January 30, 2007

easy way to get starwood gold status

One of the best things about traveling for work is the ability to build up loyalty points to earn free travel. Airlines make it really tough to redeem miles, so I've been thinking about focusing my efforts on earning hotel points instead. Based on some research I've done, I decided Starwood's Preferred Guest program is by far the best.

With each stay, you earn two points per dollar spent. Once you have 3k points, you can redeem them for a free one night stay at some of their hotels. If you want miles though, you can always redeem 20k points and with the 5k bonus points Starwood gives you, you'll get 25k miles.

Anyway, the point of this post is to also share with you how I was able to get Gold status in the program. Normally, to get Gold, you need to either have 10 stays or 25 total nights. I have a bunch of travel scheduled already for this year, so I was going to break up my lengthier trips into separate hotel stays. It would've been really inconvenient, but I decided it'd be worth it for the 50% bonus points (regular Preferred guests get 2 points per dollar spent, whereas Gold members get 3 points).

However, I was checking out the Starwood forum on FlyerTalk.com, and learned that some people got Gold status just from calling and asking. So that's what I did. I called, told the customer service rep that I have the Starwood American Express card, and that I wanted to be upgraded to Gold. They did it, no problems.

So if you're an SPG member, definitely try that. You can earn points much faster!

FYI - I'm currently in Seattle for work, hence, the fewer than usual amount of posting.

January 28, 2007

hsbc direct new money promotion - worthwhile?

I received an email from HSBC yesterday, promoting their new 6% APY for "new money." The gist of the deal is that through April 30, you'll get a 6% APY (vs. the regular 5.05%) for all new money deposited into your online savings account. The higher rate is nice, but is it really worth it in all situations?

A friend of mine just IM'ed me about the promotion, and thought he'd be able to get $300/month from the promotion if he: 1) sold off his stock holdings, valued at $20k, and 2) deposited that amount into HSBC. His rationale was based on text from HSBC's email saying that you'd receive $150 for every $10k deposited. The text was actually misleading (or my friend misinterpreted that text). Basically, for every $10k, HSBC would be giving you $50/month via the new rate.

[Here's my math: $10k x 0.06 (the APY) / 12 (number of months in a year)]

So the total gain from depositing $10k would be $150. In my friend's situation, the gain would be $300.

Is that worthwhile? I may be wrong, but I don't think it is. First, if the stocks he has right now are poised for growth (and they're technology stocks so I believe they are), then by selling, he'd be jumping off the proverbial bandwagon before the proverbial parade starts. Second, by selling his shares, he'd have to pay capital gains tax, which eats into his net gain.

Don't get me wrong -- getting 6% yield without any risk is a good thing. However, it depends on what the opportunity cost is. I personally think this is a great offer if you've got a ton of cash you can move into HSBC, from another vehicle that clearly won't get you the same kind of return (such as a money market account, checking account with a pitiful APY or you're doing an app-o-rama).

more personal than finance

Taking a break from talk of numbers, here are a couple of cool links sent to me by my friends.

The first is the latest video from my buddy Robert -- [Hard Reft]. (Note: if you like this, definitely check out some of his other videos. I particularly liked "Wish Diary" -- long but hilarious -- and "RobertFace." His Wii video was actually linked to from CNN.com as well.)

The second is the latest viral effort my old company created for Groundhog Day -- Groundhog Crossing. Pretty cool stuff, but my personal favorite still remains last year's redux on "The Shining" -- Groundhog 202.

January 26, 2007

penalty for being responsible

Just read this article about how some in the credit card industry think "deadbeats" should pay an annual fee. Now, the deadbeats they're referring to aren't those that don't pay -- they're talking about people who pay their balances in full each and every month. The credit card companies make very little money from those people (a group in which I belong), and according to some (some crazies I call them), its the delinquents and/or those who carry balances month to month who subsidize the deadbeats.

