financial

Apache is functioning normally

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information … [Read more…]

Apache is functioning normally

When my husband started using a virtual wallet, I was concerned. We share a joint credit card and I was bothered about the security side of carrying around credit card information on a cell phone. In my mind, paying for things with your cell phone seemed too easy and a bit dangerous.

Through a combination of reassurance from my husband and a significant number of Google searches on “are virtual wallets safe,” I began to feel more comfortable with the idea. 

I know I’m not alone when it comes to questions about the safety of virtual wallets. So, let’s talk about it. What are virtual wallets and, most importantly, are they safe?

What’s Ahead:

What are virtual wallets?

A virtual wallet, sometimes referred to as an e-wallet, is an electronic wallet that lives on your mobile device. Virtual wallets can store all of your payment-related information including credit cards, debit cards, rewards cards, membership cards, and coupons, allowing you to pay for things electronically. No more trucking around your bulky wallet or disorganized purse. 

Depending on the type of mobile device you use, you may have a virtual wallet already installed on your phone. For instance, iPhone users will have access to Apple Wallet. Other virtual wallets can be obtained by downloading an app onto your mobile device.  

Virtual wallets vs. mobile wallets

The terms virtual wallets and mobile wallets are often used interchangeably. However, there is a difference. A mobile wallet is a type of virtual wallet that can be accessed by downloading an app on a mobile device like a smartphone or wearable watch. 

A popular example of a virtual wallet is PayPal. However, when PayPal is used on a mobile device it can function as a mobile wallet. 

Popular examples of mobile wallets include Apple Pay, Samsung Pay, and Android Pay. 

Banks like Chase, even offer digital wallets. With Chase accounts, you can get Chase Pay®, which allows you to simply and securely use your phone to make payments.

What are the most popular virtual wallets?

There are a variety of virtual wallets available for you to choose from. Some of the most popular virtual wallets include:

  • Samsung Pay.
  • Apple Pay.
  • Android Pay.
  • Chase Pay.
  • PayPal.
  • Google Wallet.
  • Venmo.
  • Zelle.

You can also check out wearables that offer mobile payment options like Garmin Pay and Fitbit Pay. 

From a global perspective, virtual wallets like Alipay and WeChat Pay which are both based in China, service millions and millions of users.  

How do I use a virtual wallet to make a payment?

While each virtual wallet will vary, there are some general steps associated with using an e-wallet. 

The first thing you’ll need to do is launch or install a virtual wallet app. Next, you will have to add a new credit card or debit card. To do this you can take a picture of your card or enter the details manually. 

When you’re ready to make a payment, you will launch the app and then choose the credit or debit card you want to use.

When it comes to actually making the payment, most smartphones use a technology called near field communication (NFP). NFP allows you to simply hold your phone above the payment pad or tap the payment pad to pay for your purchase. 

However, not all mobile devices are equipped with NFP. In this case, you can use a mobile wallet like PayPal. Instead of tapping your phone onto the pay pad, you use your mobile phone number and a pin to make your payment.  

Are virtual wallets safe?

When I heard about virtual wallets my first question was, are they safe? It seemed a bit risky to be carrying around all of my payment information on my phone. I mean, what if I lost my phone? Then what? Could someone hack in and access my virtual wallet?

It was this fear and lack of trust that prevented me from using a virtual wallet for a long time. However, virtual wallets are arguably even safer to use than your regular plastic credit or debit cards. 

First, digital wallets eliminate the potential to expose important information like your credit card number, your pin, or the CVV number on your credit card. When you pay for something with your digital wallet it uses a process called “tokenization.” This means that your sensitive info (like credit card numbers) is removed and replaced with a one-time-use number that is generated by an algorithm. So, none of your sensitive data is ever made public in any way. Unlike when you swipe or tap a credit card. 

Second, all of your payment information is encrypted. When you add a new debit card or credit card to your virtual wallet the information is encrypted and stored in the cloud. Even if someone steals your phone they would need your fingerprint or your passcode to access your virtual wallet. 

On the other hand, if you drop your wallet somewhere or get pickpocketed, your credit cards can be easily used and the information can be stolen. 

Is it easier for hackers to access your virtual wallet vs. your credit/debit card?

While no payment option is 100% hacker-proof, a physical credit card is much more susceptible to being hacked than a card in your virtual wallet. As I mentioned above, digital wallets provide multiple layers of security that aren’t present when it comes to your plastic credit card. 

A physical credit card presents more opportunities for thieves or hackers to get your information. If someone steals your credit card they can easily make a purchase online, or even in a store as many merchants don’t confirm that you are the actual cardholder. 

A virtual wallet requires a more intense authentication process that involves a password or proof from a biometric marker (fingerprint, retinal scan). Not to mention that you have to be able to unlock the phone before you can even gain access to the virtual wallet. There are simply more security steps involved. 

If you believe that your virtual wallet has been compromised or you’ve lost your phone, it’s easy to suspend all payments. For instance, with Apple Pay, if you put your phone into lost mode, it will automatically suspend all of your payment cards. This is much easier than having to call up each bank or financial institution to cancel your cards if you lose your physical wallet. 

