There was a time when only the wealthy and well connected could invest in the stock market. Then IRAs and 401(k) plans ushered in a new era of the “common man” investor. Flash forward a bit more, to the Internet age, and we have a grand democratization of the stock market.

Not too long ago, you had to be one of the aristocracy to have access to what the power elite could dabble in: options, shorts, foreign exchange (forex), margin, commodities futures, to name a few.

But thanks to the Internet and the information age bringing investing to the masses, all that has changed. You can buy stock options through dozens of online brokerages like TD Ameritrade, Charles Schwab and ShareBuilder. Similar availability exists with foreign exchange markets, shorts and commodities futures.

When retail investors began purchasing shares in mutual funds in the 1970s, Forbes magazine was able to print the returns and expenses of every fund available. But now there are over 9,000 mutual funds on the market. When ETFs were first available in the 1990s, there were a handful and most were simple index tracking funds. Now there are over 700, many with elaborate weighting algorithms and some are straight actively managed funds.

But just because you can make use of these tools and techniques, doesn’t mean you should.

When it comes to saving for retirement, college or building your estate to pass on to future heirs, the tried and true stocks, bonds and mutual funds (and index ETFs) work just fine. The key isn’t how fancy or esoteric your investment vehicle is, but how you allocate your assets.

Take trading on margin for example. Margin is simply investing with borrowed money, usually from the brokerage. You borrow the money at a specified interest rate, and agree to pay it back with interest – hopefully once you’ve earned more from your investments than the cost to borrow. Margin amplifies returns, but it also magnifies losses, and you could end up owing more than you have. For this reason, it’s best left alone by the individual investor.

Another needlessly risky technique is shorting. Shorting is a bet that an asset will go down in value. At least in terms of individual stock, shorting puts the investor at odds with management. Knowing a particular stock is a dog, and not worth its trading price is one thing, but timing when the market will realize this is quite another.

But the real reason short selling is so risky is that you have virtually limitless amounts to lose. Consider this:

“You short 300 shares at $45 per share. Your broker deposits $13,500 in your account. Two weeks later, the price has fallen to $35 per share. You instruct your broker to “cover” your short or buy 300 shares to replace those you sold.

Your broker buys 300 shares at $35 per share and deducts $10,500 from your account to pay for the shares. The broker replaces the borrowed shares and you have a profit of $3,000 ($13,500 – $10,500 = $3,000). I have ignored commissions and so on to keep the math simple.”

Sounds great, you pocket a quick and easy 3k in profit. But here’s what happens when you guess wrong:

” You short 300 shares at $35 for $13,500. However, instead of falling like all reason and logic suggests, the stock rises and rises fast.

Before you know it, the stock is at $55 per share. You get a call from your broker, who is getting nervous. Your account for short selling is a margin account and if the stock goes too high, you will have to deposit more money or cover the short by buying the stock.

You decide to cut your loses and cover the short by buying the stock at $55 per share for $16,500. Since you only have $13,500 in your account, you have to come up with another $3,000 out of your pocket to make things right. You suffer a $3,000 loss. “

But what if the stock rockets past $55 a share. A stock can only lose so much money, and most stable companies don’t go to 0. But a share price can rise a long way before it starts to turn, and that can add up to big losses when you’re short.

For these reasons and more, you’re probably better off sticking to the simpler approach of The Simple 7 or the super simple One Minute Portfolio.

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Morningstar has their Morningstar’s Six Top Candidates for International-Stock Manager of the Year available on their website.

This is worth a look because if you’re thinking of investing in international mutual funds, you’ll want to make sure the fund has a good manager. One way to pick good funds is to follow good managers.

With the market mayhem over the past year, the winners will really be separated from the losers – it’s hard to manage a successful fund under these conditions when you’re a follower engaged in group-think. Times like these allow the cream of the management crop to rise to the top.

That doesn’t mean that this is a list of the best for 2009 only. Each manager on this list has a solid, long term track record but has also done well so far this year.

