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2005 Investment Goal Results
Back in June 2005, I made a daring investment goal of making $20,000 profit in stocks over a year period. I went back to my records today and saw that on June 1, 2006, I have made a gain of $11,000. I've only accomplished 55% of my goal. Note, I've added a total of $50 in my investment account during that one year period. But nevertheless, it was a good attempt.
Dow Dogs May Be Barking Up The Right Tree
An investment strategy that has been derided by some money managers and academics as overly simplistic, once again, proved to be best in show last year. The Dogs of the Dow strategy produced a capital gain of 26.59% in 2006 plus a dividend kick of 4.77%, handsomely beating the Dow Jones Industrials gain of 16.3% and yield of around 2.2%. The strategy, popularized by Michael O’Higgins in his 1991 book “Beating the Dow,” consists of simply buying the 10 highest-yielding dividend payers in the Dow Jones Industrials, holding them for a year, and then buying the new crop of dogs. Proponents call it an easy way to handsomely outperform the average fund manager most years with an easy, do-it-yourself strategy. Critics call it an overly simplistic approach with hidden costs and risks that has outperformed only because of “data mining” - searching for statistical anomalies and then assuming they will work in the future. “The starched shirt and suspender crowd in New York are pretty savvy, and it’ll take a bit more to beat them than this,” said finance Professor Grant McQueen of Brigham Young University’s Marriott School of Management. “It’s a competitive world, and to think you’ll get rewards without doing homework is naive.”
Source: Scottrade News, Jan 3, 2007
Quote of the Day
Being rich is having money; being wealthy is having time.
- Stephen Swid
EverBank Icelandic krona 13.10% APY 3-Month CD
have you looked into everbank.com's icelandic CD? it pay ~10%
EverBank offers a 13.10% APY 3-Month Icelandic krona CD. The yield looks very attractive so I did some research on this CD. The CD is FDIC-insured. And the reason why the yield is so high is because Iceland is combating inflation and the banks are offering high-yield CDs to combat inflation. So what's the big catch on this CD? I found out that you can lose on principal in the CD, because the krona currency fluctuates. Also, there's a exchange rate fee. The conversion fee is three quarters of a percent (0.0075%) for CDs less than $100,000.
The way it works is that your US Dollars get converted to Icelandic kronas and then at maturity if you decide to withdraw, the kronas will be converted back to US Dollars. The exchange rate then could be different from the start of the CD.
Does any one has experience with Icelandic CDs? Do you think it is low risk? Are they are other catches I am missing?
Stocks Trading vs Real Estate Investment
Empty Spaces Inc. said...
just curious, if you're good at making money in the stock market why not stick
to it?& why would you try RE investing after its already been appreciating
for several years and may be peaking in most areas?
The stock market is unpredictable. No matter how good you are or how well you have done, there's no guaranteed of future results. Granted, I have done well in the stock market since I have officially started investing and I'm confident I'll continue to do well, I cannot depend on that to make me rich. Also, my earnings in the stock market is not steady. There are some months I go into the negative zone, and those months are hard to bare even though I have very high tolerance. It's not good to be constantly picking stocks in the long term. It's very time-consuming; I've spent a lot of time reading up on companies and financial news. Also, studies show that you'll likely be beaten by the index in the long run. Even if I can match or slightly beat the index in ten years, I would lose in time and opportunity because I'd have spent thousands of hours. An investor in the index would have done nothing but did not sacrifice as much time as I did. Unless I can beat the index by a huge margin year over year for many years, it's not worth spending hundreds of hours a year.
I admit my view has changed slightly. I'm not against investing in individual stocks, but I advise caution, because many people go in without really understanding the risk. Play with money you can afford to lose.
Real Estate investing is an alternative to stocks trading and in many people's eyes, it's less risky. I agree, because real estate property is tangible and with the increasing population, real estate demand is bound to go up. My rental property is in Philly, which is not a hot area like NYC or San Diego. Even though the property value is not skyrocketing, I still have rental income to fall back on. The rental income covers my mortgage and property expenses. Basically, the tenant is paying for my house. Eventually, the mortgage will be paid off and I will own the property. It is a long term investment and property value will go up. So far, my real estate investment has been less stressful than my stocks investment. I get a check every month and my tenants never bothered me. Hopefully, I can be this lucky for every investment property.
VLO and Oil
VLO and oil in general are taking a hit right now because of the warm winter (see article below), but I think VLO and oil will do well in the long term. There are many variables in the price of oil, and warm weather is only one of them. The winter is not over yet, there's still a chance colder weather will appear. The middle east conflicts also affects oil prices. If there is a shortage in supply, oil prices will go up. Odds are, the the prices of oil will go up in the long term. I'll hold on my shares of VLO.