Additionally, when you use a virtual wallet on your phone you also have the option of installing apps that will help you to locate your phone. So, if it is stolen the thief will have to figure out how to open your phone, won’t be able to authenticate, and you will be able to track their location. 

Is the money in your virtual wallet FDIC insured?

The Federal Deposit Insurance Corporation (FDIC) has been around since the 1930s. It’s their job to ensure stability and public confidence in the financial system. The FDIC insured all deposit accounts including checking, saving, money market deposit accounts, and certificates of deposit up to a standard amount of $250,000 per depositor, per insured bank. 

When it comes to whether or not your virtual wallet is FDIC insured the answer is a bit murky. However, as a rule of thumb, if your money is stored within a non-banking institution then the money is not insured. For instance, PayPal and Venmo are not considered banking institutions, so any money stored in these apps is not FDIC insured. There are some exceptions including Google Wallet. According to Yahoo Finance!, as of 2015 money stored in Google Wallet became FDIC insured. 

Before you assume that any funds stored in your mobile wallet are FDIC insured, make sure you thoroughly investigate.

The pros and cons of virtual wallets

Pros:

  • Security. Despite my initial reservations about the security of virtual wallets, security is actually one of it’s biggest benefits. Because virtual wallets eliminate the need to use credit card numbers, CVVs, or pins, it makes them impervious to hacking.
  • Convenience. With a virtual wallet, you no longer have to carry around a wallet or a purse. You will also never have to worry about forgetting a particular credit card or rewards card at home because they are all nicely organized on your phone.  
  • Time-saving. Paying with a virtual wallet can also save you time. No more waiting for a salesperson to swipe your card or enter your number. 
  • Contactless payment. Many virtual wallets eliminate the need to touch the germy buttons on a debit machine or pass your credit card from your hand to the merchant. It makes for a clean and touchless payment experience. 

Cons:

  • Not universally accepted. One of the main challenges associated with using virtual wallets is that they aren’t accepted by all retailers.
  • Compatibility. Not all virtual wallets will accept all credit cards. While most mobile wallets are accepted by the big banks, some business credit cards might not be accepted. You can check with your bank or log onto the mobile wallet website to confirm which cards are accepted.
  • Trust. As I admitted, a lack of trust was the reason I put off using a virtual wallet. And, I know I’m not alone. While virtual wallets offer additional security over a credit card this is not necessarily the shared perception among all Americans. 
  • Battery. Unlike a conventional purse or wallet, your phone requires battery power to be used. If your phone runs out of batteries while you’re shopping, you can’t make a purchase until you recharge. 
  • Variability. Not all virtual wallets will allow you to store all of your card information. For instance, some e-wallets will permit debit and credit cards only while others will permit everything from credit cards to reward cards and airline tickets. 

Who should use a virtual wallet?

Virtual wallets are available to anyone with a desktop or mobile device. However, when it comes to whether or not you should use a virtual wallet there are a few questions you can ask yourself to decide if it’s right for you. 

Do you want to increase your security?

Virtual wallets provide additional security features that just aren’t available for plastic debit or credit cards. If you want encryption and multiple steps of authentication, then perhaps a virtual wallet is the right choice. 

Do you value time savings and convenience?

If you enjoy online shopping, virtual wallets can save you a lot of time when it comes to paying for your purchases. No more time wasted on manually entering your credit card number, expiration date, and CVV code. I mean, we’re not talking days or weeks in time savings, but a few minutes here and there adds up over the long haul.

Are you always looking for your credit card?

A virtual wallet provides a single organized location for all of your payment information. So, if you’re someone who is constantly leaving your credit card in your coat pocket or forgetting to bring your rewards cards when you go shopping, a virtual wallet could help to keep you more organized. 

Who shouldn’t use a virtual wallet?

While virtual wallets offer a number of perks, they aren’t necessarily the right payment tool for everyone. Here are a few additional questions to ask yourself to see if perhaps a regular old wallet or purse is a better option for you. 

Do you feel comfortable with a virtual wallet?

While virtual wallets are growing in use, there is still a segment of Americans that don’t trust them. If you feel uncomfortable or unsafe using a virtual wallet then you shouldn’t. While virtual wallets are arguably safer than using a physical credit card or debit card, you should stick to using what you feel most comfortable with. 

Are you very concerned with your privacy?

While a virtual wallet can add some additional security over a plastic credit or debit card, it also introduces some new privacy concerns. When you use your virtual wallet, retailers and financial institutions can potentially collect data on the types of purchases you are making. This can then be used to help retailers develop targeted marketing. I mean, this is already happening if you are using social media, but it’s something to be aware of. 

Do you continually forget to charge your mobile device?

If you are notorious for walking around with a dead smartphone then maybe you should skip the virtual wallet. Bottom line, if your phone is dead you can’t pay for things. 

