Net Unrealized Appreciation - Great Tax Benefit for Retirees

My financial advisor shared a great retirement tax strategy called Net Unrealized Appreciation or NUA. This strategy can be used to reduce the tax liability for employer stock in a company retirement plan.

Under the NUA strategy, employees take an in-kind distribution of company stock from their retirement plan (after leaving the company) and pay ordinary income taxes on the stock’s basis or original cost when it was put in the plan. The difference between the basis and the market value—the net unrealized appreciation—is taxed at long-term capital gains rates when the stock is sold, regardless of the holding period. This can be a significantly lower taxable event than rolling the stock into an IRA where all of its value will eventually be taxed as ordinary income.

Let's see how this would work for our hypothetical future retiree, Will B. Retired. Currently, Will has $1,000,000 in his company's retirement plan (ESOP, 401K, etc.). All of the savings, is in the form of his employer's stock, i.e. actual shares. These shares were purchased over the course of Will's employment. Will's company has done very well since the original cost of the stock in his retirement account was $50,000. Will has three choices when he retires from the company:

1. Leave the account with his employer. It would be continued to managed by his company and he would sell stock and take distributions as needed. The distribution would be taxed as ordinary income, i.e. as if it were salary.



2. Roll over the account to an IRA. Will can transfer the funds to an IRA, where they can be managed as he chooses. He can keep his company stock, or sell the stock to diversify his retirement portfolio. Distributions from an IRA would be taxed as ordinary income.



3. Do an in-kind transfer of the stock to a taxable account. In this case, Will would move the stock out of the retirement account into a taxable account. Assuming Will moved the entire account, he would only pay tax on the basis, or original cost, of $50,000. Tax would be paid on the balance, i.e. the Net Unrealized Appreciation, at the time the stock is sold. The tax rate would be at the then in effect long term capital gains tax rate.

Thus, by using the NUA approach, Will saves a significant amount of taxes since the maximum long term capital gains tax rate is 15%. In addition, the long term capital gains tax rate is lower than the ordinary tax rate at every tax bracket.

For reference, an NUA can be done after one of three triggering events: 1) the first distribution from the retirement account; 2) the first distribution after 59 1/2; and 3) death. To note, if the retiree is less than 59 1/2, he may owe a 10% penalty on the basis for early withdrawal.

For more details, see Revisiting Net Unrealized Appreciation: A Tax-Wise Strategy That May Realize More Benefits Than Ever in the Journal of Financial Planning. As with any personal financial strategy, please consult financial advisor and tax advisor before taking action.

For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit: morgueFile.com, Emily Roesly

This is not financial or retirement advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links to Carnivals from August 28 - 30, 2007

Here a links to select Carnivals from August 28-30, 2007:

The 89th Edition of the Festival of Frugality @ FILAM Personal Finance

The 3rd Carnival of Securities @ The Carnival of Securities

Carnival of Money Stories #22 - FIRE Edition @ FIRE Finance

The August Carnival of Career and Job Advice @ Ask the Career Counselor

The Carnival of Satire #82 @ the skwib

Please recognize the excellent work of these hosts and check out their Carnivals.

This is not financial, career or investment advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Top U.S. Universities and Where to Go To Avoid Debt

U.S. News and World Report's 2008 America's Best Colleges review is now available. While our three year old daughter is still 15 years away from attending, I have more than a passing interest in the article. One of my dream jobs is to be a College Application Coach for students applying to top U.S. universities. Since it has been a while since I applied to college myself, I wanted to begin to refresh my memory on the current state of today's colleges.

College Rankings

The college rankings are still similar to when I applied to college. Ivy League schools still have many of top spots, with Princeton, Harvard and Yale in the top three. Here are the top five schools:

1. Princeton University, Princeton, NJ
   Undergraduate student body: 4,906
   Tuition and fees: $33,000
   Room/board: $9,200



2. Harvard University, Cambridge, MA
   Undergraduate student body: 6,649
   Tuition and fees: $33,709
   Room/board: $9,946



3. Yale University, New Haven, CT
   Undergraduate student body: 5,409
   Tuition and fees: $33,030
   Room/board: $10,020



4. Stanford University, Stanford, CA
   Undergraduate student body: 6,576
   Tuition and fees: $32,994
   Room/board: $10,367



5. University of Pennsylvania (tie), Philadelphia, PA
   Undergraduate student body: 9,730
   Tuition and fees: $35,916
   Room/board: $10,208
   
   California Institute of Technology(tie), Pasadena, CA
   Undergraduate student body: 913
   Tuition and fees: $29,595
   Room/board: $9,102

As a previous reader noted, tuition and fees may not include text books, sports fees, insurance, and travel from home.

Student Debt Rankings

Surprisingly, Princeton and Harvard were the top two schools for the least student debt, among national universities. Here to the top five schools for low student debt:

1. Princeton University, Princeton, NJ
   Percent of graduates with debt: 26 percent
   Average amount of debt: $4,965



2. Harvard University, Cambridge, MA
   Percent of graduates with debt: 42 percent
   Average amount of debt: $9,717



3. Howard University, Washington, D.C.
   Percent of graduates with debt: 88 percent
   Average amount of debt: $10,868



4. Utah State University, Logan, UT
   Percent of graduates with debt: 25 percent
   Average amount of debt: $11,040



5. University of Massachusetts-Amherst
   Percent of graduates with debt: 55 percent
   Average amount of debt: $11,227

Of note, the article states that the data does not include loans taken out by parents. So the number may understate the total family debt to attend the university.

Overall, I was impressed average debt at some of the top universities, which offer about $20,000 to $25,000 of non-loan financial aid. Of course, the costs will be much higher when our daughter will be applying. If she should be fortunate enough to be admitted, perhaps she will qualify for one of these unique scholarships.

For more on Crossing Generations , check back every Thursday for a new segment.

Photo Credit: Princeton University

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Retirement Saving Challenge - Two Month Status

Those who joined the Retirement Saving Challenge on July 1, 2007 have almost completed two months. On Friday, August 31, 2007, one should have two months of saving, either at a rate to create 12 times income at age 65, or at a rate of 12% of salary. Here's what one's savings should be at this time:

	Two Month Amount by Age To Achieve Savings Equal To 12 Times Salary
Salary	20	30	40	50	60*	12% of Salary
$20,000	92	211	511	1,406	6,632	400
$30,000	137	317	766	2,109	9,948	600
$40,000	183	422	1021	2,812	13,264	800
$50,000	229	528	1276	3,515	16,580	1,000
$60,000	275	634	1532	4,218	19,896	1,200
$70,000	321	739	1787	4,921	23,212	1,400
$80,000	367	845	2042	5,624	26,528	1.600
$90,000	412	951	2298	6,327	29,844	1,800
$100,000	458	1056	2553	7,030	33,160	2,000
$110,000	504	1162	2808	7,733	36,476	2,200
$120,000	550	1267	3064	8,436	39,792	2,400
$130,000	596	1373	3319	9,139	43,108	2,600
$140,000	642	1479	3574	9,842	46,424	2,800

* Mathematically not possible. Shown only for reference

One can choose the lower of the 12 Times Number or the 12% Number. For example, if 20 and making $50,000 per year, one should have saved $229 by August 31, 2007. If more aggressive, one can choose to have saved $1,000.

