Hello and welcome to The Festival of Stocks –Magical Penny edition for 10th May 2010.
The Festival of Stocks is a blog carnival dedicated to highlighting bloggers’ best articles on stock market related topics. This will include research and commentary on specific stocks, industry analysis, ETFs, REITs, stock derivatives, and other related topics.
This week Magical Penny is hosting!
If you’re new here, Magical Penny is a UK-based personal finance blog written by Adam Piplica to help you grow your pennies. Its mission is twofold:
- To ensure readers really comprehend the power of the exponential curve when it comes to saving and investing.
- To help people actually take action on what they have learnt to grow their pennies to meaningful sums that can empower and transform lives.
Now on with the carnival!
A note for regular Magical Penny readers: most of the submissions are US centric but if you’re in the UK there’s still a lot of value in these posts.
The Winning Post
Mike at The Oblivious Investor presents “Dave Ramsey Gives Bad Investment Advice”:
Mike argues that: “while Dave Ramsey has successfully helped many people get out of debt, his investment advice is downright awful”.
I love that Mike has called out this financial ‘guru’.
As Dave Ramsey believes debt is wrong, he thinks that bonds are too, and so suggests investing purely in stocks.
In simple terms a bond is a company debt that you can buy with the promise that the company will ‘pay you back’ with interest. They tend to return better than cash but less than stocks. They can be very good at helping ‘balance’ a portfolio so when stocks go down your bonds protect you from huge losses –something that becomes increasingly important as you get closer to retirement.
Magical Penny readers tend to be young so we don’t have to worry about bonds yet as we can ride out the highs and lows on the stock market, but for people in their 40s and 50s, Dave Ramsey’s advice to stay away from bonds and keep a 100% equity portfolio could cost them huge amounts, as Mike respectfully explains.
Madison at My Dollar Plan has an article discussing: “Can you have a 401k and an IRA at the same time?”
A few people that I’ve talked to recently thought that because they had a 401k at work, they couldn’t open an IRA. Not true! Let’s take a closer look at investing in both an IRA and a 401k at the same time.”
My favourite part of the article was the helpful breakdown of the order you should fill your investing accounts, taking into account factors like taxes, contribution limits and flexibility:
A 401k is an US specific retirement account –the equivalent of a UK ‘defined contribution work pension scheme’
An IRA is an US specific “Individual Retirement Account” (IRA)
- The traditional IRA is the equivalent of a UK’s SIPP (pretax saving)
- The Roth IRA is the equivalent of the UK’s stocks and shares ISA (post-tax saving)
Both UK equivalents are much more flexible than the US versions though. More to come in future Magical Penny posts.
- Contribute the minimum to the 401k to get the full match.
- Contribute to a Roth IRA until you hit the income limits.
- Contribute any additional IRA contributions to a traditional IRA, with plans to make a Roth IRA conversion.
- Max out the rest of the 401k.
- Finally, save the rest in a taxable account.
Madison’s order of investing for retirement could work in the UK too, with a few tweaks:
- Contribute the minimum to an employee pension plan to get the full match
- Contribute to a Stocks and Shares ISA (limit is £10k)
- For tax diversification consider increasing your employer pension contribution
- For more control put any additional long term savings to a SIPP
- Finally, save the rest in a taxable account.
Note this only my UK specific interpretation of Madison’s plan–this is not Madison’s advice
I’m a sucker for tax-efficient retirement planning (that’s right ladies!) so I also enjoyed reading Silicon Valley Blogger’s article on Is Your Retirement Investment Portfolio Tax Efficient? over at The Digerati Life. The post breaks down three critical factors to retirement fund success: asset location, tax diversification, and spending philosophy.
Bob at Christian Personal Finance went to see the richest man in the world last weekend and wrote about it in: “Notes from Warren Buffett & The Berkshire Hathaway Meeting“.
“I didn’t take as many notes as I had planned, but I mostly picked up nuggets of wisdom”.
My favourite two ‘nuggets’ that Bob highlighted were:
“Don’t ever underestimate human’s abilities to solve the world’s problems.”
