Hello everyone,

I’d like to make a quick announcement that we are almost done setting up the forum. We have been very busy setting everything up, hence the lack of posts over the past ten days. So sorry about that, the rate of posting will improve very soon!

So, if you haven’t already signed up to be notified this is the time to do it.

The forum will come online sometimes in January. To be precise, we are aiming for January 10. This forum will be everything you ever wanted from the financial community. We will always be there to answer any financial questions you might have. You will also be able to meet other people with similar interests, exchange investing ideas, tips and tricks, and much more.

There will also be over $1,000 in prizes for members who joined during the first couple of weeks, so make sure you stop by to learn more.

To be notified you can just enter your email address and name here.

And do not worry. We hate spam as much as you do!

I have a passion for equities. I do. If there were a 12 step program for people like us, I would be standing in the middle of the circle and saying ‘My name is Hugh, and I am an equities addict”.

So, why exactly am I so passionate about equities? And for that matter, what exactly do I mean when I say equities? Let’s take those in reverse order, shall we?

As I mentioned last time, equity essentially means ownership. If you buy your house for $100,000 and put $20,000 down, you have $20,000 of equity. If, over a year or two, the house appreciates by $10,000 and you pay another $10,000 in principle payments, you now will have $40,000 in equity (even though you have only invested $30,000, effectively giving you a 25% return on your money. This is what keeps us equity nuts up at night…).

If you buy a share of stock, you are, in effect, buying equity in the company whose stock you purchased. By buying a share of IBM, you now have ownership (or equity) in IBM.

Keeping this fact in mind is what drives investors like Warren Buffet. Buffett believes that the way you determine if a company’s stock is a good deal or not is by asking what he would be willing to pay for the whole company, and then divide that number by the number of shares outstanding. The resulting number is the price he is willing to pay for a share of stock… if the market price is less than that number, he buys. If it is more than that number, he does not. (This is what Benjamin Graham meant when he referred to investing in a business-like manner)

So, remember, any time you own something - a share of stock, a bar of gold, a house, an apartment building, a long option contract - you are investing in equities. And the reason we invest in equities is because we think that, over some period of time, the value of it will increase and someone will be willing to buy it for more than we put into it.

In the next installment I will cover exactly why my blood races at the thought of equities and why I am virtually 100% in equities, virtually 100% of the time.

As far as I know, there are but two ways to make money in investing; you either buy things and hope they appreciate, or you lend money and hope people pay you back and pay you interest for the trouble. In other words, all investments are either equities or debt.

It really does not matter what you want to invest in; stocks, real estate, mutual funds, insurance, gold… you pick it and it is either debt or equities. Why is this so important to understand? Because I sincerly believe that most people do not understand what they are investing in.

When you buy a stock, just what are you buying? What do buying growth mutual funds and flipping houses have in common? Why can you let your house (which you assured everyone was an “investment” when you bought it) sit for years and never check the value, yet you check the value of the mutual fund you put in your IRA every day on Yahoo Finance?

Most investors tend to develop a preference for one or the other; folks who would never touch a stock will own Treasury Bonds and hold them for years. Other folks (like me) are equities junkies and see no reason anyone would ever want to own a bond. Over the next few days, I will tackle the subjects of Equities and Debt, explaining the fundamental principles behind each and why you should care.

I have a confession: I am addicted to Google. It is true, I am afraid. I use Gmail, Google Reader, Google Documents and a lot more, every single day. As sad as it is, I can no longer imagine life without Google.

That being said, Google has a habit of throwing an offering out there just to be out there. They then tweak and adjust it over time. I have to hope this is what they are doing with Google Finance.
While everyone applauds Google for its focus on minimalism, this is NOT what I want in a financial information portal. The page is virtually empty and what content is there consists mainly of various news feeds from the wire services. In other words, it is basically a news aggregator that any 16 year old computer nerd could cobble together.

The only redeeming feature for Google Finance is the integration with your own Google account, so you can customize the page to get only the information you want. However, I see no advantage to this over your iGoogle page, where you can import the various news feeds from any category, not just finance.

I hate to say it, but I see no reason for this site to exist, as there is nothing here that Google does not do elsewhere much better.
Am I just missing the boat here? Do any of you use Google Finance as a research tool? If so, what do you like about it? Let me know in the comments.

As I mentioned before, I am going through and talking about various news and finance sites I like and use. Today, I will talk about USA Today’s money page.

At first glance, there is much to recommend it;  the page is packed with information, the site is trusted as a source of news and, as we have discussed elsewhere, they have an awesome stock screening tool.  In fact, this would be an ideal news portal except for one thing…

There are too many ads! 