Since this is an honor system challenge, there is no need to report one's results. I hope everyone is make progress towards their retirement savings target. The next update will be around September 30, 2007. Good luck until then.

Here are the related posts (in date order) for The Retirement Saving Challenge:

Retirement Saving Challenge

Set A Goal

Create Environments and Behaviors

Daily Savings Targets

Preparation - Timeless Personal Finance Recommendations

Finding Money To Save

The Power of Compounding

Get Started

One Month Update - July, 2007

For more on The Practice of Personal Finance, check back every Wednesday for the next segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Renting versus Owning

What's better than owning a speed boat? Having a good friend that owns a speed boat:-)

Seriously, in many cases, the practical answer is "renting" a speed boat. For me, the same is true for a vacation home, jet ski, snow mobile, antique car and motor home. Why?

Maintenance Costs. In addition to purchasing costs, there often are substantial costs for keeping one's property in good condition. Management or storage fees, insurance, routine maintenance, repair and just plain old personal effort are often needed. I don't mind these if I am using the item frequently, e.g. my home or commuting car. However, when the time and effort exceeds the time spent using the item, it's not for me.

Frequency of Use. For me, most of the allure of items such as a vacation home, ski boat, motor home, etc. come from novelty of use. It's always fun and exciting in the moment, because it is a special and infrequent moment. If I owned it, I would NEED to use it more often, to justify it's cost. If higher use would be normal, great! Buy it! But for me, I would use it about the same amount of time, which would be once or twice per year maximum.

Renting or sharing costs is good alternative. A friend of mine once owned a speed boat and skied every weekend from June through mid-October. He would invite me out once or twice a summer and I covered the gasoline and refreshment costs for the day. It was a great deal for both him and me - I paid the out of pocket expenses for the day and he gladly carried the ownership costs.

My friend has since moved away. Since I may use a ski boat on my own once every couple years, it makes sense for me to pay the $200/day rental fee, when I need one. Renting is much cheaper than buying a $20,000 ski boat to be used occasionally.

To note, if one does use something enough, then it may make sense to own it outright. However, for many occasional use items, renting is the better financial choice for me.

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Laura Ashly

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links to Carnivals from August 26 - 27, 2007

Here are links to select Carnivals from August 26 -27, 2007:

Carnival of Wheels: Edition #35 @ The Garage

The Personal Development Carnival - August 26, 2007 @ Creating A Better Life

Carnival of Personal Finance @ Free Money Finance

Carnival of Stocks #51 @ Dividends Matters

The 1st Carnival of Family Life in Dubai @ Sandier Pastures

Please give the hosts some recognition and visit their Carnivals.

This is not financial, investing, automotive or personal development advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

8/27/07 Stock Purchase Update - Return to Positive Gains

In my 8/20/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was down $94 for a 0.5% loss, from a peak of $2310 and 13.2% on 7/23/07. Although delayed, a reversal predicted in New Life For The Bull Market seems to have started. As of 8/25/07, the portfolio is now up $1075 for a 6.1% gain. Here's the current status on the positions in these four stocks:

	My Wealth Builder Buy List
Stock	Shares	Purchase Price	Current Price 8/25/07
Terex (TEX)	50	$82.36	$80.35
Potash (POT)	50	$71.39	$87.67
Shaw Communications B (SJR)	100*	$21.755	$23.15
Avnet (AVT)	200	$38.11	$39.22

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the overall decline of the market. Since the last update, TEX and POT increased significantly, while AVT and SJR were up slightly.

I continue to be impressed with my ability to stay invested in these stocks, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week. However, the recent events (credit crunch, central bank interventions) have convinced me that the bull market is in its last stage, and I will consider closing out these positions during the next significant rally.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links to Carnivals from August 21-25, 2007

Here are links to select Carnivals from August 21-25, 2007:

Carnival of Money Stories #22 @ Carnival of Money Stories

Carnival of Financial Planning - August 23, 2007 Edition @ The Skilled Investor Blog

Carnival of Career Intensity - August 25, 2007 Edition @ Career Intensity Blog

Please recognize the excellent work of the hosts and check out their Carnival.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

PR Opportunity For Countrywide's CEO

Angelo Mozilo, Countrywide CEO, has been getting a lot of face time recently. As I interpret it, Mr Mozilo believes his company may be negatively impacted by the actions of the markets, regulators and analysts. In addition, he is calling for the government to help. Quoting from Reuters, here are some of the statements Mr. Mozilo made in his interview with CNBC last week:

1. Countrywide Financial Corp. Chief Executive Angelo Mozilo warned on Thursday that the U.S. housing downturn could lead the country into recession and the Federal Reserve should cut its discount rate to boost liquidity.
   
   Asked if there would be a recession, Mozilo said: "I think so ... I know I've been proven wrong so far, but I can't believe that when you're having a level of delinquencies, foreclosures - equity has disappeared, equity is gone, the tide has gone out - that this doesn't have a material effect, A, on the psyches of the American people, and eventually on their wallet."



2. Mozilo, 68, said markets are in "one of the greatest panics I've ever seen in 55 years in financial services."



3. "There is no more chance for bankruptcy today for Countrywide than there was six months ago, a year ago, two years ago, and when the stock was $45 a share," Mozilo said. "We're a very solid company."



4. In the interview, Mozilo also accused Merrill Lynch & Co. analyst Kenneth Bruce of "irresponsible behavior" in suggesting in an Aug. 15 research report that downgraded Countrywide to "sell" from "buy" and said that Countrywide might face a possible bankruptcy if market conditions worsen.

Mr. Mozilo didn't create any additional sympathy from me for him or Countrywide. Especially, since he was paid $69 million in 2006 and $160 million for a five year total. In addition, he has sold about $200 million of Countrywide stock in 2007.

