Novel Investor

Compounding investing wisdom...

Happy Hour: Apple Sweatshops, Go Giants and Low, Low Rates

by Jon

It’s Happy Hour again, TGIF and all that.  Time to kick back relax and enjoy the fruits of your labor.  Or a cold one.  This roundup is brought to you by Apple Sweatshops, the Super Bowl Indicator, and the ultra low rates of the Fed.

iPhone Sweatshops

A news story last week introduces the socially responsible side of Apple and its suit of iProducts.  Is it okay to buy products made by companies that use labor practices that are illegal in the U.S.?  With 37 million iPhones sold last quarter, it certainly seems to be an acceptable practice.  But should it be?

The Super Bowl Indicator

The Super Bowl Indicator was something I discussed last year at this time.  It states that when a team from the original NFL wins the market goes up and when a team from the original AFL wins the market goes down.  The Giants are an original NFL team, the Patriots an AFL team.  If you have money in the stock market, you’ve got money on the game.  Lets Go Giants!

The Fed Meeting

The Fed meeting statement was released this week. Continue Reading…

The Idiot Proof Portfolio

by Jon

Idiot Proof Portfolio
Flickr: CJ Sorg

Investing can be complicated and sometimes you just want to simplify your investing in a way that still gets you a good return while protecting you at the same time.  The Idiot Proof Portfolio is a simple low-cost, low maintenance, easy to understand approach to investing.  What you eventually decide to do is up to you, but sometimes keeping things simple is the best route for long-term investing success.

The fact is most people don’t need a complicated investment strategy.  They either don’t have the capital, the know how, or time to make it worth while and they never will.  Yet we continue to take on unnecessary investments because someone, somewhere stated that is how it’s done.  The arguments usually contain terms like diversification, risk aversion, and cost control all things you’ll get with the Idiot Proof Portfolio.

What the Idiot Proof Portfolio provides is an easier way to understand, manage and invest your money.  It’s not sexy or exciting.  But it leads to low costs, simplified taxes, less paperwork, easier rebalancing, and just spending less time hassling over your investments.  It won’t break any records but it will protect you in down markets and reward you in up markets, as long as you stick to it.  Most importantly you’ll know why.

The Idiot Proof Portfolio

The portfolio has a goal of easy maintenance, low-cost, risk control and diversification. Continue Reading…

The Answer To The U.S. Debt Problem…Donate!

by Jon

U.S. DebtThe U.S. Treasury is a charity case.  At least super rich Warren Buffett believes it is, when he announced in Time magazine that he would match any donations made by Republicans that help pay down the U.S. debt.  Not a bad idea.  Get some good PR and make a dent in the deficit.  A small dent but at this point every penny counts, right?  Well, you can contribute, too.

What If We All Got On Board?

It’s a simple question actually.  What if everyone donated $100, $500, or $1,000 to help pay down the deficit.  We’ll be paying it out of our pockets or paychecks eventually.  Why not just get it over with now?  We could even budget it out over the next 12 months.

For as little as $8.33 a month you can make a difference in the U.S. deficit!

Doesn’t sound to bad.  It’s cheaper than that Netflix account you are wasting money on and it’s going to a good cause, keeping my future taxes low.

If we go by the Bureau of Labor Statistics numbers, there are just over 240 million (the civilian noninstitutional population) able-bodied people in this country capable of working.  Thus capable of donating.  We should probably base it off of real workers (just over 150 million) but even people not receiving a pay check are getting some type of government benefit through unemployment, social security, or medicare.  It’s certainly in their best interest to keep the deficit low or risk having these benefits cut. Continue Reading…

Asset Allocation And The Benefits Of Rebalancing

by Jon

The beginning of a new year is a time for review, reflection and resolutions.  When it comes to your money it’s the perfect time to set goals, make changes and resolve to stick to those changes long term.  Whether it’s setting up and funding an IRA or just putting extra money aside for a rainy day, whatever the goal, how your money is invested, its asset allocation, and consistent rebalancing will be some of the most important decisions you’ll make as an investor.

What Is Asset Allocation?

Asset allocation is an investment strategy based on finding a balance for your money between different assets that fits your goals and risk level.  These assets are broken down into three main classes – equities (stocks), fixed income (bonds) and cash – which will make up your investment portfolio.

Unfortunately, there is no simple formula for figuring out your perfect asset allocation.  But there are some rules of thumb to follow.  The most important decision will be the split between risky and non-risky assets or your stock/bond split.  A conservative rule is to have “your age in bonds”.  According to this rule, if you are 40 years old, 40% of your portfolio would be in bonds.  For those who prefer more risk (age – 10) adjustments can be made.  It offers a starting point.  Once you have an asset allocation that you’re comfortable with, it’s time to make sure you stick to it.

The Importance of Rebalancing

Continue Reading…

Happy Hour: Comcast, Costly Data Plan, And eFile

by Jon

Happy hour came early again this week.  I have an article scheduled for tomorrow, Friday, that will be posted for the Better 2012 event.  So you can check it out here or there.

Brilliance of Comcast

I got a phone call earlier in the week from my cable provider offering a great discount deal opportunity if I upgrade to its HD service.  But I don’t have an HDTV.  Comcast’s suggestion “There are a lot of great deals on HDTVs going on now.”  Spend some money just to increase my monthly cable bill.  Brilliant!

Costly Data Plans

AT&T is jacking up it’s data plan pricing starting next week.  Apparently AT&T had the new years resolution, to make more money.  All because of a 40% increase in data usage.  Something that isn’t going to slow down anytime soon.  Maybe a sign of future capital spending on more cell towers to deal with the increase in data usage.

eFile Began This Week

Continue Reading…

New Federal Reserve Change And How It Affects You

by Jon

Federal Reserve ChangeThe Federal Reserve has picked up the transparency bug again to start the year off.  The new recently announced change will include quarterly forecasts on the federal funds rate.  This guidance will be forward looking at least two to three years out starting with its first announcement from the January 24-25 meeting.

So why is this change important?  Well, interest rates tend to move based on the direction of the federal funds rate.  If you remember back in August, the Fed slipped in an addendum to expect low rates through mid-2013.

After that announcement, interest rates dropped to all time lows.  With the rate drop, savings and money market account interest rates moved lower.  Mortgages rates headed lower too.  Many, myself included, believed this would be the lowest point of mortgage rates.  If you don’t think rates can go lower, just wait.  The potential of the first announcement could push long term rates lower still.

Possible Outcomes

Depending on which direction the Fed goes with its first forecast of the year, one of three outcomes are possible. Continue Reading…

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