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Posted on: March 17, 2021

There are different types of mortgage loans available to today’s consumers, each with slightly different guidelines. Some have inherent advantages so it takes some time to consider which loan type best suits your requirements.

Let’s take a look at the different programs to see what’s right for you.

Click here to check today’s VA loan rates.

VA Refinance

VA loans are available for eligible veterans, certain active-duty personnel, borrowers with six years’ service in the National Guard or Armed Forces Reserves, and other selected borrowers. VA loans offer two types of refinancing, a standard or a streamline — all backed by the Department of Veterans Affairs.

A standard VA refinance requires the borrowers to provide complete documentation of their loan file including a new appraisal, income and employment verification and fair credit. This loan is also known as a VA cash-out refinance, and is typically only used when getting cash out or paying off a non-VA loan.

Apply for a VA cash out loan here.

For those with a VA mortgage, there’s the VA streamline refinance, officially called the Interest Rate Reduction Refinance Loan (IRRRL). This refinance in essence allows eligible borrowers to drop their rate with very little documentation, time, or money. No income or asset verification and no appraisal are required.

Click here to apply for a VA streamline refinance.

The streamline program may be used to finance a property that was previously occupied and a VA loan used to finance the original purchase. Only an existing VA loan may be eligible for the streamline program. No cash out is allowed.

All VA loans require a funding fee which can be as high as 3.3 percent of the loan amount and may be included in the final loan. For the VA streamline, the funding fee is dramatically reduced to as low as 0.50 percent.

Non-VA Refinance Types

For eligible homeowners, the VA loan is usually the cheapest and easiest option. However, in some cases, those looking to refinance might choose another loan type.

Here are the main non-VA choices.

1. Conventional Refinance

Conventional mortgages are those approved using guidelines established by Fannie Mae and Freddie Mac and are by far the most popular program. Almost every lender offers them and guidelines are mostly consistent from lender to lender, with very few differences.

Mortgage rates on conventional loans are very competitive as lenders compete using the same programs. The best use of a conventional refinance occurs when the homeowners have at least 20 percent equity in the home. In this case, no private mortgage insurance is required.

A VA refinance requires an upfront funding fee, which ranges from 0.50% to 3.3% depending on refinance type. But conventional loans don’t require an upfront fee. This could save Veterans money, provided they have enough home equity for a conventional refinance.

Check your refinance eligibility here.

A conventional loan can also be used to finance an investment property. Other programs, VA, FHA, and USDA loans are only available to purchase an owner-occupied home while a conventional loan can be used to finance the purchase of a primary residence or a rental property.

Borrowers are also allowed to pull equity out of the home in the form of cash when refinancing, referred to as a “cash out” refinance. Most lenders allow for a cash out refinance up to 80 percent of the value of the property, although you’ll likely get a lower interest rate if you stay below 75 percent.

Conventional refinance loans are always “fully documented” meaning the borrowers must qualify in the same manner as during the purchase with paycheck stubs, appraisal, and income tax returns in addition to other standard requirements.

2. FHA Refinance

The FHA refinance also has a streamline program, very similar to the VA program.

No credit score requirement, no appraisal, and no income or employment verified. The FHA streamline is available for FHA-to-FHA transactions. In other words, you have an FHA loan currently.

It may also be used to finance a property that was previously occupied by the borrowers but is now rented out.

The new loan rate and mortgage insurance must drop. The refinance must benefit the borrower.

There can be no payments within the previous three months more than 30 days past the due date.

FHA loans require a monthly and upfront mortgage insurance premium. If the original FHA loan was opened prior to June 1, 2009, the mortgage insurance premiums receive a nice discount.

If you have a VA loan, however, your best option is the VA streamline.

3. USDA Refinance

The USDA program is for properties located in rural or semi-rural areas and the borrowers must not exceed specific income guidelines. The USDA refinance is a standard refinance requiring a fully documented loan including an appraisal, credit, and income among others.

There is a pilot streamline refinance program available in 35 states and operates in a similar fashion as VA and FHA streamline programs. The USDA streamline is for a 30 year fixed rate only and the rate must be at least one percent lower than the existing one and can only be a USDA-to-USDA transaction. No cash out is allowed.

VA, FHA, USDA or Conventional: Which Refinance is Best?

It really all depends on your home equity. VA, FHA, and USDA loans all have some form of mortgage insurance or funding fees applied, increasing the loan amount as well as the monthly payment. If there is at least a 20 percent equity position in the property refinancing out of one of these three loan types into a conventional one is the better choice.

If there are loan to value issues and there isn’t at least 20 percent equity in the transaction then the applicable streamline should be considered.