While My Wealth Builder has no PR experience, I have a few ideas which I believe could create a more positive perception. So here are my PR suggestions, for what they are worth:

1. Have a third party assessment of the issues. This would provide additional credibilty, which may help the case.



2. Show more concern. One can do this without any admission of wrong doing. At least one can publically feel sorry for the folks losing their houses due to mortgage issues. During each interview, I would express concern for those who may be losing their homes.



3. Contribute past and current compensation to solving issue. I call this as the Lee Iacocca solution, who only accepted $1 per year in compensation until the problems were solved at Chrysler. One could use compensation in the past five years to buy Countrywide stock. Also one could choose to accept no compensation until the problems are resolved.

With this approach, I believe one may be able to get more support for proposals and Countrywide's situation.

For more on New Beginnings, check back every Sunday for the next segment.

Photo Credit: CNBC

This is not financial or public relations advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Bracing For A Possible Housing Crash or Recession

Recently, the talk in media is becoming more doomsday about the housing market and the potential of recession. Executives are coming forth with comments on a housing led recession, including Angelo Mozilo , Countrywide CEO, Bill Gross, PIMCO CIO, and Alan Mulally, Ford CEO. Interestingly, these commenters are those with a large vested interest in a Fed intervention. Countrywide originates 17% of mortgages in the U.S., Mr. Gross has been betting (incorrectly) on interest rate declines for the past two years, and Mr. Mullaly is concerned about the mortgage mess spilling over to auto financing. It's not enough talk for me to be worried, yet. However, it's enough talk for me to think about what I might do if there is a further housing downturn that is accompanied by recession.

Here is my current plan:

Avoid selling in short term. We consider our house a place to live, not an investment. Our house was purchased in 2003, with plans of staying for a decade or more. I don't expect any more job relocation with my company. We like our neighbors, proximity to shopping and the general area. Our house is a great match for our lifestyle and potential family growth. The school system is excellent.

Count on our margin of safety. We made a 40% down payment on our house and borrowed 60%. Also, we did a 30 year mortgage, even though we planned to pay it off in 15 years. By doing this, we kept our mortgage payment less than 13% of our monthly income. Also, we have an emergency fund that can cover at least a year of expenses, including our mortgage payment.

Reduce real estate tax. In the event our house value declines significantly, I will petition for a reassessment of our property. If accepted, our real estate tax would be lowered significantly.

Identify investment opportunities. When there is crisis, there is also opportunity. I am still contemplating how I could have profited from the housing and subprime collapse. I have seen a significant increase in foreclosures in my area. One of my wife's cousins has found a reasonable approach for foreclosure purchases. He rents his properties with option to buy, providing income and giving the buyer the opportunity to build equity before the final purchase.

Finally, I will maintain a large cash reserve to invest, should a good option be found.

For more on Reflections and Musings , check back every Saturday for a new segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial, real estate or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Adventures of A Lifetime

Business Week's Annual Retirement Issue had a segment on the Adventures of Lifetime, which described 10 exciting destinations to consider in (early) retirement. The list was was somewhat exotic and I had not been to any of the locations. After reading this article, I decided to put together my own short list of completed Adventures of a Lifetime and start considering future possibilities

Completed Adventures

1. European tour. Right after graduating from college, a friend and I backpacked for two months through western Europe. We realized that we would not have an extended vacation for many years and delayed starting work until the fall.
   
   We used an eight week Eurail pass for most of the trip. We initially stayed in youth hostels, until we learned that there were many low cost hotels for about the same price. We traveled to Belgium, Germany, Luxembourg, Yugoslavia, Greece, Italy, Switzerland, France, Spain and Portugal. I particularly enjoyed Paris, Rome and Athens. It was the best trip that I had done up to that time.



2. Japan residency. We spent 3.5 years in Japan due to a company assignment. During that time, we saw many famous temples, visited Hiroshima and the close by island of Miyajima, experienced the Sakura (cherry blossom) festival, traveled to Koya-san and participated in many festivals, including a New Year's celebration. In addition, I climbed Mount Fuji (12,388 ft) with a couple colleagues from work.
   
   We also learned about and immersed ourselves in the culture, living as the locals would - food, transportation and shopping. I tried the learn the language but only mastered enough to get by in restaurants, barely. My wife was much better and could ask for directions, if needed.



3. China adoption trip. While living in Japan, we had wanted to visit China but never did. We did get the opportunity again when we traveled to China for two weeks for out daughter's adoption. We toured Beijing, Chongching and Guanzhou during that trip. One highlight was climbing the Great Wall. Of course, the main highlight was seeing our daughter for the first time.

In selecting my adventures of a lifetime, I realized that one of my criteria is to have an extended stay in the location, of at least two weeks. We've had some one week trips to the Great Barrier Reef, Maui, Alaska (via a cruise) and Thailand which were excellent trips. However, for me, they didn't make the adventure of a lifetime list.


Future Adventures

1. Road trip through the US. There are many places that I still need to visit in the US. Among them are natural wonders such as the Grand Canyon, Yellowstone, and the Grand Tetons. It would be great to spend a month or two driving, visiting these sites and stopping to see friends along the way. We'll probably need to do multiple road trips to see the sights.



2. Other possibilities. We haven't thought much past a U.S. road trip. Some intriguing options would be an African Safari, or an extended trip to other parts of China. I expect we'll find other opportunities once we start seriously looking.

My father-in-law has warned me to expect much higher travel expenses during retirement. Based on potential options, I think he's right :-)

For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit: morgueFile.com, JW Blonk

This is not financial, travel or retirement advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

My Actions May Be Used For Training Purposes

"For training purposes, this conversation may be recorded." - Customer Service disclosure

Although I am not trained in education, I am finding out quickly that a major learning mechanism for children is to replicate what they have seen or heard - both the bad and the good. I've learned that I need to be a good role model or else the poor actions will be replayed back to me, perhaps for weeks.

Good Role Model

Driving - Buckling up. Stopping at stop signs and red lights. Going the speed limit.

People skills - Complimenting others. Being positive. Collaborating. Sharing.

Personal finances - Saving. Avoiding debt. Making good purchase choices.

Bad Role Model

Driving - Talking on a cell phone. Commenting on other drivers with colorful language.

People skills - Complaining. Making disparaging remarks about others. Being disrespectful.

Personal finances - Buying more than one can afford. Using debt to maintain lifestyle. Gambling.

Children seem to copy those actions one doesn't want them to do:-) If I tell them not to use credit cards, but constantly have credit card debt, guess which one the child follows? The same is true for other financial practices, most driving behaviors, and many social skills.