“We aren’t particularly brilliant; it is just that we work hard to avoid stupidity”
This is inspiring stuff so thank you Bob for sharing. 🙂
Patty at Alpha Profit has been writing about “Investing in Emerging Markets ETFs and Mutual Funds”. He cites fiscal fitness, growth prospects, and corporate profitability as the three main reasons to be investing in emerging markets.
I agree that investing in emerging markets (investing in stock markets of less developed countries) can be a useful way to grow your pennies over the long term and personally have made some great returns over the last year. However Patty reminds us of an important point: not to be too greedy:
“Limiting emerging market exposure to less than 15% of one’s assets may not be a bad idea for most individual investors.”
–because a higher potential return also means a higher risk of losing your pennies too.
Vahid at Forexoma has written a reflective post: “Trade or not to trade: That is the question”. It’s core message is that a trader is not someone who clicks on the buy/sell buttons. A trader is someone who knows when he should be out of the market and waiting for a better chance.
Ryan at Cash Money Life poses the question: “What Percentage of Assets Allocated to US Based Investments?” It’s an interesting question but the real gold of the post is actually in the comments.
When you first begin investing most people suggest investing in your ‘home’ market –it’s cheaper and you are more familiar with what you are investing in. The advantage for US investors is the USA is the largest stock market in the world, is highly diversified and has performed very well over the years. Be sure to head on over to the post and add your own comments.
Best of the Rest
D4L at Dividends Value has a fascinating analysis of a specific dividend stock: Abbott Laboratories . The post is a detailed analysis and commentary of the stock of Abbott Laboratories, a company engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics.
Steve at Magic Diligence writes: “Magic Formula Stock Review: CF Industries (CF)”. It’s an analysis of CF Industries, one of the largest nitrate fertilizer producers in the world after their merger with Terra Industries. It also has a sizable phosphate fertilizer business. Steve concludes that the near-term outlook for fertilizer business metrics continue to look pretty good.
Editor at Double My Net Worth presents: “Analyzing Dividend Stocks: Dividend Model Price”, an article that shows you how to analyze your dividend stock pick using the dividend model price to keep yourself from paying too much for a stock. The post even includes a handy spreadsheet with all the calculations in. It certainly would help you stay on track if you’re trying to do what every investor wants to do: buy low and sell high!
Sun at The Sun’s Financial Diary gives a detailed breakdown of the process involved for withdrawing money from a Brokerage Account (US specific).
David at Money Under 30 submitted a guest post written by Mark Riddix, founder and president of New Horizons Financial Management, an independent investment advisory firm: “Why Now’s a Good Time to Add Financials to Your Portfolio”. The article explains that the financial sector has taken its fair-share of beatings over the last few years, but with the worst of the recession behind us, it may be a good time to load up on certain financial stocks.
Praveen at Simple Trading System has written about “Three Good Stocks Made More Attractive By The Recent Market Activity”, a particularly timely piece given the recent market drop in the last few days.
The legend that is PT, of PT Money fame, submitted a guest-post written by Michael, a contributing editor of the Dough Roller, a personal finance and investing blog: “Why I Just Bought 1,000 Blockbuster Shares”. It’s an interesting article going through a more fundamental analysis of the company (looking at the industry and company as a whole).
Jay at Market Folly presents “Value Investing Congress: Notes From Day One”, an aggregation of all the news from the event.
Manshu at One Mint posted his “List of Gold ETFs”, a comprehensive list of all gold ETFs traded on the US stock exchanges. It’s a useful resource if you want to invest in gold without buying actual gold itself.
As someone who has never engaged in individual stock analysis, this week’s Festival of Stocks has been a huge learning experience for me so thanks for submitting so many interesting reads.
I especially enjoyed hearing some new perspectives and reading how investors trading individual stocks evaluate the value of a company or an industry.
I would love to hear what is your favourite post in the carnival this week, so leave a comment below. I’d also appreciate if you could spread the word about the carnival on Facebook, Twitter, Stumble-upon, Tipd etc…
Submit your blog article to the next edition of Festival of Stocks using the carnival submission form. Past posts and future hosts can be found on our Festival of Stocks index page for those of you interested in reviewing the archives.