Ten Ways of Evaluating Your Broker

There are 10 things to consider in choosing a broker or in evaluating whether your broker measures up.

1. Trading commissions: Cheaper may not be better. The price per trade may be indicative of the level of customer service executed. If you go cheaper, you may find yourself at the end of the line with your questions unanswered, whereas paying more would most likely mean excellent service.
2. Other fees: It is important to know that brokerages charge other fees for services, such as for transferring assets into the account, wire transfer, IRA custodian, etc. Know what you need first so you won’t have to pay for unnecessary services.
3. Minimum initial deposit: Beginning investors should consider the initial investment amount they’re most comfortable with. Since some brokers have account minimums, choose one that suits your budget.
4. Customer service: Research on the services offered before signing up. Consider website performance and interface, speedy service, and a good phone service.
5. Traditional banking services: Look for a brokerage account that can adjust to your banking needs.
6. Research: Decide whether or not you have to pay for research (analyst reports, financial data, and real-time quotes) when you can do it yourself online.
7. Mutual funds: Check whether you have to pay for no-load mutual funds since some brokers charge fees. If you have a particular mutual fund family in mind, ensure that your broker offers that.
8. Investment product selection: Check so that the broker you choose offers investment vehicles you wish to use.
9. Other methods of getting your trades executed: Determine whether your broker has contingency measures such as touch-tone phone trading; things like this will prove helpful in the event you have no access to a computer.
10. Freebies: Though not entirely a big deal, free money is free and stress-relieving.

A final word: if you make less than 20 trades annually, never mind the cost; focus instead on customer service.

Budgeting Basics for Lazy People

Let’s face it. Most people find budgeting an unenjoyable activity. Many keep putting this task off until the next day, and end up never doing it. Are you that kind of person? If you are, Dayana Yochim of Fool.com has written a simple technique for the budgeting lazybones.

1. Know exactly how much you spend: To appreciate the virtue of saving, you must be personally aware of the excesses in your spending. List all your expenditures and categorize them. People who use cash can write down their expenditures on a day-to-day basis. Those who use credit or debit cards may get data from monthly bank statements. Input the data into a spreadsheet and be amazed.
2. Make your spending plan. After you get over the initial shock, you can start making your “spending plan.” The idea is to make a list of the most important purchases you need to make within the next three or six months. Include the physical purchases and financial plans you need to pay. This list will guide and direct your spending
3. Compute money to set aside. Single out the items on the list that will run you every month (ex. new tires), divide the total amount for that item with the number of months until you need them anew.
4. Put your savings on autopilot. To ward off surprise expenditures, hide your money from yourself. Open a separate savings account from the one you use for expenditures. You already computed how much money you need to put away monthly in
5. Instruct your bank to program recurring cash transfers from your main account to your separate savings account.
6. Discipline yourself. Use the “envelope method” to prevent mindless overspending. Compute the total weekly amount you need to spend on essentials. Categorize them and insert the allotted budget inside the envelope. This is the money you’re allowed to spend each week.

Investment Pointers for Every Age

While all people share and are governed by a similar economic and investment climate, age groups experience different economic situations, risks and opportunities. Thus, the young and old may vary in terms of financial focus and investment opportunity. Money Magazine’s Peter Freeman gives the following investment pointers for those in their 20s, 30s, 40s, 50s and 60s.

1. The 20s. People from this age group are rookies to the workforce and have just started to generate income. Moreover, they have semi-permanent relationships. The financial focus at this age is to save up for a deposit on a home or to pursue an investment that appeals to one’s lifestyle. Prior to building wealth, they must either control or erase credit card debt. They may also consider investing in equity funds to build deposit.
2. The 30s. At this age, people have either settled down, have children, or bought a home. The main concern is how to secure renovations, reduce mortgage, and acquire or upgrade to a better property. Main threats to this age are downsizing and inflation, so taking out income insurance and saving up for emergencies are recommended. Those who are still single may pursue aggressive investments (geared share funds, portfolio or direct share investments) with extreme care.
3. The 40s: Financial stability during the 40s depends on how well you managed your money during the past decade. As the kids are grown up and education becomes more expensive, budgeting is of extreme importance at this age. High income folks may expand their investment portfolio.
4. The 50s: Establishing your own business is advantageous at this age. Children are married and enjoy financial independence, ergo, reduced expenses. Higher salaries are also enjoyed.
5. The 60s and later: The main focus at this age is how to maximize one’s savings in order to continue generating post retirement income. People usually build investments around allocating or complying pension in order to maximize tax and social security.

