A sellers boom has recently started in Australia as some of our historic muscle cars have gone under the hammer and returned extraordinary prices. One GT-HO Phase III reportedly sold for $680,000 while another 1971 XY Falcon fetched $525,000.

"Not bad if you bought the car off the showroom floor and stored it all these years," one reporter suggested. But is it? As an investment would buying one of these cars and then later trading them prove to be a sound move?

Sure. If you take the $680K and run the figures you're returning more than 14%pa while the $525K price still exceeded 13%pa. Not bad investments in anybody's language.

But, the problem with a car investment is that they can't just be stored. They need to be maintained, serviced, and insured. And all this costs money, money that comes out of the investment value. Do these costs actually have a relevant impact on the value?

If we took just the insurance component over the 36 years (based on 2.5% of the cars value) it would cost nearly $100k. Subtract that from the bottom line you would still make a decent 12.9%pa. Providing you stored the car well, ie. drained the oil and fuel tanks, removed the battery and jacked the car on blocks your return can be fairly decent.

Therefore, one would expect that you could make money selling cars of this type.

But what does the future hold for an investment in a car? As scientists shape our driving future on solar technology, bio-fuels and electricity will the craze for such an investment be the same in another 36 years. Will fossil fuel be available to run it if you so desired? Possibly not, but the question also needs to be answered whether it matters.

Buying and selling cars of this vintage will always attract some nostalgia and sentiment, at least for the next generation. But after that no-one will ever see these cars in action as they'll be too expensive to take out for a Sunday drive.

My fear is that these will become as sought after as a horse and buggy generations from now. Museums will be interested in them but collectors will have died along with the memories of these cars carving up Bathurst.

Posted by Stuart at 7:38 AM | Permalink

We often consider "small" as insignificant, as though anything "big" is justifiably sought after and respected. Yet, the tide is changing somewhat as investors and business proprietors recognise that "small" is actually the new "big."

What am I talking about?

Well, there is no doubt that popular products and services, investments, people, ideas etc draw "big" audiences and attention. They receive a great deal of focus because the media always try and tap fads and exploit them for their own purposes.

But, they are relatively inefficient at posting good returns on investments - particularly for those late to enter the market. Those who recognised the opportunity and milked it are the ones enjoying the cream. The ones who hear about it via the media, like you or I, have already missed the boat.

For this reason many investors are turning their eyes back to the small. The seemingly insignificant investments that large stock miners miss and the popular group have little time for. For small is found in the 'niche'.

This is a handy tip - which I won't charge you for, consider it a freebie - because if you can understand that niche's are the new big, then small investments no longer require mortgage-risking levels of debt.

Now, before you head off pioneering that niche goldmine, consider that sometimes opportunities can only be met with a full-hearted commitment. If you're wanting to keep to your plan of investing small and growing your investments slowly then passing some of these 'golden' opportunities are inevitable. Get over it.

So, if you want to invest small here are a few tips;

1. DRP's or DRiP's are an easy way to drip-feed your investment into large companies by building your portfolio slowly. They usually only require a regular contribution and can offer some good leveraging of purchasing expenses. Here's some more info...


2. Join an investment group often we can achieve far more as a group than by ourselves. The concept is called synergy (The effect of two or more agents working together to produce an effect that is greater than the sum of the parts.) More investment capital, more investment ideas. Makes a whole heap of sense.


3. Invest in smaller stocks there are a ton of cent priced shares available especially through speculative mining companies. After some in-depth research you may find their prospects of success are reasonable and therefore worth the risk (albeit small). It's much easier for a cent share to double to 2 cents than it is for a blue chip stock to double from a $35 base. Not for the faint-hearted though!


4. Invest in mutual funds or listed property trusts these usually only require a small investment because they're accessing funds from a larger audience and can therefore leverage their investment potential. They can usually return a good profit as well.


5. Diversify away from personally owned stocks and properties non-listed small business and property developers may also be an avenue to try for small investors. The risk is greater bu the returns are usually proportionate.

