What is the Dow Jones?
| April 3, 2012 | Filled under Finance, Investing |
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If you don’t have a clue as to what is the Dow Jones, you are not alone. Many people who haven’t really introduced themselves to how the investment markets work. It can seem like some kind of a secret language the way the business channels keep talking about the S&P index or the Dow Jones Industrial Average .
What are these indexes? More to the point, what is the Dow Jones, and what does it do?
To people who study the stock market or invest in it, indexes like the Dow Jones are benchmarks – bellwether numbers to go by.
What is the Dow Jones though? Let’s start the story where it really starts – in 1882. Charles Dow, the editor of the Wall Street Journal, together with a couple of other friends in the financial analysis business, decided that people needed a kind of financial tool to help investors in the factories and industries of America keep track of how things were going with those businesses.
The Dow Jones is an index. What that means is, that it looks at the stock prices of a number of companies that it considers important as a way to represent the state of the economy, and it tries to represent all of them with one number – that index. How do they know what to do with all those stock prices and how to reduce them to one number?
Well, the Dow Jones is a price weighted index. When the price of a stock rises to great heights, the Dow Jones index will let it influence the index number a lot more than anything with a lower price.
If Apple for instance has its stock flying sky high, the Dow Jones index will jump up several points just based on that one stock alone. The high-priced ones have a bigger say in what the index looks like.
It’s all well to learn about what is the Dow Jones. How exactly do you use it though?
You can find any number of financial purposes that you can use it for. For instance, if you want to keep an eye on how there might be anything alarming going on with the stock markets, using the Dow Jones index, you could easily keep track of the big picture to do with the stock market.
If you’re looking to the stock markets to decide what you want to invest in, the Dow Jones Industrial Average will give you a number of pieces of information that can help you predict how the stock market will move in the future. The Dow Jones happens to be one of the oldest indexes in the world.
For any analyst who really likes to sift through his data before making a decision the Dow Jones can be quite convenient. To any analyst who wants to go back to look for old records, there’s a lot of history waiting to be discovered in the Dow Jones average.
529 College Savings Plan: Saving For Your Child’s Education
| April 3, 2012 | Personal Finance |
How serious have you been about saving up for your child’s education? A 529 college savings plan may be one of the best ways to plan for a foreseeable expenses and something for you to consider. Unless you get really serious today about saving for your child’s education, you can be pretty sure it’s not going to happen. Tuition fees are rising everywhere, and scholarships and aid aren’t what they used to be. While student loans do exist, they become such a burden on a… read more>
Are You Facing Bankruptcy Court?
| March 6, 2012 | Bankruptcy, Bankruptcy Personal, Bankruptcy Tips Advice |
With the way the credit crunch has been going, it isn’t just people living on the fringes of the economy who have to come to terms with having the possibility of bankruptcy staring them in the face. People who used to make $70,000 before the recession and the credit crunch hit, are finding themselves in bankruptcy court declaring personal bankruptcy. They call this the middle-class recession. People who used to be mortgage brokers, real estate agents, professionals – all of these people have the hardest… read more>
Smart Budgeting Tips
| January 25, 2012 | Budgeting |
Wouldn’t it be nice if we all just enjoyed doing the things that were good for us? We’d dream about buying a budgeting program for the computer, and sitting for hours at it fascinated at how it helped us keep tabs on all our expenses. We would cut everything wasteful to a minimum. We would tell our friends about all the great ways we cut our expenses, too. The software companies would even make fancy budgeting programs with 3-D effects the way videogame makers do… read more>
Protecting Your Account During Bank Mergers and Acquisitions
| January 25, 2012 | Finance |
In the wake of the financial crisis of 2008, a number of large banks like WaMu that were no longer able to stay afloat on their own, went with the decision to merge with larger, better-run banks. But this kind of action is by no means something that only comes about when there is a financial crisis. Banks are businesses, and they will try to streamline their operations as businesses tend to do, with bank mergers and acquisitions. What happens though when you are a… read more>
How Getting Your Annual Credit Reports Help
| January 25, 2012 | Filled under Credit Tips, Personal Finance |
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Your credit report and your credit score are both important when you need to get a loan for anything in life whether you are looking for a new car, a home, or even to help pay for college tuition. Your credit can also impact you when you are trying to get certain jobs or rent an apartment or house.
It can be hard to keep up and you may not even know what is going on with your credit. Even if you are good with your money, are you sure you are not a victim of identity theft?
Your annual credit reports can help you with all of these things. These are the vital statistics for your financial health, so do not ignore them.
There are a few ways that you can get your annual credit reports. There are some that you can get for free, but you can only use these once a year. You are entitled to one free report from each of the three major credit reporting agencies each year.
You will have to provide personal information when you view them so that not only are they sure it is you looking at your report, but also to make sure you are only using your freebie once. Print these out and look them over for errors and even purchases or activities that you are sure are not yours.
If you are trying to fix your credit or if you are worried about identity theft, your free annual credit reports are not going to be enough. You are going to want to see your report at least once a month for new information.
If you wait a year, a lot of damage could have been done. The sooner you get on top of problems the sooner you can clear things up. If someone is spending in your name, you want to put a stop to it as soon as you can, not a year down the road when you are in thousands of dollars of debt and the thief is long gone.