Here’s the list:

• The Team at American Funds EuroPacific Growth (AEPGX)

• The Team at Dodge & Cox International Stock (DODFX)

• David Herro and Rob Taylor of Oakmark International (OAKIX)

• Brent Lynn of Janus Overseas (JAOSX)

• The Team at Manning & Napier Worldwide Opportunities (EXWAX)

• Justin Thomson of T. Rowe Price International Discovery (PRIDX)

You will have noticed that most of these are teams, and not individuals. Also, they are not official nominees, just front runners so far.

Read the full story to learn why they’re considered front runners.

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There’s been talk about the “coming stock market crash” for years now, and one of the presumed causes is retiring baby boomers suddenly selling their stocks en mass. The reason seems sound enough. Baby boomers are no longer working and saving for retirement, and once their golden age arrives they take the money and run. But there are a few problems with that line of reasoning.

Here are 5 of them.

The top 1%.

According to the CBO (Congressional Budget Office), about 1/3 of all U.S. financial assets are held by the wealthiest 1% of the population. Think Soros and Buffett. These people don’t need to sell their assets to retire, they can live quite well on the interest and returns generated by their portfolios.

Longevity.

Retirees are realizing that retirement can be almost as long as their working life. Because of this, they get cautious and become wary of selling their assets in case they might need that money later in life. Many people think of retirement as the end game, a point where they take their savings off the table and live out the rest of their lives in happiness. But the reality is that they still need to invest in stocks so that their saving will continue to grow and be there for them 15 or 20 years into retirement.

Inheritance.

Some retirees want to leave something for the next generation, by way of bequests. If they cash out their portfolio, they won’t have as much left over for the next generation to inherit.

Foreign demand.

We’ve all heard stories about China owning America, or funding the U.S. deficit and the like. Hyperbole aside, there is a certain amount of truth in that sentiment. The world is a much smaller place than it once was, and that’s certainly true in the stock market. Foreign investors will continue investing in the U.S. stock market, even if some boomers decide not to.

Working longer.

One of the most consistent pieces of financial advice given to prospective retirees who realize they haven’t saved enough is to continue working. The longer you can defer retirement, the less money you’ll need. This effectively spreads out the retirement dates of boomers even more than they would otherwise be, lessening the likelihood of a mass exodus from the stock market.

Photo © by dan paluska

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Most people think they’ll be in a lower tax bracket when they retire, but this isn’t always true. And if you make the right financial moves during your working years, it almost certainly won’t be true.

The case for the Roth.

When you stop and consider the many tax breaks you’re likely to lose later in life, you can see why:

Tax breaks you’re likely to lose in, or close to, retirement:

• Deduction of mortgage interest
• Tax deferred 401(k) contributions
• Tax deferred 529 account contributions
• Tax credits for child dependents
• Deduction of Student loan interest

There are many other examples, but you get the idea – you’ll be paying more taxes later in life even if tax rates remained unchanged.

Speaking of tax rates, here’s why tax rates are certain to be higher in the future than they are now:

• The current income tax rates are very low from an historical stand point.
• Federal and State deficits continue to grow at alarming rates.
• The already record Federal deficit is only expected to continue growing for the foreseeable future, as Congress continues to spend money they don’t have.

In addition to paying more taxes, you’ll also have required distributions from 401(k) and similar retirement accounts that may push you into higher tax bracket.

All of this serves as a terrific recommendation for a Roth IRA, because in a Roth IRA, it’s the contributions that are taxed, not the withdrawals. So you’re paying taxes at today’s rates, and when you withdraw your money at a later date, you avoid the crushing tax burden. Also, there are no required distributions, which means if you don’t need the money you can leave it to grow, or leave it to your heirs as an inheritance.

Converting a traditional IRA to a Roth IRA.

You can convert a traditional IRA to a Roth IRA, but there are tax implications and income limitations you should know about. You will owe taxes on the amount you are transferring, so be sure to have cash on hand to pay for the tax bill – if you pay for it out of the IRA balance, you might incur an additional 10% penalty for early withdrawal.

For 2009, you must have a gross adjusted income of less than $100,000 to open a Roth IRA, but those income limits disappear in 2010. So, if your AGI is higher than $100k, it’s best to wait a few months.

A perfect marriage?

