There is so much talk in this section about what is NOT a good investment. So I thought I would switch it around.
What do you feel ARE good investments?
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There is so much talk in this section about what is NOT a good investment. So I thought I would switch it around.
What do you feel ARE good investments?
assuming that you are a dancer ... breast implants ! They will probably earn you far more money than any other investment I can think of right now.
assuming that you have any sort of outstanding loans or debts ... paying them off early is likely to provide a higher effective 'return on investment' with zero risk of loss of principal.
If you live and work in CA or NY or IL etc. you might check out ( insured ) municipal bonds issued by your state. I can't really explain further though based on the ban of 'political' content, but the reason should come to you in about 60 seconds worth of hmmmm ...
Yourself. Your own brain. Get as much education as you possibly can. Especially if it can give you an immediately marketable skill in current demand that will continue in the forseeable future: Health care ; health care management; foreign languages especially Brazilian Portugese ( it's somewhat different from what they speak in Lisbon ) ; Russian; Mandarin ; Arabic. Every study shows that the more education you have the more employable you are and the less likely to be laid off.
While we are supposed to be careful about specific investment recommendations , I will say that right now I am focused more on maintaining value than on return. Thus I am holding physical gold ; gold and other mining stocks; oil stocks and food stocks. I tend to try and invest for the long term but I am sitting back until various issues (currently unresolved) become clearer and closer to resolution. I'd rather not get more specific for obvious reasons. (This is the "new" Eric who tries to avoid arguments as much as possible. lol )
I never say "never" but I would be vewy careful about "green" investments. Solyndra is only one example of something to watch out for. ( Boy did I bite my tongue on THAT one. lol.) Research thoroughly and keep the salt shaker handy BEFORE investing in those sort of ventures. I'm not saying not to do it. I AM advising extra caution and care. The bottom line for me would be a solid business model plus good management and yet I'd still be prepared to lose the whole enchilada if it went belly up. In other words, don't invest the rent money.
Don't be jingoistic in your investing. There are excellent opportunities in Mexico, Canada as well as the BRIC countries. I am avoiding Europe like the plague ! Even Germany which is the pick of a bad lot afaic.
I'm not going to quibble with my philosophical soulmate Melonie on muni-bonds. If they are INSURED. I also prefer REVENUE to General Obligation bonds for extra safety.
Assuming you aren't going to be moving any time soon...... This would be a great time to buy a home using a 30 year fixed rate...... Paying off this loan with cheaper dollars over the lifetime of the loan will seem a no brainer in the comming years.
Capital appreciation over the next few years will be nil..... But locking in a fixed living cost will pay dividends...... And once prices finally bottom...... Inflation will help the price.
^^^ I don't want to rain on anybody's parade ... however, where dancers and housing is concerned there are a number of issues to consider -
Case-Shiller and other sources consistently indicate that the 'supply overhang' of distressed / bank owned housing will continue to drive down real estate values in most areas for the near term future at least. Of course, real estate is very location specific so there are exceptions. However, in general, all indications are that the available supply of housing a year or two from now will be greater, and the prices are likely to be lower, than they are today.
A big joker in the deck has just been proposed as part of the latest gov't 'jobs creation' bill which would disallow ( a portion of ) the tax deduction presently allowed for mortgage interest paid for people at the income level of a serious full time dancer. Also, many local gov'ts have 'no choice' but to significantly increase property taxes in order to pay for state mandated budget items like welfare / medicaid that are growing rapidly in annual cost. And of course energy prices aren't declining significantly, and have the potential for going even higher in the future based on reasons we're no longer allowed to talk about. Not wanting to go political, but these three items could significantly affect the future ( supposedly ) fixed cost of housing.
And then there's the issue of actually obtaining a mortgage loan. As a young self-employed exotic dancer, whose income is difficult to predict / verify, this is no longer an easy task. This is particularly the case given new regulations on lenders who are now required to evaluate real risk of default over the life of the mortgage. Where dancers are concerned, every bank loan officer recognizes the near certain fact that today's 25 year old dancer applying for a new 30 year mortgage will not be able to keep working as a dancer ( and thus able to keep earning sufficient income to make mortgage payments ) when she is 45 or 50 or 55 years old.
