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Dear ,
Welcome to the June 2010 issue of The Wealth Chronicle.
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Putting all of your eggs in one basket
The debacle currently going on with BP and the oil spill in the Gulf of Mexico highlights the importance of diversifying your investments and not putting all of your eggs in one basket.
 In this day and age having all of your money in one company sounds crazy but there are plenty of people who are guilty of doing this. Companies have stock purchase plans where as an employee you can buy shares of stock in the company you are employed by at a discount. The discount can sometimes be up to 15% of what the shares are trading for on the open market. You may start participating in that plan and 20 years later you realize that you have $750,000 invested in company stock. The stock may be doing well and you think why should I sell the shares now if everything is doing well. On top of that you have an emotional attachment to both the company and the stock.
We have seen this approach blow up recently a couple of times in different industries. Bear Stearns and Lehman Brothers in the Financial Industry, Enron in the energy sector, and also with WorldCom . In all of these cases the companies were healthy one day and their stock dropped almost to nothing the next.
BP is no different. The company had been doing great and earnings were over $6 / per share. There is a small percentage of companies with earnings in that range. However, once the oil spill hit there was nothing that could have stopped their stock price from being chopped in half over the past month. They have suspended their dividend payment and the threat of bankruptcy is on the horizon depending on how much they will have to payout in damages and lawyers fees.
I was talking to someone recently about not having all of your money tied up in one company and their thought was unless that company is Apple. The Apple brand can do no wrong right now and this conversation was the same day that Apple could not keep up with the demand for their new iPhone. I still said as good a company as Apple is you never know what could take down a company and more importantly for investors their share price.
When it comes to Financial Principals the first two I would start with would be:
- Spend less than you earn
- Diversify your investments
If you follow just those two principles you will be off to a good start with your finances. |
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Social Security Planning Seminar
7:00pm
Tuesday June 29, 2010
at Wood Ridge Memorial Library
REGISTER NOW
After being told for years that Social Security is "going broke," baby boomers are realizing that it will soon be their turn to collect. To help baby boomers better understand the Social Security system, this workshop will cover the following:
- 5 factors to consider when deciding when to apply for benefits
- When it makes sense to delay benefits -- and when it does not
- Why you should always check your earnings record for accuracy
- How to estimate your benefits
- How to coordinate benefits with your spouse
- How to minimize taxes on Social Security benefits
- How to coordinate Social Security with your other sources of retirement income
The decisions baby boomers make now can have a tremendous impact on the total amount of benefits they stand to receive over their lifetime.
Please click on the following link to register for the seminar |
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Minimize Investment Expenses
During a night of watching tv, note how many financial commercials are shown. You will probably be surprised at how many you come across. Unfortunately you probably weren't aware that if are an investor in that financial companies mutual funds there is a good chance you helped pay for that advertisement.
Now the fact that you are paying for funds advertisement may not be that surprising. It's probably safe to assume that if you take any product that you consume, in one way or another you are paying for their advertisement. What's different in this case is that some of the funds that are still charging 12b-1 fees are closed, meaning they are not accepting new clients.
There has been a lot of political talk about passing legislation to outlaw the charges of 12b-1 fees however so far nothing has gone done about it.
The closed funds claim that 12b-1 fees are not only used to pay for mutual fund advertisements. They also are used to compensate brokers for selling you the fund. Either way paying the fee is something you want to avoid. There are plenty of funds out there that do not contain 12b-1 fees. I recommend including them in your portfolio. |
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Company Spotlight: GROUPON |
How much would you love to buy a certificate for a massage at 50% off? Or get 75% off of drinks and appetizers at a hot new restaurant? How does half off Mets or Yankees tickets sound? Groupon features a new offer everyday, these offers run the gamut from personal and professional services to sports and entertainment tickets. Their affordable offers make it easy and effortless to try something new.
Each day Groupon features something cool to do at an unbeatable price. You only get it if enough people join that day... so invite your friends. Once the Groupon deal "tips" then everyone who brought the deal gets it! Check back the next day for another awesome Groupon!
Groupon is the latest in harnessing social media networking to create collective buying power. It costs nothing to subscribe to receive emails daily featuring deals from your home city and other cities you may travel to frequently. Buy for yourself, your significant other, or family members. If you haven't used Groupon before, you may still be wondering how it works, so check out this quick, fun video = http://vimeo.com/2112924. |
