The Finanacial Turmoil and Recency Effect

by: admin - October 23rd, 2008   Filed under: Money Thoughts Add Comment

Since we are in the midst of a recession, and anyone denying it is really hanging on to technicalities, it’s easy to fall into the recency bias trap. The recency effect, which is a term borrowed from the psychology discipline, refers to the tendency of people to remember recent events more vividly and give them a higher consideration than historical information. Unfortunately the recency bias could result in the abandoning of logical thinking when it comes to long-term financial strategies.

Here are some examples of the recency bias when it comes to investing:

* Deciding to keep money at home( in the mattress, a safe, etc’) as opposed to depositing it in the bank and letting it earn interest.

* You decide to transfer your money into “better” investments, such as bonds and gold

* You decide to cash out of your retirement savings.

Whenever a person makes this type of decision, they are allowing recent event to directly affect their long-term planning to the point of abandoning what was once considered a sound strategy. Although, you may be right in changing your approach, this is highly unlikely.

The following are the likely results:

* Your bank doesn’t declare bankruptcy and you missed out on the interest while your money was at home.

* The stock exchange begins to recover and in the meantime bonds and gold start declining. You then move your money back into stocks which leaves you paying more in the end.

* You pay taxes and penalty fees for early withdrawal from your retirement account. Stocks recover and you are left behind on gains you could have made.

Allowing news and events to drive your strategy is never a recommended. Instead, you should come up with a strategy that will withstand both the highs and lows of the market. For example:

* Select the right asset management that is right for your time horizon and risk tolerance threshold

* Regularly contribute money to your portfolio

* Reanalyze and balance your portfolio annually

The only time to actually move out of the financial market is if your individual stocks are showing obvious signs of crashing beyond repair.

Having knee jerk reactions to financial news is not a wise decision. History, we have to remember, is a good teacher of this.

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Maximize Your Internet Experience

by: admin - October 22nd, 2008   Filed under: About Blogging Add Comment

Here’s a quick post for our UK readers, who are obviously going through the financial turmoil and uncertain times, just like we are on the other side of the pond.

Nowadays, when we are all trying to get the biggest bang for our money, it’s a good idea to compare products and services. One such service would be cheap broadband Internet, and a website such as Broadband-Expert.co.uk offers good tools and advice on selecting the optimal Internet access for you.

The website offers comparison of home as well as mobile broadband deals. These services are offered by major Internet providers and are updated on a day to day basis. Each broadband provider is described in detail, including hidden costs. There are also some bargains mentioned, such as mobile broadband with free laptop. The comparison is divided into download limits, speeds, the set up fee, the cost for the first year, service ratings,and minimum contract duration.

The site also offers a broadband speed test for both your upload and download speeds, which only requires the entry of your current broadband package details. If the speed result is lower than what you were quoted by your current Internet service provider or you are ready to upgrade to a higher speed, you can definitely check the other relevant promotions.

Broadband Expert also offers visitors a news section, consumer guide, and a forum for helping users with theirresearch and choosing the right broadband provider.

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Tips To Live A More Frugal LifeStyle During These Tough Economic Times

by: admin - October 22nd, 2008   Filed under: Easy Finance Add Comment

Cutting back when times are tough is a reality for a great portion of us. While it’s not always fun, the good news is that there’s many different ways to save a few (or even a few hundred) dollars – and I’ve compiled a little list to get you thinking in the frugal mindset. So, use and enjoy!

Reevaluate Your Auto Needs – Can your family make due with one car? Extra Insurance and car payments are costly, and downsizing to one vehicle can add a lot of breathing room to a tight budget. Try carpooling or using public transit to get around when a personal vehicle is not readily available.

Quit A Bad Habit – I’ll be honest here – this one is much easier said than done. However, if you can stop or reduce the amount of time and money spent indulging in bad habits (smoking, drinking, eating unhealthy foods) you’ll save a bundle.

Buy Used – Get over the stigma of buying used merchandise and find a bargain on just about everything you purchase – clothes, electronics, tools, you name it – it’s cheaper used.

Walk, Walk, Walk - Fuel prices are high, and obesity is on the rise – why not help to kill two birds with one stone by making walking an integral part of your life? It can be tough to do without the convenience of a warm vehicle at first – but it’s something you get used to, and I promise you’ll fit more comfortably in your jeans too.