Summary

Like any technology available for use, virtual wallets come with pros and cons. You will have to decide if the added security features and convenience outweigh any trust or privacy concerns that you might have. 

It took me some time to become comfortable with the idea of using a virtual wallet. I was not one of the early adopters. I’m an old Millennial and I’ve been using physical debit and credit cards for decades. As a result, it took a lot of research and just trying it before I saw the perks. For me, the benefits outweigh the risks. But, it’s up to you to decide if a virtual wallet is right for you.

Read more:

Source: moneyunder30.com

Apache is functioning normally

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information … [Read more…]

Apache is functioning normally

Figuring out how to manage your money isn’t something that comes intuitively to most people. Instead, it’s a skill people have to learn. I was lucky that I started learning early. Even if you’re a later starter, it’s never too late to take control of your finances.

Thankfully, there are plenty of resources to help you grow on your financial journey. One of those resources is a financial advisor. 

Financial advisors typically help people grow their wealth through investing and strategy. Unfortunately, financial advisors tend to only work with people that have already started building assets.

If you’re on a low income, a traditional financial advisor may be out of your reach. Instead, you may get solicited to work with financial advisors that are more like salespeople. They get paid commissions based on the services and investments they sell you. Often, these investments aren’t your best options and could result in you losing a large part of your future returns. Even so, they may be better than not investing at all.

So what can you do to start managing your finances in a better way? How can you find a financial advisor that will work with you even if you have a low income? Here are some ideas to get you started.

What’s Ahead:

Who can benefit from hiring a financial advisor?

Anyone can benefit from the services a professional financial advisor or planner can offer. Financial advisors usually help you build a financial plan. The plan helps guide you to where you want to be in the future. These professionals help create strategies to get you to that future financial position and educate you about methods you may have had no idea about.

For instance, financial advisors can help you understand the tax advantages of different ways of investing. They can also make you aware of tax planning opportunities to help you keep more of the money you work so hard to earn.

Another key benefit of using a financial advisor is getting direct advice about your situation. They can share the results of the potential impacts of making a specific financial decision. These professionals may advise you whether there are better options available, too.

Financial advisors often earn their fees when markets are facing a downturn. People understandably get concerned they may lose a significant amount of money during an economic downturn. 

I know first hand that it can be tempting to sell and lock in your losses. These professionals can talk you off the ledge and help you stick to your strategy which is set to work for the long-term.

If you’re looking for a financial advisor – find the best options for you through the Paladin Registry – a free resource. 

What if you don’t have a lot of money?

Even if you don’t have a lot of money, financial advisors can be beneficial. If they’re tax-savvy, they can suggest tax credits and other tax advantages you may qualify for as a low-income individual. These could include the saver’s tax credit, the earned income tax credit, and more.

Advisors can help you build a plan to start growing your income and your assets. This type of strategic planning can often benefit from a second set of eyes. Advisors can help from an accountability partner standpoint, too. They can check-in to make sure you’re sticking to the activities you need to complete in order to reach your goals. 

Why it is important for people on a low income to have a financial advisor

If you’re a self-starter and educate yourself about personal finance, you may not need a financial advisor right away. In fact, I’ve never had one. That said, people that don’t have the time or don’t care to learn may benefit enormously from the knowledge financial advisors have learned through education and through experience over their careers.

A fiduciary financial advisor, one that must keep your best interests in mind, can help you avoid making costly financial mistakes. Avoiding mistakes is half of the battle of growing wealth.

You don’t have to pay a financial advisor on a recurring basis. You can pay some advisors a flat fee or an hourly rate to develop a financial plan for you. Once you have the plan, you may be able to enact it on your own. You can then hire a financial advisor on an ongoing basis after you’ve started to grow your assets.

Can you get a financial advisor for free?

You might be able to find financial advice for free, but chances are you won’t find a free financial advisor. Financial advisors can be compensated in many ways that make them appear to be free or low cost, though. 

However, they may be taking commissions from the amounts you invest or a percentage of your assets each year. This means their services aren’t free, even if you aren’t paying them with cash or a credit card for each visit.

Advisors are in business to make money so you shouldn’t avoid them because of these fees alone. Even so, you need to carefully select a financial advisor that has your best interests in the front of their mind, not the amount of money they’ll make from commissions from selling you products.

Financial advisor services to consider

If you’ve set aside money to pay a financial advisor for advice, here are a couple of options you may want to consider.

The Paladin Registry

The Paladin Registry is a free service that matches you with a financial advisor. The service vets the financial advisors you meet in advance. They also rate the advisors and document essential information you should know about them, such as education, experience, and certifications.

You have to share your portfolio range, which is likely less than $50,000, as well as your name, email address, zip code, and phone number. After you do this, The Paladin Registry matches you with one to three potential financial advisors within 24 to 48 hours that fit your profile that would be willing to work with you. 

Once you get your financial advisor matches, you get to interview the advisors to see if they’ll be a good fit. You can also discuss how they’ll be compensated and how they can help you with your specific financial needs. You’re under no obligation to move forward with any of the advisors. If they aren’t a good fit or don’t fit your budget, you can move on to other options.