Not too long ago, I had a Bad Role Model moment. Our bank was having its one year anniversary outdoor party. The parking lot was crowded and the driver of an extended van was doing a particularly poor job of pulling out of the parking space. It seemed to take forever with seven direction changes, even though the van was able to clear the parked cars after three. I commented, " What a &%$#@ dolt." Immediately, our 2 1/2 year old repeated, "What a &%$#@ dolt." Ooops. Fortunately, for me, I have never heard her speak those words again. Since then, I haven't spoken those words either :-)

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or parenting advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Three Ways to Make Money Investing

Previously, I wrote about Five Ways To Lose Money Investing. Here are three ways I have found to make money in the stock market.

Hire a good professional. I did this three years ago and am very glad I did. After returning from an overseas assignment, I decided I wanted to spend less time managing our personal investments. I chose a professional who had been in the business 20 years and utilized proven portfolio managers to select stocks.

My personal finance advisor manages part of our taxable investments, provides counsel on retirement readiness, keeps me informed of latest opportunities. Most important, he has spent the time to understand my risk profiles, my objectives and aspirations and invests consistent with those.

For reference, my advisor charges on an asset basis. However, to me, it is a very reasonable cost, about 1.25% of assets, which is comparable to the expenses of many mutual funds. That cost covers trade commissions, financial planning (retirement, college, estate, etc), and investment recommendations for my own use.

To note, it is important to do one's own due diligence when choosing a professional. A poor professional can lose a lot of money. I looked for someone with experience in at least two down markets, and who used diversification to minimize risk. Then I compared their historical results versus the market.

Validate a system. I have always looked for system that would improve my investing results. I have tried Value Line, various newsletters, best stock recommendations from financial magazines. None have ever worked consistently for me...until recently.

In 1998, my father-in-law gave me a Motley Fool book, The Unemotional Investor. After reading it, I put it aside for six years. In late 2004, I decided to test the system, with some changes, calling it a Modified Unemotional Investor Growth system. The system has worked well for me and I still use it for my own investment portfolio, which currently consists of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT).

While the modified system has not been demonstrated through a major down market, it has done relatively well in the recent downturn as shown in the 8/20/07 stock purchase update.

Invest in a diversified index fund. This can be a low cost, low involvement and profitable way to participate in equities. The stock market has averaged a 8.90% annual return since 1951. A low involvement way to participate is to buy an diversified index or a total market index fund. A slightly higher involvement (and higher return) method is to buy the best performing diversified equity index fund from the previous year.

For this approach, it is important to use a diversified or total market equity index. Sector index funds may not match long term market returns.

More On What I Have Done

With the first two approaches, it is extremely important to do a thorough evaluation to find a good advisor or a good system. Not surprisingly, there are bad advisors and bad systems, which can quickly lose one's money. For both approaches, I have started by investing a small amount of my overall portfolio. Based on positive results, I then invested a larger amount.

For the third approach, I have not been a big fan of just putting money in the diversified index. I feel I can do better with individual stock picks:-) However, overall, I think a diversified equity index would have earned a respectable return for much less effort than I invested.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Run-Flat Tires - Overpriced Insurance

Recently, a colleague and I were discussing our experiences with tire replacement. He owns a Honda Odyssey with run-flat tires, which allow 50-100 miles of driving after the occurrence of a flat tire. As part of routine maintenance, he was replacing the tires. To his surprise, he learned that the replacement tires would cost about 100% more (about $600 more for four tires) than normal tires. In addition, the tires were special order and needed special skills to be installed.

We discussed the merits and "problems" of run-flat tires:

Merits

1. Drive 50-100 miles after a loss of air.
2. No need to change tire, especially on busy road.

Problems

1. Limited service facilities that can repair or replace the tires.
2. High cost to replace.
3. Tires may not be in stock and need to be ordered
4. No spare if one needs to drive over 100 miles.

We concluded that run flat tires were expensive "insurance" for a low frequency problem. For me, my last flat tire was about 20 years ago. In addition, there are many reasonable and less expensive alternatives. Cell phones are ubiquitous now and can be used to call AAA or a service station. For a slow leak, one can pump up the tire and drive it to the nearest service station. In the worst case, I can use the car jack, get my hands dirty and change the tire myself:-)

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Alex

This is not financial or automotive advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals From August 19-20, 2007

Here are links to select Carnivals from August 19-20, 2007:

Personal Development Carnival - 8/19/07 @ Balanced Life Center

First Carnival of College and Finance @ College and Finance

Carnival of Family Life @ Why Homeschool

Festival of Stocks - August 20, 2007 Edition @ Fully Stocked

Carnival of Personal Finance #114@ The Simple Dollar

Carnival of The Capitalists 8-20-07 @ Revenue River

Please recognize the excellent work of these hosts and check out their Carnival.

Who Ya Gonna Call? - CreditBusters!

Recently, this conversation between CreditBusters (formerly of Ghostbusters fame) and Ben Benanke was leaked to My Wealth Builder:

Dr. Peter Venkman: The credit markets are headed for a disaster of biblical proportions.
Dr. Ben Bernanke: What do you mean, "biblical"?
Dr Ray Stantz: What he means is Old Testament, Mr. Fed Chair, real wrath-of-God type stuff.
Dr. Peter Venkman: Exactly.
Dr Ray Stantz: Fire and brimstone coming down from the skies. Rivers and seas boiling.
Dr. Egon Spengler: Forty years of darkness. Earthquakes, volcanoes...
Winston Zeddemore: The dead rising from the grave.
Dr. Peter Venkman: Human sacrifice, dogs and cats living together - mass hysteria.
Dr. Ben Bernanke: Is that all? I thought you meant it was going to be really bad.

If Dr. Bernanke wrings out the excessive speculation and avoids a recession, he will be a hero. So far his plan seems to be working, but he is walking a very fine line. For now, I am continuing to hold on to my stock purchases and plan to ride out the volatility.

Disclaimer: The conversation described above is fictional and any resemblance to actual people or events is purely coincidental :-)

For more on Strategies and Plans , check back every Monday for a new segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial or policy advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

8/20/07 Stock Purchase Update - Portfolio Went Negative

In my 8/13/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was up $913 for a 5.2% gain, down from a peak of $2310 and 13.2% on 7/23/07. Although I predicted a reversal in New Life For The Bull Market, the markets continued to be ugly and the portfolio finally went negative, down $94 for a 0.5% loss. Here's the current status on the positions in these four stocks:

	My Wealth Builder Buy List
Stock	Shares	Purchase Price	Current Price 8/17/07
Terex (TEX)	50	$82.36	$72.47
Potash (POT)	50	$71.39	$75.70
Shaw Communications B (SJR)	100*	$21.755	$21.71
Avnet (AVT)	200	$38.11	$39.06

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the overall decline of the market. Since the last update, TEX and POT declined significantly, while AVT and SJR were down slightly.