There can always be additional lender requirements on top of any issued guidelines called overlays. Some lenders may ask for an appraisal for a streamline for instance. If you’re thinking about refinancing, consider all your options. Not only could you benefit from a lower rate, but you might also be able to get rid of mortgage insurance premiums as well.

Click here to check today’s VA refinance rates.

Let’s look at a comparison of the four major loan types for a $250,000 purchase price.

Head to Head – VA Compared to other Loan Types

VA FHA Conventional USDA
APR* 3.721% APR 4.798% APR 5.192% APR 4.246% APR
Principle and Interest $1146 $1102 $1168 $1163
Monthly Mortgage Insurance or Fee $0 $269 $210 $84
Estimated Taxes and Insurance $268 $268 $268 $268
Total Monthly Payment $1414 $1639 $1646 $1515

Qualification:

Comparison of Qualification Requirements

VA FHA Conventional USDA
Down Payment Percentage 0% 3.5% 5% 0%
Approx. Cash Needed** $0 $8750 $12,500 $0
Typical Minimum Credit Score Needed*** 620-640 620-640 680 620-640
Streamline Refinance Available? Yes Yes No Yes

**Assumes $6000 in seller-paid closing costs;
***Varies based on lender; All scenarios assume 700 credit score, property in WA

Additional Benefits of VA Home Loans

  • VA home loans have more lenient credit and debt ratio guidelines. You may qualify for a VA loan even if you can’t be approved for other loan types. Get your  free rate quote.
  • You can refinance or sell your home at any time without penalty with a VA loan.
  • The seller is allowed to pay all of your closing costs up to 4% of the purchase price.

I’m Ready to Apply for This Great Benefit

The VA home loan program is a great opportunity for active-duty service members and veterans. Take advantage of your entitlement.

Request a no-obligation eligibility check here.

More VA Loan Resources:

Source for VA loan information: VA Handbook

Source: militaryvaloan.com

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Published: by Crystal Paine on September 30, 2014  |  This post may contain affiliate links. Read my disclosure policy here.

Everything You Need To Build Your Own Profitable Blog – For Just $0.99!

Have you ever wondered what it would be like to have your own money-making blog? You want to start – but you just don’t know how? Or, maybe you have a blog that would like to take to the next level and start earning an income from it?

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If you want to learn the basics of how to set up a blog, how to take your blogging to the next level, or how to begin earning money from your blog, this class is for you.

When you sign up for this class, here’s what you’ll get:

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Blogelina has been featured on the Dave Ramsey show, and is well-known for their ability to help bloggers make a successful start. Many of my readers here have gone through this course in the past and have great reviews to share with me.

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Sign up for the Blogelina Profitable Blogging for Beginners class today!

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Note: This post was underwritten by Blogelina. Read our disclosure policy here.

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Source: moneysavingmom.com

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In today’s world, it’s important to find a job that not only pays well but also lets you enjoy your life outside of work. To achieve this, it’s essential to have valuable skills that people need so much that they are willing to give you the conditions you need to live freely. In this article, we will share some high-income skills that you can learn to upgrade your career and improve your quality of life.

What Are High Income Skills?

High-income skills are specialized abilities that are in high demand in the job market and can potentially generate a significant income for individuals who possess them. These skills often require a high level of expertise and are usually transferable between industries.

High-income skills can include a range of abilities, such as those related to sales, marketing, software development, data analysis, project management, financial management, public speaking, and others. The specific skills that are considered high-income can vary depending on the industry and the job market at any given time.

Importance of High-Income Skills in Today’s Job Market

In today’s job market, traditional education and job skills are no longer enough to secure high-paying jobs. Many industries are undergoing rapid technological advancements, which means that jobs that were once secure and high-paying are now being automated. In contrast, high-income skills are in high demand and can help individuals stay relevant and competitive in their respective fields.

Furthermore, high-income skills offer individuals the potential to earn a high income, even if they do not have a traditional college education.

By mastering a high-income skill, individuals can become independent contractors, start their own businesses, or work remotely, all of which offer greater flexibility and earning potential than traditional 9-5 jobs

Differences between High-Income Skills and Traditional Job Skills

Traditional job skills refer to skills that are required for specific jobs or industries. For example, a doctor must have knowledge of medical procedures and healthcare, and a teacher must have knowledge of education and classroom management.

In contrast, high-income skills are often transferable between industries and can be used in multiple professions. For example, a person with strong project management skills could work in a variety of fields, such as construction, healthcare, or finance.

Additionally, traditional job skills often require a formal education, such as a degree or certification, while high-income skills can be learned through experience, mentorship, and practice. This means that individuals can acquire high-income skills without going into debt to pay for college or vocational training.