There are services out there that allow you to monitor your credit each month. You pay a small, monthly fee and you can see all that you would see on your annual credit reports but you can see them any time you wish. This is far better than waiting a year and hoping that things are okay.
If you are rebuilding your credit and fixing errors, you definitely want to see what is going on month by month rather than year by year. The fee will be worth it if you can get things going in the right direction because you were able to stay on top of everything.
Overall, your annual credit reports are a great thing. If you have good credit, you may only need to see them once in a while. If you are worried about your score and rebuilding or keeping your credit, it might be worth it to invest in a service that gives you the frequent access that you need.
The decision is up to you and what you want to do and even where you are in your life, but remember that identity theft is rampant and anyone can become a victim. Viewing your reports often can help you stop a thief in his or her tracks.
Related articles:
- What Affects Your Credit Score? (financesbudgeting.com)
What You Ought to Know About Your 529 Fund
| January 25, 2012 | Filled under Financial Planning, Personal Finance |
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My colleague’s oldest daughter was a freshman in college in 2007 when the financial crisis struck. Overnight, the 529 fund he had in place for her lost 25% of its value. As a manager at a major corporation, he was clued in well enough on how these things worked.
He thought that when they said that they would invest conservatively and carefully the closer they got to the date his daughter would actually need the money for college, that they had the right idea. They call this age-based asset allocation; and lots of people believe that this is all we need to see in a 529 fund.
Well, they aren’t far wrong. Except that when a 529 plan advertises age-based asset allocation, they’re just plain lying. They don’t do anything like it. When my colleague’s daughter lost a good bit of her college fund to the financial crisis, it was because her 529 people were still have heavily invested in risky stocks like they thought there was a good five years left before she went to college.
Or perhaps they’re not lying; perhaps they really do believe that investing 50% in risky stocks is conservative. One shudders to think of what they would do with your money if they were allowed to take a few risks.
I myself opened 3 529 accounts in my state for my three sons. The plan says that it only invested in a major mutual fund, that was convinced. I knew that if I went with my state’s 529 fund, I would get tax benefits. So I went right ahead. Only, the major mutual fund that they invested in turned out to be run by a manager who was accused of improper dealings. The fund underperformed terribly.
Actually, if I had done my research beforehand, I would have known that poorly managed mutual funds are not all that uncommon. Most 529 plans have a very short list of investment options to deal with. Also, most 529 plans invest mostly in stocks or mutual funds that are overwhelmingly domestic. Anything big goes wrong with the stock market corrects itself, and your 529 funds will evaporate.
What you need to do is basically to make sure what exactly they mean when they say “conservative”. You want them to as the time your child goes to college draws close, you want your 529 fund to truly invest conservatively – in certificates of deposit or anything else that at least ensures the safety of your principal.
Related articles from around the Web:
- Are 529 college savings plans too risky to invest in? (usatoday.com)
- What You Don’t Know About 529 Plans (forbes.com)
- 529 Plans Roll Out New Perks (online.wsj.com)
401k Versus 403b
| January 25, 2012 | Filled under Personal Finance, Retirement Planning |
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If you are given a 401k versus 403b retirement savings option, which one should you choose? Your first day at any regular job, you are going to get handed an information packet about your health benefits and your retirement benefits. When you read up about your retirement benefits, you are going to come across a choice between investing in a 401(k) and a 403b.
Everyone’s heard of the 401(k). What on earth is a 403b though? When you compare 401k vs 403b, how do you know which one wins out?
A 403b plan is not that different from the 401(k) that you are familiar with. It is a tax-deferred retirement plan. It allows you to contribute pretax dollars out of your salary every month so that you can save for your retirement.
Basically, you’re allowed to contribute up to $16,500 a year. Your employer will have appointed a financial management company to administer and manage the company’s 403b employee retirement plans, and you can choose what mutual funds or other investments your money is to be invested in.
The basic difference is that not every kind of employer out there will offer you a 403b plan. Nonprofit groups, schools and governmental organizations – these are the employers that are able to offer you this option. Basically, the 403b is for the government and for very small employers.
To help these people out, the law makes sure that the administrative costs of 403b plans are far lower than they are for 401(k) plans. In the 401k vs 403b head-to-head, the latter wins out in this respect.
What you save in administration costs on such a plan can be really insignificant, or it can be pretty big. A lot depends on what kind of investments you put your money in and the kind of money management approach – hands on or off – that the management company offers.
Whichever plan you go with – 401(k) or 403b, your overheads can be pretty high if you choose something like a variable annuity to invest your money in. Of course, 401(k) is always more expensive. But with something like a variable annuity that’s already quite expensive, the difference can be quite small.
You’ll find out how much you’re really paying for administrative costs by calling the department in your company that handles these things.
Both plans allow you to set aside no more than $16,500 a year in retirement savings. If you are over 50, you’re allowed a larger contribution in either. The good thing about the 403b plan is that you get to set aside an extra $3000.
So basically, with the 403b plan, you might end up saving more for your retirement than you could with a 401(k). In any 401k vs 403b comparison, the latter does the win out. It’s more flexible, it allows you to save more.
