Wisdom of Rich Dad

9 things to be wary of when the phone rings:

1. High-pressure sales tactics. The call may not begin that way, but if the swindler senses you’re not going to be an easy sale, he or she may shift to a hard sell. This is in contrast to legitimate businesses, most of which respect an individual’s right to be “not interested.”

High-pressure sales tactics take a variety of forms but the common denominator is usually a stubborn reluctance to accept “no” as an answer. Some callers may resort to insult and argument, questioning the prospect’s intelligence or ability to make a decision, often ending with a warning that “you’re going to be very sorry if you don’t do such and such.” Or, “you’ll never get rich if you don’t take a chance.”

2. Insistence on an immediate decision. If it’s an investment, the caller may say something like, “the market is starting to move even as we talk.” For a product or service, the urgency pitch may be that “there are only a few left” or “the offer is about to expire.” The bottom line is that swindlers often insist that you should (or must) make your decision right now. And they always give a reason.

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Successful investment clubs share a few common characteristics. To help ensure that your club succeeds, follow these five tips:

1. Join NAIC. The National Association of Investors Corporation has been helping individuals to start clubs for nearly 50 years. They have manuals, sample agreements, and brochures to assist new clubs in forming, as well as a monthly magazine and stock study tools. NAIC membership is a great first investment for a new club.
2. Agree on an investing approach. Members of successful clubs share a unity of purpose. If some members in a club want to pursue short-term strategies, and others prefer to buy and hold, the resulting discord will doom that club to failure. All members should understand and abide by the club’s approach to investing.
3. Think long-term. Even in an online club, it can be difficult (if not impossible) to manage a short-term investing strategy, where decisions to buy or sell stocks need to be made very quickly. A long-term, buy and hold philosophy — planning to own every stock for five years or more — has proven to be the best approach for the majority of clubs.
4. Use your computer. Software makes the number-crunching part of club recordkeeping and investment analysis much easier to bear. NAIC sells club accounting software, which should be every club’s second investment (after NAIC membership). Also, the Internet provides terrific resources for investors, and e-mail is a great way to communicate with fellow club members, whether your club meets online or off.
5. Education is key. Clubs that operate with the primary goal of educating their members about investing will find that profits naturally follow.

NEW YORK (AP) — More than 8 million consumers stopped using credit cards over the past year. The decline stems from a combination of consumer choices and bank actions.

An analysis by credit reporting agency TransUnion found that use of general purpose credit cards bearing MasterCard or Visa logos, or issued by Discover or American Express, fell more than 11 percent in the third quarter, compared with the July to September period last year.

About 62 million people now have an active card, compared with 70 million a year ago.

The Chicago company found that consumers in the subprime category, or those with low credit ratings, were believed to be without cards mostly because they were shut down by banks after payments fell behind or balances were written off.

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It’s never too early to start with New Year’s resolutions, particularly as you enter the holiday season and begin contemplating how to best strengthen your family’s financial future.

Here are five financial resolutions that will put you ahead of the curve over the long run.

1. Lay a balanced investment groundwork. Does your current asset allocation—the mix of securities in your investment portfolio—still match your risk tolerance and time horizon? Complete a risk tolerance questionnaire each year to make sure your asset allocation is aligned with the risk you are willing to assume. You can find many samples of these online or through your employer-sponsored retirement plan.

Why go through this exercise? Quite simply, stock market performance over the past few years may have shifted the value of your stock holdings above or below the level you had originally intended. This is a particularly worthwhile consideration given the extreme market volatility of the past few years. If your stock holdings have changed meaningfully in value, consider rebalancing—either by selling some of your stock or bond investments or by purchasing more stock, bond, or cash investments.

2. Create a nest for the future. Rather than just hoping you’ll have enough for a comfortable retirement, take some time to calculate how much you’ll need—and how much you’ll need to save.

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In their 1978 album, Minute By Minute, the Doobie Brothers tell the tale of a man who is self-deceived, believing a lie of his own fabrication. Somehow, this poor sap has convinced himself that he is a Casanova, the apple of some woman’s eye, when in fact he has never been so much as a blip on her radar. This pathetic chap just doesn’t get the facts. As one anonymous person quipped, “What seems to be is always better than nothing.” Unfortunately, this guy has bought into this ethos of ignorance and prefers his fantasy to the sobering reality that, if properly understood, could set him free to move on with his life.

This fictitious character’s predicament is not much different from what many retirement investors face. In love with the Wall Street fantasy of trouncing the markets through laser beam equity selection, many investors prefer to see themselves as a type of Warren Buffett—glasses slung low into the bridge of their nose, astutely gazing past today’s Journal while processing terabytes of random data with super-computing accuracy to distill the investment insight of the day.

The unfortunate fact, however, is that research unequivocally demonstrates that only a tiny percentage of professional money managers display such oracular talents. For those who value facts over fantasy, the fulcrum about which all investment activity should turn is that the overwhelming majority of active money managers do not beat the market.

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Before you invest your money, it is important to be aware of the fees attached to your particular type of investments. Any respectable, professional advisor should be able to explain every fee in great detail.

The problem is that when we invest in our retirement accounts such as a 401(k) or IRA, we often don’t think about the fees associated with each mutual fund, ETF, stock, or bond. Before you do anything with your money, the following six fees are worth asking about:

1. Expense ratio. It takes money to create a mutual fund. For this reason, there are operating expenses involved. These are known as an expense ratio. Calculating an expense ratio is not as difficult as you may believe. A fund with a ratio of 1 percent, for example, translates into roughly $10 paid in expenses for every $1k invested.

Typically, you should look for mutual funds and ETF’s with an expense ratio of less than 1 percent. The reason why so many people like index funds is because they are typically not actively managed, therefore, their expense ratios are very low and more of your money gets invested instead of getting eaten up by fees. Read the rest of this entry »