High-income skills are in high demand in today’s job market and offer individuals the potential to earn a high income and achieve greater flexibility and independence in their careers. Unlike traditional job skills, high-income skills are often transferable between industries and can be acquired without a formal education.

1. Copywriting

Copywriting is the art of selling by writing. It involves convincing people to take action through your writing. While it may be easy to persuade people verbally, writing to convince them to take action is a lot more complex. Copywriters are highly sought after because they are the ones who write promotional emails, home pages, and online product features.

To be a good copywriter, you need to be good with people, understand how they think, what they need, and how to best help them. You should also be skilled at structuring your paragraphs and words to make sense and sound compelling. The average salary for copywriters is around $55K, but depending on your niche, you can earn over $200K per year.

2. Sales

Sales is all about communication and convincing someone to do something. It’s not just about convincing people to buy a product they don’t need; it’s also about presenting an idea, interviewing for a job, or presenting a project to your boss. If you believe in the company you work for or the product you sell, then excellent sales skills are essential.

Average salespeople make around $50K per year, but those who work for businesses can earn six figures. If you’re good with people and passionate about helping them, sales could be the perfect fit for you.

3. Web Design

Web design involves designing beautiful websites that follow brand strategy and guidelines to develop a unique look. If you have a sense of design and creativity, web design might be the skill for you. The average salary for web designers is around $55K per year, but on platforms like Upwork, people charge between $65 to $80 per hour, which is more than $135K per year.

4. Digital Marketing

Digital marketing is the practice of promoting products or services through digital channels, such as search engines, social media, email, and other online platforms. As technology has continued to advance, digital marketing has become increasingly important for businesses of all sizes.

Digital marketing involves a variety of different disciplines and specializations, including search engine optimization (SEO), pay-per-click (PPC) advertising, social media marketing, email marketing, content marketing, and more. Each of these areas requires a unique skill set and approach, but they all share a common goal: to connect with potential customers online and drive business results.

One of the biggest advantages of digital marketing is its ability to target specific audiences with precision. Through advanced targeting options, businesses can reach the people most likely to be interested in their products or services. This can help to maximize the effectiveness of marketing campaigns and generate a higher return on investment.

Another benefit of digital marketing is the wealth of data and insights that it provides. By tracking website traffic, social media engagement, email open rates, and other metrics, businesses can gain valuable insights into how customers are interacting with their brand online. This data can be used to optimize marketing strategies and improve overall performance.

As for the salary range in digital marketing, it varies greatly depending on the specialization and level of expertise. According to Glassdoor, the average base pay for a digital marketing manager is around $77,000 per year in the United States, but this can range from $47,000 to over $117,000 depending on the location, company size, and years of experience. In specialized areas like SEO or PPC, the salary can be even higher. Freelance digital marketers can also earn significantly more by working with multiple clients and charging an hourly or project-based rate.

5. Computer Science

If you’re passionate about apps, algorithms, and online processes, then computer science might be the skill for you. This broad term can encompass many areas like data analysis, software engineering, or machine learning. The average salary for computer scientists is around $75K per year, but on platforms like Upwork, people charge between $65 to $80 per hour, with some earning up to $150K per year.

Job Title Salary Range
Software Developer $70,000 – $150,000
Web Developer $50,000 – $107,000
Database Administrator $74,000 – $122,000
Information Security Analyst $77,000 – $130,000
Data Scientist $85,000 – $165,000
Cloud Architect $120,000 – $200,000
Machine Learning Engineer $110,000 – $190,000

Please note that these salary ranges are approximate and may vary depending on factors such as years of experience, location, company, and industry.

6. Consulting

Consulting involves using soft skills like communication, negotiation, and presentation to help clients find better solutions. It’s all about asking key questions, handling emotions, and understanding your clients to serve them better. While the average salary for consultants is around $75K, it’s not accurate due to the great resignation.

Independent consultants can earn between $90 to $150 per hour, but it’s not something you can learn online. You need to learn skills like negotiation, presentation, and sales to become a good consultant.

7. Content Creation

Content creation involves creating great content that will attract people to your business. You can do it for yourself or for others, like writing, content creation, and content management. If you do it for others, you can earn between $75-$150/hour.

Content creation is the process of developing engaging content that captures the attention of an audience. It can include creating written content, such as articles, blog posts, or e-books, as well as visual content, such as images, infographics, or videos. If you have a passion for creating compelling content and are skilled at storytelling, content creation may be a high-income skill worth pursuing.