Even if a dancer can get approved for a new mortgage, in all likelihood her self-employed status is going to force a 20% down payment requirement on top of closing costs. So on a typically priced home this amounts to ~$50,000 or so in 'front money' that will produce zero positive cash returns unless and until the purchased property is sold at a profit in the future. In comparison, that same $50,000 could producing 4-6% tax free positive annual cash returns ( i.e. $2-3,000 additional annual after-tax income ) if invested in a state muni bond !
Not a bad idea at all DEPENDING on the area. Some areas have pretty much bottomed out while others are still on the way down. BUT - READ what Mel just posted. I agree with every word.
How much of a down payment can you afford ? What is your credit rating ? How much of a monthly payment can you EASILY afford ?
What kind of shape is the house in ? Does it need work ?
How much are property taxes ? Water & sewer charges ? Home insurance ? Utilities - gas, oil or electric heat ?
Is it in a flood zone ?
^^^ indeed all of those issues make the 'game' of buying a home more and more of a gamble. And unlike almost any other type of investment, in the case of a home mortgage the buyer must play by the same repayment 'rules' for the next 30 years, while the 'house' is free to change the rules of the 'game' at any time. As I posted in a different thread, an acquaintance of mine who owns a home in New Jersey was recently faced with the choice of ponying up an additional $3,500 a year in newly mandated flood insurance premiums, or having his mortgage terminated. This left him the choice of trying to sell his house at a loss before the end of the year, coughing up the additional $3,500 a year for flood insurance premiums, or coughing up $ 250,000 before the end of the year to pay off his remaining mortgage balance. Fortunately, he was in a position to do the latter.
He also noted that, had he decided to continue the mortgage and make the $3,500 annual flood insurance payment, the proposed loss of his home mortgage interest tax deduction would have also 'cost' him an additional $2,500 a year in higher income taxes. And he points out that some of his neighbors, who are not able to pay off their outstanding mortgage balances, and who are not really able to afford the $3,500 a year in newly mandated flood insurance premiums, are being forced to 'dump' their otherwise very desireable properties at 'fire sale' prices ... for the simple reason that there are very few 'qualified' new mortgage applicants able to purchase these properties once the new flood insurance costs and proposed reduced after-tax income levels ( partial loss of home mortgage interest tax deduction ) are taken into consideration by the banks' would-be mortgage borrower 'stress test'.
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this just released re housing ...
(snip)"LOS ANGELES (AP) -- Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.
The number of U.S. homes that received an initial default notice -- the first step in the foreclosure process -- jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.
The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.
"This is really the first time we've seen a significant increase in the number of new foreclosure actions," said Rick Sharga, a senior vice president at RealtyTrac. "It's still possible this is a blip, but I think it's much more likely we're seeing the beginning of a trend here."
Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.
Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.
Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, a possible settlement of government probes into the industry's mortgage-lending practices, and lenders' reluctance to take back properties amid slowing home sales.
A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.
Foreclosures weigh down home values and create uncertainty among would-be homebuyers who fret over prospects that prices may further decline as more foreclosures hit the market. There are about 3.7 million more homes in some stage of foreclosure now than there would be in a normal housing market, according to Citi analyst Josh Levin.
"This bloated foreclosure pipeline now presents the greatest obstacle to a housing market recovery," Levin said in a client note this week.
Banks have been working through a backlog of properties that first entered the foreclosure process months, if not years ago. But the August increase in homes entering that process sets the stage for a host of new properties being targeted for foreclosure.