This is only a short list of small investment possibilities. A plethora of opportunities abound provided you are willing to accept the paradigm shift of thinking 'small' is the new 'big'.

Posted by Stuart at 6:30 AM | Permalink

The problem with inheritances is that old people aren't dying quick enough. They're living longer and enjoying a greater level of health than at any time in history.

Prior to our parents generation, our grandparents saw an inheritance as a major windfall. They could finally pay off the home, travel to that exotic destination they had always dreamed of and maybe buy a new car.

But our parents are too wealthy already and most have a greater financial base than their parents. So when a grandparent finally carcs it the inheritance becomes like a ripple in the next generations finances, barely rating a mention on the Richter scale of appreciation.

This then causes an adjustment, a paradigm shift if you like, as the older generations consider what to do with their accumulated wealth. Here's the options as I see it;

1. Give it away to charity - Your children will only flitter it away as if it were pocket change anyway. It's far better to give it to those who need it than leave the family in a quandary wondering where it should go.

   More and more charitable organisations are targeting older people to include them in their will. On the surface it may appear like a scavenger circling overhead a rotting corpse but it makes common sense. This money if given to families will predominantly spend on materialistic items whereas this option gives a sense of legacy.



2. Give it to the second generation - the parents don't need it. The kids on the other hand are only just setting out in life and a sizable inheritance could be the kick start they need. Buying a piece of property, paying for their kids tuition and maybe buying a decent car are options that the lower generations will invest in.

   They realise that a holiday or new Jaguar are far too frivolous too spend someone's lifetime wealth accumulation. While an inheritance would only be a ripple in the 2nd generations pockets it would be a small Tsunami for the younger ones.



3. Spend it yourself - Well, why not? You earned it. Inheritances have far less importance these days so saving your money to pass on to future generations is less required. Better than splitting it between your kids why not selfishly enjoy it while you still have your health and wits about you?

   In Australia, we refer to them as "Grey Nomads" - the baby boomer generation that retires at 55, sells up and buys a large 4WD and caravan and traverses the nation for the next x years. They even sport bumper stickers stating "Spending the Kid's Inheritance".

Regardless, it's your money and you can do what you like with it.

Posted by Stuart at 6:11 AM | Permalink | Comments (2)

Online Collective Action is the phrase associated with community collaboration on the internet. Sites that require people to introduce, edit, review and rate are all part of this picture. They include sites like Wikipedia, Digg and Yahoo Answers. They're all great sites and a new one appears on the scene with increasing regularity.

So how can businesses use them?

Don Tapscott's latest book Wikinomics looks at how these collective actions are affecting business and vice versa.

And in true wiki style it asks for readers to add their own experiences of either creating collective action programs or their reviews of them.

Link

Posted by Stuart at 5:59 AM | Permalink

Ask a real estate agent which investment option is better and she'll tell you "Property". Ask a stock broker which is the better performer and he'll unequivocally state "Stocks." So which is better?

You can make up your own mind but here's six reason's why I'd invest in stocks over property.

For the record, I'm not saying that I wouldn't invest in real estate or that it's a bad idea to do so. I'm merely stating that there are reasons why stocks are much better

1. Liquidity

The beauty of investing in stocks is that if everything goes pear-shaped, either with your investment or your own life situation, you can readily liquidate them. In fact, you could have them sold and the money transferred to your bank account within an hour.

To liquidate property requires are far more tedious and time consuming exercise. The property needs to be listed with an agent who will then network with clients to view the property. If there is no interest at this level, the property will be advertised and in due course a buyer will be sourced.

Then there's the settlement period which could take from between 1-3 months before you actually see your money.

2. Transaction costs

Transaction costs when buying a property include stamp duty tax, conveyancing fees, mortgage transfer fees etc and could be well into the thousands of dollars. Selling your property will also incur fees including the agents fee, unless you go down the for sale by owner road and perhaps some legal costs. These exit fees will also be in the thousands of dollars.

Stocks, on the other hand, enjoy marginal transaction costs. Taxes may apply and perhaps a small percentage by a broker but nowhere near the amount we're prescribing with a property transaction.

