Personal Finance is Fun Blog

When to Sell

personalfinancefun — Sat, 21 Apr 2007 16:46:02 +0000

I consider myself an above average stock picker. I try to do a lot of research and find strong companies. Something I struggle with is when to sell. Many sources, such as The Market Guys, advise adopting a hard and fast rule and stick with it. They advise selling a position when it will cause your overall portfolio value to fall by 10%. This seems sound, but I tend to think it takes decision making out of the equation. Other sources base sell decisions solely on the fundementals or technicals of that specific investment. Myself, I use the 200 moving average as a rough guideline. I absolutely will sell if the stock drops 15% below the 200 moving average. I will also sell if my follow up research highlights something very ugly. What does everyone else do to decide when to dump a stock?

Albuquerque- A Smart Place to Live

personalfinancefun — Fri, 13 Apr 2007 03:45:27 +0000

Awhile back Kiplinger’s named Albuquerque the 3rd smartest place in the United States.

http://www.kiplinger.com/features/archives/2006/05/albuquerque.html

Carnival of Personal Finance #95

personalfinancefun — Fri, 13 Apr 2007 03:40:33 +0000

Here is the latest carnival of personal finance:

http://www.accumulatingmoney.com/carnival-of-personal-finance-95/

Marketocracy Hindsight

personalfinancefun — Sat, 09 Dec 2006 17:27:40 +0000

In March of this year, I heard about a website called Marketocracy.com operated by Ken Kam. On Marketocracy you start with $1,000,0000 and built a customized mutual fund for yourself. Ken used information from his top amateurs to perform very well in MSN’s Strategy Lab contests.

Because of moving, job searching, and getting settled, this became a study in the merits of a Buy and Hold strategy. No changes at all since I made the initial purchases on March 21, 2006. As the year comes to a close my Marketocracy account is up 43% YTD. Here is the graph showing my account in yellow and the SP500 in green.

I like the financials sector and have about 66% there. The beta on this account is 2.14. Here were my two best performers. GROW is U.S. Global Investors a mutual fund company with a strong background in commodities. As commodities becomes more attractive to retirement investors, U.S. Global Investors has reaped solid returns.

GROW

$475,200.00

33.03%

$377,629.56

387.03%

CHDX

$55,461.00

3.86%

$32,259.05

139.04%

Protection of Assets and Long Term Care Insurance

personalfinancefun — Mon, 18 Sep 2006 21:12:54 +0000

Sorry it has been so long since I posted. Here is an article I wrote awhile ago for Investorgeeks.com. Protection of assets should be concern of all investors.

Do I Need It?

Currently, about 1 and 5 Americans over age 65 are utilizing some form of nursing home care, assisted living, or in home assistance. The average cost of nursing home care is $150 dollars per day in the United States. Let’s assume that a husband and wife enter a nursing home at age 70. If they both live until age 75, they would have exhausted a non-inflation adjusted $547,500 of a retirement nest egg. If you have a nest egg over $2 million, you could be fairly comfortable self-insuring yourself and a long term care policy would not be as attractive.

What about Medicaid?

In most states, to be eligible for Medicaid assistance, you must have less than $2000 in assets. Your home, one car, and $30 in monthly income are excluded from this provision. Every other asset or income stream (including pensions and social security) goes to the state. Medicaid also is much more restrictive than long term care insurance. In many states, Medicaid will only pay for assistance in nursing homes that accept Medicaid patients. You would not have the comfort of receiving assistance in your own home like long term care insurance could offer you.

Going on Claim

To be able to start receiving your long term care benefits, most policies require you to have the inability to perform at least two activities of daily living (ADLs). These activities include being able to bathe yourself, use toilet facilities, eat unassisted, and get out of a bed or chair without help. I know, terrible things to think about, but realities for many of us as we age. Many policies also allow you to go on claim if you fail specific mental acuity exams.

Policy Options and Opinions

Policies can be structured for certain periods of coverage. If policy pricing is not an issue, opt for the lifetime coverage. People are living longer and longer even if their faculties continue to diminish. Elimination periods are another consideration. Usually, going for the 90 day elimination period (similar to a car insurance deductible) can substantially reduce policy rates. Choosing the 5% compounded inflation adjustment also provides excellent safety as health care costs continue to rise. The biggest piece of advice I can give is to shop around. Compare apples to apples with the big providers like John Hancock, Genworth, and Met Life.

When Should I Buy?