Obviously, I'm not in favor of any fee being put on me for being fiscally responsible. To lay blame on people who manage to spend what they can afford is ridiculous. If those people get their way though, I wonder what people would do. My initial reaction was, I'd just stop using credit cards. However, the reality will probably depend on the type of rewards I get for whatever card I choose to stay with. Still, I much prefer the current situation now.

what my tarot cards say

Obviously, I'm not going to say I know what stocks/sectors are going to do well, but I do have some ideas on how to pick some winners for your portfolio (this post is in response to the several questions I've received lately about what to buy -- keep in mind that, by day, I'm a marketer, and by night, I'm a blogger; nowhere in between am I a certified financial guru. =)

So my first suggestion is to look within your own industry. What companies rival the ones that compete against the one you work for? What other companies lead, depend on, impact, etc., your industry? Look for the strong ones, or the ones with real potential, and think about investing in those. This suggestion is a good one because, as someone who works in the industry, you probably have a good feel for what's real and what's perception in the media.

For example, I'm in the online marketing industry. I own shares of Yahoo, Baidu and Microsoft. Each have their proponents and their critics. However, since I'm in the industry and I feel pretty confident in what the competitive landscape looks like (versus the shallow knowledge most stock pickers have for the industry). Knowing what I know, I'm pretty confident that in the long term, all three companies' stocks will have success.

Of course, that's not to say I can be totally wrong, and that I'll lose my shirt from these stocks. But if that happens, at least I failed with the best knowledge available.

My second suggestion is to look at macro trends. What's happening in our country/world that's going to really impact the future? The biggest thing I see is the aging of the Baby Boom generation. Many, many, many people are going to get old real fast in the next 10-15 years. Pharma companies will probably do well with medication, hospitals may do well, funeral homes should make a killing (pun), retirement communities, recreational companies (such as those that sell boats or RVs), etc. Those are just some high level ideas I have on companies that should benefit from the graying of America.

On the flip side, there'll be more Generation Y (kids of Baby Boomers, aka the Echo Boom) people entering the workforce. They may be looking for financial planning advice, apartments, etc. Also, the tail end of the generation will enter college soon. Tutoring and test prep companies may do well, as well as companies offering educational loans. Again, these thoughts aren't guarantees, but they make logical sense.

target date funds

Finally back from Tampa. Of course, the return flight was delayed because of traffic into LaGuardia. When will I learn and fly into Newark?

Anyway, some great posts from others during my hiatus. This one about target date funds caught my eye. Particularly because one of my friends recently threw his rollover money into a Fidelity Freedom Fund.

For those who don't know, a target date fund is basically a mutual fund that invests within an asset allocation depending on when you retire. Depending on how far away you are from retirement, your asset allocation will be more or less aggressive (more if you're young and many, many years from retiring, and less if you're older and need to be more conservative with your money). These types of funds will automatically update their asset allocation as time passes, saving you the trouble of having to rebalance your portfolio.

Here's my (humble) opinion of target date, or life cycle, funds -- if you're someone who's all that interested in tracking, monitoring, assessing and rebalancing your investment portfolio, go for it. These types of funds make it easy for you to invest according to an allocation appropriate to your life stage and, as long as you're buying from a reputable company like Fidelity or Vanguard (I'm sure there are others too), then you can be pretty sure you're getting mostly efficent returns for your investment (in terms of expenses).

However, if you have even a little interest in taking more control over your investments, I say looking at index funds, ETFs and stocks of companies that you know well (examples include companies in your industry) would probably make for a better performing mix long term. That's partially why, even though I've considered target date funds, I don't think I'll ever choose to invest in one. To me, it just feels like I'm giving up too much control of my investments -- things that make other things easy might make them too easy at a cost. Again, just my opinion.

I also want to make sure readers know that the reason why I reference Fidelity so much is that because pretty much all of my accounts are set up there, so I'm most familiar with them. Obviously, I also like them (otherwise my accounts wouldn't be there =P), but I'm sure Vanguard and other top-quality companies are just as good.

January 23, 2007


Finally, some good news for one of my stocks -- Yahoo Beats Estimates.

adding to the 0% balance transfer discussion

Lately, there's been much talk about how profitable it can be to exploit credit cards with 0% balance transfer offers, including articles written at 2million, Consumerism Commentary and Blueprint for Financial Prosperity.

I used to do that back in the day, right after I graduated college. Actually, right after college, I transferred balances left and right to stay financially afloat, because of my silly, "Just because I can't afford it doesn't mean I should live a certain lifestyle" philosophy (ah, the ignorance of youth). But after I paid off my debt, I realized it was possible to transfer a "balance" from a new credit card that offers free transfers at 0% (for a limited time period) to another credit card that has no balance, withdraw that extra money, and put it into a savings account or (here we go again with the stupidity) invest the money in stocks.

