Trying to get a loan on jointly earned property is a subject that’s gotten hot lately. In a perfect world, our partners would be right in line with our thoughts and desires, but this is not always the case. You have to try to communicate well and hope that you are received well. It is possible to make your goals come to life once you get their approval on the topic.

You see, when it comes to getting a secured loan on this property type, you will not be able to move forward without their consent. They own part of the property, and would therefore be subject to a foreclosure hearing if you defaulted on the secured loan that the property is holding. Does that make sense?

You can think of it as something that both of you are using at the same time. If someone wants to come up to you and ask if they can use your house — both of you have to agree on it. That’s the principle behind jointly owned property. Just as you both share in the benefits, you both also share in the risks and downfalls.

We advise that if you want to get a loan for the property to do something else that you sit down with your spouse or partner and really figure out what both of you want. One person might want to renovate the property, while the other wants to pay down debt. It can seem like the two desires are in conflict, but they’re really not. It’s all about balance. There’s nothing that says the two goals are really even mutually exclusive. It would be better to sit and make sure that you both are agreeing to split the money towards both goals. If this isn’t doable, then you may look at which goal can get you the things you want more. There’s nothing that says that you can’t just pay off the secured loan and then get something else.

Sometimes it helps to talk it out with a separate adviser that has no vested interest in the home. Homes are emotional items in our lives, and sometimes it can be hard to really hear someone when they’re trying to get through to us. Bringing in a third party to listen to both sides could be the very thing you need to do.

Need more information on getting a secured loan on joint property? Make sure that you read more about this topic today!

For a lot of people who are looking for a new type of financial investment opportunity, gold is something that often comes up. Generally, this is true with relation to the concept of purchasing actual gold bullion as an investment, rather than investing in any sort of gold “stock” (which can also be done via investing in gold mining companies). However, investing in a resource like gold bullion requires an entirely different understanding and set of strategies than a typical financial investment. So, without further ado, here are a few tips regarding the general concept of gold investment and the current climate.

Generally, most people’s reason for investing in gold is to protect existing financial assets, rather than to hope for gains. Unlike stocks or even other resources, the price and value of gold bullion does not rise or fall dramatically or consistently, which means that you will likely avoid significant gains or losses with any money you invest this way. However, what you will be doing is protecting the money you invest against the potential consequences of general economic trends.

As world economies ebb and flow, it is only natural that their respective currencies raise and drop in value, accordingly. This means that if your money is tied up in currency – even if that currency is in the bank – it may be subject to drops in value if your economy experiences any sort of downfall. This is not something that you will notice in your day-to-day activities the same way you would if you directly lost money, but it does still represent a legitimate depreciation of value. Many people who invest in gold bullion, therefore, do so to place their monetary wealth behind a source that is not so easily susceptible to economic shifts.

So how exactly do you invest in gold? It’s actually extremely simple, if you happen to be interested. You can simply visit a website like Bullion Vault online, and you will find that it is virtually effortless to invest any amount of money you want in any amount of gold. That gold will then be stored in a vault of your choosing, and protected safely to be withdrawn or re-sold whenever you choose. This is something that a lot of people have been doing in recent months due to the struggles of many of the world’s larger and more influential economies. However, lately there are actually some signs of economic recovery, particularly in the United States, which has led some to speculate that the dollar may actually be on the rise. This would imply that now many not be the best time to invest in gold, but in general it is still an interesting investment concept for those who wish to protect their wealth.

Andy Jackson is a freelance writer and professional blogger. He has contributed to various sites in the fields of finance and investment techniques.

Whiplash. It’s something that a lot of people don’t really take seriously until they’re actually in an accident. There are so many injuries that can happen when you’ve been in one of these car accidents, and not all of them will be sudden onset. You may have injuries that creep up on you over the following weeks and months to come — even years!

What if you still have to go to work everyday and you can’t? That means that the bills could start stacking up, leaving you and your family in a world of hurt.

You need an advocate on your side that understands how important the money is to you. Sure, the insurance company may offer you something for your raw medical bills, but it’s often never enough. Remember that they’re not thinking about your best interests. They’re actually thinking about their best interest. They are thinking about how little they will be able to get away with paying you because you’re just an individual.

Yet if you look for whiplash solicitors, there’s plenty of power in your hands again. You will have an advocate on your side that knows that you are entitled to plenty of money after an accident. The car accident claims process is really not as tough as it seems, not when you have a lawyer that can work for you. You just need to make sure that you get aggressive and begin looking early.

