Investing Archives

Why Socially Conscious Investing May Be Costing You A Lot Of Money

Have you heard about socially conscious investing? Socially conscious investing basically means that you or the mutual funds that you use will not invest in companies that do not promote the social good.

Socially conscious investing takes entire industries like alcohol, gambling, gun manufacturers, potential environmental polluters and the like out of the investing mix of potential companies in the possibilities for your investments.

Several mutual funds have gravitated to this investing style as a way to market and differentiate themselves from the masses of funds that comprise the investing universe.

Socially responsible investing (SRI) mutual funds and socially conscious investing look to limit or restrict their investments in companies that promote what the general public would consider vices.

They shy away from investing in companies that are seen as environmental polluters, makers addictive substances like alcohol or tobacco, and other companies. Many of these mutual funds have also removed themselves from investing in companies that have been seen as having bad corporate governance policies and practices. They have also shunned companies with suspected human rights violations.

Socially Conscious Investing Mutual Funds Have Gained In Popularity

Socially conscious investments and socially conscious investing mutual funds have exploded in popularity in recent years. The number of socially conscious investing mutual funds or socially responsible mutual funds in the United States has grown to over 250 with assets of more than $300 billion as of 2010, this is up 30 fold since their inception in 1995.

According to InvestmentNews.com and Morningstar.com, socially conscious investing mutual funds have had over $3 billion in net inflows into these types of funds in the past three years ending in 2012.

What You Can Learn About Investing From Building A Pinewood Derby Car

by Hank Coleman

All across America, boys and their fathers are building a Pinewood Derby Car for the Cub Scouts. My son is no different. We actually just put the finishing touches on building a Pinewood Derby Car. And, last week when he was racing it at our local Pack meeting, I got to thinking about all of the lessons that you could take away from building a Pinewood Derby Car and apply to the world of investing.

Here are a few things about investing that we all can learn from building a Pinewood Derby Car…

How Building A Pinewood Derby Car Is Like Investing

A Great Car/Investment Starts With Research

I was blown away by looking at some of the other Pinewood Derby cars that were at my son’s race that weren’t optimized to be as fast as possible. It only took me a little time and effort to Google and find where to put the weights on the Pinewood Derby car to get it to be the fastest car possible.

I also bought a book to ensure that my son didn’t miss any steps in building his car, polishing the wheels, sanding the axles, and the like that would help when building a Pinewood Derby car and making it fast. The same thing is true with investing A little research can go a long way. There are so many resources available to investors that can help you find great stocks or mutual funds to invest in. You should start with

The same thing is true with investing A little research can go a long way. There are so many resources available to investors that can help you find great stocks or mutual funds to invest in. You should start with site like Google Finance or Yahoo Finance when you are researching investments.

It Takes Hard Work To Get It Right

Wow! I had no idea how hard building a winning Pinewood Derby car would be. There was a lot of sanding, painting, cutting, chiseling, and the like that had to go on to make that Pinewood Derby car a winner. It was worth it to bond with my son, but man wow!

The same can be said about investing too. If you are investing in individual stocks especially it can be a lot of hard work keeping track of all those companies and what they are doing in their industries. People with normal day jobs are at a disadvantage to other people like analysts and money managers who watch stocks and certain industries for a living. That is all they are doing day in and day out. It can be worthwhile for the rest of us but hard work nevertheless like building a Pinewood Derby car that wins. Click here to learn more about Motif Investing

Teamwork Is The Best Approach

It is hard for this dad to take a step back and hand the saw over to my son and let him take the reins building his Pinewood Derby car. But, it was and should always be a team event between the boy and his parent. Not only are you teaching him and providing him with a sense of accomplishment, you are also there as a backstop and a somewhat subject matter expert when he really needs help.

Too many people try to go it alone without the help of a financial planner. Either people think that they do not need help, can do it themselves, or can’t afford to hire a financial planner. These arguments, of course, are extremely flawed. Everyone could benefit from a little help from teammates now and again, and help from a financial planner is no different.