What are your options if you can’t afford a traditional financial advisor?

If you’re living paycheck to paycheck and can’t afford the fees financial advisors charge for one-time or ongoing advice, you aren’t alone. 

There are still plenty of places you can get inexpensive or free advice about personal finance or investing. You may have to spend a little bit more time applying concepts to your particular situation, but you can still find the knowledge you need.

Robo-advisors

Robo-advisors are a great way to learn how to start investing. They use technology to provide some of the investment picking services a financial advisor would offer at a fee lower than most traditional advisors. They usually offer educational resources on their websites for free, as well.

One key aspect that makes robo-advisors accessible to those with low incomes are the low minimums to get started investing. Some robo-advisors have no minimums while others have small minimums that are within reach, such as $100 or $500. Robo-advisors usually offer many educational resources, as well. Here are just a couple to choose from:

Acorns

Acorns provides investing services for fees as low as $3 per month. This service could be especially useful to those with low incomes because it helps you start investing without directly feeling the pain.

Acorns offers a tool called round-ups. This rounds up your purchases to the nearest dollar. Then, it invests the change. It won’t necessarily build your assets quickly. That said, it’s a great way to get started with the habit of investing. You can also make automatic purchases. These purchases can be scheduled on a daily, weekly, or monthly basis. 

Betterment

Betterment is another option for those without a lot of money to invest. You can get started with just a $10 minimum deposit, and Betterment charges 0.25% of assets under management each year, which is much lower than a traditional financial advisor’s 1% assets under management fee.

Betterment uses technology to match you with a portfolio that meets your needs and investment goals. They also offer strategies to help you minimize the amount of taxes you pay on your investments and portfolio rebalancing to keep your investments on track.

Also, Betterment is a fiduciary, which means they must keep your best interest in mind when making financial recommendations.

Personal finance books

Personal finance books provide a vast amount of knowledge for the extremely low cost of buying a book. If you borrow the book from the library, it can even be free.

Many financial advisors have written books about managing your money and building wealth. The advice won’t be tailored to your specific situation, but you can pick up plenty of great tips to help you get started.

You may have to read a few books to get a good idea of different strategies. That way, you can pick the one that’s best for you. Make sure to read reviews of the books, as well. Some get outdated and others may offer controversial advice. Reviews may point out areas where you should be cautious following the advice given in a book.

Local and online resources

Local and online resources provide even more knowledge, often for free. Check with the companies you already do business with to see if they offer free financial resources. Be skeptical of any offers, though. 

These companies are often trying to sell products that generate more profits. That said, companies like Vanguard or local credit unions may have educational materials you can learn quite a bit from.

You can read through the archives at Money Under 30 to learn about many personal finance topics, too. Other websites also provide a ton of useful information. These range from professional publications such as Kiplinger to other personal finance blogs. 

The key is knowing who to trust and verifying the information with reputable sources. After all, not everything on the internet is true.

Summary

Getting financial advice when you have a low income isn’t easy. Many financial advisors won’t work with you because you don’t have any assets they can manage. Then, some of the advisors that will work with you charge outrageous fees. 

Consider the options listed above to find financial resources that fit your budget and situation. Then, take action to start improving your finances and growing your wealth. Eventually, you may be able to hire a traditional financial advisor if you still feel it is in your best interest at that time.

Read more:

Source: moneyunder30.com

Apache is functioning normally

A GRS reader dropped a line last weekend. “I want to invite you to the Diehard Organizational Meeting on Wednesday,” he said. “I’m new to the group but obviously we’re all believers of value of index funds and John Bogle’s investment philosophy.”

“Hope to see you there,” I replied.

I’m still new to investing, but my reading continues to point in the direction of index funds. (An index fund is a mutual fund designed to track a particular stock market index. FSMKX, for example, attempts to mimic the performance of the S&P 500 index.) Index funds were popularized by John Bogle, the founder and retired CEO of The Vanguard Group. Followers of Bogle’s investment philosophy call themselves Bogleheads or Diehards.

I’m not a Diehard (yet), but a chance to meet and learn from them was an offer I could not refuse.

The Diehards
Seven of us gathered last night at a Portland coffeehouse. We’re all at different places in life, and we each have different investment goals and strategies:

  • Ron is retired. He derives his income from dividends and social security. His investments follow a conventional split: 60% equities (50% stock index funds, 10% real-estate investment trusts, a.k.a. REITs) and 40% fixed income (30% bonds and 10% cash).
  • J.D. is a middle-aged blogger. He recently eliminated his consumer debt, and is only now beginning to learn about investing. All of his retirement money is in stock index funds (though one of them is FFNOX, which includes a small portion in bonds).
  • Tony is learning about investing. He reads Get Rich Slowly (and is the one who invited me to the meeting). His portfolio is 80% equities (50% total stock market index, 15% international, 15% small-caps) and 20% other (10% REITs and 10% bonds).
  • Greg is also new to investing — Tony has been showing him the ropes. Greg is a lifelong saver and is not a risk-taker. He tries to max out his Roth IRA every year, putting his money in Vanguard’s STAR fund. Greg lives frugally in order to get the money to invest: he doesn’t have cable, and he doesn’t have internet.
  • Tim is a fee-based Certified Financial Planner. He believes that everyone’s situation and circumstances are different. He likes to see the different approaches each person takes to financial planning. His own investments are 50% in stocks, 40% in fixed income (including 20% in TIPS, Treasury inflation-protected securities), and 10% in what he calls “alternative investments”, such as REITs and commodities.
  • Tom just moved to Vanguard index funds this year. He wants to do a lot of intense research over the next couple of years, find a plan that works, and then put it on auto-pilot. Like Ron, he has 60% invested in equities and 40% in fixed income.
  • Bruce teaches Certified Financial Planner courses at a nearby university. His personal investments are interesting. He’s an income investor. He doesn’t care how the share price moves. He cares about the income, because that’s how he pays his bills. His portfolio contains 60% “income securities” (REITs, preferred stock, utilities) and 40% conventional equities (in other words, normal stocks). “This is not what I teach,” he said as he explained his methods.

Profiting from shared wisdom
As we introduced ourselves, others asked questions about our backgrounds, and we had tangential conversations about a variety of topics. We talked about health insurance. We talked about preferred stock. We talked about financial planning.

It seemed to me, though, that we were mostly discussing facts and figures. “What role do you think behavior plays in financial planning?” I asked.

“It’s starting to play a bigger role,” said Bruce. “Financial planning is a huge topic. If you want to be a competent advisor, you have to know it all. The coursework is structured as if there are right answers and there are wrong answers, but then you get out into the real world and you realize that’s not true.”

“There’s no one right answer,” said Tim. “It’s a broad subject.”

I also mentioned that the Doom-and-Gloomers (like Peter Schiff) are starting to get to me. “Those folks come out every time the economy goes bad,” Bruce said. “They bubble to the top. You just have to ignore them.”

I left the meeting with two pages of notes and tons of information, not just for the blog, but for myself. I learned about George Kinder and his concept of life planning (see video below). I learned about Sheryl Garrett, and her goal of making financial advice accessible to all people. I learned a little more about income investing (a subject that interests me).

[embedded content]

I’m grateful to Tony for inviting me to join this group, and I look forward to additional meetings in the future.

Strength in numbers
It’s certainly possible to learn about investing from books and blogs and magazines. But I think meeting and exchanging ideas with other people adds a new dimension to the subject.

If you’re interested in sharing and learning about index fund investing, check the list of Diehards local chapters to find a meeting in your area. If you can’t find a group nearby, you can still chat with hundreds of other like-minded folks at the Bogleheads investment forum.

You might also consider joining the American Association of Individual Investors, a non-profit founded in 1978 to provide individual investors — people like you and me — with tools and knowledge to better approach the stock market. This organization also has local meetings. (Here’s info about the next meeting of the Portland chapter [PDF], which I hope to attend.) The downside to the AAII is that everything costs money.

There may be other similar groups in your city. One of the men at tonight’s meeting mentioned that he’s involved in a couple of other organizations that meet regularly to discuss saving and investing. These kinds of gatherings are excellent ways to meet other people, and to learn from their successes and failures. They allow you to profit from shared wisdom.

Source: getrichslowly.org

Apache is functioning normally

“People want to make money fast, but it doesn’t happen that way.” — Warren Buffett

Over Christmas, I read Roger Lowenstein’s fantastic biography of Warren Buffett, one of my financial heroes. Because I currently prefer to invest through index funds, it was fascinating to read how Buffett has been able to make billions by purchasing individual stocks.

Next, I picked up the new book from David and Tom Gardner: The Motley Fool Million Dollar Portfolio. It was the perfect follow-up to reading about Buffett. “This book is about picking great stocks,” write the authors in the introduction, and it’s true. Over the subsequent pages, they describe a variety of techniques for finding individual stocks that are worthy of investment (and not just speculation).

Stocks that don’t suck
I don’t write much at Get Rich Slowly about investing in individual stocks. For one thing, I have a pathetic track record in choosing good companies. In the past, I’ve been a speculator and not an investor. Some of my choices include:

  • CRA, at its peak
  • PALM, on the day of its IPO
  • WAMU in the autumn of 2007
  • SHRP, last January

Fortunately, I’ve never had huge sums to invest in these speculative bids. All the same, I’ve lost thousands of dollars in bids to get rich quickly in the stock market. Because of my experience, I’ve come to admire the virtues of indexed mutual funds.

All the same, I recognize that it is possible to build a great investment portfolio from individual stocks. Many GRS readers are interested in doing just that. And I, too, would like to allocate some portion of my money to buying stocks — now that I have the urge to speculate out of my blood. In their book, the Gardners write:

If you have the time, ability, and interest, individual stock investing is the single best way to build you own million-dollar portfolio.