The last thing that anyone wants to see you do is go without the compensation that you so rightly deserve. If you are worried about not being able to afford the right legal representation, you might want to look for solicitors that can help you on a no win no fee basis. The name is straightforward. The solicitor will take on your case knowing that if you do not win, you will not have to pay them anything. Yes, that means that they’re going to be taking a risk and therefore they will get their fees out of your recovered compensation. However, isn’t that better than constantly worrying that you will not be able to get what you need done with your life?

If you think about it form the right perspective, you’ll find that it really does just make sense to go ahead and get a great legal professional on the case. They will be able to give you a lot more on the specifics of compensation, especially when it comes to something like whiplash.

Are you ready to get started? Great — don’t delay!

Is the capital asset pricing model flawed?  Is risk defined by volatility? Or is it something more of which the model cannot capture correctly?

For those of you without the technical knowledge. CAPM assumes that beta, or the volatility of a stock, is defined by how correlated that stock moves with the market as a whole. If the beta is 1, it perfectly matches the market, -1, it perfectly does opposite of what the market does, and so on. This is used to define the rate of return on equity, which estimates the cost of capital to the firm.

But is that really risk? I mean, you can have a very volatile security with an expected return of 1%-100%, and I bet you almost anyone out there would love to own it. It’s volatile, but not risky.

Should risk be redefined? Something such as the possibility of a negative utility towards the holder?

I’m not alone in this either. Warren Buffet (whom should be worshipped) agrees and doesn’t ahere to this definition of risk either. In his 2006 letter to his shareholder’s he criticizes the Efficient Market Theory.
quote:

Let me end this section by telling you about one of the good guys of Wall Street, my long-time
friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably
successful investment partnership, from which he took not a dime unless his investors made money. My
admiration for Walter, it should be noted, is not based on hindsight. A full fifty years ago, Walter was my
sole recommendation to a St. Louis family who wanted an honest and able investment manager.

Walter did not go to business school, or for that matter, college. His office contained one file
cabinet in 1956; the number mushroomed to four by 2002. Walter worked without a secretary, clerk or
bookkeeper, his only associate being his son, Edwin, a graduate of the North Carolina School of the Arts.
Walter and Edwin never came within a mile of inside information. Indeed, they used “outside” information
only sparingly, generally selecting securities by certain simple statistical methods Walter learned while
working for Ben Graham. When Walter and Edwin were asked in 1989 by Outstanding Investors Digest,
“How would you summarize your approach?” Edwin replied, “We try to buy stocks cheap.” So much for
Modern Portfolio Theory, technical analysis, macroeconomic thoughts and complex algorithms.

Following a strategy that involved no real risk – defined as permanent loss of capital – Walter
produced results over his 47 partnership years that dramatically surpassed those of the S&P 500. It’s
particularly noteworthy that he built this record by investing in about 1,000 securities, mostly of a
lackluster type. A few big winners did not account for his success. It’s safe to say that had millions of
investment managers made trades by a) drawing stock names from a hat; b) purchasing these stocks in
comparable amounts when Walter made a purchase; and then c) selling when Walter sold his pick, the
luckiest of them would not have come close to equaling his record. There is simply no possibility that what
Walter achieved over 47 years was due to chance.

I first publicly discussed Walter’s remarkable record in 1984. At that time “efficient market
theory” (EMT) was the centerpiece of investment instruction at most major business schools. This theory,
as then most commonly taught, held that the price of any stock at any moment is not demonstrably
mispriced, which means that no investor can be expected to overperform the stock market averages using
only publicly-available information (though some will do so by luck). When I talked about Walter 23 years
ago, his record forcefully contradicted this dogma.

And what did members of the academic community do when they were exposed to this new and
important evidence? Unfortunately, they reacted in all-too-human fashion: Rather than opening their
minds, they closed their eyes. To my knowledge no business school teaching EMT made any attempt to
study Walter’s performance and what it meant for the school’s cherished theory.
Instead, the faculties of the schools went merrily on their way presenting EMT as having the
certainty of scripture. Typically, a finance instructor who had the nerve to question EMT had about as
much chance of major promotion as Galileo had of being named Pope.

Tens of thousands of students were therefore sent out into life believing that on every day the price
of every stock was “right” (or, more accurately, not demonstrably wrong) and that attempts to evaluate
businesses – that is, stocks – were useless. Walter meanwhile went on overperforming, his job made easier
by the misguided instructions that had been given to those young minds.