3. Stocks outperform property in the long term

Traditionally stocks outperform property over the long term trend. Why? Because property is an asset used by companies which obviously affects their share price. Any upswing in property values is reflected in the company's balance sheet which determines their dividends or stock value. Downturns are also measured against the company's financials.

If the companies were no longer making profits then stocks would go down but so too would the value of property. People would be laid off, property values would fall as people try to reduce their mortgage debt and the value of stocks would still remain higher.

4. Ability to enter the market

Try getting into the property market with $5,000 and you'll find listed property trusts may be your only avenue (although most of these require larger entrance investments). However, with $5,000 you could start investing in stocks immediately.

This is the problem for new home buyers. Coming up with a 10-20% deposit on a $400k home is near on impossible. I imagine that in years to come many young people will turn to investing in the stock market long before they contemplate buying a house.

5. Maintenance costs

Stocks cost nothing to keep. Real estate, on the other hand, will consume large chunks of maintenance money. At the very least fashions and trends change and there is always the need to update and keep your property relevant in a fickle market - unless your prepared to accept less when selling it.

Gardens, lawns, fences, plumbing, painted areas... the list goes on and on - and on.

6. Transaction ease

This is where stocks stand out. As previously mentioned when it comes to liquidity stocks are very easy to sell and buy. All it takes is a phone call or internet transaction and the investment is yours.

Real estate takes much more. Time, legalese, paperwork etc makes a transaction to purchase or sell property look more like signing a peace treaty with a warring nation.

While property seems to have many downsides to investing than stocks, there is another option than buying a physical property - Managed Property Trusts. These are similar to stocks in that you are buying a share of the property rather than the whole property.

Many managed property trusts are listed on the stock exchange as well and enjoy all the convenience of buying and selling as stocks have.

Posted by Stuart at 6:44 AM | Permalink | Comments (3)

Would you like to know how rich you are in comparison to the rest of the world? Sure you would!

If you're dying to know where you rank, type your annual income into this wealth calculator. (Depending which country you hail from you may need to do some currency conversion first).

This is a great little calculator that I found via Seth Godin's blog. It makes you think how the rest of the world is getting on.

Posted by Stuart at 6:05 AM | Permalink | Comments (3)

...but you do need to employ one, or two.

FMF started this post and as I followed the links I found that myself disagreeing on a couple of points.

My e-journey finally took me to this post on using financial planners. FMF's opinion was "If I was to use a financial planner, I wouldn't want one who wasn't in better financial shape than I am." and illustrated this point referring to not employing the services of a fat doctor.

Birds of a Feather Flock Together...And Fools Seldom Differ

I understand FMF's point but his opinion is slightly flawed. For if we carry that notion forward he wouldn't use a doctor to operate on his heart who also hadn't had a heart operation. This is foolish thinking in my book because it limits the amount of knowledge you are willing to hear and process. It's really the same argument that people have for keeping the friendships they do - we mostly tend to those who have the same ideas and agree with our worldview.

Most millionaires would employ the services of more than one accountant or financial planner so that they can be stretched. It's their ideas that we need to become wealthy more than their advice. And their ideas come from their education and the fact they work with many individuals who have specific requirements that may be way outside the box.

Having said that, I agree with the heart of FMF's opinion and that is if financial planners aren't willing to take the same risks and succeed then their advice has limited value - but it still has value! As people on a journey to financial independence, or whatever your financial goal is, we can't know all there is to know about everything. So we find advisors we can trust and speak excellence through how they handle their own affairs and those of their clients.

Our Goals May Not Line Up With Our Accountants

FMF is also making a big assumption that if someone is going to give good advice they must personally have the same goals and priorities. How can this be valid? If a financial planner personally values lifestyle and time with their family over the next million dollar profit doesn't mean that they aren't capable of giving great advice. My goals don't have to match those of my mentors or my advisors.

However, they do need to understand my goals and dreams. If their worldview clouds their financial advice then it is as FMF espouses - not useful.

In a Nutshell

Never write someone's advice off because they don't fit your mold. We employ accountants and financial advisors because they have a finger on the pulse in areas that we may not. They see ideas that we may be blinded to.