Now, do not get me wrong; I understand the need to monetize content. I know that someone has to pay for the servers, the overhead and (lest we forget) the writers. However, there has to be a balance, and the good folks at USA Today opassed it a long time ago.

Most bothersome are the full page ads that insert themselves between you and a link. For example, you click on a headline to read the rest of a story about e-trade. However, before you can read the rest of the story, they take you to a full page ad for the new Honda Civic. I do not want to see an ad for a car, I want to read the story (that is, after all, why I clicked on the link).

The ads are simply too much. They invade the entire site, making using it absolutely a headache.  If they did not have such an awesome stock screener, I could think of no reason to go to this site at all.

Once upon a time, long long ago (Actually, it was only about 10 years ago) all the financial news was filtered through only a few sources. You either got your financial news from a broker, a newspaper or a subscription service such as Morningstar or Valueline.

These days, however, it is the wild wild west, with many sources of financial news. With all the options, the question has to be, “Just who do you use”?

Over the next few days I will give you a few of my thoughts on some of the various financial sites; your mileage may vary.If you have a favorite or want to disagree with me or my conclusions, let me know in the comments!

Yahoo Finance

For those of us who where on the web before Google instituted their plan of world domination, Yahoo holds a special place in our hearts. One of the first major finance portals, it is still one of the most highly trafficked pages on the internet.

The thing I like most about Yahoo is the breadth of coverage; everything from wire headlines to quotes to charts (but, I do not like the new java based charts as much as the old school charts they used to have). That being said, I do not know how much of this is habit and how much is due to their efforts. It is hard to change, and the older I get, the harder it is.

One huge advantage (for me) with Yahoo Finance is their homepage is easy on the eyes and well laid out, so I can see the “whole picture” at a glance.

In short, the main reasons I use Yahoo Finance is it is convenient, it is well done and it is trusted… what more can I ask for?

After I posted about The Rule of 72, I realized I had forgotten to mention that The Rule can be used against you as well. Here are some examples of how you can use The Rule of 72 to find the time bombs in your financial situation.

Use the Rule of 72 to calculate the impact of inflation

For example, inflation is a constant concern of most investors. Everyone knows that a 3% rate of inflation is better than 5%, but either way, the number is small, so why worry, right?

Wrong!

At a 5% rate of inflation, the cost of goods and services double every 14.4 years (!). That means the college tuition that today is $5000 a year will cost your3 year old child $10,000 a year when he is off to college.

The Rule of 72 will tell you how much credit cards cost you

Just like you lend money at interest (in debt instruments like bonds) to make money, so do the credit card companies. Of course, they get better rates of return than you do. Ever wonder just how much that dinner you bought on credit really costs?

A $100 date with your wife, put on a credit card at 20% interest, will end up costing $200 if you don’t pay the card off in 3 and a half years or so (obviously, if you make payments and so on, it will take longer).

The Rule of 72 will show you at a glance how much that decision to borrow money will really cost you.

Pretty much everyone knows that the name of the game is to get a good rate of return on your money. After all, you do not have to be a genius to know that getting 8% on your money is a better thing than getting a 6% rate of return. But, just how much better is it?

How long until your money doubles?

If you have a 12% average rate of return on your money (say, in an index fund), then your money will, all things being equal, double in just six years. Drop your rate of return down to 10% (still respectable by anyone’s definition) and now it takes a bit over seven years to double. Bump your rate of return up a bit and get a 13% average and your money doubles in 5 and a half years.

If you do not happen to be a math super genius, you can calculate how long it will take your money to double at a given interst rate by useing the rule of 72.

Money invested at 1% interest will double every 72 years. If you get a higher rate of return, just divide 72 by the rate of return and the answer is the number of years until your investment fund doubles.

Example:

I have $1000 and will put it in the bank at 5% interest. How long until I have $2000?

72 divided by 5 = 14.4 years (better not need it soon!).

While not precise, it is accurate enough for quick calculation and quickly shows the value in getting the highest rate of return possible on your money.

If it were a perfect world, the sky would always be blue, everyone would be skinny and healthy and Warren Buffet would manage my stock portfolio.

It NOT being a perfect world, I guess I will have to put up with occasional thunderstorms and I will have to learn to stay on a diet; however, there IS a way to get investment returns like Warren Buffet. Two ways, actually.

The first, and most obvious thing you could do is buy shares of his company, Berkshire Hathaway. Since Warren is the chief stock picker for this company, literally he will be investing your money, along with his own and that of the other shareholders. Of course, their is a small problem… one share of this company is currently selling for about $140,000.00 (!).

Yeah, that stinks.

The other thing you could do is invest in a mutual fund that owns Berkshire, or buy shares in a mutual fund that holds the same stocks. A few such funds can be found in this post over at the Motley Fool.