After all, if you are in the shipping business, it’s helpful to have all of your potential competitors be taught that the earth is flat. Maybe it was a good thing for his investors that Walter didn’t go to college.

Does CAPM assume that the efficent market hypothesis is correct? Or is it simply a religion?

Is Beta dead?

William Sharpe has written a lot about CAPM and its flaws. His book “Investors and Markets” talks a bit about it. Here’s an excerpt comparing Markowitz/CAPM to the Kenneth Arrow’s State Preference Approach:
William Sharpe posted:

Let me be careful, because I’ll get in trouble with Harry Markowitz because we have somewhat different approaches to this. But the crux of the matter is that Markowitz and the CAPM, in its original manifestation, assumed that people choose portfolios strictly on the mean and the variance of the portfolio return distribution-which is to say, you tell me two things about a portfolio an that’s all I need to know. What is its expected return and standard deviation? You give me those two numbers and I’ll choose my portfolio among a set of portfolios based on those two numbers for each portfolio. Markowitz assumes you are willing to do that and CAPM assumes everyone is willing to make portfolio decisions this way. Now why might that be true? There are two conditions under which it would be true. One is, every single portfolio you can even imagine has nice probability distribution, which, if you tell me the expected return and the standard deviation, I know the whole distribution, I know the probability of any possible outcome. And the easiest case for that is everything is the normal distribution we learned about in class.

So that’s one kind of world in which this would be a great assumption. The other kind of world in which it would be a great assumption is, “All I care about are those two numbers. I don’t care what the probability distribution looks like.” Now for this to be the case, I must have a particular kind of preference, which is called quadratic utility. So you have these two possible rationales for those approaches. But what we know is that people are increasingly coming up with investment products that have very non-normal distributions: hedge funds and protected products. You go down the list. And there are all these exotics, which, partly intentionally, have weird distributions, what’s called tail risk—small probability of a disastrous outcome. That’s the classic hedge fund approach. So the first rationalization doesn’t hold as well perhaps as it did 40 years ago, at least for some people in some cases. The second rationalization, the preference assumption, the quadratic utility, if you look at it, it doesn’t seem to conform with how most people really think about having bad things happen or good things happen.

For a number of years, I’ve tried to think about finance in terms of the State-Preference approach, to think of the future as one in which the world can be in a number of discrete states, and each one has a probability. An easy way to think about it is a spreadsheet. You’ve got a column in the spreadsheet, and each row is a different thing that could happen. Only one of them will happen, but you don’t know which one. The best you can do is say, “There’s a 10% chance it’ll be this row and an 8% chance it’ll be that row.”

“Tail risk” is obviously a major issue with CAPM, as he stated, as it assumes a normal distribution of returns. Really, most people are probably more worried about bubbles and geopolitical disasters than standard-deviation.

The state-preference approach doesn’t rely on a normal distribution, has simpler calculations (although it involves a LOT of calculations), and easier to relate to and understand the idea of risk.

A great book that goes over the theory of investments is A History of the Theory of Investments, by Mark Rubinstein.

In the next month, I will have my credit cards paid off (I am sure some of you know how amazingly good that feels), which means I will, for the first time, have a nice amount of investible income each month. In addition, I plan on becoming engaged soon, so I would like to put that most of that money into something fairly liquid (or something that will be fairly liquid in 6-9 months). After that, the next thing to save for is a home, so recommendations on less liquid investments (2-3 year plan) would also be helpful.

Here are my quick, rounded off, monthly numbers:

Income:
8,000/month after taxes

Monthly payments:
1300 rent
700 car/insurance (4.1% loan, 3 year term)
1000 student loans (3.2% rate, so I really don’t want to pay more than the minimum amount, unless I am completely missing something there)
200 utilities
1500 food/movies/going out with friends or girlfriend (I know this could be lower, but I like to eat healthy, which means expensive, and I eat out a lot with work)

Lets just say that leaves $3,000 a month to save (most months it will be somewhat more, some months will be somewhat less).

Question 1: What are good options for investing if I want to use that money in 6-9 months for a ring (I want to pay cash for the ring). I have seen some online savings accounts that will give around 5% return with a minimum balance of 5k, which is what I am planning on using, unless other people have a better idea.

Question 2: After purchasing a ring (and maybe a nice TV, since I still have my 27 inch tv from 1998), what are some investment options that I would be able to liquidate in 3 years when I want to buy a house? I have heard that a Roth investment has a provision where you can withdraw funds for a house payment, but I’m not that sure how it works. My job does not make any matching payments for a 401k, but would that still be a viable option for investing money that I need in a few years?