In reality, all they are doing is offering advice. Heading towards financial independence I need to "eat the chicken and spit out the bones."

Posted by Stuart at 6:26 AM | Permalink

As a gambler (risk-taker), I find Venture Capital Trusts and Angel Investing very tempting. The possibility of huge gains riding on the back of a new service or technology inspires the pioneer spirit within me.

For the uninitiated, Venture Capital is required by many start-up companies in order to proceed with the manufacturing of a patented technology or to bring a new service to the market. These start-ups are usually immature in their equity base and therefore they approach investors willing to take a portion of the business (and therefore its future earnings) for an agreed value - the amount of venture capital.

Without VC many startups can never progress to the next stage and their ideas never come to fruition. Banks and financial institutions aren't prepared to take the risk of loaning investment money and these businesses aren't big enough to float on the stock exchange.

Therefore, their dependence on a venture capitalist or angel investor is exceptionally high and deals in the investors favour aren't hard to procure.

However, while the possiblity for huge gains exists so too does the risk of losing your capital or being stuck with a company that will never perform as well as you expected. So, before you head into the investment heavenlies and become some startups angel you may want to consider whether this type of investment is for you.

The Daily Reckoning(UK Edition) have put together a list of 10 questions to consider before you venture off into the VC unknown.

Continue reading "Venture Capital Trusts - The possibility of huge gains" »

Posted by Stuart at 8:00 AM | Permalink

Markus Frind, creator of Plenty Of Fish has thrown his hat into the ecommerce ring. Frind currently runs a very lucrative online dating service financed predominantly through Google's Adsense program.

In a post on his Wordpress blog, Frind claims that opportunities exist in monetizing whole online communities. While his methods may seem new and exciting commenters have already pointed out several existing programs.

I, like some of the other commenters, would say to Frind that it's no use just talking about it and slamming those who diss you. Entrepreneurs, real entrepreneurs, don't cry on shoulders but find ways to make their dreams happen. There is always more than one way to skin the proverbial cat and a entrepreneur the size of Frind should have no trouble trying to make these possibilities into a reality.

Less talk - more action Markus.

Posted by Stuart at 10:40 AM | Permalink | Comments (1)

I had a conversation over the backyard fence yesterday with a neighbour kicking himself for not buying 4 or 5 blocks along our street when the price was only A$50K each. Three years later each block is now in high demand and could easily command A$200K+.

How easy it is to talk about what might have been. The only problem is that hindsight is just that - seeing behind. It's a great teacher because we can learn from what has happened in the past, analyse and extrapolate patterns and trends that can help us invest in the future. But as an investor, hindsight can fool us into thinking that what happened once will definitely happen again. If you think this is a wise investment strategy then I would refer you to the disclaimer found on every managed fund prospectus, "Past performance does not indicate future performance".

My neighbour rues his lack of investment nouse three years ago when now it appears that one could have taken a huge risk and it would have paid off. If he was so savvy with financial hindsight then I question why he hasn't already purchased those 4-5 blocks at their current price for surely they will be at least A$800K+ by 2009!

That's just the point. If we had all knowledge and could eliminate risk from every investment then it would be pure sailing. However, everyone else in the market would have the same knowledge and lack of risk also meaning that the investment would be rendered useless.

To my neighbour I would say, "Stop talking about what might have been. Learn from the past and look for investments that are possible for your own risk levels. Christmas only comes but once per year. The other 364 days we need to live out what doesn't make news headlines."

Posted by Stuart at 7:30 AM | Permalink

As interest rates head north many families will be sharpening their pencils bracing themselves for their increased mortgage rates. But what if you could do some calculations beforehand and even make some decisions to swap financial institutions or change the terms of your loans.

Thanks to Google Spreadsheets you can do this online if you don't already own a proprietary software copy. Googe's spreadsheets offer many of the financial functions that MS Excel does and the ones pertinent to our calculations are all there. So how do we go about it?