Often times discussion about the Roth vs traditional IRA is an either-or proposition, but it may be beneficial to have both.

Here’s why:

You can keep the traditional IRA and open Roth IRA, max out your Roth first, then your traditional IRA. Then, in retirement, you take your mandatory distributions from the traditional IRA as your base income. This is taxed as income, but you can then supplement your income with Roth IRA withdrawals that are tax-free.

This strategy also gives you the flexibility to keep your money in the Roth to continue growing if you don’t really need it as income at that time.

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Bonds are an important part of any good asset allocation, and here are 3 bond funds from the Pimco firm as recommended in a recent Kiplinger magazine article.

PIMCO bond total return (PTTAX).

Manager Bill Gross sticks to investment grade, intermediate-term U.S. bonds for this fund. The expense ratio for this fund is 0.90%, and yields 4.97% and has a YTD return of 10.44%.

By comparison, the Harbor Bond fund (HABDX) carries an expense ratio for this fund is a mere 0.60% of assets and the yield is a respectable 3.91% and has a YTD return of 10.89%.

As you can see from the chart, performance parity of the two funds is very tight.

PIMCO Investment Grade Corporate (PBDDX).

Manager Mark Kiesel has the latitude to venture into other sectors with this fund, but his performance suggests it’s warranted. The fund’s D shares have a YTD return of 12.57%, expense ratio of 0.90% and yield 4.82%.

PIMCO Emerging Local Bond D (PLBDX).

This fund invests in emerging markets debt that is denominated in the local currency. Admittedly, it’s a bit riskier than the other two, but it also provides global diversification. Currently the YTD return on this fund is a whopping 19.81%, and the expense ratio is higher as well, coming in at 1.35%. The yield is a very nice 5.37%.

All funds in this article are rated 5 stars by Morningstar

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It seems counter intuitive, that choosing the wrong kind of savings account for your child’s college fund could actually cost your child more, but that’s the world we live in – make the wrong choice, and your child may lose thousands of dollars in financial aid come enrollment time.

According to Robert Helgeson, director of financial aid for Valparaiso University in Indiana:

“If a parent has $100,000 in assets, the government is going to expect them to contribute $6,000 of it to education. If a student has $100,000 in assets, the government will expect $20,000.”

So, you can see where you stash your money is just as important as how much you stash.

According to the U.S. Department of Education, the student can have up to $3,000 saved in a checking or savings account in their name without losing any financial aid, but every dollar above that takes 20 cents away from any federally funded scholarships and grants junior would have been eligible for. After that, the money would be subtracted from federally funded loans.

Here are 3 places to safely shield your college savings without causing the loss of any aid.

529 college plans

This is perhaps the most popular method among younger parents. 529 plans are much like 401(k) or IRA plans, except you’re saving money for college instead of retirement. But the idea is the same. You contribute money to the plan, set your desired allocations for the money (choose between stock, bond and money market funds), and the money grows tax free – provided it is only used for education related expenses. An added perk to many plans is that if you live in the state that offers the plan, you can often deduct your contributions from your state income tax bill. 529 plans offer flexibility in determining the “owner” of the plan as well, since the parent can control who the beneficiary is. This means that if junior decides he’s going to the #1 party school, and he doesn’t really know what for, you can keep the funds from him until he gets his act straight.

529 plans do carry some restriction though. For example, the funds can only be withdrawn tax-free for educational expenses. Also, the funds available for allocation are limited.

UGMA and UTMA Custodial Accounts for Minors

The Uniform Transfers to Minors Act (or Uniform Gifts to Minors Act) provide a alternative methods of transferring ownership of cash and other financial assets to children who are too young to handle such assets, that may be simpler, cheaper and faster than a trust. Before the 529 plan became ubiquitous, the UGMA and UTMA accounts were often used as a means for parents and grandparents to provide savings for children and grandchildren.

According to the IRS, the first $950 in gains is tax-free, the second $950 is taxed at the child’s income tax rate and the remainder is taxed at the parent’s income tax rate. As you can see, the tax benefits are not nearly as robust as they are in a 529 plan, but the UGMA and UTMA custodial accounts place no restrictions on what the money can be used for. This can be good or bad, depending on your situation. For example, the child becomes the sole beneficiary of the assets in the account at age 18 or 21 (depending on the state you live in), so there’s no way to make sure junior spends that money on college and not a trip across Europe.