Five Tips for Picking an Investment Partner

If you have succeeded in forming a company without external financing, there is great likelihood that you will attract private equity investors. When the time has come to consider an investment partner, selecting who to choose will be a major decision. Here are five tips to ensure you pick the best investment partner:

1. Know your needs. It is important to determine exactly why you are raising capital. Is it for personal liquidity, growth equity, a management buyout, or a combination of all three? Before making the big decision to gather outside financing, understand what business opportunity confronts you. Only then can you determine the type of capital required and the right investor.
2. Evaluate each firm's track record. Choosing the right firm requires diligence. If you must, evaluate data on each firm, such as size, stability, capital resources, and track record. Be aware of the firm’s success history and level of experience with businesses related to your own. Assess the firm’s capacity to deliver returns for both investor and business owner.
3. Make sure the culture fits. Find a private equity firm you can work hand-in-hand with. Conducting interviews with CEOs of the firm’s portfolio companies can give you a feel of what working with a particular firm would be like. Narrow down your choices to firms who can provide capital and keep your management team in control of decisions.
4. The value of personal trust. Chemistry is a must when assessing a potential investment partner. Among the questions you can ask are: Does the firm operate with honesty and integrity? Do we share common ethics? Do we like them as people?
5. Look for stability. Stability helps raise follow-up capital as well as provides potential for growth. Monitor retention of personnel as well as investors. Determine if there is a succession plan crafted for smooth transition of the firm to the next owners.

Three Essential Investing Tips

True, most people understand the concept of investing: exchange your money today for a company you hope will earn you more money over the coming years. While this may seem simple, what we have seen in reality suggests that doing it “right” and succeeding in it is far from easy. Those who have proven their mettle have done it differently from in their own ways --- take Warren Buffett, James Simons, and George Soros, who have made it big with varying approaches to investing. As the market evolves and becomes more complex, every investor, whether freshman or veteran, needs three essential tips to secure a return on their investments.

1. Know what kind of an investor you are and make sure your investments are consistent with that. Is your personality fit for a “speculator,” looking to maximize on short-term movements? On the other hand, are you the “investor”; more interested in buying stocks off a great business to hold on the long-term? Your chances of succeeding depend on how and where you put your money on the market.
2. Think independently and avoid becoming a market lemming. The thing that draws the crowds is not always the wisest thing to follow. This particular bandwagon syndrome that focuses on short-term results makes investors “act like a herd of crazy lemmings.” It pays to be independent in making decisions. Take Warren Buffett’s example. During the tech boom, almost everybody placed bets on short-term tech companies while Buffett stuck to his long-term investment methods on “boring” companies like Gillette. Rookie investors criticized Buffett for his “relic” style. Eventually, the tech bubble burst and Buffett proved them all wrong.
3. Do not rely too much on stock tips. Sure, stock tips can help point you in the right direction, but it is wiser to research on a stock first and buy it for a good reason.

Investment takes practice. Eventually, you will get better at it, especially when you unfailingly consider these 3 essential tips in your decision-making.