Though the authors advocate picking individual stocks, they’re as wary of fees as any index fund investor. They believe active trading is dumb. They’re advocates of buy-and-hold. The Gardners also write that there are two components to investing well:

  1. Picking the right stocks.
  2. Building a balanced portfolio (i.e., diversifying).

“In the end,” they write, “you want 100% of your money invested in companies that don’t suck, and 0% in companies that do.”

Investment strategies
Each chapter of Million Dollar Portfolio explores a specific investment strategy. The authors note that “each [strategy], practiced well, can and does beat the market.” Some of the methods covered include:

  • Dividend investing, which involves buying stocks that produce consistent income through the use of “dividends”. MDP argues that dividends are the investment world’s “allowance”. When you own a dividend stock, you receive a periodic payment just for investing.
  • Value investing focuses on buying companies trading for less than what they’re worth. It’s about buying good companies at a great price. “The excitement of blue-chip value investing comes from looking at long-term charts of what value stocks do as a group over a period of decades.”
  • Small-cap investing attempts to find “hidden gems” — stocks from smaller companies that tend to be ignored by large institutional investors.
  • Growth investing. Growth stocks are those expected to produce above-average earnings over the near future. Increased earnings lead, in theory, to increased profits, and to higher share prices.
  • International investing, which allows you not only to diversify, but also to find stocks in other countries that might be better than those in our own.

The authors lay out the basic techniques of each style, and then provide case histories. Along the way, they explain investing concepts like P/E ratios, book value, “market cap”, rebalancing, and more. Though they write about individual stocks and not index funds, much of the advice is familiar: buy and hold, diversify, etc.

Million dollar portfolio
Million Dollar Portfolio includes more than just information about choosing stocks. The book also features:

  • A chapter about CAPS, the Motley Fool stock-researching tool (which Get Rich Slowly has covered before).
  • A discussion of asset allocation and diversification.
  • A short section on the financial collapse of 2008. The Gardners look at the causes, the reactions of big investors, and the prospects for small investors like you and me.

The Gardners also stress the importance of investing as soon as possible. They write that the biggest mistakes that American investors make are:

  1. Never starting.
  2. Starting too late.
  3. Picking poor stocks.

As many have argued, the best time to begin investing is now, whenever now may be. Because of the power of compounding, time is the investor’s best friend.

I was ready to hate this book, but I didn’t. I found it fascinating. I loved the information about how to evaluate stocks. I’m not ready to abandon index funds, but I am eager to learn more about dividend investing, the method that seems best suited to my personality and goals.

I also like that the book doesn’t just tout successes. Each chapter describes a particular investment strategy, explains the method, and then illustrates it with two or three successes. But each chapter also includes a real-life mistake the authors have made. These examples of choices gone wrong are often more instructive than the picks that worked!

Note: I recently had a chance to interview author David Gardner. Look for an excerpt from that conversation later today.

Source: getrichslowly.org

Apache is functioning normally

You’ve paid rent year after year and what do you have to show for it? Zilch. Zero. Nothing.

If you’re starting to dream about building equity, now is a great time to make the leap. Interest rates are still low, and real estate prices haven’t started to spike yet. Before you apply to a lender, though, there are a few things you should know.

Applying won’t damage your credit

“If you are shopping around for a mortgage and worried that the inquiries will ding your credit score, don’t worry,” said Roman Shteyn, co-founder of Credit-Land.com. “The credit bureaus know that people may go to different providers to check interest rates especially for a big purchase like a house. Loan inquiries within 30 to 45 days of each other for the same thing are lumped together and treated as a single request, and your credit score should not be impacted.”

Your past matters to lenders

They will look at previous mortgages on your credit report to determine your creditworthiness

“We all know a foreclosure has a negative impact on your credit score,” says Shteyn “but many people don’t realize a short sale can be damaging as well. It can knock your score down 85 to 160 points depending on your score at the time and how it was reported to the credit bureau.” Occasionally, a lender will agree to report a short sale as paid which will not negatively affect a credit score. But this is rare.

A short sale is not as bad as a foreclosure, which will make it more difficult to get a loan. It will remain on your credit score for seven years, and lenders will see this black mark whenever you apply for credit during this period.

Lenders handle couples with different credit scores in a special way

If you’re applying for a mortgage loan as a couple, the mortgage lender will check both of your credit reports and credit scores. The bank reviews your debt, the length of your credit history and current credit activity.

Paying bills late and too much debt can negatively impact a mortgage approval, plus influence the mortgage rate. However, some couples believe that they’ll receive a low interest rate as long as one person has excellent credit — but this isn’t always the case.

Typically mortgage lenders use the lowest credit score to determine the mortgage rate. Therefore, if you have a 790 credit score and your partner has a 670 credit score, you’re not likely to receive the most favorable rate due to your partner’s less-than-perfect credit history.

To ensure the best rate, both of you need to maintain good credit before applying for a loan. This includes paying bills on time, paying off debt and checking your credit reports for errors.