Firstly, login to the spreadsheets or register if this is your first Google account. When you first enter Google Labs for their spreadsheet software it will look like this;

Continue reading "Using Google Spreadsheets to Calculate Your Mortgage" »

Posted by Stuart at 7:48 AM | Permalink

I heard an interesting comment on the evening news from a high-profile real estate agent. The suggestion had been made that West Australia's property cycle was fast becoming a dangerous market.

Prices in WA are closing on Sydney's property market rates due to the economic resources boom. Growth of between 20-40% per annum for the past 2-3 years has increased the median price and it appears that Federal Interest Rates will rise from between 0.25%-0.50% when the Reserve Bank meet next week.

Greg Rossen from REIWA made the dubious statement when confronted with the "dangerous market" suggestion that "housing sales will cool and return to the long-term trend of 8%pa." This is true - in the long term view. However, in the short term, growth must cease and possibly decline to correct the "long term average of 8%". Many investors wouldn't have heard this but rather interpreted the comment to mean "at the least you will get 8%pa".

Afraid not. The very least has no depth gauge. It could be 0% or even less.

Time will undoubtedly tell.

Posted by Stuart at 9:16 PM | Permalink

When most people consider purchasing an investment property they normally think in terms of residential or commercial rentals. That is, they buy a property expecting to rent it out to long-term tenants. While this is an effective investment proposition and has been successful over the years there is less known about purchasing a holiday investment property.

We've just come back from a weekend in Fremantle staying in a holiday property. The unit was sited amongst a block of 1 and 2 bedroom apartments that was oiginally built in the 70's. From the outside the building was very ordinary but inside the unit the owners had renovated the living space into something very tasteful and comfortable.

We came across this unit from some online hunting and were able to secure it for $70 per night (fairly cheap when you consider most hotel rooms range from $110+ per night). The selling point for us though was its own kitchen and amenities which allowed us to cater for ourselves without having to dine out for every meal.

It then challenged us to think about the possibilities of buying into this market fo a couple of reasons;

1. Cheap holidays - obviously this is the biggest bonus. Not having to fork out cash every time you want to take a holiday is big plus.
   


2. Location - If you have your own property in a location where you are likely to use it often then it can also provide a major benefit. Most of our family live in Perth so we always trek north for Christmas, major family functions and the occassional gathering. This event, with our four children, can sometimes be an insurmountable mission especially when we require staying with family members. Being able to have our own place that isn't too far from the action but far away enough to give us some space would be great.
   


3. Rental income - when we're not using the property we can rent it for others to use and hopefully this will pay the mortgage.
   

Continue reading "Buying an investment property for your holidays" »

Posted by Stuart at 7:34 AM | Permalink

It pops into your mind every so often, that niggling thought that you still haven't tied up all those loose ends you planned to three years ago - or was it four? It's not that it isn't a high priority it's just that it's so easy to procrastinate on writing your last will and testament.

The reason I'm posting this very topic is because having a legal will has once again risen it's ugly head in our household. We have four children, a mortgage, lease on our car and several other assorted assets including home furnishings for which there is no designated benefactor.

If Deb and I were both to die tomorrow our financial situation could be tied up in bureaucratic red tape for months. The situation is even more exaggerated because there is currently no guardian to protect our children and I could envisage a major family bun-fight for who would step into this role.

So, it's time to clean up our act and get a legal will in place. Here's what I've found;

Continue reading "Legal Wills: Is your last will and testament finished?" »

Posted by Stuart at 7:38 AM | Permalink

I'm not sure whether I should file this one under 'Investment' or 'Insurance' as it seems staying married can be viewed either way. Very few days pass by where there isn't some talk about a celebrity couple who are in the process of signing pre-nuptial agreements. Yet for the commoners we don't usually have this process in place. Perhaps we're idealists hoping that the marriage will survive and we will all live happily ever after...

The truth is that many marriages that begin don't last. I won't quote any stats here for I'm sure you've all heard them but more importantly I think they are generally flawed (most figures quoted take the current annual weddings and divide them by the annual divorce numbers. Therefore, if you were married in 1963 yet applied for a divorce in 2006 the statisticians would offset your divorce against the 2006 marriages - not the 1963 marriages).