Those days of tracking when I needed to pay back the new debts and/or find a new credit card to transfer a balance to are long over for me. The effort-reward ratio just didn't make it worth it for me personally.

However, I still strongly recommend transferring credit card balances -- if they're held on a card with a high APR. This article at SmartMoney.com has some good advice on finding not 0% cards but cards with low APRs to transfer to -- doing so will save you a ton of money in the long term, so the effort-reward ratio is certainly worth it.

little things add up

Yesterday, a friend of mine showed me two pictures of furniture she was interested in buying. One was for an entire set of bedroom furniture -- bed, dressers and all those other things -- and another was just for a bed. The prices for the sets of furniture were (hypothetically) 1.5x and 1x. She was wondering which one to buy, and I told her to go for the entire set for 1.5x.

This actually kind of stemmed from my decision a little less than a year ago to buy a couch for my new apartment for $1,600. At that time, I thought having a big comfy couch would be critical to my happiness. After all, I love to watch TV and I love to sit on big comfy couches. However, as time passed, I realized I probably could've gotten the same utility (love those economic terms) from an IKEA couch at 1/5 the cost.

Wait, you may say. Didn't I tell my friend to go for the more expensive option? Yes, I did. =) My rationale was that she was going to need to buy all of those pieces of furniture anyway so in the end, the 1.5x cost would be less than the total cost of the bed at 1x plus all those other pieces at .

So what does this have to do with personal finance? Well, duh! The motivation for spending less overall is so that you have more money to sock away in your savings! That was the driver behind my thinking. =)

By the way, this blog will be quiet most likely the next couple of days as I'm traveling to Clearwater for a client visit. Looking forward to the warmer weather!

January 22, 2007

useful how-tos

JLP at AllFinancialMatters recently posted three great articles about calculating returns. He explains things much better than I would, so here are the links:

Definite must-reads!

mutual funds primer

Mutual funds are simple, but they're also complex. Instead of trying to explain them in my typical long-winded fashion, I'll just link to a nice write-up from the Money Walks blog, called Mutual Funds 101.

Pay particular attention to #6. That's something to consider when thinking about funds vs. ETFs in taxable (regular brokerage) vs. non-taxable (usually retirement-type) accounts.

who needs real-time quotes?

Recently, the evil empire announced that it'll be offering free real-time stock quotes. Many people would love that. I, on the other hand, have realized (yet again) just how addicted I can be to monitoring my holdings' performances. It's probably similar to a gambler's addiction.

I've been using the Windows Vista, and one of the cool new features it has is the sidebar. You can put gadgets on it (similar to widgets on a Mac, I've heard). One of the gadgets you can put is a list of stock quotes. Up until today, I had all of my holdings listed in that gadget, with up to the (20-)minute(-delay) quotes and percentage changes. You know what that's been like? Imagine a person who just underwent gastric bypass surgery and chooses to sit in front of a buffet full of red, delicious meat. It's somewhat the same -- for someone who's trying to thinking long term, and be disciplined in buying and holding, getting constant reminders of how your stocks are performing is not a great idea.

So I mustered the strength to get that gadget off my desktop. Moral of the story? If you buy stocks, mutual funds, ETFs, etc. with a long-term objective, then don't subject yourself to daily updates. =)

carnival of personal finance

There's this thing called Carnival of Personal Finance (actually, there are many different types of carnivals -- check out my right hand column) where bloggers submit articles about -- you guessed it -- personal finance. My post about term life was actually featured in the latest carnival of personal finance, so check it out. Lots of other good articles too written by regular folks like you and me.

January 21, 2007

i thought indexing was supposed to be easy?

One of the strongest pieces of advice out there for retirement/financial planning is to invest in index funds. The rationale is backed by how, over the long term, something like 98% of actively managed funds underperform when compared to the index (usually the S&P 500 index). Actively managed funds are those where the fund managers often make decisions about what to buy, hold and sell based on some type of analysis/strategy. On the flip side, you have passively managed funds where a manager just follows some sort of index. This means there's not a whole lot of thinking needed, not a whole lot of need for buying/selling (aka turnover, which leads to high costs and taxes) and a simple rationale that plain ol' investors like me can actually understand.