Here are some points to consider when developing your content creation skills:

  • Writing: The ability to craft well-written and engaging content is a valuable skill in today’s digital age. If you’re interested in writing, consider taking courses on writing techniques, storytelling, and copywriting. Practice writing regularly to hone your skills and build your portfolio.
  • Video Production: Video content is becoming increasingly popular, and businesses are looking for skilled video producers who can create high-quality content. If you have an interest in video production, consider learning how to shoot and edit videos, as well as how to use video editing software.
  • Social Media: Social media is a powerful tool for businesses to connect with their customers and promote their products or services. As a content creator, you may be tasked with developing social media content that is engaging and shareable. Consider taking courses on social media marketing and developing your social media skills.
  • SEO: Search engine optimization (SEO) is the practice of optimizing content to rank higher in search engine results. As a content creator, you may be responsible for ensuring that the content you create is optimized for search engines. Consider taking courses on SEO and staying up-to-date on the latest SEO best practices.

  • Graphic Design: Graphic design skills are valuable for creating visual content, such as infographics or social media graphics. If you have an interest in graphic design, consider taking courses on design software, such as Adobe Photoshop or Illustrator, and developing your design skills.

Overall, content creation is a versatile skill that can lead to high-paying opportunities in a variety of industries. By developing your content creation skills and building a strong portfolio, you can position yourself as a valuable asset to businesses looking to connect with their customers and build their brand.

8. Writing

Writing is a versatile skill that can open doors in various industries. Whether it’s creating content for a blog, writing copy for a website, or drafting an important business proposal, writing is a skill that can help you communicate your ideas effectively.

Strong writing skills are especially important for those working in fields like journalism, public relations, marketing, and advertising. Good writers can earn an average salary of around $60K per year, but top earners can make well into the six figures.

9. Project Management

Project management involves overseeing a project’s planning, execution, and closing phases. It requires strong organizational skills, leadership abilities, and the ability to manage resources effectively. Project managers are in demand in various industries, including construction, engineering, technology, and healthcare. The average salary for a project manager is around $80K per year, but top earners can make over $150K.

10. Public Speaking

Public speaking is the art of delivering a message to an audience. It’s a skill that’s useful in various industries, including education, sales, and politics. Good public speakers can engage their audience, convey their message clearly, and leave a lasting impression.

Public speaking can be a lucrative skill, with top motivational speakers earning millions of dollars per year. However, even an average public speaker can make a comfortable living, with an average salary of around $60K per year.

“Public speaking is a skill that can be learned and mastered with practice. It’s not about being perfect, but about connecting with your audience and delivering a message that resonates with them.”

– Grant Baldwin, author and professional speaker

11. Graphic Design

Graphic design involves creating visual content, such as logos, illustrations, and layouts. It requires creativity, technical skills, and the ability to communicate a message visually. Graphic designers are in demand in various industries, including advertising, marketing, and publishing. The average salary for a graphic designer is around $50K per year, but top earners can make over $100K.

13. Accounting

Accounting is the process of recording, classifying, and summarizing financial transactions. It requires attention to detail, strong analytical skills, and the ability to work with numbers. Accountants are in demand in various industries, including finance, healthcare, and government.

The average salary for an accountant is around $70K per year, but top earners can make over $100K. Accounting is a great career choice for those who are organized and detail-oriented. With the right qualifications, you can open your own practice or work in a large organization.

Accountants must be prepared to stay up-to-date on changing regulations and industry trends. They also must be comfortable working with computer software and technology, such as accounting programs and spreadsheets.

The Bottom Line – Increase Your Income with High Income Skills

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In conclusion, acquiring high-income skills can lead to a more fulfilling career and a better quality of life. These skills can take time and effort to develop, but the financial rewards can be significant. Whether you choose to learn a new programming language, improve your writing skills, or become a better public speaker, there’s always room for growth and development in today’s job market.

By investing in yourself and developing valuable skills, you can position yourself for success and achieve your career goals.

Source: goodfinancialcents.com

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Interest Rate for Series I Savings Bonds Falls to 4.3%. Here’s What it Means

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Gone are the days of series I savings bonds paying almost 7% in interest. The U.S. Treasury announced Friday that the inflation-protected bonds would start paying investors 4.3% on May 1, down from the 6.89% that they’ve paid out over the last six months.

Since they were first introduced in 1998, series I savings bonds – also known as I bonds – have helped investors keep pace with inflation. They’ve especially come in handy in recent years, as inflation has reached levels not seen since the early-1980s. Here’s what you need to know about I bonds and Friday’s interest rate adjustment.

A financial advisor can help you determine whether I bonds or other inflation-protected securities are right for your portfolio. Find an advisor today.

About I Bond Interest Rates

An I bond’s interest rate is calculated using two separate rates – a fixed rate and an inflation rate. While the former stays the same for the duration of the bond, the inflation rate changes every six months. That’s because the latter is linked to the Consumer Price Index for all Urban Consumers (CPI-U).

As a result, when inflation increases, like it has in recent years, I bonds pay out more interest. When inflation falls, they pay out less.