That's bad news for homeowners who may have grown accustomed to missing payments for several months without the threat of foreclosure bearing down on them. In states such as New York and Florida, for instance, processing delays have helped some homeowners stay in their homes for more than two years before banks got around to taking back their properties."(snip)
from
... or put another way, and trying to avoid the political aspect, there are a LARGE number of homes that have been 'artificially' prevented from hitting the housing market / auction block for various technical reasons. Those technical obstacles are now being resolved. Thus over the course of the next year or two, not only is the pace of foreclosure notices increasing but the large number of 'semi-foreclosed' homes that had previously been held in 'legal limbo' will be hitting the housing market / auction block at the same time. Together, this strongly indicates that home price levels a year or two from now will be significantly lower than they are today.
^^^ I know but I hesitated to post something similar on the recent uptick in foreclosures. All part of being the "New" Eric and avoiding politics as much as possible.
As to your last point, it is one of many of those "issues" I mentioned that I'd like to see go one way or another before deciding which way I want to jump. At least as far as some of my own investing is concerned. 'Nuf said.
and I'm sticking to my original point that Breast Implants are likely to be the best 'investment' an exotic dancer can make. Where else can you find a $5000 investment that will provide $5000+ a year in additional earnings ?
Well there are always reasons not to buy a home...... I would reiterate the idea of locking in a fixed living cost that can be paid off in depreciating dollars is a good investment.
Correct as far as it goes. But Melonie made the point ( among several ) that the house you can afford NOW on a six figure (?) income could easily become an unaffordable burden a few years down the line. Also, look at how many "hot" areas THEN are wastelands and ghost towns NOW.
Aside from the hackneyed , yet true , expression that the three most important things in real estate are location, Location and LOCATION, affordability and marketability are also prime considerations.
Dancing around this as delicately as possible ( given the new directive from the management ) the main reason I advise extra caution and care in buying now is because the real estate market is still distorted and unsettled to put it mildly. While some differ, the general consensus is tha the real estate market has not yet found a bottom and that it will take several more years for it to heal. And even if the political winds shift dramatically and policies change, it will still take years for stability to return to real estate. Nobody is saying that a prospective buyer ought to wait until there is a definitive bottom. Trying to really time something like that is imho foolish. If you seriously try to buy at rock bottom you probably never will. I'm just advising or advocating waiting until there is a clear trend.
Circling back to the original question and topic, I would say that right now real estate is more of an asset than an investment. More akin to money in the mattress or gold coins under the floor boards.
How about AGG, i Shares Barclays Aggregate Bond fund?
^^^ I'd lean more toward TLT, which is a similar ETF but deals with longer T Bond maturities ( i.e. mostly 20 year as opposed to AGG's 5-7 year ) ... which should benefit more in the short term from 'Operation Twist'. Any long maturity bond ETF is a great way for a 'small' investor to participate in an 'Operation Twist' trade over the course of the next few weeks / months. And if you're a 'gambler' there's always UBT, a 2x leveraged 20 year T Bond ETF !
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Hmm... top holdings seems to be a fairly even spread of short and long term US govt debt
http://us.ishares.com/product_info/f...erview/AGG.htm
And note it has gone up over this year
http://us.ishares.com/product_info/f...erview/AGG.htm
In accordance with the short and long ends of the yield curve going down
http://www.bloomberg.com/apps/quote?ticker=USGG2YR:IND
http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND
http://www.bloomberg.com/apps/quote?ticker=USGG30YR:IND
So I guess they bought bonds, then interest rates dropped. The question if you're buying now is do you think interest rates will drop further or not. Very roughly, buying bonds = shorting interest rates (like a fixed term deposit account). If you buy the ETF then rates go up, and you sell your ETF, you've lost money.
And like Melonie says, you might want to weigh up long term vs short term bonds depending on your personal confidence in what's going to happen with all this debt crisis stuff.
I have been trying to decide where to put my money for my employer supplied retirement plan. Basically my choices are funds that match the following indexes Barclays Aggregate Bond fund, S&P 500, DWCPF, and EAFE.
^^^ ahhh, the typical 'long' bias of employer supplied 401k programs.
Again the usual disclaimers, but if your plan allows unlimited trades you might consider a short term 'ride' with the S&P based on the FED's announcement that it will provide 'unlimited' US dollar liquidity to European banks ... which should make US banks comprising a substantial chunk of the S&P look like 'safe havens' in comparison ... for a little while.