Anyway, regardless of how they arrive at their figures statistics are still showing us that divorce rates are high. And, while these rates are so high the only ones making money are the lawyers as family breakdown is also financial breakdown.

Divorce is rarely an amicable solution. Each party feels hurt by the other and wants to see their partner have at best only a half share but more commonly much less than half. Therefore all assets need to be disposed of, and usually as soon as possible, in order that each partner can then get on with their own life quickly. However when it comes to investments and financial savvy every investor knows the worst time to sell an asset is immediately.

Savvy investors also know that the best time to buy an asset is when there is a divorcee sale.

So my investment tip is to stay together. I'm not advocating staying together for the sake of money alone as 8% of surveyed respondents claimed, but if the marriage was worth starting then surely it's worth keeping. If you choose not to stay together then it may pay to consider the financial ramifications of this decision before you opt out.

Continue reading "Investment Tip #3065: Stay Married" »

Posted by Stuart at 2:01 PM | Permalink | Comments (2)

When I was completing my Marketing degree one of the things that stuck was the three main appeals of advertising; Sex, Humour and Fear. Each of these appeals can generate a response from people and hopefully engage the consumer in desiring your product.

While I love humour, and I'm tired of seeing sex used as an advertising strategy, I would never base an investment decision on either of them. Fear, on the other hand, is a great indicator of a possible success when it comes to investing.

Take this post for example,
Identity Theft and Security Lead to Surge in Sale of Shredders. The biggest biochemical stock prices have soared after news that the avian bird flu may become a pandemic. Even free-range chickens are now commanding premium prices, as people are concerned about hormone inducing technologies. These are just the tip of the iceberg.

As most investors will tell you, the best time to buy a stock is when its discounted from it's real value. The real value of a stock can only be achieved by people's perception of what that stock is worth. The same applies with products, which obviously flows through to stock prices.

If you want to buy stock at a discounted price you need to anticipate the mood of consumers. What are they frightened of? What is driving them to make irrational decisions about their future based on their insecurities?

Please don't misunderstand me. I am not advocating predating on people's fears. Merely trying to predict what people are going to become fearful of and will throw money after in order to feel secure again. Reading this market well will always result in success because consumers are willing to pay premiums for security.

Why do you think products like mangosteen (aka Xango Juice) and Hoodia are becoming so popular? It's because people fear dying and bad health. They will gladly pay exorbitant amounts of money and eat or drink products that taste disgusting in the hope that their fears may be allayed.

If you are looking for an investment that will take off start by finding a problem that's linked to people's security; home security, security of personal belongings, identity, health and well being. Then follow the logical progression. I the case mentioned before, the problem was identity theft. The solution is shredding personal details so that consumers don't become victims at the hands of some negligent employee. If shredders are the solution, then invest in a company that produces shredders. Their stock is about to boom.

Posted by Stuart at 8:08 AM | Permalink | Comments (1)

Your personal financial plan is your road map to financial freedom and independence. I probably should have underlined the word YOUR because we so often hand the reins of our financial plans over to others. We may do it consciously by accepting the latest morsel of advice hoping that this new piece of knowledge may be the key we've always been looking for. Or worse, we accept the "voices" in our head that tell us to deviate from our premeditated plan.

An analogy that may encapsulate my point is the many times I would head off 4 wheel driving in the bush. If I had unlimited time and an ongoing source of fuel I would explore every track that I came across. But I usually had a destination in mind before I set off. As an undiscovered track appeared I would stop and weigh the virtue of adventure against the map. If it took me in an opposite direction or would obviously increase the time taken to get to my destination then I could easily discern that it was a wrong way.

The same applies to your own personal financial plan. Sorry...did you just say you don't have one? Well that's like hopping into you car with a blindfold covering your eyes. You drive off aimlessly hoping to arrive somewhere but readily realising your chances of success are extremely limited.

Continue reading "Stick to your personal financial plan like superglue" »

Posted by Stuart at 6:50 AM | Permalink | Comments (1)

Perhaps boom prices do bring out an element of stupidity in investors but I'm not sure one can count on this when offering an investment for sale.