Roth IRA

The Roth IRA is an Individual Retirement Account in which you pay taxes on the contributions, but not on the withdrawals – ever. So what’s in doing in a list of college savings accounts? I’m glad you asked.

Once the child has an earned income, he can open a Roth IRA. Once the child turns 18, he has sole control of the account, so here again the parents lose control over what the money is spent on. One important restriction on the Roth is that withdrawals can only be made on the earnings after the child turns 59½. BUT, contributions can be withdrawn tax free at any time. So, if you’re looking at stashing a large sum of money for college, a Roth is a great way to shield the money from financial aid formulas and give the child a head start on retirement savings, since any money earned after the contributions will continue to grow tax free since it can’t be withdrawn until the child turns 59½.

Conclusion.

It seems that the custodial account is really a dinosaur when it comes to savings vehicles for children, but the 529 and Roth can be incredibly beneficial. If you’re a young family, with only a modest amount of money available to contribute on a steady basis, the 529 plan is probably the best choice. But if you come into an inheritance, or the grandparents want to make a one-time gift and you don’t mind the possibility of your child being able to use the money for something other than college, a Roth IRA is definitely worth a look.

Photo © by alancleaver_2000

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Here are the top 5 Investors of all time, as picked by  Investopedia. But first, the criteria…

The list is based on 4 factors:

1. The investor is a long term performer – that is one with a long history of beating their bench mark index(es).
2. The investor or manager must be retired.
3. The investor did not operate as part of a team. As John Templeton said, “I am not aware of any mutual fund that was run by a committee that ever had a superior record, except accidentally.”
4. The investor has made some lasting contribution to the investment industry, and their own companies.

So, now that we know the criteria, here are the winners.

1. Benjamin Graham.

Graham is known as the “father of security analysis” as well as Warren Buffett’s mentor. His investment style is classified by Investopedia as “deep value investing”.

Graham’s best investment was GEICO (BRK.A), well before Warren Buffett’s Berkshire Hathaway bought the company. Graham usually sold his stock within two years after buying it, but GEICO was held for decades. Most of his investments were in low-risk arbitrage situations.

Among Benjamin Graham’s many contributions to investing are “The Intelligent Investor” (originally written in 1949 – and still relevant today!), and helping to bring about what would eventually become the CFA exam, which provides for certification of security analysts.

Graham’s estimated return is difficult to pin down since he began investing around 1914, and records and methods were not as stringent as they are today, but according to John Train in the book “Money Masters of Our Time”, Graham’s fund earned 21% annually over 20 years.

2. Sir John Templeton

Known as the “dean of global investing”, Templeton was even knighted by the Queen of England. His investment Style is “Global contrarian and value investor.” Templeton’s strategy was to buy when the investment was at the “point of maximum pessimism.” An example of this is when he bought shares of every public European company that traded for under $1 per share at the start of World War II. He made these purchases with $10,000 of borrowed money. He sold them for $40,000, four years later.

Among Templeton’s best investments are Europe at the start of WWII, Japan in 1962, Ford Motor (F) in 1978, Peru in the 1980’s and shorting tech stocks in 2000.

His major contributions are building part of Franklin Templeton Investments, and having the Oxford University’s Said Business School named after him.

Templeton’s estimated return for the Templeton Growth Fund from 1954 to 1987 is an annualized 14.5%. Not too shabby.

3. T. Rowe Price, Jr.

T. Rowe Price Jr. got his start on Wall Street in the 1920’s and in 1937, he founded his investment firm. Price is known for his saying, “What is good for the client is also good for the firm.” His style is characterized as Value and long-term growth. He invested primarily in companies he thought had good management, and were leaders in their industry. Like Warren Buffet, he preferred to hold his investments for decades.

Some of the best investments attributed to Price are: Coca-Cola (COKE), Avon Products (AVP), IBM (IBM), and Merck (MRK). He bought Merck in 1940 and reportedly made a 200% return on his money.

