Manage Money and Income Sucessfully

For a fee, newsletter writers rate individual stocks and funds. Most newsletter writers are optimistic sorts who like to predict ever-rising stock prices. A few are perennial bears. Newsletters sell from $60 a year to more than $1,000. The higher priced newsletters claim to have better information.

Newsletter writers on a hot streak sell more copy; some become household names for a few years until their streak runs out. Extensive studies of newsletters show less than 20 percent outperform the market. Higher priced newsletters are no more accurate than cheap newsletters. Most newsletters die within a few years of sending out their first batch of predictions.

Investors looking for certainty in an unpredictable market turn to newsletters. Their authors become gurus. Many a fortune has been lost along the way. The gold bug gurus of 1975-1980 continued to recommend half or more of a portfolio in gold throughout the 1980s as gold lost more than 65 percent of its value.

Investors who choose among newsletter recommendations and supplement newsletter research with their own research will benefit. One or two good picks can be worth the price of a subscription. On the other hand, as a newsletter subscriber, you may believe you are in an exclusive club with special knowledge about the market. This sense of grandiosity can be hazardous to your financial and mental health.

Exchange traded funds (ETFs) are CEFs that own a set group of stocks, often those in an index such as the S&P 500 or the Dow Jones utilities. Most ETFs are also convertible into the underlying shares such that they always trade at or near NAV. The main issue with ETFs is that they only own the overpriced, overowned stocks in the index. When the last buyer is in for overpriced stocks, returns are mediocre at best and volatility increases.

However, ETFs, unlike index funds, are traded all day long. Overconfident investors will trade them, running up commissions and spreads. Internet companies now offer, for a fee, selected groups of individual stocks. These preset stock portfolios are tailored to attract a wide range of investor whims and are designed to give the investor the illusion of control.

With a mutual fund you are taxed on gains you did not incur and can lose value because other investors panic and sell. Internet portfolios allow you to control your gains and do not subject you to the whims of fund managers and fund management companies. Unfortunately, as a group, most of these portfolios will have the same swings as the market. These portfolios are full of the same overowned, overbought stocks that fill mutual funds. When the last buyer is in, return will be mediocre and volatility high. A mutual fund panic will cause your portfolio to drop just as it would if you owned a mutual fund. Powerlessness can lead to anxiety, numbness, depression, and freefloating fears as with any stock product.

What would you think if I told you study after psychological study ranked financial pressure as the one of the leading causes of stress, anxiety, unhappiness, and relational discord? And what if I also told you a joint study done by the Universities of Virginia and Arizona linked physical health problems to financial stress?

My guess is that most of these problems didn’t come from having too much money, or even just enough money. Instead, it probably came from owing a whole lot of money to other people.

As you clean up your debt situation, I’ll bet that you’ll begin to see noticeable differences in everything from your emotions to your physical health. While it can’t replace a healthier diet, regular exercise, or a trip to the doctor, it can sure help the underlying problems!

Okay, I get it. Money is fun to spend, right? Would you be surprised if I told you that I agree and love to spend money? I do.

Ultimately, my beef with debt is that it forces you to send your money to someone else for something you bought in the past. I’d much rather get to spend it on things I truly want now or will need in the future (like a retirement or a college education for my kids). You have to shift your mind-set from “I don’t want to miss out on fun today” to “I want to have even more fun tomorrow.” It’s one of those “is the glass half empty or half full” type of moments.

By scrambling to pay off your debts now, that means interest does not accumulate as fast. That in turn means your debt gets paid off even quicker. This of course means the money you waste on debt each month will now be freed up for you to spend on whatever you like!

Let’s look at someone with $25,000 in combined short-term debts (a payday loan, a few credit cards, and some medical bills), with an average interest rate of 20%. Take a look at their total interest costs based on some different fixed monthly payments. What a difference $250 makes as you raise your payment from $500 per month to $750. It cuts your repayment period by more than half and saves $18,000 in interest! For what you saved in interest by paying off your debt as quickly as possible, you could go out and pay cash for a new car. If that doesn’t make the case for an opportunity cost of using your money for other things besides paying down debt, I don’t know what does!

Control is exercised by monitoring the company’s performance against agreed targets. Control over the transaction enables momentum to be maintained to complete it both during the restructuring discussions and subsequently within a given time frame. It also gives the participating banks the ability to react to events quickly, and thereby address problems before they are too late. Control plays an important part within the bank as well, so that the transaction team works efficiently and effectively.

Communication

Communication should be present at all levels: within the workout team in a bank so that all members of the team know the exact position and status of the restructuring; within the loan workout unit of a bank so that a consistent approach is adopted by the institution in all its workouts; within the bank to enable knowledge transfer from the workout department to, in particular, the bank’s credit function; with other creditors and the company during the restructuring so that all parties are kept informed of each other’s positions, where appropriate; and communication should be maintained with the company after the restructuring is in place to ensure effective monitoring and control.

Trademarks and trade names are a second class of identifiable intellectual property. Trademark law is intended to prevent consumer confusion as to the source of products or services. The great names of the old economy are largely trademarked: Coca-Cola, McDonald’s, Xerox, Sears, Gillette, DuPont, and Kodak all inspire trust on a global basis. They create shareholder value above the intrinsic value of the goods and services in the marketplace.

The proliferation of web sites has made trade names even more important in the New Economy. Witness the flood of dotcom advertising during the Christmas season of 1999 aimed at creating brand awareness. The very names America Online and AOL, Amazon, Yahoo!, and eBay are now important commercial franchises. The traffic that comes with consumer awareness generates real options to supply new services on these sites and thus leverages value beyond that earned from the existing services.

Trademarks can be used commercially almost as aggressively as patents. Monsanto spent millions to establish the Nutrasweet trademark and required soft drink suppliers such as Coca-Cola and PepsiCo to put the Nutrasweet swirl logo on every can and bottle. They succeeded, despite considerable resentment from their customers, because of their patent position on the composition of matter. The objective was to use the trademark to differentiate Nutrasweet from generic aspartame and to protect its market position after the patent expired. The strategy appeared to work for a while, but the swirl now has been harder to find on the cans of the major soft drink brands.