Top 3 Low Cost Investments

One key to investment returns is actually the cost of your investments. If you can keep your costs down, you can keep large parts of your earnings from losing out to expenses. Here are the top 3 low cost investments to keep your costs down, and your returns up.

Low Cost ETFs (Electronically Traded Funds)

ETFs or Electronically Traded Funds) can be a great low cost alternative. Many brokerage companies are offering commission free trades on their in-house ETFs. I personally use Charles Schwab, but Vanguard does this also. So not only do you not pay to buy and sell them (which is awesome) they also have low expense ratios. My lowest ratio is 0.06% and the highest is 0.14%. Better than paying 1% to 2% to someone to manage your portfolio whether it wins or loses.

Mutual funds

First you want to determine if the fund is no-load or load. Basically, are there commissions for buying and selling. Load funds typically charge a upfront charge (usually higher) or a back-end. Either no-load and load funds may also charge fees called 12b-1. Which are to pay promotional fees. So a load funds can have fees ranging from 3% to 5% plus 0.5% per year. That means given the same asset class, the fund manager of a load fund needs to be able to beat the manager of a no-load fund by at least 3.5%. So you’ll want to review the prospectuses and histories very carefully. Again, remember the goal is to keep costs low. I think in most cases a no-load fund is best for the majority of people.

Certificates of Deposit (CDs)

You can actually do CDs for no cost and 0% expense rations. But you may want to look up some sites such as to find the best rates. I would also check with your brokerage account. Sometimes they have better rates. For instance, lately, many brokered CDs have been offering rates higher than direct CDs on 2-year to 5-year CDs. Of course, although you aren’t paying for them, brokered CDs to compensate the sales agents by marking-down a portion of the rate. So if you buy a 3-year at 1.35%, the real rate may be a 1.55% to 1.60%.

You should also pay attention to the penalties of your CDs. Brokered CDs don’t have stated penalties. You could have a gain or loss depending on the market conditions at the time. For instance if you bought your CD paying 1.30% and rates are now higher, you will have to sell your CD at a loss to make up the difference. For direct CDs, banks usually have stated penalty like 3-months of lost interest all the way up to all of the interest. So read the disclosures.

I hope this post has been helpful.

12.5 Trillion – That’s not so bad is it

So US Debt is roughly $12.5 Trillion dollars. I don’t believe any man or woman can even fathom that number. I heard it reported that if every one living on Earth contributed $19,000 we would be scottfree. So come on people. Let’s just send it in and be done with it.

Okay, I’ll admit that isn’t very fair. However, the ideas of redistribution aren’t very fair either. It is becoming a revenue problem, but tax receipts really haven’t been the problem. Rampant greed, lobbyists thinking of themselves, politicians just looking for the next election, leaders with no spine (on both sides of the aisle), etc. have created a much bigger mess and literally thrust the world into an economic quagmire that could not be imagined.

QE1, QEII, TARP, cars for clunkers (remember that), $8000 home credits, etc. None of it has worked. Why not? You can’t just keep throwing more debt at a debt problem. Just as I have to mind my checking account so every city, county, state, and nation. And greed is just not in the US. Look at Greece, Portugal, Spain, Italy and even China. Yes, the US has a serious problem, but some of these other countries need to pull the plank out of their eyes.

Okay, back to home. First, I would be willing to concede taxes are necessary if some Democrats would find some spine and realize that many social programs are just not sustainable. Second, get rid of the lobbyists. Put those people to work solving some serious issues rather than spending millions on their pet projects. Next, our leaders need to look at their benefits. Why should someone collect retirement for a 4-year stint serving our country in politics. Why should they get free medical, free cars, free housing, etc? Give them a salary like 99% of the rest of the US and make them figure out their own budget and what they will spend money on.

Crack down on special tax favors for people that have no need of them. Go after the Wall St. criminals. Prosecute them and put them in jail. Let the whole world know that greed doesn’t pay.

No more free lunches. If you are collecting unemployment you need to be required to work for that money. We have national forests and treasures falling apart. Put these people to work there. Once they find a real job, fill the position again with someone collecting unemployment. Make the required community service hours a graduated scale. Make it increase the longer they are getting benefits. And at some point, it just has to stop.

Shrink the national government. Move 99% of the social programs to the state and let the states decide which ones they want to keep and fund. Let our government do what it is suppose to. Deal with interstate commerce and secure our borders.

Just stop the madness, please. Grow up and start behaving like reasonable, compassionate adults. I know it is a tall order, but that is what we elected you to do.

The Big Drop of 2011

Today, the major stock markets saw the largest drop of the year. The DOW dropped over 500 points. All stock market gains for 2011 have been erased. I hope it will remain the largest, also. But should you panic. Please no.

I realize it is difficult to hang in there when things are looking bleak, but research shows that panic reactions cause great loss to portfolios. In most cases you will be better off waiting it out.

There are some factors to consider before making drastic changes to your portfolio. One question to ask, “How long before I retire?” If you still have twenty or more years, I think I would ride the current downturn out. Another question, “My stock(s) lost 50% today, do I sell?” I would first determine what the price was when you first purchased it. If you bought a stock when it was selling for 19 and it is still trading at a profit, hang on to it. It is probably going to come back. But, do some research. Is the company having some serious problems or was it just caught up in today’s selling.

The stock market is still much higher than the lows of 2008. The danger with just selling now and getting out is your portfolio could take a huge loss. People have a bad habit of buying high and selling low. Market timing is next to possible and trying to guess its downturns and upturns usually costs us money.

That being said, during this turbulence, you might want to look for some top cd rates to at least protect a portion of your assets from loss. I know many people keep saying, buy gold, buy gold. But, I think for most people, it would be a losing investment at this point. One thing I have learned, when everyone is saying to do a particular investment, it probably isn’t the right choice.