Six Mutual Fund Investing Tips You Need Now

Mutual funds are great investment vehicles. They combine money from hundreds and thousands of investors to create a financial portfolio of stocks, bonds, and real estate, among others. Moreover, every investor gets a slice off the total profits. In order to succeed in mutual fund investing, here are six important tips:

1. Keep ongoing expenses as low as possible. Closely monitor sales charges and other fees of your mutual funds. This is crucial for newbie investors who want to keep their own money working for them as much as possible.
2. Be wary of short-term performance. Do not be overwhelmed by spectacular one-year performance figures. In evaluating funds fit for long-term investment, look at past performance in terms of return, within three, five, or ten years. Moreover, you also need to assess how consistent the return is comparatively to similar funds, as well as to the overall market.
3. Evaluate your manager’s track record. Check the track record of your fund’s manager. Pick a manager with experience of five years or more who has worked on a particular fund, follows a consistent strategy, and has delivered impressive returns for long periods.
4. Develop automatic plans. Set up a mutual fund using an automatic plan with your fund company or employer. If you can, use your 401(k) plan to have automatic deductions on your paycheck before taxes.
5. Monitor your fund's performance. Monitor your mutual fund’s performance monthly, or at the least, quarterly. This will enable you to make decisions such as whether to increase your investment or to sell. Compare your fund’s performance with other funds as well as with the overall market.
6. Diversify. One of the most attractive features of mutual funds is that they are usually diversified. Based on economic and historical data, it is wisest to diversify by using asset allocation (as stocks, bonds, and cash equivalents).

Top Ten Investment Strategies from Warren Buffett

Readers get a glimpse of how Berkshire Hathaway’s Warren Buffett generates wealth in John Train’s book “Midas Touch.” The following are the top ten investment principles used by Buffett himself.

1. Buy a share as though you were buying the whole company. Determine how an enterprise is worth but do not rely on formal financial projections or mathematical formulae. Invest in “a business you understand, favorable long-term economics, able and trustworthy management, and a sensible price tag.”

2. Volatility does not create risk. A serious investor sees opportunity in volatility.

3. Value should include “growth at a reasonable price” or GARP. The ideal companies have a business “moat” that has steady and reasonably predictable growth. In the long run, these businesses are more tax-efficient and more convenient than one bought at a bargain.

4. Invest on what you know best. Refrain from seeking the “newest” thing because it is too risky. Buffett's biggest investments are firms founded in the 1800s, such as American Express, Wells Fargo, Procter & Gamble, and Coca-Cola. Said Buffett: “Startups are not our game.”

5. Avoid investing in bad industries, or turnarounds. It is not sound to invest in a business that requires a revival.

6. Seek out businesses that can reinvest at high rates of return over long periods. Avoid investing in low-margin businesses that require cash from you periodically and can expect only modest rates of return.

7. Do not sell a great stock just because it has doubled. Its value could go up when you least expect it, sometimes going up 20 or even 100 times during the next generation.

8. Never offer your own underpriced stock for the fully valued stock of an acquisition candidate. You will end up on the losing end of the bargain.

9. Avoid long-term bonds. Given how easy it is to inflate currencies, this is not a wise move.

10. Invest like a fanatic. Concentrate relentlessly on how you can transfer wealth to your own pocket.

Seven New Tips Toward Financial Security

How can you become financially secure considering the current chances in economic climate? Money Magazine keyed in tools on understanding the risks that the new economic climate poses including tips on adjusting to them in order to attain financial security. The article challenges people to get rid of old assumptions and take in new ones. It highlights seven new ways to achieve financial security.
Risk tolerance is about making or missing an important goal. Analyst T. Rowe Price suggests that relying on the volatility of the markets is not a wise move. The market lesson is: weigh the amount of risk you can lose and still meet your basic goals.

Save and rely on cash more. Analysts recommend redefining the scope of savings to include significant expenses such as tuition, a wedding, or a down payment on a house. Build an emergency fund before anything else. Consider your earnings potential. Instead of focusing on stocks and investments, think about human capital, or your capacity to earn while working on a job. Evaluate how secure your human capital is and make adjustments. Borrow cautiously. Be very conservative in borrowing for a mortgage or for college. Get a mortgage you can afford and put a 20% downpayment. Be wise about owning a home. Face the fact that owning a home will not make you rich but it has advantages. Have modest expectations when you do decide to purchase a home. Diversify. The best way is to go out and buy 16 new mutual funds that can kill two birds with one stone. T. Rowe Price recommends investing 20% of assets in emerging markets and the remainder in developed countries. Do not retire early. Delaying retirement for one year can increase your retirement income by 9%.