T. Rowe Price, Jr. was one of the 1st fund managers to charge a fee that was based on the assets he managed. This was at a time when other managers almost exclusively charged a commission. Price was also an early pioneer of growth investing, and buy and hold style with broad diversification. And, of course, he founded the company that would bear his name: T. Rowe Price (TROW).

He started his first fund in 1950, and had the best performance of that decade – almost 500% return!

4. John Neff.

John Neff joined Wellington Management Co. in 1964, where he would stay for over 30 years and manage 3 funds. He preferred to invest in popular industries, but from indirect means. For example, he would have bought shares of Home Depot (HD) or Lowes (LOW) during the recent real estate bubble, but not home builders themselves.

His style was low P/E, high-yield (value) investing, focusing on low price-earnings ratios (P/E ratios) and strong dividend yielding stocks. He sold only when the fundamentals began to deteriorate, or the price hit his target.

Neff also used what he called the “you get what you pay for” ratio, which was derived by adding the dividend yield and the growth in earnings, and dividing by the P/E. An example from Investopedia:

“if the dividend yield was 5% and the earnings growth was 10%, then he would add these two together and divide by the P/E ratio. If this was 10, then he took 15 (the “what you get” number) and divided it by 10 (the “what you pay for” number). In this example the ratio is 15/10 = 1.5. Anything over 1.0 was considered attractive.”

Neff’s best investment is considered to be his acquisition of a large stake in Ford Motor Company in 1984, and selling it 3 years later for almost 4 times as much.

His major contribution to investing is his how to book entitled “John Neff on Investing“, which is presented as a year by year account of his career.

By the time John Neff moved on from the Windsor Fund, after 31 years, his annualized return was 13.7%, versus 10.6% for the S&P 500 over the time.

5. Peter Lynch.

Lynch, a graduate of the Wharton School of Business, is famous for his “relentless pursuit.”
He would visit numerous companies to find any small difference that the market had not yet noticed. When he found such opportunity, he bought a little at a time until he eventually created what became the largest mutual fund in the world – the Fidelity Magellan Fund.

His investment style is characterized as Growth and cyclical recovery. Though he is typically considered a long term growth investor, some say he made most of his gains through value and cyclical recovery plays.

Some of what Lunch called his “ten-baggers” (A stock whose value increased 10 times its purchase price) were Dunkin’ Donuts, McDonald’s (MCD) and Pep Boys (PBY).

Among some of Peter Lynch’s contributions to the investing world are: turning Fidelity Investments into a household name, and writing the classic investment books “One Up On Wall Street : How To Use What You Already Know To Make Money In The Market” and “Beating the Street“.

Perhaps the most significant trait that these men have in common is that each took an unconventional approach instead of following the herd.

• Mutual Fund Monday: Morningstar Announces their Choice for Fund Managers of the Decade. These managers were chosen by Morningstar as the best of the decade because the "deftly steered investors through good times and bad". That's saying something. Investing in the '80's and 90's was pretty clear cut, but the 1st decade of the 21st century was anything but easy. As with the......
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• Mutual Funds 101 One way that investors can pool their money is mutual funds, which allows them to invest together in a variety of different stocks. Each of the participating investors is charged a percentage fee based on what they invest so that the professional fund manager can receive payment for his work......

I started this post with an idea of screening stocks on Morningstar to find the top 3 which fit my stringent criteria:

• Morningstar rated A for Growth, Profitability and Financial Health.
• At least 4% dividend yield.
• At least 10% earnings growth over the past 3 years.

I had to change course however when I saw the results of my screen was a single stock: NutriSystem (NTRI).

Yup. The weight loss program based on prepackaged meals, and hocked by such names as Dan Marino, Jillian Barberie and Marie Osmond.

The original NutriSystem went bankrupt in the 90’s, but this new incarnation seems pretty fit at first blush.

The details.

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The compelling story.