How Many Phones Do You Really Need? – Are you paying for each member of your household to have a wireless phone? If your wallet is hurting, go back to a singular land-line, and rake in the savings.

Replace That Steak With Celery - Okay, that title is maybe a wee bit on the extreme side, however cutting back on meat and consuming more vegetarian meals is a sure-fire way to reduce the size of your grocery bill.

I hope you enjoyed these tips, but remember that they’re just a starting point. If you have additional methods that you use to save money, feel free to share them in the comments below.

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How Can Warren Buffett Keep Getting Richer?

by: admin - October 21st, 2008   Filed under: Money Thoughts Add Comment

The world’s richest man, Warren Buffett, is also the most famous stock investor. During the latest financial crisis, and previous ones, he hasn’t panicked but actually did the reverse. He invested big and for the long term.

Buffett’s company, Berkshire Hathaway, is a far-reaching worldwide empire that owns businesses in diverse industries from insurance to furniture, jewelry to candy and Dairy Queen ice cream shops. Starting from 2004 onwards, Berkshire Hathaway had approximately $44 billion in cash. For those 4 years, Buffett decided to sit on this enormous amount of cash and wait for the right opportunities to come along.

Well, the best opportunity is the current economic meltdown.

Buffett termed the current crisis an “economic Pearl Harbor”. He also stated, “In my adult lifetime, I don’t think I’ve ever seen people as fearful economically as they are now.” Although arguably true, this is not to say that Buffett was entirely pessimistic.

Earlier this year, Buffett invested $6.5 billion into the candy company MARS in order to acquire the gum company Wrigley, among other deals. Since the latest crisis, Buffett invested in the following:

- $4.7 billion to acquire Constellation Energy, an electricity and natural gas distributor.
- $5 billion stake in Goldman Sachs’ preferred stocks.
- $3 billion stake in General Electric in preferred stocks.

When Buffett made the above investment deals, he was offering much more than straight capital. He was also lending his credibility, which means that Goldman and General Electric were willing to grant him great deals based on the hope that his name alone would stabilize their stock prices for the foreseeable future.

It’s important to keep in mind, however, that Buffett got sweetheart deals which are likely to provide substantial returns on his investments, but other investors cannot get. Instead of buying what Warren Buffet is purchasing these days, it’s better to learn from his overall strategy:

- Assemble a list of attractive businesses
- Invest for life

Buffett hasn’t freaked out during these turbulent financial times, and he hasn’t attempted to make a quick buck. Instead, he is investing for the long term. This is the same strategy that he consistently followed for decades. Wait for the opportunities and strike hard when the iron is hot. When the opportunity is right, the negotiation is much easier and he can get a share of the companies, or the entire companies, at a great price.

As Buffett did, it’s essential to conduct a complete market/company research before the opportunity appears. This is important in order to remove the emotional aspect of investing. Therefore, compile a list of companies that you wish to own for the long term, combined with the prices you wish to pay for them. Regularly check the market value of these firms and whether the business environment has changed since you first added them to your list. Then make your move and keep these stocks for the long term.

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Chew on This – Tip #4. It’s Still Possible to Borrow.

by: admin - October 10th, 2008   Filed under: Money Thoughts Add Comment

During the current economic downturn, it is harder to get a loan for essentially any purpose. Even people with a good credit history need a loan occasionally, but are turned down by the banks. One company that offers loans for people with good credit is FirstAgain.com.

First Again, based in San Diego, offers a range of loans that include unsecure loans throughout the US for purposes such as home improvement, buying a car, medical expenses, education, etc’

One of the advantages of getting a loan from First Again is that it is paperless. It’s a streamlined, online application process, where the loan documents are signed electronically. As a result it is fast, and in the ideal situation, a person could apply and receive the money in their bank on the same day. This, as well as getting the loan at a competitive interest rate, is a big advantage for people with good credit.

An additional advantage of using First Again is that they offer unsecured loans. In other words, there is no need to tie your car, home, or other assets to the loan. This is the case since a good credit history generally indicates that the lender is likely to pay back the loan at the agreed time period.

Most Anything Loan finance amounts range from $10,000 to $100,000 at the following FirstAgain rates.

As demonstrated in the FirstAgain videos getting a loan through First Again is indeed possible.The company’s loan services prove that having exercised fiscal responsibility has its rewards in the form of quick approval and preferential terms.

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