Book Review: The Vigilant Investor

November 17th, 2011  |  Published in Investing  |  Comments Off on Book Review: The Vigilant Investor

I received a free copy of the book, The Vigilant Investor: A Former SEC Enforcer Reveals How to Fraud-Proof Your Investments to review. With all the financial fraud in the news the past few years it seemed like this book could be a good resource. The author,Pat Huddleston, is a former SEC enforcer and founder of investor protection company, Investor’s Watchdog so he knows a lot about scams.

The first part of the book focuses on recognizing scam artists. It gives you resources such as the SEC’s website and PACER, which searches courthouse records that you can use to investigate a potential investment. The next part shows you how to steer clear of offering frauds and other popular scams. After that he predicts the future of fraud. Now that people know to be skeptical of investments such as the Bernie Madoff fund that always had large returns even when the market is down future scammers will change their tactics to make it harder to uncover their investment scams. Lastly he tells the truth about the securities industry. The author covers the conflict of interest that may keep a branch manager from regulating brokers who churn customers’ accounts to generate commissions, pointing out that putting the brakes on those brokers will cut into the firm’s bottom line. He reveals the signs that suggest trouble may be brewing, and urges investors to open brokerage firm mail immediately; complain in writing about unauthorized trading right away; and review monthly account statements to confirm that the firm has not changed their investment objectives.

Before reading this book I wondered how so many people could fall for scams that seemed obvious to me. The author shows that the scams aren’t as obvious as they seem. Many of the stories of the different scams are very entertaining as well as informative. Following the advice in this book could save you a lot of money if it keeps you from investing in a scam.

Book Review – The Monopoly Method

August 26th, 2011  |  Published in Investing  |  1 Comment

I received a free copy of The Monopoly Method: An Insider’s Guide to Navigating Wall Street and Becoming a Better Investor: Make Decisions Faster, Make Them More Profitable, and Make Them with Less Risk (Volume 1) for review. The monopoly mentioned in the title has nothing to do with the board game. (joke)

It refers to the author’s strategy of investing in companies that have monopolies or near monopolies in their industry. One example he gives is Google which has a large share of the search market. There is much more to the method than that though. The method includes a scoring system made up of eleven different variables that each receive their own value. The total score of the variables is used in determining whether the stock is a buy,hold, or sell.

I’m not an investor that does detailed fundamental research but he gave a good explanation of the different fundamentals in the scoring system that enabled me to at least have a basic grasp of the items he was discussing. He also includes some technical analysis which would take quite a bit of study for me to get a firm grasp on the subject. I think I’ll just stick to fundamentals for now.

The author also includes three case studies that are extremely helpful in understanding how to use the method. The three companies are Apple,Cisco Systems, and Wal-Mart. The method seemed to work quite well in screening these stocks but some of the variables are subjective so not every investor would end up with the same result. If you are looking for a system of researching stocks according to fundamental and technical variables that gives you a clear buy,hold, or sell result this book provides that system.

Lending Club $100 and up IRA Bonus

March 25th, 2011  |  Published in Investing, IRA  |  1 Comment

Lending Club is offering a cash bonus of up to 3% to IRA investors. IRA investors may be eligible to receive a 1% cash bonus for a transfer, rollover or contribution of $10,000 or a 2% cash bonus for a transfer, rollover or contribution of $50,000 or a 3% cash bonus for a transfer, rollover or contribution of $100,000. To receive the bonus, all funds must be (1) newly transferred between March 15, 2011 and April 30, 2011, (2) eligible funds must be continuously maintained in your Lending Club account and (3) eligible funds must be fully invested on the Lending Club primary platform market by May 31, 2011. Existing account balances and transfers prior to program enrollment date do not count towards satisfaction of the investment requirements needed to earn this bonus. The transferred funds that qualify for this bonus offering will be locked for investment purposes only and unavailable for withdrawal from the eligible Lending Club account. Limit one bonus per tax ID and a maximum bonus of $7,500 per tax ID.