How Behavioral Finance Biases Can Cost You Money

by Hank Coleman

Many of you may not have heard of the term behavioral finance biases, but it is hard to find a point where our minds do not get in the way of our money. It happens all the time. We try to kid ourselves that we are rational human beings who make rational decisions, but history and our stock market has proved us wrong time and time again.

In fact, we let our emotions take hold of us more often than we would like to admit much to the detriment of our finances. Below are three classic examples of behavioral finance biases and how we behave irrationally with our money and let our minds get in the way and cost us.

Behavioral Finance Biases Says We Have An Aversion To Losses

When we are investing for our financial goals, whether it is buying a home, retiring early, sending our children to college, or any one of the hundred others, a rational person is supposed to step back and look at the big picture. You are supposed to consider your total investment portfolio, and the goal is to increase your wealth to accomplish these financial goals.

But, far too often, we look at the individual wins and losses. I’m sure that most of the readers can quickly name a stock or mutual fund that has cost them a significant loss over their investing career. Investors have a loss aversion, and we tend to focus on our losses as opposed to the other investments that are in the black.

We would rather avoid a loss altogether than risk it for a chance at again. Investors often sell winning stock in order to lock in a profit and hold losing stocks as they sink further and further in an effort not to have to actually accept the current loss on paper.

Top Tips For New Trustees

by Guest Contributor

In the high-pressure, high stakes world of the pensions industry, scheme management is never an easy job. Pension scheme trustees face administrative and legal pressures, along with an obligation to act with honesty, transparency and complete impartiality in all their dealings with the trust agreement.

Before trustees can assume their roles, they must be conversant in the details of the scheme they are charged with governing – and any relevant legal or administrative demands. While some trustees will have years of financial experience to draw from, many lay-trustees will lack this advantage – fortunately, there are plenty of training schemes available to help individuals become comfortable with the position.

What type of training should new trustees go for?

New trustees and anyone without a financial background should approach the role from a general perspective. Training courses, seminars, conferences and literature are available for a range of educational needs, but an ideal starting point for lay-trustees is The Pension Regulator’s online ‘trustee toolkit’. The toolkit is a free resource and can be browsed by trustees at leisure. The toolkit involves essential information in both theory and practice, along with case studies and tutorials – the kit serves as an excellent supplement to any additional ‘off-line’ training the trustee is undergoing.

While online resources may be useful, combining them with other methods can be particularly effective. Workshops and seminars provide opportunities to meet other trustees in the same position and discuss concerns or problems specific to particular schemes. To get the most out of any training strategy, it’s important that trustees ‘self-asses’: identifying the areas which they’d like to receive guidance, and weaknesses in their own skill-set.

Tips to achieve a sufficient level of trustee knowledge and understanding include:

Regular briefings: these can be broadly-themed or scheme specific, but involve bringing in a professional advisor to consult with trainees in a formal capacity.

Development programme: implementing a long-term plan for the training of trustees – and keeping records of their development as a way to build and consolidate knowledge.

Self-review: scheme trustees should provide their own feedback on their performance and the training they receive in order to tailor future training to their needs.

Where To Invest $1,000 In Today’s Market

by Hank Coleman

Do you have a lot of money sitting idle? Do you know where to invest 1000? There is a lot of cash on the sidelines of the market. People have been scared and have a significant amounts of money sitting on the sidelines, under their mattresses, and in savings account earning little to no interest.

There are better places to put this money to work like investing in the stock market. While $1,00 seems like a lot of money in today’s standards were people are having so much of a hard time making ends meet, in the grand scheme of things it is not altogether too difficult to find where to invest $1000 in today’s market.

Here are ten excellent places where you can invest $1,000 today. While you’ll see some of these ideas are using the term investing loosely, it is investing in the broader sense of the word.

Ten Places Where To Invest $1000 Today

1. Pay Off Your Debt – One of the best places to invest $1,000 today is in paying off your consumer debt whether that be credit cards, a car loan, or any other type of consumer debt.

Paying off your debt is the equivalent of Burning the same amounts that your pain and it just right as you would from an investment. For example, if you have a credit card that is charging 16% annual interest rate and you pay that credit card off, then that is the equivalent of you earning a 16% rate of return on your money.