On Friday, the Treasury raised the fixed interest rate for I bonds from 0.40% to 0.90% but dropped the semiannual inflation rate to 1.69%. This resulted in a combined interest rate of 4.3% for newly issued bonds.

Keep in mind that an I bond’s combined rate is calculated in two steps. First, the fixed rate is added to double the semiannual inflation rate. Next, the fixed rate gets multiplied by the semi-annual inflation rate. The two sums are then added together, resulting in the combined interest rate of an I bond. Here’s the formula:

[Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

What Falling Rates Mean

As inflation has climbed in recent years – peaking at 9.1% in summer 2022 – so did I bond interest rates. But as inflation continues to fall, the same will happen for I bond yields.

Friday’s rate adjustment comes one year after I bonds were paying investors a whopping 9.62%. In November, the Treasury raised the fixed rate from 0% to 0.40% but lowered the inflation rate to 3.24%. That brought the combined rate down to 6.89%.

While Friday’s adjustment results in lower overall interest rates, the fixed rate is now at its highest point since November 2007 (1.20%). Keep in mind that if the inflation rate increases again in another six months, those who purchase I bonds now will stand to benefit because their bonds will continue to pay out 0.90% in fixed interest plus the higher interest rate.

Bottom Line

Series I savings bonds or I bonds are inflation-protected debt securities issued by the U.S. Treasury. The bonds, which were previously paying 6.89%, will begin paying out 4.3% on May 1, the Treasury announced Friday. However, those who buy I bonds now will lock in a 0.90% fixed rate – the highest it’s been since 2007.

Tips for Managing Inflation

  • Treasury Inflation-Protected Securities (TIPS) are another low-risk investment that can help soften the blow of inflation. Instead of the interest rate rising and falling with inflation, the principal of a TIPS bond increases with inflation. This differentiates TIPS from I bonds, whose interest rate is linked to inflation.
  • A financial advisor can help you invest in I bonds, TIPS and other assets to protect your portfolio from rampant inflation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/DNY59, ©iStock.com/hobo_018, ©iStock.com/Khanchit Khirisutchalual

Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.

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When it comes to the active vs. passive investing debate, to me, it’s a no-brainer: I’m a passive guy.

My entire portfolio consists of a couple of broad-market stock index funds and a bond fund. I don’t own any individual stocks and zero funds that try to beat the market. I stay invested in good times and bad and I ignore my portfolio as much as possible, except for annual rebalancing. (In practice, this means I look at it once a week. Thanks a lot, Mint.)

I invest this way not (just) because I’m lazy, but because I believe the evidence is overwhelming that a passive approach will outperform the vast majority of active investing strategies over time. Yes, over any given period, some active funds will outperform by a little and a select few will outperform by a lot — they’ll sail through a bear market smelling like honey.

Unfortunately, it’s impossible to know ahead of time which will be the winning funds and you might end up selecting one of the big losers. Oh, and index funds cost less. That means more money for me and less for a money manager.

As Rick Ferri puts it in his book The Power of Passive Investing, “There’s only a low probability that any fund will achieve superior returns. While it’s possible, it’s not probable.”

Or take it from author Bill Bernstein: “The debate between active and passive management is like the debate between astrology and astronomy,” he said in a recent interview.

As you can tell, I’m convinced of the superiority of index funds and passive investing to the point of smugness, so I thought it would be good for me to talk with someone who fundamentally disagrees. Jerry Webman is the chief economist at OppenheimerFunds and author of the new investing guide MoneyShift: How to Prosper from What You Can’t Control. He dedicates an entire chapter of his new book to building an intelligent argument against my style of investing, and the book is witty and engaging.

Webman and I didn’t have time to hash out the entire classic active/passive investing debate, so I wanted to focus on one of his favorite topics: emerging markets. These markets now account for about one-quarter of the stock market wealth outside the U.S., and we both agree that it’s important for a portfolio to own stocks from emerging economies like Brazil, India, and China. We disagree about the best way to do it, though.

An emerging discussion

MoneyShift argues that most investors, including index fund investors, are missing out on buying opportunities in emerging markets. “Emerging markets is one of the places where it’s easiest to make the case for bottom-up active management,” Webman told me. “You really do have many companies that are not carefully followed, maybe not well-understood, and a careful manager takes the time to figure out what the real market for the company is, and how they fit with the regulatory environment in which they have to work, which might not be fully evolved.”

“It would be foolish to surrender the emerging markets portion of your portfolio to a dumb index fund,” Webman argued. “I want somebody who’s taking a really careful look at it,” he said. “There’s a lot more value to be added by someone who’ll go and do the research in less-understood and less-invested markets.”