Visit Lending Club
for more information or to open an account.

How to Know When to Switch Financial Advisors

February 7th, 2011  |  Published in Investing  |  2 Comments

With the recent ups and downs in the stock market, many people have taken a good hard look not only at their investments, but also at their investment advisors. Back in the bull market 1990’s, it was hard not to make money in just about any investment available. Now, however, it takes a competent advisor to really pick the right investment vehicles for your specific goals and circumstances.

If Things Have Changed, Then It Might Be Time to Move On

In most instances, financial advisors must perform a great deal of marketing in order to obtain clients. But just because your advisor is a good marketer does not necessarily make him or her a good advisor for your finances.

There are some red flags you should look out for once you’ve handed over your savings to a financial advisor. And, if you see any of these warning signs, you might want to consider transferring your account to someone who can better serve your financial needs.

8 Good Reasons to Move On

Any of the following can give good reason for you to move your money elsewhere. Unlike an unacceptable relationship with your barber or tailor, having a poor fit with your financial advisor can literally mean the difference between retiring or having to work for several more years. Therefore, it’s imperative to make sure your advisor’s goals for your portfolio are in line with yours.

  • Your Advisor Doesn’t Contact You Regularly. If your financial advisor has disappeared into thin air, this could mean a problem with your investment recommendations (i.e., they fear calling you based on their poor advice), or they are simply too busy to call you. Either way, lack of contact with you is not a good way to serve you and your investment needs. Most financial advisors should contact their clients once per month, even if it’s just to “check in.” At the very least, you should be contacted once per quarter. Anything less should be grounds for moving your account to someone who will keep you informed.
  • Your Life Circumstances Have Changed. Sometimes financial advisors specialize in different types of clients or accounts. For example, some focus primarily on working with younger investors. Therefore, if you opened your account years ago, but now need to focus on estate planning, it may be time to consider changing to an advisor who specializes in this area.
  • Your Portfolio is Not Keeping Pace with Inflation. If you compare your investment returns to other similar vehicles, and your account is way behind, this may signal that your advisor isn’t paying enough attention to your account. If this is the case, consider moving your nest egg to someone who will maintain a focus on your investment returns, and who will make necessary changes if need be.
  • Your Advisor Sells You Products that Make Him or Her More Money Than You. If you notice your advisor seems to continuously gravitate to particular products – even though they may not suit your needs – there could be a reason. Often, financial services companies offer “contests” or “spiffs” for their brokers and reward them when they sell a particular product to clients. If your advisor is more concerned with their bonus than about your account, consider a change immediately.
  • Your Advisor Doesn’t Explain the Investments They Are Recommending. When advisors truly understand the products they sell, they will be able to explain them to you. If your advisor does not go over their recommendations and how they can benefit you, this could signal that they don’t understand what they are selling. This, then, may not be the best person to be handling your retirement assets.
  • Your Investments are Too Risky for Your Tolerance. As a younger investor, you are better able to handle more risk in your investments. However, if you are approaching retirement, your risk tolerance will likely change to less aggressive investment vehicles. If your advisor continues to place you in risky products, you stand a greater chance of losing those dollars. If this is the case, you should consider moving your funds to someone who will take less risk with your money.
  • Investments in Your Account are Being Bought and Sold Without Your Knowledge or Permission. It should go without saying that if your advisor is trading in your account without your permission – and even more so, without your knowledge – move your account immediately. Not only is this dangerous to your funds, but it is unethical.
  • Your Advisor Knows Too Much About Your Financial Situation. This may sound strange, but there are situations where your advisor may actually know too much. If your financial advisor is your cousin, a neighbor, or a good friend, a dip in your account value may strain the relationship. In this case, it may be a good idea to move your account to someone who will concentrate on your investments, without making it uncomfortable in personal situations.

