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Rent vs. Buy: Why Buying a House Generally Wins
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Rent vs. Buy: Why Buying a House Generally Wins

By on Sep 27, 2013 in Personal Investing | 0 comments

Article by, The Motley Fool Rent vs. buy. In finance circles, it’s a bigger debate than “paper vs. plastic” or “tastes great vs. less filling.” It remains a debate fought by smart people on both sides, because the variables make calculus look like third-grade math. Advocates of buying will use arguments that feature phrases such as “throwing away money on rent,” “mortgage interest rate deduction,” and “forced savings.” They may even appeal to your sense of community by pointing out the social benefits of an ownership mentality. Advocates of renting will say the benefits of homeownership are overrated while the costs are underrated. From the title of this column, you know where I stand. But let’s give the rent advocates their due. Rent vs. buy: The case against buying a house A popular argument against owning housing is that home prices barely keep up with inflation. Using Yale Professor Robert Shiller’s data that goes back to the late 1800s, we’re talking about just 0.2% annually. Yes, that’s a decimal point before the two. Compare that inflation-adjusted return with the 6%-7% historical real return of the stock market and you can see where their argument is headed. Buyers also pay closing costs, real estate agent fees, homeowners insurance premiums, property taxes, and sometimes refinancing costs. Then there are the “investments,” which are often better classified as “cool stuff I want,” or maintenance costs — neither of which meaningfully increase the value of the house. I’ve owned a house for 10 years, so let’s use me for illustrative purposes. Here’s a list of things I’ve bought that cost at least $1,000 (often much more). Renters normally don’t directly pay for any of this stuff. Hardwood flooring Deductible on homeowners insurance after my washer flooded the basement Landscaping (twice) Laminate wood flooring New roof Painting and fixture upgrades (pre-wife) New heating/cooling system New sliding glass doors Cutting down of diseased trees or trimming of healthy trees (three times) Stainless-steel refrigerator Blinds Painting, bathroom refurbishing, and fixture upgrades (post-wife) I fancy myself strategically frugal, but stuff breaks, neighbors complain about overgrown vegetation, and new wives refuse to live in a bachelor pad. So I’ve averaged more than one $1,000-plus item a year — and...

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Indexed Annuities | What are they? | Lindsey’s Four Key’s to Investing in Indexed Annuity…
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Indexed Annuities | What are they? | Lindsey’s Four Key’s to Investing in Indexed Annuity…

By on Sep 18, 2013 in From Find the Capital, Personal Investing, Videos | 0 comments

Article by, Brent Virkus of Find the Capital Indexed Annuities have become very popular as of late. Why is this? Well to help Find the Capital’s follows better understand this type of investment, Lisa Virkus Founder and CEO of Find the Capital conducted a short interview with industry leading Financial Advisor, Cleat Lindsey about Indexed Annuities and his Four Keys to Investing in them. In summary Indexed Annuities have become popular due the people still being leery about the stock market and the fact the banks simply are not paying interest of any significance. Basically an Indexed Annuity protects the investor from downside risk and allows them to “participate” in the potential upside of the stock market. Lindsey’s Four Keys to Investing in Indexed Annuities are as follows:   First…Understand the CAP Rate or the Floor The floor refers to the minimum guaranteed amount credited to the account. At the time of this writing (see Update date at the bottom of this page), this rate is almost always between 0% – 2%. The cap rate is the annual maximum percentage increase allowed. For example, if the chosen market index increases 35%, and the contract has a 10% cap, the increase will be limited to 10%. Some contracts do not have a cap rate (these tend to have a lower participation rate, such as 30% to 50% compared with 75% to 100% for a plan with a cap rate). The cap varies depending on the length of your term — fixed-indexed annuities with longer commitment periods (surrender periods) tend to have a higher cap rate, whereas annuities with shorter surrenders periods tend to have a lower cap rate. NOTE: The cap may reset annually and is subject to change at each renewal. Second…Be aware of the Bailout Rate An Indexed Annuity bailout provision is a clause in the contract of your annuity that allows you to withdraw your money without any penalties based on predetermined conditions. Some annuity contracts include a medical bailout provision for nursing home expenses or if you become terminally ill. Once your annuity expires, on the maturity date you have the option to either renew or surrender the annuity. If you surrender at this time, you do not pay charges. Choosing to renew...