To put it another way, it’s hard to learn anything new about an S&P 500 company. Those are the 500 biggest U.S. companies — everyone has heard of them and thousands of analysts scrutinize them all day long.

But who’s keeping an eye on, say, the Peruvian stock market? One manager who takes the time to understand Peru and how to read annual reports from its companies might be able to make a ton of money from insights that would be totally lost on a U.S. stock analyst.

This argument seems intuitively correct. However, I remembered the same argument being made about investing in small companies (aka: “small-caps”) in the United States: the market was less efficient, there was less public information about the companies and the stocks traded less heavily, which meant more opportunities for active managers to make money.

But it didn’t actually work out that way. As Standard & Poor’s put it, “over the last decade, SPIVA has consistently shown that indexing works as well for U.S. small-caps as it does for U.S. large-caps.” SPIVA is Standard & Poor’s Indices vs Active Funds scorecard, which twice a year compares the performance of passive index funds with actively managed funds.

More on that in a moment…

Webman said there are important differences between U.S. small-caps and emerging market companies: In the US, “you do have financial reporting that’s well-established. You have good protection for minority shareholders and you have all of the things that you might not have in an emerging market company.”

I wondered whether SPIVA could help answer this question: in emerging markets, is it better to own a dumb passive index fund that buys all the companies it can, good and bad, or to turn your money over to an expert manager who carefully researches and selects the best companies from each country?

The answer

Well, it’s not even close. Over the five-year period ending in December 2011, only 17% of actively managed emerging markets funds outperformed their benchmark index. Since an index fund hugs the benchmark index as closely as possible, buying the index fund would have put you near the top of the heap. This is typical: it’s difficult to find any five-year period in any investment category where the index fund didn’t trounce most of the competition.

Webman is skeptical of this kind of raw statistical analysis. “I worry about looking at averages,” he said. “It turns out a lot of so-called active managers aren’t so active. And it does look like results are better for active managers who really actively manage their portfolios.” He added that just looking at the number of funds that outperformed doesn’t tell you how much money outperformed. Maybe those few winning funds are actually the biggest funds, which means the average active investor is doing just fine.

Again, this argument sounds reasonable: who cares if most funds don’t beat the index? As long as I can identify a fund that will, I’m golden.

Unfortunately, there’s no evidence that there’s any way to identify the best performers ahead of time, aside from sheer luck. SPIVA also measures performance persistence and the results are appalling. “Very few funds manage to repeat top-half or top-quartile performance consistently,” says the report, which some consider an understatement. For example, in U.S. small-cap funds, less than 4% of funds stayed in the top category five years in a row. They didn’t look at emerging markets funds, but there’s no reason to expect a different result.

High bias

Let’s stipulate that everyone involved in this conversation is biased. Jerry Webman is an executive at a Wall Street firm that sells actively managed mutual funds, S&P is in the business of selling indexes, and I have my life savings in passively managed index funds and am unlikely to go out dragging the river for convincing evidence that I’m investing like an idiot.

If you think Webman is right and I’m wrong, however, I’d like to hear about it.

And let me give Webman the last word: “I think what makes markets is, we’re all going to look at several different kinds of conflicting evidence and come to different conclusions.” I couldn’t agree more.

Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.

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Source: mint.intuit.com

Apache is functioning normally

When I was 23, I bought an eight-unit apartment building with no money down. And I walked away with $1,000 cash at closing! Sounds pretty fancy, right? Wrong.

It was one of the dumbest real estate investing mistakes I’ve made in my young life.

I escaped without a scratch, but it was due to an over-sized dose of sweat, tears, and luck. None of it was due to savvy investing skills.

The Sound and the Fury

I was 23 years old and had just earned my real-estate license the previous year. My first couple of months were spent buying and selling a few upper-end units for individual homeowners. The commissions were decent, but as a new Realtor, my split with my company was high. To complicate the problem, I had financed my association, training, and union fees to get started. (This was before I had decided to cancel my credit cards.)

After several months, I began to work more in the booming foreclosure and short-sale markets that were plaguing central Indiana. Out-of-state lawyers, doctors, and other high-income earners (mostly from the West Coast) were swarming our local market.

They were buying up $30,000, $40,000, and $50,000 houses like they were toys — albeit over-priced, over-financed, and only half-functioning toys at best. With rents ranging from $400-$1000, they simply couldn’t resist what their spreadsheets were telling them the return would be. They bought many of the homes sight unseen and used the first real-estate company that would sell to them.

We represented a lot of the banks that had no idea about the local market prices. They also didn’t understand the current condition of their properties (even after we told them several times). Well over half the deals fell through. Either the banks were too unrealistic to negotiate, or a closing would be interrupted by the discovery of a mystery lien, a second mortgage no one knew about, or some other problem with the title that we didn’t even know was possible!

