After several months of using automated posts from del.icio.us, I’m going to experiment with making the daily links more robust. You folks seem to have a love/hate relationship with these — I’m hoping to make them more palatable to the “hate” crowd.
>> Carnival of Personal Finance #99 <<
This week’s carnival is hosted by Golbguru at Money, Matter, and More Musings. Highlights from this edition include:
- KMull looks at “keep the change” programs from Bank of America and American Express. Are these worth considering?
- 10 common sneaky fees credit card companies charge
- The Coin Jar shares that her daughter’s millionaire dreams aren’t far from reality. The young woman is just nineteen, but has already developed excellent habits.
>> Sitting on $100,000 <<
A CNN Money reader worries: “I’ve been sitting on $100,000 for over a year because the market has been climbing to historic highs. I have always been told to buy low and sell high, so do you think I should wait for the correction before I invest this money. Or should I just invest it now?” Walter Updegrave, one of my favorite money experts, has the answer. (Also read JLP’s take at All Financial Matters)
>> Renting, rights and money mistakes <<
Dawn at Frugal for Life (a great blog, a constant source of inspiration) has some excellent tips for those of you who rent. My favorite is “read the lease”, which is similar to my advice to read your mortgage before signing.
Thanks for the linkage, JD! Did you get that e-mail last week?
Daily links felt like a hit-and-miss approach compared to the well-planned articles written here. It will be nice to know there will be daily links I will actually enjoy! Thanks JD.
I love the 10 ’sneaky’ credit card fees.
OMG, did you know credit cards are a *business* and they actually, you know, try to make *money* off you when you use their service!!1one!?
Here I thought they were just free magical money mills that you don’t have to pay back forever and ever.
[...] at Get Rich Slowly has linked to my post from the most recent Carnival of Personal [...]
A CNN Money reader worries: I’ve been sitting on $100,000 for over a year because the market has been climbing to historic highs.
I’m saddened he didn’t talk about the higher long term gains obtained by purposeful periodic rebalancing of a diversified portfolio in that article. He told the person to stop trying to time the market, but didn’t tell her how to capture the gains that she was worried about losing by a meaningful method.
Every month, 3 months, or 6 months, which ever makes more sense from your brokerage’s fee structure, your stock/bond/risk mix should be rebalanced to fit your target risk profile. For someone in their 20s, this will look different than someone in their 40s, but usually will get out of wack after a couple years of investments changing value. Recently (luckily) your stocks will have risen so much that you’re all of a sudden overexposed to risk. If someone would have entered the market in say, 1999, by 2002, they would have found themselves overly conservative, with only their low risk items holding much of their value.
Determine the mix you actually want again (usually the same or just a little more conservative than last time and move money between investments to approach this goal. Why would you let the market dictate the amount of risk you’re exposed to when you can choose an amount of risk that suits you better?
This will capture gains from bull markets, while mitigate losses from bear markets.
Keep in mind, fees will *eat you alive* if you do this the wrong way. Make sure your brokerage fees align with this. Don’t make small corrections, as the gains from this method aren’t worth the transaction costs (unless they’re free, which some plans have a number of per some period). Some plans have X free per month free trades. In that case, monthly rebalancing is cheaper from a transactional perspective. Each month you do the trades that bring you closer to your ideal risk ratios with your free trades.
–Michael
JD
Thanks for the kind words and the link. Glad you liked it.