The real estate in my local area is still booming and has been for the past 2 years with no sign of receding and prices have increased more than 40% annually. Even though it has been booming and demand is far outstripping supply it amazes me that some good quality homes take a long time to sell. I couldn't understand it until my neighbour decided to put his house on the market at a price that one would expect to achieve had they been living closer to the beach.

In fact, a house which has far more street appeal and would be on a par with my neighbours sold in less that a week for A$75K less than next doors is demanding. Does he think that investors are stupid? Obviously.

I would assume that even in a boom investors are not without their faculties and able to make sensible decisions. One would have to reason that if an investor bought this house at the advertised price, it would take him at least 12 months before he was able to break even on the investment. And investors know that if a boom has been occurring for more than 2 years it probably won't continue for another two.

I think boom prices just result in stupid sellers.

Posted by Stuart at 7:49 AM | Permalink

I read and responded to a post at DINK's personal finance blog which discussed the issue of stock portfolio diversification or focused investing. It was a great post.

Since reading the article I've thought more about this whole notion of portfolio diversification. I was trained to think that stock diversity was almost 'Biblical' and anyone serious about investing would diversify their stock portfolio to somehow 'hedge' their bets. It makes an incredible amount of sense. Invest in stocks where losses can be offset against gains and vice versa and hopefully those gains will outweigh the losses and produce a reward.

One reader recommended the The 15-Stock Diversification Myth presented by Bill Bernstein as the most concise argument for stock portfolio diversification. This stance implied that focused investing was not the best way to manage a portfolio and that diversification was.

I would probably agree with the DINK's. However, in saying that, and as I responded to the post,

For one investor diversification will be the answer while for another focused investing will be what they're looking for.

It all depends upon the amount of risk you are willing to take with your investment.

Continue reading "Stock portfolio diversification may not be the answer" »

Posted by Stuart at 10:03 PM | Permalink

We tread the internet in tip-toe fashion, trying not to clumsily step on anything hazardous to our online health or alerting the attention of unwanted hacker publicity. Why? Because we know that lurking in the not too distant background is the possibility that our identity could be stolen and used innappropriately or credit card details could be used to transact a criminal's spending spree.

We're just trying to download the latest offering from iTunes or pay for a successful auction win on Ebay unaware that the threat is real or that it may be greater than we first assumed. Most internet users, myself included, assume that e-crime is something that happens to other people and optimistically prescribe to the notion that companies are getting better at dealing with these security risks. They're not!

In fact, most online companies while employing a 128bit SSL for their transactions fail to secure the backend of their data, inadvertently creating a back-door for would-be hackers. Now imagine for a second that your data, address, full name, date of birth and credit card details are sitting insitu on some (unfortunately not-so) secure server with the backdoor left wide open. It's like a red-rag to a bull teasing hackers to try their luck.

And who's to blame for the increase in e-crime? Well, while we're pointing the finger it must be directed toward the door of the reigning governments initially. Are they fair dinkum (an Australian colloquialism translated as "genuine") about resolving this type of crime that will inevitably cost the community? There seems to be little that is being legislated in this arena and the resourcing for crime prevention compared to the resourcing of criminals borders on obscure.

My life, like many others, is becoming increasingly dependent on the web. Unfortunately though, it can be that life can be rubbed out quicker on the internet that it can in real life.

Read this article.

Posted by Stuart at 8:43 AM | Permalink

Have you got what it takes to be a quality investor? Have all those decisions gone wrong because you're missing the one key character trait that could have made you millions?

This article goes on to talk not only about the personal characteristics of money managers but also lists another 8 approaches that quality investors take. How would you compare against these?

I've revamped their list with my own lean on some ideas.

Continue reading "7 traits of an astute investor" »

Posted by Stuart at 3:51 PM | Permalink

So you have a spare couple of million laying around that you're just not sure what to do with. Do I buy another boat? Take another holiday? Buy more stock options? Why not invest in some art? And we're not just talking about prints here.