2. Build Your Emergency Fund – Another excellent use of $1,000 in today’s market is to continue to build your fully funded emergency fund. Popular radio host and best-selling author, Dave Ramsey, recommends that everyone start with at least $1,000 in a bank account as a starter emergency fund. This is his baby step one from his book and financial plan, Total Money Makeover.

The Total Money Makeover is also one of my top 10 personal-finance books that should be on everyone’s bookshelf. Actually is the number one book that everyone should read and should have a prime place on your nightstand.

3. Invest In Index Funds – For brand-new investors, the best the best place to start is an index fund which mirrors the stock market. You can either invest in index funds that follow the S&P 500 index or the Dow Jones industrial average. I typically recommend starting with an index fund that mirrors S&P 500 index. S&P 500 is the best index that closely resembles the overall US economy. You should be investing in the stock market.

4. Start A 529 College Savings Plan – If you have already started saving for your retirement, another great place to start investing your $1000 is a 529 college savings plan for your children’s college education. Like a Roth IRA, a 529 college savings plan lets you invest your money in mutual funds that continue to grow and earnings can be withdrawn tax-free as long as those earnings are used for educational expenses.

5. Invest With Lending Club – For the more advanced investor, I always recommend investing in Peer to Peer lending through Lending Club. Lending Club allows investors to earn a higher rate of interest and you normally would from a CD, savings account, or even from the stock market as a hole in most cases.

I have been using Lending Club for over four years now to hurt a higher rate of return than I normally would have with other investments. While I would not recommend investing all of your money with peer-to-peer lending, is a great way to supplement your investments.

Lending Club allows you to invest directly in borrowers who are looking for money for things such as debt consolidation, home repairs, cars, and many other reasons. Peer-to-peer lending allows borrowers to skip the bank and receive a better interest rate for their loans. It also provides a greater rate of return by skipping the bank for investors looking for a little more return.

How To Invest Money Like A World Class Poker Player

by Hank Coleman

I used to love to play Texas Holdem Poker. I still do, but I also have to know when something starts to become habit forming and possibly not healthy. Believe it or not, but there are a lot of things that investors can learn from poker players that will make you a better investor in the long run. You can learn how to invest money like a poker player.

There are a lot of similarities between the two. Here are ten attributes that I wanted to highlight how to invest money like a world class poker player. There are some great insights that can be drawn from the world of poker and applied directly to investing. Here are a few of my favorites.

How To Invest Money Like A World Class Poker Player

Know When To Hold’em

Like the classic Kenny Rogers song, The Gambler, you have to know when to hold them and know when to fold them. Of course, Kenny was talking about the cards that you have in your hand. But, the same can be said for stocks or even mutual funds. You have to know when to keep them and when to sell them.

Do you have a strategy? Did you buy a certain stock for a certain reason and you’re waiting for it to pan out? These are all things that you need to consider when investing just like a poker player thinks about when he or she sits down at the poker table to play.

Know When To Fold’em

There is no shame in calling it quits with a certain investment that did not pan out. It is often better to live to fight another day than to go down in complete flames with all of your money. Jim Cramer recommends in his book, Mad Money, to set a certain percentage (say 10%) of a loss as a trigger for you to automatically sell a position that you have in a company’s shares.

While Cramer’s book isn’t one of my top ten personal finance books that should be on your bookshelf, it is definitely well worth a read especially for people investing in individual stocks.

Play With The House’s Money

This is one of my favorite things to do when investing. I will often sell a position that I have had a lot of success with and get back my initial investment. Then, I will let my profits continue to run.

This is playing with the house’s money, the casino’s money or other people’s money…not your’s. This is also akin to using the interest that you earn from an investment to earn passive income and reinvest the proceeds into new investments. This is exactly what I do to earn a passive income with Lending Club. You can learn how to invest money.

Patience Is The Key

It takes patience to land on that incredible hand in poker. If a player is playing tight or only playing the best pair of cards, he or she could wait a while to strike. The same of course can be said for investing. You may have to stalk a company waiting for a pull back of its stock price to pounce on it. You may have to be patient to let your strategy play out.