I have been impressed with my ability to stay invested in these stocks, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. However, the central bank interventions have convinced me that the bull market is in its last stage, and I will consider closing out these positions during the next significant rally.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

A Stock Market Scenario - Going From Bad to Worse

"Things are going to get a lot worse before they get worse." Lily Tomlin

On Friday, the indices hit the prerequisite 10% decline to qualify as a correction. 30% volatility is the highest level since March, 2003. Real estate prices are declining or, at best, stagnant. Housing starts are at a 10 year low. Mortgage brokers are going bankrupt. People with excellent credit ratings can't get mortgages. Ben Bernanke isn't planning to cut the Fed Funds Rate, because there isn't a threat to the economy...yet.

Last week I thought the Fed breathed new life into the bull market. I've changed my mind. Here's why it's going to get worse:

It's a transition to a new economy. Globalization, interdependency, new people, and volatility have voided the old models. People still remember when Alan Greenspan and the Fed were able to single-handedly change the course of the economy and stock markets. Mr. Greenspan is gone, and more US debt is owned by foreign countries than ever before.

There are more factors, new factors to consider, which were part of the previous equation. While Dr. Bernanke is a smart guy, it's pretty tough to be exactly right for a situation one has never encountered before.

It's about unknown probabilities. Investors and traders are getting whipsawed. Will the Fed cut rates? Will liquidity be restored? Is this the bottom? Is the the beginning of a protracted bear market? Should I short the market? Nobody knows. Worse yet, the models aren't working because they depend on some level of predictability. Right now the Fed is not acting the same as when Alan Greenspan was chair. Ben Benanke is still an unknown quantity for these types of situations.

So it's about considering possible scenarios and preparing for them. What if the Fed doesn't lower interest rates? What would be investment strategies for this situation. What if the Fed does and interim reduction? What if the Fed reduces interest rates in the September meeting? What are strategies for these situations? What is the probability of each situation?

As a result, quantitative analysis, in the short term, is not working. Factor values are changing too quickly, no one can predict what the Fed will do, and everybody is very anxious. To note, some hedge fund quants are being decimated. More will come. This is a the type environment for irrational actions to take place. This is an excellent time for people with experience and good intuition to take advantage of individual stocks being mispriced.

Net, we should all be getting ready for a wild ride. At this time, I've decided to buckle up and hold tight. While the Fed is willing to let excesses be purged from the market, they don't want to go into recession. While the short term will be very volatile, the economy is still strong and I expect the market will recover. I believe large cap, financially secure stocks will survive and thrive after this current shakeout of the market excess. I'm staying in the market, but making no new purchases.....for now.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Happy Blogiversary - One Year

Monday, August 13, 2007 was the one year blogiversary of My Wealth Builder. Today, I am celebrating with a nice glass of wine and a good cigar. Here are some fun facts related to the past year of My Wealth Builder from August 13, 2006 to August 12, 2007.


Blog Statistics

378 articles posted through August 12, 2007.

Total visits: 35,975

Page views: 55,927

Three most popular articles:

How Much Is Needed To Be Wealthy - The NUMBER

2006 IRA Contribution Deadline is April 17, 2007

Retirement Calculator Evaluation - Vanguard

Geographical Reach

Top countries:
United States
Canada
United Kingdom

Top cities:
New York City
Los Angeles
Atlanta

Top non U.S. cities:
London
Sydney
Vancouver

August 13 Birthday Trivia

August 13 is also the birthday of several well known people or characters: Alfred Hitchcock (1899-1980), Bambi (65), Fidel Castro (81), and Dan Fogelberg (56).

For more on Reflections and Musings, check back every Saturday for a new segment.

Photo Credit: morgueFile.com, Jose

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Signs Of Being Considered For Promotion

In my experience, there were several signs when I was being considered for promotion. In each case, after these "criteria" were met, I was promoted to the next level. Here are my three signs:

Consistently did the job at the next level. Prior to my first promotion, I had consistently doing the job at the next level for over a year. 90% of my work was generally done by the level above me. I was authorized to sign documents typically done by a person one level up. I was representing our company externally in arbitration (usually done by one to two levels higher). I created and led the global team in my area of responsibility, and half the members were one level above me. Also, I was expected to represent the projects in my area to in presentations to the General Manager.

Turned "average" projects into a superior business result. I still remember the day my department manager called me into her office and said, "Our General Manager has asked that we staff this project again. We've decided to do it and think you would be the best candidate. Let us know if you are interested." Even though it was not a glamorous assignment, I immediately agreed. Over the next two years, the work we did made several projects into top priority areas for our General Manager.

Interaction with upper management became more frequent. Before my last promotion, my General Manager was periodically calling me directly for perspective on my project and to provide his input. My memos, summaries and updates were often circulated among the senior managers in my organization.

For perspective, to get a promotion doesn't mean one needs to get more face time with upper management. On the contrary, upper management wants more face time with the candidate because of the excellent results being delivered by the person. Also, these three signs do not guarantee a promotion. A promotion won't happen until those making the decision have confidence the candidate can do the work at the next level.

For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit: morgueFile.com, Kevin Connors

This is not financial or career advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Choosing a College 529 Plan

Since we plan to cover our daughter's college education, we looked into college savings options not long after she arrived. My financial advisor helped me to quickly sort through the options, and recommended our state 529 plan. Contributions by residents were tax deductible, fees were among the lowest, and there was a great selection of funds. He added the qualification that they had just started recommending our state 529 plan after it added a new family of funds. Prior to that they were recommending other states' plans, even though there was a resident tax deduction for our state's plan. After reading the materials from the plan, I immediately sent in our first contribution.

For those who don't have a financial advisor, I'd recommend three sources for helping with one's decision.

How Stuff Works. This is one of my favorite Do-It-Yourself sites. It provides a great explanation of How 529 Plans Work and shares eight steps for Choosing the Right Plan. I consider the first three steps the most important: check one's own state, evaluate the plan manager, and estimate total fees. I would also add evaluating the the funds that are in the plan.

Saving for College. They have a great section on 529 plans with an introduction to 529s that includes answers to FAQs. In addition, they provide an evaluation of every state's plan with their 5-cap rating system.

Lazy Man And Money. Lazy Man shares his 529 Plan analysis which includes elements of the eight steps from How Stuff Works and uses information from the 5-cap rating system in Saving For College. His main criteria were: low minimum investment amount, low maintenance fees, low expenses, and good fund choices. Even though he lives in California, he chose plans from Ohio and Michigan as his top two 529 picks.