Based upon some non-scientific research I conducted by calling agents at John Hancock and Genworth, I discovered that the ideal age to purchase long term care insurance is your late thirties. The underwriters will see you as healthy, and settled down raising a family. You can take advantage of acting fast and buying a ten-pay lifetime benefit plan. You pay level premiums for ten years after which the policy is good for the rest of your life. In a few years, this will be what I purchase for my wife and I. Waiting until your early fifties, the policies would still be affordable for a healthy individual. Expect to pay about $2,000 per year for a lifetime coverage plan with $200 in daily benefit. If you wait until your early sixties, that same plan could cost you over $4,000 per year.

Broker-Dealer’s Friend

As a potential long term care insurance purchaser, you should be aware that long term care insurance is very lucrative business for broker-dealers. The broker-dealer you are working with will scoop up about 50-60% of your first year premium payments. In years 2-10, the broker-dealer will receive 10% of your ongoing premium payments. Just some information to be aware of. Analyze your own situation. Determine if your investment plan will allow you to self-insure or if you need the protection that long term care insurance could provide you.

Carnival of Investing #36

personalfinancefun — Wed, 23 Aug 2006 15:18:23 +0000

Please check out the most recent carnival of investing hosted by Blueprint for Financial Prosperity. Flexo’s article on exchange traded funds was very well done.

http://www.bargaineering.com/articles/carnival-of-investing-36.html

Check Out InvestorGeeks.com

personalfinancefun — Mon, 07 Aug 2006 02:36:17 +0000

I have had the website as a link on my blog since almost the beginning. About a month ago, I was selected to become a contributing writer. I think you will love what InvestorGeeks is and what it will become in the future. Check out the articles and participate in the discussion boards.

Check it out here: http://www.investorgeeks.com/

Also, check out my first article on InvestorGeeks:

http://www.investorgeeks.com/articles/2006/07/21/variable-annuities-friend-or-foe/

Playing the Percentages

personalfinancefun — Tue, 18 Jul 2006 23:46:20 +0000

An understanding of percentages and the role they play in managing your stock holdings can help you decide when it may be time to start further research about the possibility of selling a stock. Let us look at an example. Habanero Fudge Products Inc. (a fictional company but a real New Mexico product) is currently trading for $25 per share. All of a sudden, a new pepper variety is discovered and a new fudge company launches making fudge 50% hotter than Habanero fudge. Habanero Fudge Products stock falls by 20% to $20 per share. Many personal investors think that it would just take a 20% increase to get Habanero Fudge Products stock back to $25 per share. Unfortunately, the math tells otherwise. A 20% increase would only get Habanero to $24 per share. Habanero Fudge Products needs a 25% increase to get to its pre-competition share price.

If a stock falls even further, say 50% from $20 per share to $10 per share it will need to increase 100% to get back to its original share price. That is a lot to ask from many companies. I am not advising that looking at percentages should be a deciding factor in actually deciding to sell. If you are a value investor, did the qualities you liked in the company when you originally bought the stock still exist? What is the competition doing? By understanding percentages, you will know when it time to dig deeper and decide whether the time is right to sell.

What would you do?

personalfinancefun — Fri, 09 Jun 2006 17:00:25 +0000

Wow, been awhile since I posted. We have been getting ready for our move. Recently, friends of ours were over and we got into a discussion about a story I read about recently. The scenario is this, a group of co-workers form a lottery playing group and go forth and buy lottery tickets every draw for a period of five years. A few members of the group drop out along the way due to leaving the company. The group treasurer goes around on their regular Tuesday collection and one member says they don't want to participate this week. The rest of the group plays on and luckily they win, $40 million or so. My question for discussion, do you think the person that dropped out on Tuesday should get his cut of the winnings? Do you think the other original group members that dropped out due to job change should get their cut? I want to hear what everyone thinks then I will share what our friends said, and what my stance was.

Ok, have a great weekend.

Anyone been hosed lately?

personalfinancefun — Tue, 02 May 2006 17:17:41 +0000

The wife and I were on Sunday. We woke up early for the drive to Talladega to see the Nascar race. Our tickets in the Gadsen Tower cost us $52 each. The published start time on the tickets was 12:30. I have known from attending other Nascar events, this is really the start of what used to be only 30 minutes of non-sense pre-race festivities. At Talladega this year, the cars did not take to the track until 1:20. We saw a whopping two parade laps before it started pouring down rain.

We left as the sky did not look at all promising. I was disappointed. Nascar used to be a sport that cared about its fans. You can purchase pit passes and actually talk to and shake hands with drivers. Last Sunday, caring about the fans was not a concern. Looking at the radar conditions, Nascar could have decided lets skip the pre-race junk and have the cars actually racing by 1PM. The fans could have seen at least 15-20 laps.

We were not one of the seemingly thousands of fans who mysteriously came down with "Talladega Flu" on Monday and saw the full race.

Anyone else want to share any good personal stories about getting hosed?