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5 Years After Lehman…Investing Lessons from the Financial Crisis
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5 Years After Lehman…Investing Lessons from the Financial Crisis

By on Sep 13, 2013 in Personal Investing | 0 comments

Article by, Motley Fool Staff The fall of Lehman Brothers five years ago triggered a financial calamity that will never be forgotten by investors. We may have been bloodied initially by the turmoil, but we eventually emerged wiser about investing, in the end. Looking back at that tumultuous time, we asked our top investors to share their most valuable lesson from the financial crisis. Seth Jayson: I learned, or rather, relearned, that things are only obvious in hindsight. Unfortunately, most investors cannot cope with this basic truth and will forever misunderstand recent market history and their place in it. It’s far too easy to look back at the credit spigot, the outright scam that masqueraded as a credit default industry, and the eventual unraveling and say, “I told you so!” Some smart observers had been telling us so for years before everything fell apart (and didn’t make a nickel investing because their timing was wrong). More difficult is looking back at the dark days at the bottom of the market and remembering that “only an idiot” was putting money to work then. If you were buying stocks and you didn’t feel like an idiot, you weren’t paying attention, because the financial press was telling you the worst was yet to come. And during the entire climb back, we’ve been told incessantly that the next leg down is just ahead. Luckily, the simplest investing policy is also the easiest to execute, even in those nausea-inducing times: Invest a little bit every month, regardless of market climate, into the best companies you can find. This served me well personally, and served us well at Hidden Gems, too. Morgan Housel: You asked for one, but I’m going to give you five. I think they’re all important: Cash gives you options. Debt takes options away. This is a simple way to think about the two, but it really captures what they do to your finances. It’s much easier to say “I’ll be greedy when others are fearful” than it is to actually do it. Almost everyone I know — including myself — should have bought more aggressively when stocks crashed. “Risk” in the stock market means different things to different people. The 2008-2009 crash was the biggest...

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Self-Directed IRA Investors – Untapped Capital for Your Start-Up
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Self-Directed IRA Investors – Untapped Capital for Your Start-Up

By on Sep 12, 2013 in Personal Investing, Project Financing, Running Your Business | 0 comments

Article by, The Entrust Group When starting a business, you likely want to explore as many avenues for start-up capital as possible.  Banks have tightened their loan policies lately, making that avenue a challenge, and while there are some grants available for small businesses, chances are that the majority of your funds will come from interested investors. Investors can come in many packages, but we’re here to introduce you to the wealth of opportunity presented by self-directed IRA investors. Who are Self-Directed IRA Investors? Self-directed IRA investors are just like any other investors, except that they are using retirement funds to make their investments. Investing with a retirement account brings certain benefits to IRA investors that aren’t available to the standard investor, such as tax-deferred or tax-free earnings. The standard IRA or 401(k) investor will not be able to invest in a start up business because most banks and financial firms to do not offer a platform for these types of investments.  Self-directed IRAs, by definition, allow for alternative investments, such as private equity or real estate, so it is investors that self-directed their retirement funds that will be looking for investment opportunities with entrepreneurs. Can Self-Directed IRA Investors Help Grow Your Business? The simple answer is; yes. Because self-directed IRA investors have the ability to invest in private companies, many are looking for the opportunity to grow their funds alongside a small business. Especially with the tech boom of recent years, it seems everyone wants to be part of the next big start-up. Similarly, you may already know someone who wants to invest in your business, but has been unable to because of a lack of funds. Chances are these people don’t realize there is a huge opportunity available to them by using a portion of their nest egg. With self-directed IRAs, your neighbor or your cousin could be your next big investor! (Note: certain family members and others close to the IRA owner may be considered disqualified for investment purposes.  Please refer to section 4975 of the Internal Revenue Code for details about disqualified persons) About the author:  The Entrust Group is a third party administrator of self-directed savings accounts, including IRAs, HSAs, and ESAs. The Entrust...