For a lender, there’s nothing like responsibility

Make other loan and debt payments on time, especially over the months leading up to the filing of your mortgage application. Every 30-, 60- or 90-day delinquency on a loan or credit card is going to reduce the credit score the lender considers as part of the loan file. That score, in turn, will determine how good a loan you get — if you get one at all.

You need to be strategic about your personal finances

Consider paying off more debt and putting down a smaller amount at closing. This move leaves borrowers with larger mortgages, but it will allow them to replace non tax-deductible, high-interest rate debt (like credit card debt) with lower-rate mortgage debt that features deductible interest.

If you have a financial setback and need to miss a payment on your other debts, miss the credit card payment first, followed by the payment on any installment loan you might have and finally, the payment for an existing mortgage. That’s because credit scoring systems look at the performance of similar loans first when deciding what type of score to assign.

Before you apply, think about the future

If your next few years are full of big life changes and multiple new financial obligations, apply for a mortgage first. Numerous credit inquiries, such as new applications for credit cards, can hurt a borrower’s credit score, especially if they’re filed in the months prior to the home loan review process.

The value of your potential home can make or break the deal

Sometimes it’s not your fault that your mortgage application is denied. If your home isn’t worth enough, lenders might not approve your request for a mortgage. Say you agree to pay $200,000 for a home and are asking for a mortgage loan of $190,000. If an appraiser determines that the home is worth only $160,000, a mortgage lender might not grant you a loan, even if you are willing to pay the higher amount.

The 3 big don’ts

We can talk about the things you should do when applying for a mortgage all day long, but realistically, avoiding the big mistakes should be your first concern. Here are five things you should remember.

  1. Don’t make any big purchases over the next couple of months. It makes less money available for the down payment and it might require you to get yet another loan.
  2. Don’t upgrade too fast. Lenders consider what’s known in the industry as “payment shock” when approving loans. Somebody who goes from a relatively small monthly housing payment to a huge one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money.
  3. Don’t just get pre-qualified for a mortgage, get pre-approved. Home buyers must allow their lenders to pull credit reports, check debt-to-income ratios and perform other underwriting steps. But that puts a borrower much closer to obtaining a loan and locking in a rate and term.

Source: totalmortgage.com

Apache is functioning normally

After a push higher on Monday, stocks, bond yields, and mortgage rates are easing back a little on Tuesday. Market participants are still largely in a wait and see mode ahead of Wednesday’s key Consumer Price Index Report.

With inflation data remaining in the spotlight, that reading has the potential to send current mortgage rates one way or another. Read on for more details.

[embedded content]

Market Outlook 2.12.18 from Total Mortgage on Vimeo.

Where are mortgage rates going?                      

Rates down a little today

It was a strong start to the week on Monday with all of the major stock indexes moving higher. With long-term Treasury yields being sold off, we saw yields rise to multi-year highs.

Click here to get today’s latest mortgage rates (Jul. 16, 2023).

Of particular importance to mortgage rates is the yield on the 10-year Treasury note, which moved as high as 2.89% on Monday. That’s a big rise from where it was at the start of the year at 2.46%.

Mortgage rates typically move in the same direction as the 10-year yield, and as we saw in the most recent Freddie Mac Primary Mortgage Market Survey, the average rate on a 30-year fixed rate mortgage has moved up thirty three basis points since the start of the year.

The general consensus among market analysts is that bond yields and mortgage rates still have room left to run. How high they will rise in 2018 is an ongoing debate, but we have seen several calls for the 30-year fixed rate to hit 5% by the time 2019 rolls around.

That’s not something that will happen overnight, but we are still dealing with the threat of rising rates this week. Tomorrow, we will get the Consumer Price Index reading for January–a key inflation reading that financial market participants will certainly have their eye on.

We haven’t seen much uptick for CPI in recent months, but that only increases the potential for a big market reaction if we see some unexpected growth.

After all, one of the leading theories for last week’s stock market decline was the jump in average hourly earning in the monthly job report for January, signaling to investors that inflation was picking up.

So what would happen if CPI comes in higher? Well, it’s easy to imagine a similar scenario as last Monday with stocks falling and bond yields and mortgage rates surging.

It’s definitely a wait and see game, with no clear outcome readily visible. The CPI report will be released at 8:30am tomorrow morning and the market reaction, if there is one, will happen swiftly after the release.

Federal Reserve on track to raise rates in March

Cleveland Fed President Loretta Mester spoke this morning to the Chamber of Commerce in Dayton, Ohio, stating that she is not overly concerned about the U.S. stock market’s recent stumble. She said, “I expect the economy will work through this episode of market turbulence and I have not changed my outlook.”

That means that she’s still planning on raising the federal funds rate by about three-quarters of a point in 2018. Mester did throw in the caveat that she would have to readjust her outlook on monetary policy if the data starts to come in differently.

Overall, it still seems like the Fed is poised to raise the federal funds rate for the first time in 2018 at their March meeting next month.