For more on Crossing Generations , check back every Thursday day for a new segment.

Photo Credit: morgueFile.com, Jane M. Sawyer

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Financial Truths are Truths, Even In A Virtual World

"If it's too good to be true, then it probably is." - unknown

The Sydney Morning Herald recently reported that the largest bank in the virtual world of Second Life recently closed its door after a run on its deposits. Ginko Financial had been offering 44% APR on deposits of Linden dollars. In a move that would not be possible for a real bank, Ginko Financial has converted deposits to Ginko Perpetual Bonds equal to the amount of the deposit. These bonds are now trading in a virtual world stock exchange, WSE, for much less than the original deposit value.

Of note, Reuters Second Life had previously alleged that Ginko Financial was running a Ponzi or pyramid scheme since the beginning. The owners of Ginko Financial have not revealed how they have been able to achieve 44% returns for depositors.

Unfortunately, all the Ginko Financial depositors have lost some real money. The virtual money does have real value since 270 Linden dollars can be converted to 1 USD. I guess 44% annual interest yield on savings is even too good to be true in a fantasy world :-)

For more on The Practice of Personal Finance , check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals From August 13-14, 2007

Here are links to select Carnivals from August 13-14, 2007:

Festival of Stocks #49 - Time For Medicine Edition @ My Wealth Builder

Carnival of Family Life: Colloquium in Paradise @ Colloquium

About Your Finances #2 @ MyQuo.com

Made to Be Great Carnival of Personal Development @ Made To Be Great

Carnival of Personal Finance #112: T.G.I.N.F. Edition @ My Open Wallet

Investors Blog Network (IBN) Festival #13 @ My Covered Call Blog

Festival of Frugality LXXXVIII @ Frugal for Life

Carnival of Money Stories - Show and Tell Edition @ Ask Mr. Credit Card

Please give the hosts some recognition and stop by their Carnival.

This is not financial, parenting or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Shorting Stocks - For Experienced Traders Only

Recently, I've noticed an increase in posts on the topic of shorting stocks in the Personal Finance blogosphere. Since I have had some experience shorting stocks, I thought I would contribute my point of view to this discussion. For reference, I have shorted nine stocks from late 2002 to mid 2004. My results have been mixed. Seven times I profited from the short trades and twice I lost money. I have not shorted any stocks since 2004.

As a start, here are some definitions. Going short means selling a stock and then buying it back in the future, hopefully for a lower price. If the stock should go down, one makes a profit. If the stock rises, one loses money. This is the opposite of going long, which means buying a stock and selling in the future, hopefully for a higher price.

Short sellers benefit when the stock or the stock market is declining. Because their investing approach requires a stock to do poorly, short sellers are sometimes looked upon with disdain. Objectively, a short seller is someone who is trying to capitalize on a downward direction of a stock or the market.

Short selling is not for the faint of heart, low capital, low expertise investor. It is definitely is not for a novice investor. In my opinion, a short seller should have shown some success at short term trading, have sufficient capital to handle paper losses, and have demonstrated success at minimizing losses. In addition, a short seller should have above average analytical skills to make "objective" decisions.

Here are some more details on the criteria I think an investor should meet before shorting stocks. As an example, I will use Amazon (AMZN) which has 13.2% of its shares shorted. For reference, that is a fairly high percentage of shares being shorted, meaning that these people believe AMZN will have a lower price in the future. Here are the criteria and details:

Demonstrated success at market timing. Success in shorting is not only about being right, but being right fairly quickly. Otherwise, it can be awfully painful waiting to be right. For example, Amazon (AMZN) rose from 44.75 on April 24, 2007 to 62.60 on April 27, 2007. I recall some bloggers commenting that AMZN couldn't support such a high price. Today, AMZN closed at 73.45 after reaching a high of 88.80 on July 25, 2007. If one had shorted the stock on April 27, it would have a loss of $10.85 per share as of today. On July 25, the loss would have been as high as $26.20 per share. On the other hand, if one had shorted on July 25, the gain would be $15.35 per share.

Sufficient reserves to cover short term paper losses. Regulation T requires an initial margin requirement of 50% of the short sale and the NYSE and NASD have a maintenance requirement of 25% of the short sale value. For a short of AMZN at $62.60, one would need to have an additional $31.30 (50%) in cash available in the account, for a total margin value of $93.90. When the stock was $88.80, one would have to have an additional 22.40 (25%) in cash for a total margin value of $111.40. In this case, your broker would issue a margin call for the difference of $111.40 - $93.90 = $17.30 per share. In other words one would need to add $17.30 per share to the account or your broker will close the position.

Know when to close positions. Although knowing when to close a position and taking a loss is important in both long and short investing, it is more important when shorting. In a long position, the maximum loss is the price of the stock. In a short position, the loss can be one, two, three times or more the price of the stock. Also, often a decline in a stock is a short term dip. Waiting too long will cause one's profits to disappear. Finally, as described in the reserves section above, one often needs to add money to an account should the short position begin to lose money.

In addition, it doesn't hurt to have an analytical system for deciding when to short and when to close the position. Often stocks that are shorted can have high volatility with price swings of around 10% or more in one day. High volatility can cause emotional instead of rational decisions. An analytical system can help mitigate emotional reactions.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

8/13/07 Stock Purchase Update - The Difference a Day Makes

In my 8/6/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. The portfolio was up $495 for a 2.8% gain, down from a peak of $2310 and 13.2% on 7/23/07. At the close on 8/10/07, the portfolio only had a gain of $234 and a return of 1.3% since purchase. Due to hosting the Festival of Stocks #49, I delayed posting another update one day until this evening. As predicted in New Life For The Bull Market, the positions had excellent gains of up to 7% today, leading to a $913 gain and a 5.2% return since buying the stocks. Here's the current status on the positions in these four stocks:

	My Wealth Builder Buy List
Stock	Shares	Purchase Price	Current Price 8/13/07
Terex (TEX)	50	$82.36	$78.30
Potash (POT)	50	$71.39	$87.57
Shaw Communications B (SJR)	100*	$21.755	$22.21
Avnet (AVT)	200	$38.11	$39.42

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the portfolio still has a positive return of 5.2%. Not bad for about 9-15 weeks of owning these stocks :-) Since the last update, TEX declined significantly, while AVT gained significantly (due to an upgrade by Citigroup) and POT and SJR were flat.

I have been impressed with my ability to stay invested in these stocks, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. However, the central bank interventions have convinced me that the bull market is in its last stage, and I will be looking to close out these positions during the next significant rally.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Festival of Stocks #49 - Time For Medicine Edition

Welcome to the Festival of Stocks #49 - Time For Medicine Edition. First, I would like to thank my dad who taught and coached me on investing in stocks. We have spent numerous hours debating the merit and issues for our stock picks. Second, I would like to thank George at Fat Pitch Financials for giving me the opportunity to host this esteemed Festival.

