The Roth Conversion Opportunity (And Why It’s So Cool)!

Ever heard about this?  The idea that you can take your Traditional IRA or previous employer’s 401(k) plan and convert it to a Roth IRA?

If you haven’t, read on.  It just might be the best thing since sliced bread, and I’m not kidding.

Heck, even if you have heard about it, read on.  You might find it explained here in a better way that you have before, and that would mean I’ve done my good deed for the day.

First, what’s the difference?  That sets the stage for why this is such a great idea!

Read More …

Technorati Tags: 401K, Compound interest calculator, Convert My IRA, how to invest, IRA Conversion, Retirement, Roth IRA, Rule of 72, traditional IRA, young investors

Should I Buy A House Now?

Lots of people are asking this question lately. I thought it would be a good time to clarify what I said a few weeks ago about not looking at your primary residence as an investment. Some people thought I meant they should just continue to rent their living space instead of buying it. That couldn’t be further from the truth, so let me explain in more detail.

When you buy a house, you are admittedly taking on a huge responsibility, but one which can pay off handsomely down the road. My parents bought a house in 1964 and took out a 30-year fixed mortgage. The monthly cost of that mortgage was pretty tough for them to swallow in 1964, but in 1984, when they were still paying $296.00 per month, it was a pretty sweet deal!

The logical conclusion from that is to buy as much house as possible, but don’t overbuy. Doing that is part of what got us into the huge mess we’re seeing right now, with record foreclosures. Don’t be afraid of that happening, but also don’t forget that “huge responsibility” part. Buy what you can afford – you can always trade up later when the time is right.

Now, what was I saying about that not being an investment? Just remember, even though it is likely to go up in value over time, that money is tied up unless and until you sell the house, but if you do that, you have to buy something else or rent, because you still need a place to live. The other important consideration is that if you live there for five, ten or more years, you will probably have to replace carpet, paint, perhaps some appliances, maybe even the roof! That’s not money being paid TO you, which is what an investment is supposed to do.

Contrast that with a rental house, where, for example, you might pay $1000 per month for the mortgage, taxes and insurance, and rent it out for $1200. That’s $200 per month INTO your pocket, which is what a good investment is all about.

So, bottom line, buy a house if you can, because the alternative is to pay rent, which is exactly the same thing as paying someone else’s mortgage for them. Just don’t buy more than you can afford and put the rest into real investments, both in the stock and bond markets as well as in real estate.

Contact me if you’d like a professional to help you with doing that!

John@financialideasblog.com

1.888.379.4352  Extension 1000

Technorati Tags: Buying a home, Debt consolidation, Home buyer, Invest in a home, Invest young, real estate investing, what to invest in now

College Investing – Where Do I Start?

Lifetime Career Earnings:  H.S. Graduate Vs College Graduate

Finally, an easy question!  I wish I could say that the answer was just as easy to take, but it’s not, because college costs continue to go through the roof.
When I do a forecast for anyone saving for college, whether it’s for themselves later on or for their children or grandchildren, I forecast the college tuition inflation rate to be no less than 7%, which is twice the average inflation rate for the rest of the economy.

So, the biggest and hardest part to get through is going to be how much you might have to save and how early you might have to start.

In my neighborhood, there are dozens of young families Read More …

Technorati Tags: Financial Ideas, how to invest, Invest in college, Invest young, start investing, Stock Market Education, What to Invest In, young investors

Why Did The Stock Market Drop After Last Week’s Unemployment Report?

The stock market dropped after last week’s unemployment report for one reason, and one reason only.  That reason is short-term investors.

We’re not talking about the proverbial day traders here, but ordinary people with ordinary fears and concerns who are not able to distance themselves emotionally far enough from their money to do serious investing.  We’re talking about most people.

We’re not just talking about unemployment reports.  We’re talking about any economic “news”, such as housing starts, manufacturing orders, foreclosures, mortgage rates, trade deficits, and a few dozen other factors which can be interpreted to mean different things by different people.  Primarily though, we’re comparing what actually happens with what “experts” forecast.  Even though we’ve seen a marked decrease in the number of new jobless claims, the unemployment numbers last week were a tiny bit higher than what was forecast.

This is not unlike the famous, or infamous, “guidance” which many companies offer as to how much money they will earn per share of their stock.  For example, Read More …

Technorati Tags: Financial Ideas, how to invest in stock, How to Invest Stock, Interest Only, play the stock market, recovering economy, Stock investing, Stock Market advice, stock trading, US finance, What to Invest In, what to invest in now, young investors

I’m Not Convinced, ­ “I Just Don’t Want To Play The Stock Market”

Of course you don’t, I understand that completely.  I don’t “play” the market either.  I don’t even know where the phrase “playing the stock market” even comes from.  Although I have to acknowledge that it is very common terminology, I think it is not only misleading, but a widespread cause of misunderstanding about what an investor is actually doing.

A true investor is actually taking a very calculated, well-researched and probably even mostly safe although not guaranteed position that owning a piece of a company, or piece of a group of companies, or maybe even a piece of the debt that a company or a government owes, will pay that investor enough of a return to warrant the associated risk that comes with making that move.

On the other hand, “Playing The Market” is the same thing as gambling, whether it be on high-risk stocks that could go through the roof, or on horses or at the casino or the lottery, where in order, your chances of profiting go downhill and fast.  (I once had a professor in college tell my class that we each individually had a better chance of being randomly chosen to be a U.S. Senator than we had of winning the Super Lotto Jackpot!).

Read More …

Technorati Tags: Compound interest calculator, Debt consolidation, Financial Ideas, how to invest in stock, How to Invest Stock, Rule of 72, rule of 72, the rule of 72, What to Invest In, what to invest in now, young investors

How Can I Educate Myself About The Stock Market?

