeing a parking lot full of cars I decided to go in and buy some stamps. Surprise -- after waiting in line and finally getting to the front desk, the clerk leaves. The remaining clerk looks up and says "I asked her to stay for one last customer." But I was still standing there to be helped.

Being very short tempered when it comes to the post office, I asked to see the supervisor. He adivises me the post office is not open on Saturday. They can't open to sell stamps. It makes no difference there are fifty people in line and no signs saying anything about not being open for business.

Come to find out the whole world came in to get passports. I can't even get a stamp.