Much of investing's nuances go way over my head and/or are so complex that I really have no interest in staying abreast of it that much. (If I was that interested in it, I wouldn't have quit my job at CIBC World Markets, after all.) Now, I just found out (via a New York Times article)
about fundamental indexing. Which, again speaking as someone who likes easy-to-understand stuff, makes index investing more complicated.

For the purpose of providing background -- when index funds are discussed, its usually something like the Vanguard 500 (VFINX), which holds stocks in the S&P 500. The number of shares held in each company is weighted according to their market capitalizations -- the greater a company's "size" in the S&P 500 index, the greater its "size" in an index mutual fund. Pretty simple, right?

Fundamental indexing goes beyond the weighting of market caps to look at stuff like earnings, dividends, etc. First, let me say I don't necessarily think the concept is ill-conceived. I just think it complicates the simplicity of index investing with so-far unproven theories, and like some guy in the article said, it sounds more like active management of a fund than passive management.

I'll probably keep an eye out for information about this new tact as more come out (and you know the fund companies will be pushing the PR machine pretty hard), but I think I'll just stick to the vanilla flavor of index investing.

January 19, 2007

buy and hold, buy and hold

That's the prevailing advice. It's the smart thing to do, and the numbers through the years definitely support it. But man, is it hard to do. Especially for someone who has a gambler's mentality like me. Speaking tangentially, maybe investing isn't the best thing for someone like me, but its also necessary for someone like me to build wealth. I just need to keep it in check.

So today's post is about another lesson I learned recently about the importance of buying and holding. There's another side lesson too, and I'll cover that as well.

Here goes..

Every year, around the November timeframe, The Motley Fool issues its top picks for the upcoming year. They actually have a great track record (even after discounting the boost they get alone from issuing the picks). A year and a half ago, I ponied up in late December for their report, and saw that BioMarin (BMRN) was one of their picks. The rationale made sense, so I bought shares of the company.

So the idea was that BioMarin was on the verge of getting FDA approval and/or had some really good stuff in its pipeline (sorry, bad memory here). The guys at Motley Fool said that once that catalyst occurs, the stock should rise. So I ended up buying the stock at around $7. I held it for a short amount of time, and during that time, the stock languished. After a while, I got tired of waiting for "the big news" and sold off around the price I bought the stock at. Didn't lose much, just the cost of commissions. (If you're wondering how I don't remember why I bought the stock, but I remember what price I bought/sold at -- I keep a record of every stock purchase.)

Just for kicks a week ago, I decided to buy the 2007 version of Motley Fool's stocks picks. In it, I saw that since they recommended BioMarin, the stock had jumped over 200%. My eyes bugged out, and I quickly looked up the stock price. Sadly (for me), it was above $17. If I had just been a bit more patient, I would've made 143% on my investment.

I know I shouldn't play the woulda-shoulda-coulda game, but still, seeing this stuff hurts. But I do take solace in that besides the lesson of buy-and-hold, I also learned another -- invest in what you know and understand. When I bought BioMarin, I really didn't know anything about their business, their industry or their market situation (as evident by the fact I can't even remember why I bought their stock). Since then, I've been much more disciplined in buying what I know and/or stock where I feel pretty confident in understanding their business (hence, the Yahoo, Baidu and Microsoft stock buys). So all wasn't for naught. =)

fyi -- Another valuable lesson is that the Fool allows you to return your purchases, no questions asked!

January 18, 2007

term life: buy now or buy later?

(This is a long one, but I think its pretty interesting if you’re finance-geeky)

if you've talked to me lately, you'll realize that I’m not a huge fan of whole life, variable life or any type of cash value life insurance policy. Part of that has to do with bitterness from having been sucked into one such policy a few years ago (one of the worst financial decisions of my life). Another part of that is that I ignored such clear advice from independent experts. Such as this, this and this.

Anyway, making the case against whole/variable life can come later, but this post is about how I came to realize that holding off on buying term life insurance makes sense if you aren't married/don't have any dependents.