Rate/Float Recommendation            

Lock now to avoid risk of rising rates

Mortgage rates have been steadily rising throughout 2018. There is the definite risk that they will rise tomorrow when we get some key inflation data. If you want to avoid the risk of rising mortgage rates, your best bet is to lock in a rate now.

In the current rate environment, opting to float could mean that you’ll get a higher mortgage rate down the road. If that’s something you can stomach, then by all means do it, but just understand there is a clear risk involved.

Find out how to get the best rate possible with our in-depth video series. 

Today’s economic data:                               

NFIB Small Business Optimism Index 

The NFIB Small Business Optimism Index hit a 106.9 in January. That’s an increase from the prior month’s reading of 104.9.

Fedspeak  

  • Loretta Mester at 8:30am

Get the GreenLight and close in 21 days*      

Notable events this week:                

Monday: 

Tuesday:    

  • NFIB Small Business Optimism Index
  • Fedspeak

Wednesday:      

  • Consumer Price Index
  • Retail Sales
  • Atlanta Fed Business Inflation Expectations
  • Business Inventories
  • EIA Petroleum Status Report

Thursday:        

  • Jobless Claims
  • Philadelphia Fed Business Outlook Survey
  • PPI-FD
  • Empire State Mfg Survey
  • Industrial Production
  • Housing Market Index

Friday:       

  • Housing Starts
  • Import and Export Prices
  • Consumer Sentiment

*Terms and conditions apply.

Carter Wessman

Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

Source: totalmortgage.com

Apache is functioning normally

Wells Fargo is taking bigger precautions on its office building loans, setting aside more funds to cover potential losses as the sector continues to deteriorate.

The office market “continues to be weak” in many cities, Chief Financial Officer Michael Santomassimo said Friday. But he also argued that general trends can be misleading, and said the bank has been doing a property-by-property analysis to see where its specific risks lie.

The warning from one of the country’s largest banks hints at signs of trouble that smaller banks may share as they start reporting earnings next week. Office loans make up about 3% of Wells Fargo’s total loans, but many smaller lenders have bigger concentrations.

Wells, which has $1.9 trillion of assets, continued to conduct a deep dive into its office loan book in the second quarter, which prompted it to set aside more reserves to absorb potential losses later on.

After stress testing its commercial real estate loans, the bank’s allowance for credit losses in the CRE sector jumped to $3.6 billion in the quarter — up 64% from a year earlier. Office vacancy rates have climbed as remote work has shown staying power.

Wells Fargo executives, who also boosted CRE loan reserves in the first quarter, didn’t rule out adding more reserves as conditions evolve. But they said their current analyses covered just about every risk they can see at the moment.

“We’ve gone through a number of stress scenarios and feel like at this point, we’re appropriately reserved,” Santomassimo said on the bank’s second-quarter earnings call.

JPMorgan Chase also bumped up its reserves during the quarter due to office loans, though its executives cautioned against reading too much into the buildup, given the bank’s limited exposure to the office sector. JPMorgan Chief Financial Officer Jeremy Barnum said the company wanted to get “ahead of the cycle,” but he noted that most of the bank’s CRE portfolio is tied to loans backed by multifamily buildings.

Wells Fargo and other large banks have manageable exposures to office buildings and other commercial real estate, said CFRA research analyst Kenneth Leon, pointing to the resilience those banks showed in this year’s stress tests. Leon credited Wells executives for displaying strong “credit risk control” and closely monitoring its CRE loan portfolio.

Wells Fargo’s CRE team is focused on “surveillance and de-risking,” Santomassimo said. The bank highlighted diversification in its portfolio, with an investor presentation showing that office loans make up 22% of its CRE book. 

Loans backed by apartments, a sector that Santomassimo said is performing “quite well,” account for 26% of Wells Fargo’s CRE book. Warehouse, hotel and retail loans make up smaller chunks.

Nearly a third of Wells Fargo’s office loans are in California, and the remainder are spread across several other states. San Francisco, where Wells is headquartered, has been a source of worry in the office market, given that tech companies have embraced remote work more than many other firms. One office building there has reportedly seen an 80% drop in its value.

Asked about office-related risks in California, Santomassimo said that worries are not “isolated to California” and “you see weakness in a lot of cities these days.” He also cautioned against focusing solely on geography.

“Even in California, we’ve got as many examples where clients are actually reinvesting in buildings, even if lease rates are low or even empty in some cases, as they are going into a workout,” Santomassimo said. 

Wells CEO Charlie Scharf said it’s “a very big mistake” to think that a building’s geographic location is the only factor that will determine whether losses occur.

“We have examples in cities that are struggling where the structure of our loan is quite good — the underlying property has very high lease rates for an extended period of time,” Scharf said. In markets that are doing well, specific properties may be at more risk due to a large amount of upcoming lease terminations, he added.

“That’s the level of detail that we’ve used to come up with what we think the appropriate level of reserving is,” Scharf said. “We’ve tried to be as diligent as we can.”

Source: nationalmortgagenews.com