How to Make the Switch

Prior to moving your account – and risking the same problems all over again – you should research and interview your potential new financial advisor. If you don’t get a good feeling about them, move on. However, if the new advisor fits your needs, then transferring your account is not as difficult as it may at first seem.

In most cases, your new advisor will take care of all of the transfer details, including contacting your former investment company, monitoring the transfer process, keeping you informed along the way, and re-investing the funds according to your wishes.

Al Ramsay has been an avid dividend investor and personal finance contributor for 4 years. His weekly articles are published in the dividend stocks blog that covers high yield stocks and income investments.

5 Questions You Should Ask About Target Date Retirement Funds

May 18th, 2010  |  Published in Investing, Retirement  |  5 Comments

A Target Date Retirement Fund seems like an easy way to save for your retirement.  You just invest your money in the fund that matches your planned retirement date and you are all set.  Of course, investing for retirement is not that easy.  There are several questions you should ask when deciding to use a target-date retirement fund to save for your retirement.

  1. How risky is the fund? –  Not all target-date retirement funds have the same level of risk.  Two funds with a target date of 2025 could have wildly different proportions of equity and fixed-income investments.  You need to decide what is an appropriate level of risk for your goals.
  2. What are the fees? –  Funds also differ on the fees they charge.  Paying too much in fees can seriously affect the performance of your target-date retirement fund.  Make sure you are not paying too much in fees.
  3. How much should you invest?  –  These funds will not tell you how much you need to save for retirement.  You need to figure that out on your own.
  4. Do you have other retirement savings? –  These funds are designed to be your sole retirement investment vehicles.  If you have other retirement savings that will change your investment allocation and you need to adjust accordingly.
  5. What happens when you hit the target-date? – Some of the target-date funds are designed to end when you hit the retirement target-date while others are designed to continue and hopefully provide you with an appropriate return on your money while retired.  Whichever is the case with the target-date retirement fund you choose you need to make sure that your investment will provide you with a sufficient income during retirement.

These five questions are a good starting point when choosing a target-date retirement fund.  Be sure to investigate a prospective target-date retirement fund thoroughly before using it to save for your retirement.

Dividend Investing for Retirement

March 30th, 2010  |  Published in Investing  |  1 Comment

Dividend stocks make up a major portion of my retirement portfolio. If you do not already have dividend-paying stocks in your retirement portfolio you should strongly consider adding them. By buying dividend-paying stocks and reinvesting the dividends you could have a nice stream of income when you retire.

Dividend-paying stocks have been out of favor the last few years because their small, steady returns didn’t have the appeal of speculative stocks with potentially huge returns. After hundreds of companies cut or eliminated their dividends in 2009 dividend stocks fell even more out of favor. As a result there are many dividend stocks available at good prices.

There are several reasons that dividend-paying stocks are good investments. The first is the power of reinvested dividends. For the period from 1925 to 1995 reinvested dividends comprised two-thirds of the return of the S&P 500. Another reason is that dividends offer protection against inflation. There are many companies that have a history of raising their dividends thus increasing your income. If you invest in fixed-income investments such as a CD or bond your income will not increase and you won’t have a hedge against inflation. A final reason is that after the latest round of dividend cuts most of the cuts should be over and as the economy improves companies could start increasing their dividends once again.

I have several stocks and funds in my dividend portfolio but I won’t make any recommendations here. If you want to learn more about dividend-paying stocks a couple of good books on the subject are The Ultimate Dividend Playbook: Income, Insight and Independence for Today’s Investor and Dividends Still Don’t Lie: The Truth About Investing in Blue Chip Stocks and Winning in the Stock Market. Also there are plenty of websites that discuss dividend stocks. Dividend Growth Investor is one I read on a regular basis. Beginning to invest in dividend-paying stocks now could provide you with a nice income in retirement.

Should I Sell Everything?

February 10th, 2009  |  Published in Investing  |  Comments Off on Should I Sell Everything?