Some background -- a fallacy that I’d been following was that buying term life when I was younger was ideal because it helps me to lock in a lower premium. But I talked to a former math major who did some actuarial stuff for insurance companies and he helped me realize that $400 in today's value is not necessarily less than $500 in tomorrow's value (hypothetically speaking). Ok, so here's the set up. I was wondering, "Hmm, should I buy a $500k policy today, at $295/year for the next 20 years?" I’m single, have no children -- legitimate or ill- -- and so no one really depends on my income. If I didn't buy today, the alternative would be buying (again, hypothetically speaking) in five years, when I may have a dependent. but if I wait five years to buy a policy for the same term (20 years) and coverage ($500k), my annual premium goes to $310 (the annual premiums are quotes I got off Fidelity's insurance quote tool).

Blah Blah, too many words in paragraph form. What does this scenario look like graphically? Below is a table to illustrate:

As the table above shows, if I were to buy term life now, I would:
  • End up paying $5,900 for coverage that ends when I'm 47.
  • 10% (2 years) of the term of my policy will be in force during a time when I'm fairly confident I'll have no dependents. On the flip side, from ages 48-52, when I *might* have a dependent or two, I'll have no coverage.

If I were to wait five years, then I would:

  • End up paying $6,200 for coverage that doesn't start until I'm 33, but ends when I'm 52.
  • All of the years of my policy will be in force at a time when I *might* have dependents, and zero when I'm certain I'll have no dependents.

Ok, so you may be thinking, hmm, the stuff about being insured when you’re more likely to have dependents makes sense, but still, you do save $300 by buying now versus later. But as the table below shows, there's another cost to consider.

What the table above shows is what would happen if I were to take money I would've paid towards a life insurance premium and invested it in the years when I didn't have a policy in place. So in the "buy now" scenario, I wouldn't have premium money to invest until I’m 48, when I could invest $310/year (I use $310 because that's how much I would be paying if I waited). In the "buy later" scenario, I would have $295/year to invest ($295 b/c that's how much I would've paid if I bought now) right away, for the next five years.

Assuming a conservative 6% annual return and investing only a total of five years, it’s clear that the power of compounding benefits me most in the "buy later" scenario. When I’m 52, my total return on investment in the "buy now" scenario would be $1,747 while my ROI in the "buy later" scenario would be $5,333 (in other words, more than 3x greater). So what are the final numbers? Yes, there IS another table to illustrate! =)

(I feel like some finance professor or worse, a financial advisor.)

So if I were to buy now, after paying 20 years of premiums and investing five years of the alternative premium payment of $310/year, and receiving a return of $1,747, I would be down about $5,700 while receiving insurance coverage. On the other hand, if I were to buy later, after 20 years of premiums and investing five years of the alternative premium payment of $295/year, and receiving a return of $5,500, I’d be down only $2,140. Just that alone would make a strong case for buying later. What makes the case even stronger is this -- remember, I still have the investments going and compounding (even conservatively at 6%). but at the "buy later" scenario, my "base" at age 52 is 3x more than my base in the "buy now" scenario. That means even though the returns will grow at the same rate, the actual amounts will be higher if I wait!

cash back credit cards

Up until recently, I was a big proponent of cash back credit cards. You didn't get a whole lot back per purchase, but after a while, the 1%/5% breakdown would add up to a decent amount. In fact, I actually hit my $300 limit on my Citibank dividends card in 2006. But I’ve lately been using my rewards cards that give me miles on United and/or points with Starwood. This was somewhat due to the joy I experienced when booking my Asia flight on miles alone. I love free stuff, especially when it comes to travel. And it was also due to the fact that Citibank recently changed their cash back percentages so that it’s a lot harder to get the same amount back.

Since I stopped using my Citibank card, I have about $28 stuck in my cash back account. Unfortunately, since u can't ask for a cash back check unless your balance is $50 and up, I guess it’s just going to sit there for a while.

January 17, 2007

what to buy, what i bought

In my Roth IRA, I recently sold off my positions in the Mainstay Small Cap Opportunity Growth fund (motbx). The fund was a mediocre performer for me in the nearly three years I held it. In fact, when the small cap sector was doing lights out, I had only about a 6% annualized return. In other words, combine that with the high expense ratios and the fund stunk.