But if your plan only allows infrequent trades then the bond fund is probably the least of the evils, despite the midrange maturities.
we're no longer allowed to discuss the underlying reasons, but yes ... for a little while. All I can provide in support of this assessment is a suggestion to google 'Operation Twist QE 2.5 '.Quote:
You're comfortable shorting long term US rates?
A very good deal, if you have the requisite 720 FICO and 20% down.
If you are in that category, I would add one additional caveat, buy small rather than large on the house. If you have two kids, three bedrooms are probably enough. Let guests sleep on the couch or in a motel. Swimming pool, unless you are a competition level swimmer, doesn't make sense. View the house not as an investment, but a place to live. Spend on it appropriately.
Z
I think that I am limited to 2 or 3 trades per month, right now I am hiding out in the bond fund. I will prabably wait until the 50 day moving average goes back over the 200 day moving average to put money back in to the S&P 500 fund.
Actually the bond fund has out performed the S&P500 over the last 3, 5, and 10 years.
^^^ probably the 'least of the evils'. Regarding the relative ratings of your available bond fund versus S&P fund, for better or worse this is in some ways like comparing a broken leg to rheumatism. The point I'm trying to make of course is that, from an objective standpoint, both have performed rather poorly over the course of the past 10 years.
Actually, over the course of the past couple of years, some of my acquaintances with major assets in 'limited option' 401k's have chosen to 'borrow out' those assets from their limited option employer plans and in turn independently invest the 'borrowed' money in short / defensive investments instead. This was their way of dealing with the 'long bias' inherent in most employer 401k's ... where the best one can hope for in a down market scenario is to 'sit out' market losses via moving funds to the available 401k money market fund or bond fund options. By investing the 'borrowed out' money into inverse ETF's, into gold etc. my acquaintances were actually able to 'make money' in a down market, then pay back the 401k once the markets bottomed, as well as pocketing the additional profit.
Brokerage will probably kill you in cases like that. eg. Over my way, Commsec and Etrade are typical ways that mums & dads buy and sell shares, and they charge $15-20 per transaction. So buy and sell and you've already lost 40% of your money! I believe Americans have a wider array of "discount brokerages" which charge fairly low commissions, but you need to watch out for scammers ("spread betting", "bucket shops" etc.). Also, is that $100 on top of your emergency-fund? Cash might be the most versatile thing to own if not.
^^^ in general, to keep brokerage fees down to a reasonable percentage, and to avoid additional brokerage fees trading non-standard blocks of less than 100 shares ... at typical $20-100 a share price levels means minimum $2,000 to $10,000 a transaction. There are exceptions of course.
With the usual disclaimers, I agree with Vamp and person that a beginning investor's order of priorities should be ...
- pay off any pre-existing debts, starting with those carrying the highest interest rates ( with possible exceptions based on very low interest rates / tax deductibility of interest payments )
- build an 'emergency fund' via a local bank or credit union amounting to 6 months worth of normal living expenses ... typically using a savings account or my personal preference 'rolling' maturites on six 6 month duration CD's. To elaborate, say your minimum monthly living expenses are $2000 and the amount of monthly income you can afford to set aside to savings / investments is $1000. Every month you take the $1000 and purchase a six month duration $1000 CD. When the seventh month rolls around and the first CD you purchased reaches maturity, take the $1000+ proceeds plus the $ 1000 savings for that month and purchase a six month duration $2,000 CD. When the 13th month rolls around you can stop adding savings to your CD based 'emergency fund' and direct it elsewhere ... because with the six $2000 6 month CD's you now own if something bad should happen you will have $2000 per month available each month for the next 6 months to cover it.
- save up an additional $5,000 in a bank account earmarked for future investments
- THEN open a brokerage account transferring in that saved up $5,000
Of course, if you are an active dancer, I still contend that investing the above $5,000 towards breast implants will provide you with a far higher 'return' on your investment that virtually any stock or bond alternative !!!
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