Caveat: Because of my job, people often speak to me about financial stuff as if I know what they are talking about. Please assume I know basically nothing about finance. I plan on actually hiring a financial advisor in the next year, but I would still like to hear other people’s options, if for no other reason so that I will know what the hell the guy is talking about.

It’s my view that you probably want a better size emergency fund before you invest. You have to take the outlook that the money YOU DO NOT HAVE A FORSEEABLE NEED for can be investable. The reason I’m able to generate the returns that I do is because I never take money out of my brokerage account and my profits generate more profits.

Basically: If you have an extra $10k lying around you dont need and dont want to see in a CD, invest it. Do not constantly put money in and take money out. That breaks discipline.

Your best options are mutual funds or individual stocks, I like mutual funds more because you dont have to pay attention to them. You can run them for a short term or long term and do with it as you please, its a hands free approach to investing.

A roth IRA allows you to take money out of your retirement for your FIRST HOME – thats it. I’m not exactly sold on the idea of taking money out of an account that generates money tax free in perpituity to buy a house that’s going to appreciate only 2-3% a year but that’s just me.

With 8k a month, your mAGI is probably too high to contribute to Roth IRAs [at least until you get married]. It sounds like your time horizon for the cash is relatively short so my recommendation would be an ING Savings Account or Vanguard’s Prime Money Market fund [VMMXX]. You could also try Vanguard’s California Tax Exempt Fund [VCTXX].

I store most of my cash in VMMXX through a Wells Fargo PMA checking account. You get 100 free trades a year with the PMA account as long as you have 25k of assets shared across your checking and brokerage account. Money market mutual funds aren’t technically FDIC backed although the better ones invest in U.S. Treasuries and Bank CDs which are relatively safe.

Roth IRA

http://en.wikipedia.org/wiki/Roth_ira

ING Direct Electric Orange

http://home.ingdirect.com/products/…=ElectricOrange

VMMXX

https://personal.vanguard.com/VGApp…&FundIntExt=INT

VCTXX

https://personal.vanguard.com/VGApp…&FundIntExt=INT

for money you need in 6-9 months, a savings account or money market fund are your best bet.

For the 2-3 year term, stock investing is still too volatile — the next 2 years could be great and nearly double your money… or be horrible and cost you 35% or more.

One thing to consider with CDs versus Money Markets/Savings Accounts that you might not be thinking about: interest rates change. The money market rate changes every day, the savings account rate changes whenever the bank feels like it. But your CD will pay the promised percentage interest all the way to the end. If rates go up, the money market is better. If rates fall, the CD is better. Again assuming you don’t need the money in the meanwhile.

VMMXX (Vanguard Prime Money Market) is a good choice as far as that goes.

As sherpa pointed out, Money Market Mutual Funds (not to be confused with Money Market Deposit Accounts offered by your bank) are not FDIC insured. They start out at $1 per share, and “strive to maintain” that share price. There is no guarantee from anybody that they will. That said, so far as I know, no US Money Market Mutual Fund has ever “broken the buck” — so far, every time it’s happened, the company running the fund has bailed the fund out. The Vanguard Prime Money Market makes its money by buying, among other things, corporate bonds. Typically, they buy debts that are due within the next 30-45 days.

Vanguard offers another Money Market Mutual Fund that invests in only U.S. Treasury bonds. It pays a bit less interest, though the interest is *generally* tax-deductible for state income tax (you still pay federal income tax).

If you have tolerance for a little bit of risk, you can look at a short-term bond fund — either corporate or treasury. They typically buy bonds with 1-3 year maturity. The value fluctuates every day. It is rare but not impossible to lose more than a small percentage of your investment. In exchange, they typically but not always pay a higher return. Right now, they’re damn near identical.

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How Important is your Credit Score
April 11th, 2009

Lets say your credit score is like 500 (I think that is bad) but you are a doctor, can you still get a loan for a car or a mortgage? But lets say your credit score is like 800 but you are a McDonald’s Janitor, can you still get a loan or mortgage?

How does this credit score thing work compared to other aspects of your portfolio/job/history?

What is a score you always want to be above..?

If there are any other good points to make about credit scores and what-not, I’m open ears… err eyes.