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15 Biases that Make you do Dumb things with your Money
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15 Biases that Make you do Dumb things with your Money

By on Sep 10, 2013 in Personal Investing | 0 comments

Article by, By Morgan House of the Motley Fool You are your own worst enemy. Those are the six most important words in investing. Shady financial advisors and incompetent CEOs don’t harm your returns a fraction of the amount your own behavior does. Here are 15 cognitive biases that cause people to do dumb things with their money. 1. Normalcy bias Assuming that because something has never happened before, it won’t (or can’t) happen in the future. Everything that has ever happened in history was “unprecedented” at one time. The Great Depression. The crash of 1987. Enron. Wall Street bailouts. All of these events had never happened… until they did. When Warren Buffett announced he was looking for candidates to replace him at Berkshire Hathaway, he said he needed “someone genetically programmed to recognize and avoid serious risks, including those never before encountered.“ Someone who understands normalcy bias, in other words. 2. Dunning-Kruger effect Being so bad at a task that you lack the capacity to realize how bad you are. Markus Glaser and Martin Weber of the University of Mannheim showed that investors who earn the lowest returns are the worst at judging their own returns. They had literally no idea how bad they were. “The correlation between self-ratings and actual performance is not distinguishable from zero” they wrote. 3. Attentional bias Falsely thinking two events are correlated when they are random, but you just happen to be paying more attention to them. After stocks plunged 4% in November 1991, Investor’s Business Daily blamed a failed biotech bill in the House of Representatives, while The Financial Times blamed geopolitical tension in Russia. The “cause” of the crash was whatever the editor happened to be paying attention to that day. 4. Bandwagon effect Believing something is true only because other people think it is. Whether politicians or stocks, people like being associated with things that are winning, so winners build momentum not because they deserve it, but because they’re winning. This is the foundation of all asset bubbles. 5. Impact bias Overestimating how big of an impact an event will have on your emotions. Most people are utterly terrible at predicting how happy they’ll be after receiving a raise, or getting a new job, particularly as time goes on. We get...

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Warren Buffett’s Next Big Buy
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Warren Buffett’s Next Big Buy

By on Aug 23, 2013 in Personal Investing | 0 comments

Article by, Marr Koppenhefler – The Motley Fool “Confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission.” That’s the line that careful readers may have found in Berkshire Hathaway‘s (NYSE: BRK-B  ) 13F filing — the SEC filing that discloses the company’s major stock positions. Mysterious, right? So very un-Buffett. Unless, maybe, it isn’t. This isn’t a line that commonly shows up in a Berkshire 13F, but it’s not something we haven’t seen before. In the August 2011 filing, there was a very similar line: “Confidential information has been omitted from the Form 13F and filed separately with the Commission.” That timing should set off some bells for the close Berkshire watchers out there. It was just three months after that filing that Buffett revealed a huge position in IBM. The size of the IBM stake quickly vaulted it to among Berkshire’s largest holdings, and is now mentioned by Buffett in the same breath as Wells Fargo, Coca-Cola, and American Express when he talks about Berkshire’s “Big Four” investments. Flip back to today’s filing, and the logical conclusion would be that Buffett is once again building a large stake in a new investment, and is trying to keep quiet about it to keep the copy-cat investors away. There’s plenty of room to speculate on what Buffett might be buying now. We could see him surprise the peanut gallery again by going with a name from the tech arena or another industry seen as outside of his normal strike zone. However, if I were betting on it, due to the overwhelming odds, I’d wager that the new addition will be either a financial or consumer goods company. Consider that, with IBM as the exception, eight of Berkshire’s nine largest stock holdings are in one of those two categories. And depending on how you want to treat DIRECTV — not a Buffett pick, by the way — we could say nine of 10. If we’re looking at financials, I wouldn’t be too surprised if Discover  (NYSE: DFS  ) made it into the portfolio. This is a business with a strong franchise and a record of strong equity returns. And, when we consider that American Express has long been a Buffett favorite, and both Visa and Mastercard can already be...

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