It was harder work for lower commission, but there were hundreds upon hundreds of properties, which helped even out the paychecks from month to month. And I was learning a lot about how to avoid real estate investing mistakes.

Property Management Comes Calling

After most of the out-of-town investors closed on their new rentals, they began searching for a company to manage/rent them. After several dozen requests for an affordable and trustworthy property management company (and no clear-cut option), we decided to start offering the service ourselves.

I joined forces with a broker who spent his time focusing on acquiring more leads for buying/selling. I set about figuring out how to actively manage and rent the vacant units (which almost always needed repairs first).

Since many of our clients were repeat customers already, they were ecstatic to have the option of having their properties managed by us in-house. Within just six months or so we had over 125 units under management.

I was working countless hours and answering the most bizarre phone calls you can imagine at all hours of the night. Overall, though, we were turning a profit and looking for ways to scale our system over the next couple of quarters.

A Perfect Storm

As part of our networking and lead-generation work, we regularly attended private meetings where local brokers would pitch each other their current clients wants and needs. In one particular meeting, another broker was pitching one of his own properties for sale. It was two side-by-side four-plexes (eight units total) with each unit being one bedroom. It was in a low-income part of town, but he was only asking $125,000 for both properties.

“$125,000 for eight units?”, I thought. “There has to be a catch.”

There was. Seven of the eight units had tenants, but only three had any history of paying on time. Even after kicking out any non-paying tenants, each unit would need a couple thousand dollars of work to get anything decent in rent. In addition, there were four furnaces in total all of which were probably made in the 40s or 50s.

In other words, it was a project by anyone’s terms. It would require some up-front repairs, several months of eviction filings, court visiting, and re-showing the units, but… “$125,000 for eight units!“

If Only Someone Would Loan Me the Money…

I dug deeper and deeper into the numbers. I was already managing property, coordinating repairs, negotiating prices on materials, and renting units for dozens of other clients. It made sense that if I could get a loan, I could plug a property right into this current system I was running.

There was a big glaring issue, though. Neither my partner nor I was credit-worthy in any sense of the word. The chance of me getting approved for a mortgage was zilch (let alone a non-owner occupied, low-income commercial loan). With regret, I pushed the property to the back of my mind and continued about the process of building the management business.

At our next networking meeting, though, we caught wind of some additional news on the properties. The broker who owned them was in serious trouble on about a dozen different pieces of real estate. He owed $76,000 on both the buildings, which were financed through a popular investor/hard-money lender.

The private lender was getting scared that the investor would soon default (giving the lender a property he wanted nothing to do with). The owner was only looking to get out of the property, so he could focus his energy on his salvaging his other properties.

Without much thinking, we pulled the trigger.

A Bold Offer

We called up the private lender (an individual) who was currently financing the properties. Then we pitched him the idea of us taking over the loan and purchasing the property from the current desperate owner.

We offered to both sign onto the loan, giving the investor two names opposed to the one he currently had. Then showed how we would remedy the situation, evict all the tenants, and plug it into our management system.

Neither of us had a penny to our names, so we even had the guts to require that the private lender actually invest more money into the property. In order for us to take it over he’d have to loan us an additional $15,000 to replace the furnaces and repair two of the units after evictions.

It was a bold offer. We’d give nothing but a management plan and our signatures on a $91,000 private mortgage (at 12%) for eight units and a $16,000 cash loan. The lender must have known even more about the current owner’s dire circumstances then we did because he took our offer. The current owner was happy to get out for what was owed, and within the week we sat down to close.

After the paperwork was signed on my first-ever real estate purchase I was handed a $1000 check (for prorated rents/deposits for the month). I gave nothing tangible, just my worthless signature, and walked to the bank to deposit the money.

“So this is how real estate works”, I gloated. “I could get used to this.”

I had no idea what was in store…

To be continued…

J.D.’s note: This is a glimpse into a world I’ve always wondered about. Though Kris keeps trying to dissuade me, I have a fascination with rental properties. I look forward to reading part two of this story. And although GRS is not about to become a real-estate blog, this Sunday’s reader story is actually about how one of you folks decided to take the plunge by buying a rental property, so we’re going to have a mini-theme here for a week or so…

Source: getrichslowly.org

Apache is functioning normally

As parents, we all want the best for our children — from the best nutrition to keep them strong, healthy, and sharp, to catering to their safety and giving them all the things that keep them happy and peaceful. We want them to sleep as tight and peaceful as they can and wake up brimming with energy for the day. 

So the question is, how do you make your kid’s bedroom as peaceful and safe as it can be?