In this article
Experts Advise Considering Handmade Oil Paintings for Offices we're reminded that investing in art is a worthwhile project. However, while investing in blue chip stock paintings such as a Dali, Renoir or Van Gogh is lucrative, the average Joe doesn't have that cash available.

So, like any investor you're wanting to find ground floor opportunities. Enter stage left - Art Cigiema. Art cigiema is a consortium of artists amalgamated to peddle their wares. Painters, musicians, sculptors - you name it, they're available. They're all very talented and who knows, you may even find a budding Picasso.

The catch - there's always a catch. The site is all in French. But as we all know, Europe is where the bulk of the renowned artists came from initially.

Posted by Stuart at 7:57 AM | Permalink

Is personal finance an issue that can be taught or do you just pick it up along the journey of life? The 'school-of-hard-knocks" is where many seem to sharpen their teeth on fiscal matters but is that the right playground for our society to be maintaining?

I've just read another article Back to personal-finance basics on a school system hoping to influence young students in money matters. I'm bouyed by the optimism but I struggle with the pressures that you can't teach kids that will inevitably inch their way into their lives.

For instance, here's a big one: Will they teach them that staying together in a relationship and working hard at it to make it successful makes better financial sense that separating years down the track? What about those ridiculous purchasing terms of "Pay nothing now - 4 years interest free" - how do you teach kids when they're mates all have the latest Plasma that delayed gratification is a better deal?

I'm all for education, but education taught as theory only seems to me to be the biggest waste of time. You would never train a doctor purely from manuals and tutorials. They need experience with the tools of their trade - bodies and scalpels. The same needs to happen with teaching kids about personal financial skills. They need to somehow deal with the pressures of this world in a simulated environment that's as close to real as possible.

Where can this happen? Where it should happen - in the home.

Posted by Stuart at 6:24 AM | Permalink

While everybody has a belief system (Christian, Islam, Catholic, Buddhist, atheist, agnostic etc) this hasn't always translated into their dealings with money. Many investors, especially those who hold nominal beliefs, would argue that the two, Money and Beliefs, are not congruent and should be dealt with at arm's length.

If you believe that gambling is a bad thing you may not venture to a casino but you may invest in Aristocrat Leisure because it's share price keeps booming. You may not believe in promiscuous lifestyles but it doesn't seem to rate a bleep on the radar when purchasing those Ansell stock options. Or does it? Can our belief structures begin to dictate our investment portfolios and still make solid returns?

Todd Larsen, quoted in this article Investors bet on their faith says,

Investors are finding that they don't have to sacrifice returns to invest with religious values in mind. Some faith-based funds have consistently outperformed the broader market, and performance between screened and unscreened funds is competitive

Could it be possible that what you stand for can actually stand up to the investments that go against your values?

Posted by Stuart at 7:45 AM | Permalink | Comments (1)

Perhaps! In fact most investors claim that 23% take the financial advice from friends and family, 26% from traditional financial advisers and accountants and 20% from online resources according to this article. Sure, if your kids are still in nappies, or they struggle to manage a car then allowing them to influence your financial decisions could be costly - perhaps bordering on stupid! However, if your child is old enough with enough investing nowse under their belt - why wouldn't you?

Still, the cry for more online resources for investors increases. However, if the desire for online advice and resources becomes too great it will impinge on one of the other two sources of financial influence - and it won't be the family and friends!

Maybe the days for traditional financial advisers and accountants are numbered. People will always tend to rely on those closest to them to influence their decisions and that usually isn't the professional number-crunchers.

Posted by Stuart at 7:21 AM | Permalink | Comments (1)

Could it actually be healthy for you to own your own home? Apparently so according to this US News article.

It makes sense though doesn't it? If you were able to make all the decisions yourself what a difference it would make on your well being. You would be able to take more pride in the home in which you live, adding to and changing the landscape, removing walls that no longer worked in your home and even painting the kids bedrooms the colours they wanted rather than what you're landlord wanted.

Continue reading "Homeownership! Renting vs buying a home" »

Posted by Stuart at 6:59 AM | Permalink