Here’s where it gets interesting.
According to Dr. Michael Eades from his blog Protein Power :

“After taking care of thousands of people over the past 25 years I’ve come to understand the psyche of overweight people well. I got my first clue when I noticed that the dietary histories of the overweight people coming to see me had a commonality. … The average patient coming to see me had lost significant weight two or three times before. Most would put something like this: 1991 Jenny Craig, lost 50 lbs., 1993 NutriSystem, lost 38 lbs., 1996 Physician’s Weight Loss Center, lost 55 lbs.”

So far, so good but that’s a lot of competition. Or is it?

“The thing I found remarkable about this is that almost no one ever went back to the same place twice. I virtually never saw: 1991 Jenny Craig, lost 55 lbs., 1994 Jenny Craig, lost 60 lbs. It was always a different place each time.”

According to Dr. Eades experience, no single weight loss company or system has a loyalty advantage over the others. This still give NutriSystem the advantage in my mind because it is in a far better financial condition than its rivals. Note: Jenny Craig was taken private in 2002 after many years of financial loss, so it is difficult to know for sure what the financial state of the company is. Weight Watchers has anemic growth, half the yield and a rating of B in Growth and Financial health, with no rating for profitability.

But here’s the money quote from Dr. Eades that explains the psychology of the demographic so well:

“… the reason they are overweight is that they eat too much of the wrong stuff. I told them that if I had a magic wand that I could tap them with and make them instantly their ideal body weight, they would be back in my office in a year, overweight as ever, if they didn’t change the way they ate.”

It’s a client base that keeps coming back for more, and in times of increasing competition NutriSystem seems poised to not only survive but thrive.

• Healthcare Stocks Ripe for Growth: MEDICAL RECORDS. This is a continuation of the Healthcare Stocks Ripe for Growth series this week. Yesterday, I profiled the Biotech company Gilead Sciences. This week is the medical record keeper, Quality Systems. Quality Systems (QSII) Regardless of whether the Obama administration gets public healthcare legislation passed, one thing you can count......
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• Nutrisystem Weight Loss Program Many of you have seen Nutrisystem commercials. Weight loss while eating has become popular. On their web site you can read about dozens of success stories of people losing 20 to 100+ pounds! Nutrisystem Weight Loss Program Nutrisystem is a weight loss diet program where you eat to lose weight!......
• Tipping the Scales: 8 lbs. Lost this Week I DID IT!! I reached my goal of 8 lbs lost this week. I was so happy to have done it. Happy enough to be eating some Italian sausages for dinner as a reward. Last week was a rough one, but I got it done. I haven't had a high......

Here are 3 small cap stocks that you probably haven’t heard of, but they each have at least a 25% increase in sales over last year – a time in which most companies have seen sales take a big hit.

K12.

Market Cap: $548 million
Estimated sales growth for current year: 26%

K12 (LRN) provides online high school courses for home schooled children. Almost half the states in the U.S. have approved their curriculum for use in online public schools. Enrollment for U.S. students is free, but foreign students pay to enroll. The stock currently trades at 30 times estimated 2009 earnings, but in this “Great Recession”, stocks with this kind of growth are rare.

Health Grades.

Market Cap: $133 million
Estimated sales growth for current year: 31%

Health Grades (HGRD) provides information on doctors, hospitals and nursing homes to patients. The information even contains ratings from past patients. Visitors to the company’s web site (HealthGrades.com) can access basic information in exchange for giving their own opinion of their doctor. More detailed reports can be purchased for around $13 and the company also receives fees from hospital marketing services. The majority of sales are currently to hospitals, although sales to patients is growing more rapidly.

Though the share price of Health Grades is up 80% this year, it trades around 20 times estimated 2009 earnings.

InterDigital

Market Cap: $937 million
Estimated sales growth for current year: 32%

InterDigital (IDCC) licenses high-speed data transfer technology to cell phone makers. They’ve had some legal disputes with Nokia, but analysts think things will be settled by a licensing deal with Nokia. InterDigital holds $6 per share in cash, and expects $3 per share in payments form Samsung. Shares are trading at 14 times estimated 2009 earnings.

Obviously, small cap aggressive growth stocks carry much more risk than large cap stocks and broad based index funds. But then, they also carry the potential for much higher return. Just do your research and know what you’re buying.