Verdict: HOLD on VLO
Source: Scottrade News 1/2/2007
Oil Prices Face Warm Weather, High Stocks
The new year began with a whimper, weatherwise, in the world’s biggest heating oil market. In New York City, temperatures on the first day of 2007 hit a peak of 54 degrees - 45% above normal and 10 degrees warmer than the first day of spring 2006. The current spring-like weather - in line with forecasts - looks likely to put strong pressure on heating oil and crude oil futures prices when trading resumes on the New York Mercantile Exchange on Wednesday. But there’s more afoot that can rile the market than just the warmest December on record in Boston, in the heart of New England, where heating oil inventories stand at their highest level since 1998. Latest revised data from the U.S. Energy Information Administration show oil demand in October in the U.S. - the world’s largest oil consumer - was 2.7% lower than expected, though still 2.5% above a year ago. The new figures put demand at 20.757 million barrels a day in October - some 567,000 barrels a day below earlier indications - as demand figures for heating oil, gasoline and jet fuel were reduced. EIA’s preliminary data would have put October demand at 21.324 million barrels a day, the highest level since December 2005.
The weakness at the start of the fourth quarter calls into question whether U.S. demand will manage to post even the modest year-to-year gain of 1.25% to 21.05 million barrels a day, which EIA forecasts would make it the strongest quarter of 2006.
Closed HSBC Business Checking Account
I went to my HSBC branch and closed my Business Checking Account on December 30, right before the start of the new year. I've moved my Business money over to Fidelity Investment since I was not earning any interest in my HSBC account. Fidelity Investment was offering interest and check writing on my business account.
While I was closing my account, my HSBC account manager told me the things that were going on in her department. She said HSBC will be implementing a Point System for staff members. Supposedly, the staff will receive points for opening new customer accounts, CDs, etc.
She told me there's no points for closing accounts, and that's why no other staff members were willing to handle the close of my account. She was a little disgruntle and frustrated at how picky (lazy) the staff members were. She also hinted how the Point System is going to cause more tension among the staff.
HSBC has excellent customer service. I hope they can maintain that.
Penfed 6.25% CD Strategy
Penfed is currently offering 6.25% APY CDs for their 3 to 7 year terms. The rate is very attractive for an investment with virtually no risk. This rate is among the highest, if not the highest insured-rate in the nation. With interest rates expected to decrease in the future, it would be a good idea to lock in these rates. I want to maximize the benefits of these CDs. I have 100K to invest and I've come up with a few scenarios.
Scenario #1: Lock 100K in a 7-year 6.25% APY CD and have the interest paid out by check monthly. The idea is to have a recurring income.
Pros: Lock in high interest rate for the maximum CD term. Protected from future interest rate decreases. Income delivered my savings account every month. Principal is protected.
Cons: Sacrifice of compounded interest. Principal amount will be lock in for a long period, money is not accessible immediately and may result in loss of future investment opportunities if they arise.
Scenario #2: Lock 100K in a 3-year 6.25% APY CD and have the interest reinvested. Cash out CD at maturity.
Pros: Short term
Cons: If interest rates decrease a lot, I would lose the opportunity for high insured-interest-rates.
Scenario #3: Lock 25K each in a 3-year CD, 4-year CD, 5-year CD, and a 7-year CD, and compound interest.
Pros: Duration of CDs are spread out.
Cons: May not maximize interest earnings.
My idea in Scenario #1 is to create a streaming income investment vehicle by putting 100K in a CD and collecting interest each month. The downside is locking up 100K of cash. Early withdrawal is a steep 365 days of interest for the 7-year CD. I can put the whole 100K in a 3-year CD (Scenario #2), which would give me more liquidity but if interest rates come down in the future, I would lose the high inerest rate opportunity. The third option (Scenario #3) is a CD ladder and would give me better liquidity. Still, locking up 100K for at least 3 years without seeing any income from that investment is a tough decision. That brings me back to the idea of receiving a monthly check for interest and locking in the CD for the longest term, the 7-year CD.
Locking in 100K in a 7-year 6.25% APY CD and compounding interest would yield the highest interest, but that would made the 100K inaccessible for a long period of time and I can't afford that.
There's always good investment opportunities out there and I don't want to be caught with money tied up. Also, I'm looking forward to buying an investment property in the near future, so I may need to tap into the money. What do you think is the best option for me?
Happy New Year
Happy New Year to all!