There are plenty of ways to do so, but one of the best among them is to soundproof their room. It’s basically keeping internal and external noise from distracting our kids while they sleep, play, read, or do whatever they please in their territory.

The best thing about this is that soundproofing is easy to do. And cheap! If you’re looking to improve your kid’s bedroom’s soundproofing, here are 6 easy ways to do so.

#1 Install soundproof art panels on the walls

You can turn to soundproof art panels for help, both for soundproofing and for interior design needs.

These stylish panels are made with sound absorbing and soundproofing materials to control noise from entering and leaving your kid’s bedroom. They also come in different colors and styles, so you’ll have plenty of options for panels that match the interior of your child’s bedroom. 

Fortunately, there are soundproof art panels readily available on Amazon. But if you’re picky about the style of the art panel you’re installing, you can opt for custom-made panels instead. 

They’re as easy to install, maintain, and remove as acoustic foam panels, so you won’t run into any problems when placing these soundproofing aids in the bedroom.

#2 Get a white noise machine

If you’re looking for the easiest and instant way to block noise completely from your kid’s bedroom, a white noise machine is the solution you’re looking for. 

A white noise machine drowns the distracting noises for your kids by producing sounds that make them subconsciously ignore all other distracting sounds and noises. As a result, white noise can help your child get a peaceful good night sleep you’re looking for.

However, you must use a white noise machine with caution. Use it only when the situation calls for it, say when a sudden loud commotion erupted outside during your kid’s sleeping time. 

When you use them to comfort your kids during their sleep, they’ll develop the habit of relying to white noise to drift to sleep. Not to mention that other children don’t respond well to white noise. Some may actually prefer a little noise playing in the background as assurance that they’re not alone at home.

You can check out this guide to learn when to stop white noise for babies.

#3 Double-glaze the windows

Double glazing your windows means placing one more windowpane, separated by a vacuum or gas-filled space.

Not only does this add some soundproofing for the bedroom, but it also improves the overall insulation of the room. The extra glass layer traps heat from coming in and out, saving you from relying too much on the air conditioner during the summer or the heater in the winter. Soundproofing and savings off the electricity bill, all in one go. 

The only downside to this is the remodeling needed to install the new layer of glass window panes. You’ll also need to spend a little more on the installation.

You can also hang soundproof curtains to adore your new double glazed windows. These curtains are made with tightly-woven fabric to help keep noise out.

#4 Lay more rugs or carpets on the floor

Children are just full of energy. They love to run, jump, and play around in their bedroom whenever they feel like it, and that’s a good thing. 

Well, except when their bedrooms’ on the second floor and you can’t concentrate on what you’re doing with all the thumping on the ceiling. Or when it’s the middle of the night and you suddenly hear lively footsteps and thumping in their bedroom.

In that case, you need more rugs or carpets in your child’s bedroom. These can help deaden the noise produced by the thumping, especially if their bedroom is made of hardwood or vinyl. The thicker the rug is, the more noise it can absorb, so feel free to layer those rugs on the floor.

Rugs and carpets can also add more security to your kid’s health while they’re playing in their room. When they accidentally stumble, fall, or trip, the thick rugs or carpets can serve as a cushion for their bodies, lessening the impact of the fall. 

#5 Soundproof your doors

Noise from other rooms can still sneak through your door, even when it’s tightly shut. Those small gaps are more than enough for noise to penetrate, so you need to fill them up too. You can do this through weatherstripping.

The most common type of weatherstrip used for soundproofing doors is adhesive-backed foam type. They’re easy to install – you just measure how long you need, remove the adhesive, and stick it around your door frame where the gaps are located.

If you’ve got the budget to spare, and you’re already planning to do some remodeling, you can replace your hollow-core door with solid ones, preferably those made with 27.5-inches-thick wood.

You can also paint your new door with a plywood coat or soundproofing paint to make the bedroom door perfectly fit for soundproofing. 

#6 Place more soft furniture in the bedroom

We don’t want our kids to play in their bedroom only to get hurt by bumping into corners of the furniture. But the lack of furniture in their room allows noise to keep roaming around since there are no surfaces to deflect them around.

To fill the white space in your room, provide more surfaces for noise to deflect around, and prevent your kids from getting injuries, soft furniture items are your best friends.

Fluffy, overstuffed sofas, bean bags, and other soft furniture also help balance the ratio of hard and soft surfaces in their bedroom.

More tips for homeowners

These are ‘Queer Eye’ Bobby Berk’s Top 6 Choices for Wall Décor
10 Beautiful Tiffany-Style Floor Lamps to Light Up Your HomeBe the Envy of Your Friends this Holiday Season with These Top Christmas Decorating Tips
10 Unique Picture Frames for the Perfect Photo Wall

Source: fancypantshomes.com