The pros and cons of Sharebuilder

guy working at computer

Bill wrote the other day looking for my opinion on Sharebuilder. Sharebuilder is an online discount brokerage that encourages automatic scheduled purchases of stocks and exchange-traded funds. In plain English, the company makes it easy to start investing. Here's what Bill had to say:

I was wondering what you thought about Sharebuilder. I am considering signing up for an Individual Retirement Account. I am not sure if Sharebuilder is a good place to start, or if I should try to get out of debt first (I have about $30,000 left and am paying it off). I have a 401K through my employer, so I have some retirement savings. I just don't think I have enough saved for my current age, so I am looking to offset the 401K with some other investments. Anyway, do you like Sharebuilder?

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Book review: The Automatic Millionaire

millionaire sign

David Bach is perhaps best known for coining the term the latte factor, a phrase that has almost become a joke in personal finance circles. That's too bad, really, because Bach has some good ideas. And the latte factor is a marvelous concept, applicable to many people who casually spend their future a few dollars at a time. Bach's most popular book is The Automatic Millionaire. I've referred to it often, but never reviewed it until today.

The Automatic Millionaire is based on sound financial concepts. The author encourages readers to eliminate debt, to live frugally, and to pay themselves first. But the core of his book is unique: rather than develop will power and self-discipline, Bach says, why not bypass the human element altogether? Why not make your path to wealth automatic?

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More about...Books, Budgeting, Investing, Retirement

What if the Stock Market Makes You Nervous?

A couple of readers have mentioned that they're nervous about the stock market's recent volatility. I've read similar concerns on other blogs and financial news sites. People are worried that the stock market's performance over the last month portends an impending bear market, and they don't know what to do.

Reading these concerns reminded me of Why Smart People Make Big Money Mistakes, which I reviewed last week. In the book, the authors discuss panic selling as a common financial pitfall. When people suffer from loss aversion, short-term losses cause them to sell investments prematurely, which can lead to greater pain:

One of the most obvious and important areas in which loss aversion skews judgment is in investing. In the short term, being especially sensitive to losses contributes to the panic selling that accompanies stock market crashes. The Dow Jones Industrial Average tumbles (along with stock prices and mutual fund shares in general), and the pain of these losses makes many investors overreact: the injured want to stop the bleeding. The problem, of course, is that pulling your money out of the stock market on such a willy-nilly basis leaves you vulnerable to a different sort of pain — the pangs you'll feel when stock prices rise while you're licking your wounds. Continue reading...

More about...Investing, Psychology

Confessions of a Personal Finance Guru

Suze Orman set off quite a stir a few months ago in a New York Times interview. Although some folks were all atwitter to find out she was gay, what really had people in the personal finance world talking was the fact that the most successful personal finance writer in the country had the bulk of her $25 million portfolio in conservative municipal bonds, with only about $1 million invested in the stock market.

My buddy Chuck Jaffe, a MarketWatch columnist and not exactly a Suze fan, had a particularly good time that little factoid. Chuck has often criticized Suze's advice as too conservative, and her lack of personal exposure to the stock market confirmed his suspicions that she was out of touch with the needs of everyday people. "In short," he thundered, "the person being trusted as everyone's financial adviser has a portfolio that few people could live with."

I think Suze should be allowed to invest any way she wants to, but the whole kerfluffle points up an irony of personal finance columnizing: the more successful we pundits are, the less our lives resemble those of the majority of our readers.

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Questions and answers about Roth IRAs (Updated!)

The series on Roth Individual Retirement Arrangements (Roth IRAs) has covered a number of topics -- what they are, how (and where) to open one, and which investments are best. Now, in the final part, we turn to some of your questions. Remember: I am not a financial adviser. I'm just a regular guy trying to gather information to help you. If you need more specific answers, please consult a CPA or an investment professional.

All of the questions below were submitted by Get Rich Slowly readers via comment or email. If your question isn't here, please drop us a line so we can research an answer and add it to the list. If you are new to Roth IRAs, this article is not the place to begin. Start here, instead.

Man using computer at home

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Which investments are best for Roth IRAs?

So you are in the market for a Roth IRA, that popular, flexible, tax-advantaged vehicle that can be used to save for retirement -- smart choice -- but here comes the next question: which investments are best for a Roth IRA?

Roth IRA Mutual Fund Options For Investment

There are three basic options for your Roth IRA investments:

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How to open a Roth IRA

You've heard how awesome Roth IRAs are and how starting one now can mean big bucks when you're older. You've even done some research so you have a vague idea of how a Roth IRA works. Now what? How do you actually open a Roth IRA for yourself?

The good news is that it's surprisingly easy to set up a retirement account and begin investing in your future. Here's what to do...

How to open a Roth IRA

  1. Decide where to open your Roth IRA account. Financial services providers such as Vanguard or Fidelity will have IRA products.
  2. Gather your information.
  3. Transfer money into your account.
  4. Set up an automatic investment plan.

1. Where to Open a Roth IRA

One of the reasons people fret about opening a Roth IRA is because there are so many financial institutions offering IRA products. It's important to search for a company that suits your needs, but how do you evaluate each company's strengths and weaknesses?

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When and How To Hire a Financial Planner

Typically people seek the help of a planner when they don't have the time, know-how, or desire to do create their own financial plan. In its 13 February 2006 issue, Newsweek featured a great article by Jane Bryant Quinn called “Money Guide: How to Pick a Planner”.

Even if you do most of the work yourself, you may want to check with a planner to be sure your plan will work as you intended. Some planners will use sophisticated probability calculations to determine your likelihood of achieving your goals when you are invested in markets that fluctuate. Market ups-and-downs can have a significant effect on your chances of success if you are making monthly or yearly contributions to long-term investments. By monitoring your probability of success, you can reduce the likelihood of over- or under-planning. Under-planning results in the need to make sacrifices in the future, while over-planning leads to making unnecessary sacrifices now.

Planners can also make recommendations and give advice on how to implement your plan. It is important to be mindful of potential conflicts of interest when recommendations could also stand to benefit the planner. Some planners simply do the planning and leave the implementation up to you while others will take an active role in implementing your plan.

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What is Dollar-Cost Averaging? An introduction to DCA

The three videos scheduled for today were going to cover hedge funds. After watching them, however, I've decided they're not necessary for basic financial literacy. Unless I've missed something, hedge funds are targeted primarily at institutional investors. If you want to learn more about them, you can visit the SEC or watch Michael's videos at YouTube:

Instead of covering hedge funds, we'll move on to Michael's discussion of timing investments and dollar-cost averaging:

Timing investments and dollar-cost averaging (5:52)


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