• Jim Cramer's Tips For Picking Stocks to Buy. I've just finished re-reading Jim Cramer's Real Money: Sane Investing in an Insane World and thought I would share some tips I found inside. This is a suggested list of the types of stocks to buy for a diversified portfolio. 1. Buy local. Cramer recommends that you buy stock in......
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• Best Funds To Invest In Now. These are peculiar times we find ourselves in. Here's a list of funds from Kiplinger that not only cover just about every bogeyman bandied about in the financial press these days, but hit upon some classic needs in a mutual fund as well. Inflation protection Sooner or later, the reckless......
• 5 Overlooked Stocks Poised for Growth? These stocks are covered by fewer than 5 analysts, but they have increased both their earnings and sales by 10% or more over the past 12 months. Company Ticker Industry SharePrice PriceChangeYTD(%) SalesGrowthPast Year(%) ForwardP/E Citi Trends CTRN Clothing stores 60 $23.62 13 17.5 AZZ AZZ Industrial equipment 32.24 28......

• Good News? Number of UK properties repossessed has fallen Whether it is good news of bad remains debatable, as many people feel that under no circumstances people should be evicted from their homes, at least the numbers are decreasing. The Council of Mortgage Lenders announced on Friday that that the number of U.K. homes repossessed in the second quarter......
• An Explanation Of Insider Trading And Why It’s Illegal Have you heard about this guy Raj Rajaratnam? He’s a billionaire hedge fund manager who seems to have gotten into trouble because he was engaging in “insider trading”. I was talking with someone about this yesterday and they asked “what is insider trading?” Instead of explaining it to her I......
• Supplement to Weakon 206 and 207 Weakon 206 and 207 covered asset allocation and diversification.  The problem with what I did is the terms aren't quite right.  The two terms have merged definitions, with people referring to diversification when they mean asset allocation and vice versa.  Confusion ensues.  But instead of adding to it I'm trying......
• Senate OK's Health Care Bill in Victory for Obama In an epic struggle settled at dawn, the Democratic-controlled Senate passed health care legislation Thursday, a triumph for President Barack Obama that clears the way for compromise talks with the House on a bill to reduce the ranks of the uninsured and rein in the insurance industry. The vote......
• Melco PBL On the Right Track Melco PBL Entertainment (Macau) Limited (NASDAQ: MPEL) a developer and owner of casino gaming and entertainment resort facilities focused exclusively on the rapidly expanding Macau market, today reported financial results for the full year ended December 31, 2006. Lawrence Ho, Chief Executive Officer and Co-Chairman of the company, said: "2006......

Retirement is a time of great financial uncertainty and worry for many people. The common thinking is that you spend less in retirement than you did when you were working. Once you’ve retired, you no longer have the expenses associated with a commute, eating lunch out, new suits and career upkeep like training and so forth. But the reality is that many retirees spend more in retirement, at least in the first few years. New retirees like to catch up on home maintenance and feed their pent up thirst for travel. And don’t even get me started on greens fees!

So what’s a prospective retiree to do. Put your retirement plan to the test of course. A dry run in the years leading up to your target retirement date can help you see what kind of lifestyle you’re actually in for while you still have time to adjust.

Here’s a simple, 3 step approach:

1. Track spending. Get an idea of what your expenses are that will carry over into retirement. You want to track your cable bill but not what you spend on lunch with the guys from work or bridge tolls, for example.

2. Create a budget and stick to it for a year or two. Once you have an idea of what you think will be your expenses in retirement, create a budget and limit yourself to living on that amount.

3. Invest the money you’re not using into your retirement account. Take the difference between your budgeted expenses and your income and invest or stash it in a savings account. This will let you see what retirement will be like while increasing your retirement savings – a win-win!

The end result of this process is an emotional preparation as well as financial test drive. You will see if you really are ready to retire or not. If you are, then you’ve gotten some practice and some extra savings. If you’re not, then you’ve got some work to do. Get your financial house in order, minimize expenses, maximize savings and investigate other options like working longer, or part time in the early years of retirement. Whatever the outcome, you want to become aware of any problems before you’re on that fixed income and have less options.

Photo © carlos170691 (is busy with his assignment)

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