To note, the number of submissions seemed lower than for the average Festival. Perhaps, everyone has been too busy figuring out the market and didn't have time to participate in this Festival :-) Nevertheless, there were still many excellent posts on stocks, the market, investment systems, and alternative investments. With today being the one year blogiversary of My Wealth Builder, I was very generous with the criteria for acceptance to the Festival. If a post did not meet the Festival criteria, the submitter received a request for an alternate submission. Also, if more than one post was submitted, I chose the one I considered the better article. Finally, posts are show in each category in the order received, a bonus for early submitters :-)

On to the Festival .....

This past month has been an exciting one - down and up, again and again. It has been very much like a roller coaster with many peaks and valleys, loops and spirals. Enough to make even the strongest stomachs weak. If there is some lingering nausea, here are some potential remedies for the ride.

Stock Analyses and Recommendations

This year has been a "stock picker's market." If stock picking is your medicine, try these remedies.

Mr. Nabloid presents My Hedge Fund - The First Investments posted at Nabloid on Investing. Nabloid has created a virtual Hedge Fund at Investopedia and shares his strategy of buying LEAP options.
Stocks: YHOO NDM GRMN WFMI SLW

Average Joe presents Reader Request - Garmin Limited (NASDAQ:GRMN) posted at Investment Jungle. Joe offers, "Garmin Limited is still a Rule #1 stock in my opinion. However, it is currently over priced. Too much enthusiasm for my taste."
Stocks: GRMN

Average Joe presents Dividend Analysis - Citigroup Inc (NYSE:C) posted at his second blog Dividends Matter. Joe notes, "All the financials are getting slaughtered over the sub prime concerns. Is this an opportunity to buy a great dividend yielding stock while the rest of the herd is running for the hills? All 3 valuation models point to a buy."
Stocks: C

Bill Trent presents ADBE: A Small Bet on Adobe posted at Stock Market Beat. Bill writes "I have followed Adobe Systems for several years, and up until now it has been one of the names I have been more successful at timing."
Stocks: ADBE

Tim Plaehn presents Stock Review: Thornburg Mortgage posted at Investing Thoughts. Tim says, "Recent market events have made this stock even more attractive! Thornburg Mortgage has dropped to around $23.50 today (August 3, 2007), making it a stock you should take a look at. I have owned and watched this stock for several years, and it has consistently traded between $23 and $28 a share." Festival Host's note: TMA closed at $18.06 on August 10 2007. It dropped to $17.25 after hours and seems to be another victim of subprime concerns.
Stocks: TMA

The Financial Blogger presents Top 10 Dividend Stocks in Canada posted at The Financial Blogger. TFB writes " As the markets are dropping, I wrote this article about the top 10 dividend stocks in Canada. A good way to protect yourself against inflation and to buy more defensive stocks. "
Stocks: ROC.TO RUS.TO BCE.TO MBT.TO NBD.TO EMA.TO TA.TO TS-B.TO LB.TO BMO.TO

Market Analysis

Since a tide raises and lowers all boats, analyzing the overall market trend can provide a remedy.

Jeremy presents 2nd Quarter 2007 Market Review posted at Generation X Finance. Jeremy notes, "An interesting trend has emerged during this period that shows regardless of market capitalization, growth re-emerged as a leading investment style over value for the first time in years." I have been investing in Growth since 2004. Hopefully, 2007 will reward me for being early :-)

Leon Gettler presents Bear markets and the Rumsfeld effect posted at Sox First. Leon comments, "You know things are really looking bad on the markets what the central banks start pumping in money to ease the liquidity crunch. But it’s a band-aid solution because no-one where the risks are. It’s a bit like Donald Rumsfeld’s “unknown unknowns”. Do the banks know something we don’t?"

Babak presents Sentiment Overview For Week Of August 10th 2007 posted at Trader's Narrative. Babak observes that every sentiment measure shows the market has not reached a bottom yet.

Super Saver, presents New Life For The Bull Market - For Now posted at My Wealth Builder. Super offers, " Hmmm...........When I have I seen this happen before? 1997? 1999? It's time to get ready for the ride, both up and down."

Investment Systems

For the scientists, mathematicians, or optimists among us, there is nothing like a model or system to serve as a remedy.

Blain Reinkensmeyer presents 7 Strategies for Online Stock Trading posted at Stock Trading To Go. Blain shares, "Investment strategies come in all different shapes and forms and can integrate both technical and fundamental analysis together, while some strategies just involve one or the other." A good set of strategies to consider for one's use. In my experience, it's helpful to know about more than one strategy since each strategy may be more successful in certain types of markets.

Thomas Ott presents Using Genetic and Evolutionary Algorithms to Build a Trading Model posted at Neural Market Trends. Thomas shows readers how to use RapidMiner's Evolutionary Algorithm to build a trading model. One of the drawbacks of a model is that it can be static while the market evolves. A self learning model is a great idea.

Golbguru presents I Am Happy When The Market Goes Down presented by Money Matter and More Musings. Golbguru muses, "A fall in stock prices seems like a 'grand sale' for me. If the price drops further, I am going to buy more aggressively. If the price increases, I will switch to my normal investing frequency, but still keep buying."
Stocks: SPY

MoneyNing presents Can We Use Alexa Rankings to Buy or Sell Stocks posted at Personal Finance Blog by Money Ning. MN wonders,"Whether or not Alexa Rankings can be used to buy or sell a stock since some companies' earnings are directly related to traffic."
Stocks: AMZN, YHOO

Silicon Valley Blogger presents 8 Ways To Invest Internationally: How Much Foreign Exposure Should Your Portfolio Have? posted at The Digerati Life. SVB advises, " If you’re after growth and want to be well diversified, the conventional wisdom is that you pack your investment portfolio with some foreign punch."

George presents Buybacks vs. Dividends posted at Fat Pitch Financials. George shares, "Last week’s poll at Value Investing News asked, 'As a shareholder, which would you rather have? Buybacks, dividends, or other.' Here are the results: There are good reasons to prefer buybacks in some cases and dividends in other cases."


Emotional Elements

As my doctor recommends, "If it hurts when you do something, don't do it."

Warren Wong presents Stop Checking That Stock posted at INTJ Personal Development. Warren recommends, "Focus on the things you can/will do something about. Ignore the things that are out of your control." Being an ESTP and personal finance junky, I probably check too often:-)



Alternative Investments and Options

When all else fails, punt. The best remedy may be to get out or keep one's cost low during volatile times.