A CNN Money reader recently wrote into Walter Updegrave and asked whether she should sell all her stocks and move into safe investments. After the 4.5%+ drop in the market today after Geitner’s remarks, she probably would’ve done well to follow her instincts and not Updegrave’s advice! While that would’ve been great in the short term, selling now and trying to time when to re-enter is a fool’s errand you’re like to fail at. Fortunately, Updegrave agrees.

He argues that selling today and “waiting it out” is a problem because you don’t know when things will recover. He cites recent market moves as clear
proof that you should try to time the market:

In early October, 2007, the Dow Jones Industrial Average hit a peak close of 14,164.53. Then the you-know-what hit the you-know-what. The Dow began falling, eventually dropping 17% by the beginning of March, 2008.

But then the market began to dramatically improve. By early April, 2008, the Dow had rebounded almost 5%. And by early May it was up 11% from where it had been just two months earlier.

If you had pulled out of the market in late 2007 or early 2008, you might very well have seen the rally in the spring of 2008 — a double-digit gain in less than two months — as a signal to get back in. It looked like stocks were back.

But with the benefit of 20/20 hindsight, we now know that this rebound fizzled, and stocks dropped again. The Dow plummeted 42% between May and late November, 2008.

Ah, but the Dow then rebounded by 20% from November, 2008 to early January, 2009. Sign of the big turnaround? Apparently not. By the end of January, the Dow had slumped 11%.

The market headfaked not once, not twice, but three times! There’s no way to predict it… so don’t bother.

Warren Buffett’s Metric Says BUY!

February 4th, 2009  |  Published in Investing  |  1 Comment


Famed investor Warren Buffett has a metric that says the best time to buy stocks is when the total market value of U.S. stocks is 70-80% of the output of the U.S. economy, the gross national product. Stock quotes are the source of this information.

Well, that’s where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham’s statement about the stock market: “In the short run it’s a voting machine, but in the long run it’s a weighing machine.”

Buffett’s metric says it’s time to buy [Yahoo Finance]

5 New Retirement Investing Rules

January 20th, 2009  |  Published in Investing  |  Comments Off on 5 New Retirement Investing Rules

Hmmm… I guess it’s about time that someone wrote about “new” rules to investing, so why not Katy Marquardt of U.S. News & World Report? In citing the classic risks retirees face, Marquardt talked to some experts and came up with five new rules for retirement.

Separate investments into different time horizons

Rather than treat your investments as one big pot that you will draw down, they recommend that you treat it as three post – short-term funds, intermediate-term funds, and long-term investments. The short-term should be in low risk investments like high quality bonds, the intermediate-term funds should live in a 50-50 or 60-40 mix of stocks/bonds, while the long-term investments, which a time horizon of 5+ years, should be heavy on stocks. It’s an interesting idea that I think many people were already doing. If you plan to live for 20 years after retirement (into your 80s), I can’t imagine you treating the dollars you plan to spend in your 70s the same way you are treating those you will spend tomorrow.

Don’t reach too far for yield

For your safe investments, don’t try to get too good of a yield by taking on too much risk. I believe in the same mantra, you’ll want a safe return on your short term funds because the risk of something falling tremendously is simply too great. If you’re retired, you can’t afford to lose the money you will need to spend in the next five years so just keep it in a safe high yield savings account or buy a high quality bond.

Munis, dividends

Rule three and four are similar to rule two in that they talk about income generating investments. Rule two points you towards government bonds, or municipal bonds (muni), and rule three says you should look towards stocks with a dividend. One warning I’d have about stock dividends is that they are an indicator but they’re not 100% reliable, companies cut dividends all the time.


This one I liked the least because we start getting into “how should I invest” rather than “how should I be changing my investing plan to account for a new era.”

The five rules weren’t really five rules, it was two rules and then three investment suggestions. That being said, it’s not a bad article, just a little misleading.