Before we go there, I think the first question here really is: “Why should I even invest at all?” The underlying answer that most of us have to that question, even if we don’t say it, is: “That’s too risky. I know people who have lost everything doing that.  I’m not that dumb, I’ll just save in a savings account.”

Learning the Rule of 72

So the first answer to educating yourself is to ask yourself: “Do I know what the Rule Of 72 is?” and “How does it affect me, anyway?”

What Is The Rule Of 72?

The Rule Of 72 goes back at least many hundreds of years.  Luca Pacioli, an Italian mathematician, referenced it sometime during the 15th century as a convenient way to determine how long it takes your money to double, assuming you know the interest rate it earns. Luca didn’t explain the rule much, meaning it probably goes back even further than that, but the principle still holds true today.

Here’s an example:  start with any amount of money; let’s say $100.00 to be simple.  Read More …

Technorati Tags: Compound interest calculator, Compound Interest Formula, Financial Ideas, how to invest in stock, How to Invest Stock, Invest Stock, Invest young, Learn Stock, learning Stocks, Microsoft, play the stock market, recovering economy, rule of 72, Stock investing, Stock Market, Stock Market advice, Stock Market Education, stock trading, the rule of 72, trade stock, What to Invest In, what to invest in now

Fed’s Say U.S. Recovery Is Underway

By Mark Felsenthal and Alister Bull

WASHINGTON (Reuters) – The Federal Reserve on Wednesday upgraded its assessment of the U.S. economy, saying growth had returned after a deep recession, while reiterating its promise to hold interest rates very low for a long time.

The Fed also said it would slow its purchases of mortgage debt to extend that program’s life until the end of March, in a move toward withdrawing the central bank’s extraordinary support for the economy and markets during the contraction.

The U.S. central bank, as widely expected, held its benchmark overnight lending rates at close to zero percent.

“Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn,” the Fed said in a statement after its two-day policy meeting.

“Conditions in financial markets have improved further and activity in the housing sector has increased,” it said.

U.S. government bond yields ended lower on the news that the central bank had reiterated a pledge to keep rates ultra-low for an extended period.

“I think it confirms that the economy still needs a little bit of help and that rates aren’t going to go up anytime soon,” said Alan Lancz at Alan B. Lancz & Associates in Toledo, Ohio.

But a stock market rally fizzled on concerns Read More …

Technorati Tags: federal, how to invest in stock, Invest young, poor economy, recovering economy, Rule of 72, Stock investing, U.S. recovery, US finance

Warren Buffett Gives Financial Advice to Girl Scouts at Dairy Queen

Youngsters wanting to make blizzards of money got valuable advice from financier Warren Buffett who was visiting his local Dairy Queen for the launch of the new Girl Scouts Thin Mint Blizzard.

Surrounded by a group of Girl Scouts in his hometown of Omaha, Buffett offered this tip for college students: “The biggest suggestion I have is to avoid credit cards. Interest rates are very high on credit cards. Sometimes they are 18 percent. Sometimes they are 20 percent. If I borrowed money at 18 or 20 percent, I’d be broke. . . . So if I had one piece of advice for young people generally it would be to just avoid credit cards,” he said.

And what advice does Buffett have for a new investor? “I would do a lot of reading before I invested,” he replied. “In other words I would prepare for it. I wouldn’t jump in the water until I know how to swim. . . .I read every book the Omaha Public Library had about investing by the time I was 11.”

On qualities Buffett looks for in employees? “The biggest thing I look for is if they have a passion for whatever they are going to do,” he said.

http://www.whattoinvestinnow.com/

Technorati Tags: how to invest in stock, Invest young, Rule of 72, Stock investing, Warren Buffett, What to Invest In

10 Investing Books Recommended By Warren Buffett

Over the years, Warren Buffett has recommended many books in a variety of venues about a variety of subjects. Continuing our ongoing series of books recommended by Buffett here we highlight ten books that Buffett has recommended on investing.

---

Take on the Street: What Wall Street and Corporate America Don’t Want You to Know. What you can do to fight back

by Arthur Levitt

The Securities and Exchange Commission’s longest-serving chairman, supervised stock markets during the late 1990s dot-com boom. As working Americans poured billions into stocks and mutual funds, corporate America devised increasingly opaque strategies for hoarding most of the proceeds. Levitt reveals their tactics in plain language, then spells out how to intelligently invest in mutual funds and the stock market. His advice is aimed squarely at small, individual investors, as he explains how to look for clues of malfeasance in annual reports, understand press releases and draw more from reliable sources.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns

by John C. Bogle

Read More …

Technorati Tags: Compound Interest Formula, how to invest in stock, Invest young, Rule of 72, Stock investing, Warren Buffett, What to Invest In

Why Right Now Is A Good Time To Buy A House For A First Time Buyer

Why is right now a good time to buy a house for a first time buyer?

Real estate, along with many other investments such as stocks, bonds and mutual funds, can be found right now at prices lower than in recent years.  Some would say it’s the best opportunity we’ve seen so far in our lifetime.  Couple that with the $8,000 first-time homebuyer credit available if you close on a property and take title before December 1^st, 2009, and you have a potentially winning combination.

So, what is a first-time homebuyer anyway?  It’s not as restrictive as it sounds.  IRS rules say that as long as neither you nor your spouse have owned your own home for at least three years prior to purchasing a new one, then you’re a “first-time home buyer”!  If you’re married, and your spouse has owned a home, neither of you can qualify, but if you have a significant other and you’re not married, then you could. Read More …

Technorati Tags: First time home buyer, how to invest, Invest young, tax deduction, tax rebate, What to Invest In