With the proceeds from the sale, I invested in three things -- two ETFs and one mutual fund. For the ETFs, I chose the iShares MSCI Ex-Japan fund (EPP) as well as Barclays' Asia 50 (ADRA). Clearly, I have faith in the growing markets in Asia, but the faith only goes so far as the total amount between the two ETFs were split between the "new hotness" of EPP and the old stalwarts of ADRA. I also think the financial services sector is going to do lights out in the upcoming years, so I bought into Fidelity's Select Brokerage and Investment Management fund (FSLBX). However, part of my reason to buy into the fund was also the ability to do dollar-cost averaging for my 2007 contributions, which I can't do with my ETFs, nor my other Roth IRA holding, Baidu (BIDU).

You might've noticed a trend in my Roth IRA. It leans very international. And very Asian at that. Normally, it'd probably be overweight in that regards, but I’m planning to max out my 401k this year as well, and in that account, I’m invested in the Vanguard Institutional Index fund (VIIIX), which tracks the S&P 500. That gives me a good core to play off of I think. (Plus, I don't think it hurts that it has a sick 0.03% expense ratio -- you can't beat that!)

stock award vesting

Yesterday was my one year anniversary at work. That also meant that 1/5 of the total stock award I received when I joined was going to vest. I was all excited. I mean, the total number of shares involved wasn't much, but still, I thought it'd be a nice lil' bonus. I had received 170 shares total as part of the award, and on the 16th, I was expecting 34 to vest.

I checked my Fidelity account today and saw that only 19 shares had been transferred. "Do they do transfers in piecemeal?" was the question that first popped into my mind. I did a lil' reading on the company site's FAQ on stock awards, and found out that 19 was, indeed, all I could look forward to.

You see, there's this thing called taxes. When stock awards vest, it’s a taxable event and as such, the fair market value of the shares vested is considered compensation income. Therefore, when my first batch of stock vested, it was converted into an equivalent number of common shares, and then the required tax withholding would be paid with a portion of the shares that vested. What remains after gets transferred to my Fidelity account.

It’s a real bummer when over 44% of the number of shares you were expecting gets zapped because of taxes. Damn Uncle Sam. =P

learn the basics...

From people preeminently more qualified than me.

Morningstar.com is one of the best sites for financial info. They're not really biased and they don't really make money telling you to buy, buy, buy. That being said, they've put together a series of "lessons" that you can take for free to learn about investing. It's called Investing Classroom.

I've gone through some of them and they're pretty straightforward and easy to follow. Check it out when you have time.

January 16, 2007

start of something

Why this, why me, why now...

Among most of my friends, I probably know a lot more about personal finance issues than others. I'm by no means an expert who should go on CNBC (first, I don't wear starched shirts and second, i don't think i'd qualify for Asia Squawk Box), but I know my fair share. And I love talking about this stuff. It's something I care about for my own personal situation, and its just an exciting topic for me in general.

Lately, I've been reading a lot of other personal finance blogs (see the links to the right) and I was blown away by the openness of the authors. They share figures for their net worth, investments, etc. I'm still not sure if I'll get to that point, but as a reader, I definitely appreciate the candor. In part, I'm hoping this blog can contribute to that discussion. If not for the wider internet population, then at least for my friends. Becausae even tho I'm no Mother Teresa, I'm sick of hearing financial advisors pitching so-called smart investments when their underlying motivation is to get people to buy products that earn them commissions.

People have said I should think about switching careers and going into financial planning. I've thought about it, but I'd be terrible -- I can't in good conscience tell you to buy a cash value life insurance policy over term life, even tho I'd get paid a lot more with the former than the latter. So this blog hopefully will help my friends at least avoid getting hoodwinked, bamboozled, and other forms of weirdly-named scams.

So what are my qualifications? Hmm, let's see... I'm very anal about who controls my money and what they do with it. I listen to financial people with a very skeptical set of ears. I love reading Fool.com and other sites that give financial planning advice. Technically, you could say I started on "The Street" (tho I quit after two days because the thought of staring at CNBC all day while arguing about which stock performed best at the top of my lungs made me ill).

The caveats -- first, I will likely share personal information here. In most likelihood, the numbers I'll show will pale in comparison to what you the reader has to play with. So don't make fun. Second, I'm not a financial expert, and you ain't paying me for financial advice. This blog is about stimulating and promoting ideas. If you do something I suggest and it doesn't work out, don't take it out on me. In most likelihood, I'll be feeling the same financial pain as you. =P

Anyways, that's the intro and its out of the way.