Garrett Benner presents Time to Move into Commodities posted at Jim Cramer Blog. Garrett believes, "Today's commodity market has the stability and growth potential to draw an enormous amount of equity out of stocks and into the commodity market." Think "Bees."

FMF presents Illustration of How Costs Can Greatly Hamper Your Investment Returns (And Why Index Funds Do So Well) posted at Free Money Finance. "One reason many index funds have consistently done better than most managed funds is because they typically have lower expenses," Dr. Malkiel said in a recent Vanguard.com interview. "It is that gap between expenses of the two types of funds that gives you the advantage from indexing."

FIRE Finance presents World Currency Index CD From Everbank! posted at FIRE Finance. FIRE submits, "EverBank’s latest offering "World Currency CDs" is a great option for investors seeking to diversify their portfolios amidst a devalued dollar. This is a single CD comprising of multiple currencies each strategically designed to benefit from a specific regional strength and/or geopolitical and economic development."

Jorge presents Discount Online Broker Review - Zecco posted at My Adventures into The Street. He observes, "Zecco appears to be gaining steam in the discount brokerage game. It’s very difficult to top a $0 commission fee on regular equities. "

This concludes the 49th Edition of The Festival of Stocks. Next week's edition will be hosted by Fully Stocked and posts can be submitted via the blog carnival submission form.

Photo Credits in order of appearance: morgueFile.com, Microbiologist: Mary B. Thorman; Hospital Bed: Kenn Kiser; X-Ray: Clara Natoli; Button: Clara Natoli; Helicopter: Kenn Kiser

This is not financial or investing advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

New Life For The Bull Market - For Now

"Those who cannot remember the past are condemned to repeat it." - George Santayana

On Friday, it finally happened. New life was breathed into the bull market. The Fed made the statement that it would provide "reserves as necessary" to stabilize credit markets. The European and Japanese central banks are also pumping money into the markets. In addition, the markets are now predicting that it is highly like the Fed will lower interest rates at its September, 2007 meeting.

Hmmm...........When I have I seen this happen before? 1997? 1999? It's time to get ready for the ride, both up and down.

In 1997, the Thai Baht collapsed and led to the East Asian Financial Crisis. The result was that creditors withdrew funds from the region, affecting additional countries. The International Monetary Fund (IMF) stepped in and provided the largest loans in its history and arranged for financing from other countries. A bigger crisis was averted by this liquidity infusion and stock markets resumed their meteoric rise.

In 1999, there was great fear that Y2K would create significant issues leading to an eventual financial crisis. Preemptively, the Fed lowered interest rates to provide support. No significant Y2K disruption occurred. The markets responded and continued to rise.

However, the stock market would only been fueled for a couple more years.

Initially, the bubble began to burst in 2000 with the dot.com decline and NASDAQ fall and was followed by the stock market downturn of 2002.

Today, I see the market in a similar situation. A housing bubble, a credit crunch and liquidity crisis . The Fed, European and Japanese central banks will deliver the liquidity needed to prevent a market downturn ..... for now. Cheap money will become available, markets will settle, investors will return, leading to a rise in the market into 2008.

After 2008 (or perhaps sooner), history indicates there will be a downturn and correction. I will try to be prepared for this correction, but not by getting out of the market. For me, I will work with my financial advisor to have a diversified asset portfolio (e.g. equity, fixed income, and cash equivalents), and have good diversification in my stock portfolio. Based on the most recent correction in 2000 -2002 , it seemed portfolios invested only in the tech sectors had the worst performance, while diversified asset and equity portfolios have recovered in the ensuing years. For now, I will go with what's worked well in previous downturns.

For more on New Beginnings, check back every Sunday for the next segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Do-It-Yourself - Do The Basics and Save Money

This has be the year of "home maintenance" projects. We have lived in our home four years and it will turned 20 this year. Until now the home has been relative maintenance free. However, this year, we have had to do a number of projects, including hiring professionals to do the work. Even so, there are still a number of projects that I will do each year, perhaps saving $1000 to $2000 per year.

Here's a list of projects that I will do (basic) and need to hire (advanced). For some of the basic items, the first time usually takes longer due to learning how to do it. However, the cost saved and the future reduction of effort is worth it.

	Type of Project
Category	Basic	Advanced
Lawn	Mow, edge, fertilize, seed	Resodding
Sprinkler	Adjustment	Add new sprinkler head
Landscaping	Design, planting, trimming, mulching	Remove tree
Driveway	Sealing	Repaving
Painting	Touch up, minor trim, single room	Entire house exterior or several rooms
Plumbing	Drip leaks, caulking, new sink or toilet	Requires soldering
Gas	Piping and fittings in open area	Piping behind walls
Car	Oil change, light change, flat tire	Tune up, brakes, body work
Electric	Change fixture or switch	Rewire
Masonry	Minor patching of mortar or concrete	Relaying brick or pouring concrete

For reference, the blue items I used to do myself. However, I now have others do it since the cost has become very reasonable. For example, changing oil at the dealer is about $25, only $2 more than the materials (oil filter and oil) I would need to purchase. Also, for some reason, grass cutting prices are very competitive in my area, $35 for 1/2 acre, including edging. Normally, this would be a three to four hour job for me, with a push mower.

To note, many of the basic do-it-yourself projects require additional tools. Since I previously owned a 80 year old house, I have every tool imaginable :-)

Reference Materials
With projects that I do infrequently, I like to have a "how to"reference to use. Here are several that I like to use:

Instruction manuals. Often, the manual for cars and appliances can be found on the Internet. About 80% of the time, it will have the information I need, including diagrams, part numbers, specific tools and troubleshooting guide. The other 20% of the time, it gives about half the needed information, requiring further search.

Do It Yourself or other reference websites. There are a number of websites that give generic instructions, guidance and tips. One that I have used is How Stuff Works.

Lowe's. The staff at Lowe's is typically knowledgeable on most do-it-yourself projects. Often they will have a plumber, carpenter or other craftsman on staff. They can usually help me with about half to three quarters of the projects without an instruction manual.

Local repair or manufacturer customer service. My final resource is a local repair shop or the manufacturer. About 90% of the time, someone is able to talk me through the repair steps or explain the additional parts needed.

Savings

Recent projects have included fixing a toilet leak and a car A/C condensate leak. I estimate these projects saved me about $150 to $200, which was a pretty good return on my time.

For more on Reflections and Musings , check back every Saturday for a new segment.

Photo Credit: morgueFile.com, Michael Connors

This is not financial or home maintenance advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC