Prime Interest Rate & Credit Interest Spreads

Almost all of us hear some variation of this from our credit card or car loan company: your interest rate is a variable rate of 14.99% based on Prime plus 6.74%. That means your current rate is 14.99% but may change at any time, so if the prime interest rate goes up or down 0.5% so will your card. Let’s look at the Prime rate closer, and I’ll share some tips to enhance your credit search.

Inflation: A Reason for (Not) Investing in Bonds

Most people invest in bonds because they want to have stable fixed income. Because the performance of bonds are very stable, they also serve to reduce the volatility of the overall portfolio. Depending on the weighting from 0% to 100%, you can reduce your stock volatility correspondingly. With regular re-balancing between your stocks and bonds, you should be able to “sell high and buy low” in your stock portfolio, and use your bonds as a stable source of income.

Everything sounds good so far, but the most attractive feature of fixed income is also its greatest drawback — the income is FIXED. It does NOT increase as time goes on, and inflation keeps reducing your principle and interests into nothingness. Since inflation is almost always there, you’ve got a real problem especially when you’re investing long term in long term bonds.

Tips for using Bid-Ask Spreads

I recently have been looking at the Bid/Ask Spread to help me determine the right time to add to my positions. Here are some tips I’ve picked up that you might find useful when looking at your stock’s spread.

My Memorable Failure

Sherman, set the wayback machine to the winter of 1999! This was a time when everyone thought they were a financial genius. You couldn’t loose, or so we thought. I was a conservative investor even in those days but a co-worker was talking about a great investment tip he heard from a friend who had heard it from their doctor. That in it self should have been a sign.

Variable Annuities: Friend or Foe?

Arguably, no investing product receives more bad press than variable annuities. Many individuals have horror stories to share about unscrupulous brokers who pushed them into complex annuity plans without adequately explaining fee structures and provisions. Some individuals may have thought they were getting an IRA and instead ended up in an annuity. In this article, I will explain the facts related variable annuities and give you some information to help you decide if variable annuities are right for you.

Basics of Precious and Base Metals Investing

There are two types of metals for investment: precious metals as opposed to base metals. Precious metals include gold, silver, platinum, and some other less known materials such as ruthenium, rhodium, palladium, osmium, and iridium. Base and/or industrial metals include copper, nickel, aluminum, zinc, lead, and iron/steel. The reasons for investing in precious metals and base metals can be very different. But their prices are correlated nevertheless because of inflation.

Here are some ways to invest in metals:

Stepping it up with CDs

Certificates of Deposit are not for everyone but if you live long enough you will probably be considering them at some point. If you are going to invest with what banks currently call CDs then you should be smart about it. Using a technique called "laddering" or "stepping" you can improve your liquidity and maximize your returns over the long run by protecting yourself from downturns in market interest rates.

Finding The ‘Boring’ In Attractive Stocks

The market has come a long way since its last major crash — an event that transferred much wealth from the ignorant to the informed. It almost feels like deja vu when you see VCs lining up again to fund startups, or companies commanding unreasonable stock price multiples based on little more than hope for the future. Don’t you wonder what we’re not knowing this time around? I don’t wish to convince everyone to be value investors, but what if there’s a way to play a popular trend, but also err on the safer side of risk to avoid the extreme volatilities?

How Much Should You Spend on a Home?

In my previous article, Misconception: Renting is for Suckers, I wrote that there comes a point when it makes more sense to rent an apartment than buy a home. For myself, I have a rule of thumb that for every $1 dollars I spend in rent a month I can afford to buy up to $125 in property. Right now I pay $1000 in rent, so using my rule I shouldn’t spend more than $125,000 on a home. This created a surprising amount of controversy; some exclaiming me a heretic, and some accusing me of house-hating. For those of you who wanted to know where that number came from, wait no longer — and I’ve put together a calculator for you to figure out how much you should spend on a home.

Misconception: Renting is for Suckers

You’ve heard all the reasons that people want to stop renting. “I don’t want to waste my money.” Heck, you may have even said them yourself. Many of my friends are reaching that point in their lives where they’re considering buying a home. However it’s unfortunate that so many choose to buy over rent, especially in this expensive market, because many well-intentioned people are buying homes that are actually damaging their finances.

Despite the fact that many people disagree with me that the real estate market is going to deflate, there is a rule of thumb that I use that should give you an idea about how much you should spend on a home no matter what the market looks like.