The credit score is an assessment of risk, in theory, the lower the score the more risk the lender is taking on. Lenders counterbalance that risk by raising the interest rate of the loan. So a doctor with a low credit score can certainly buy a car but will have to put more money down and pay a higher interest rate. A janitor with a high credit score can still only buy within his means, he isn’t buying a Rolls Royce with a high credit score alone.

Aside from being a college senior not yet making a salaried income (hoping to get into market consultancy with my BS Psych), the major financial problem that myself and my family face is that we are well invested, but with old money, tied into assets that are difficult to mobilize without reaping horrible capital gains taxes. The company I was mainly invested in was a dog which I inherited after it grew to modern prices from a very low price – as such, capital gains taxes take a huge chunk of the money selling it. I’ve recently reshuffled quite a bit of it into other stocks that have much better growth numbers (General Electric, Emerson Electric, Procter & Gamble, and so further) that are firm growth but still yield dividends. I also did very well recently on Nintendo.

The problem I face, however, is that while I have a lot of money invested, I don’t have any cash on hand, really. I receive dividends but those don’t make for much and won’t pay off any investment into the stock in the timeframe I’m looking at holding investments. The Nintendo is unfortunately tied up in an irrevocable trust, or I’d have sold the investment and let the profit ride.

My parents are in a slump where the business isn’t pulling enough money and they’ve been liquidating for years, which is something I am not planning to get into. What I’m looking for and what I haven’t yet found is a way to work cash profit out of invested stock without liquidation – I somehow doubt there is a way to do this but it’s always worth asking.

Beyond investing in companies with high dividend yields, (the company the family owns is already very good for this), is there a way to make short-term profit from investments without attempting to day-trade or trade short-term? I have not discussed short-term trading options with my broker, but I don’t have the cash capital to work with that anyways at the moment nor do I really have the time to do my research. I’m really just looking to float the next year of school before I get a salaried position and can leave the invested wealth aside to play on its own, so to speak. Anyone else in similar situations? If so, how did you/are you dealing with it?

Let me see if I got this straight.

You have stocks that have been held for years. You think that you cannot sell them without large capital gains taxes. But you don’t say how long you’ve held them. IIRC, capital gains tax decreases the longer you hold a stock.

But then you say that you’ve “reshuffled” your inheritance into other stocks. Doesn’t that trigger a taxable gain?

Next, you’d like to know if there’s a way to make passive income from a stock without selling it. Other than dividends or some crazy investment scheme, I believe the answer to be no.

Then you reveal your investment timeline to be one year. That’s a bit risky to bet your income on the dividend yield of the stocks you own.

Here’s a thought: Why haven’t you moved your stocks into DRIP accounts? It sounds like your not making a whole lot of money on the dividends, but a DRIP account would allow you to reinvest those dividends into additional shares. If you don’t really need that money and you’re planning on holding onto those shares, a DRIP account may be what you need to “let it ride”.

Selling “covered calls” would be an option for you. An investor pays you a premium for the ability to purchase your shares at a certain price for a period of time. If the stock goes up beyond the strike price, they will purchase them from you at that price [trigging long-term capital gains tax]. If the stock doesn’t go beyond the strike price, then you keep the stock and the premium [less your broker’s fee].

Another possibility is to borrow on margin with your equities as collateral. Your brokerage account gives you a loan at a certain number of basis points above the nominal lending rate. Some brokerage houses will only let you buy equities, whereas others will allow you to take that money out as cash [I believe charlesSchwab allows this]. The brokerage will use your stock as collateral, and if the price of the stock drops sufficiently, will force you to sell to cover your loan.

If you posses shares of a different company/mutual fund that have declined in value, you could sell those and harvest the tax loss against the gain. You could then re-buy those same shares after 31 days using the IRS’s “wash-sale-rule”. You come out ahead if the price of the devalued shares don’t increase greatly within the timeframe you didn’t own them.

Finally, if you do sell the appreciated shares, you may want to specify a tax “lot”. If you pick the shares with the highest cost basis, then you will owe the least amount of tax in the near-term.

All of these options are advanced techniques: covered calls are tricky, the wash-sale-rule must be obeyed explicitly and your broker will charge you for all of these transactions. There are also rules about the tax lots that I won’t go into here. You should do a lot of research before utilizing any of them.

I’m not making any recommendation on what you should do, just enumerating the possibilities. Other people can chime in with their preferences. Personally, I think it would be easier to get student loans and use your investments to cover those loans in the future. It won’t be fun worrying about your margin account or covered calls while studying for exams.