February 13th, 2006 Podcast from the Money Guy, J. Brian Preston, CPA, CFP®, PFS

February 13, 2006

New and Exciting Update!! Next Financial Chaos Topic: Tax Preparation and Planning with special guest co-host Brandon Verner, CPA, a partner with Verner, Perling & Company, P.C.

Articles of Interest:

Money Guy in the Media

“My Story: A One-Trick Pony Nearly Galloped Off With My Fortune.” from
Kiplinger’s Mutual Funds 2006 by Robert Frick.

Other Useful Articles and Links

Getting Wise to Mortgages.” from the Saturday, February 4th, 2006

Wall Street Journal by James R. Hagerty and Ruth Simon.

Mortgage Links

“Is an HSA Right for You?.” from the Thursday, February 2nd, 2006 Wall Street Journal by Sarah Rubenstein. “Buffett Letter Provides A Contrarian Guide to Timing the Market.” from the March 9th, 2005 Smart Money by James B. Stewart.

Financial Chaos Topic for February 13th Podcast:

Mastering the World of Investing!

Basic Definitions

Stocks: Stocks represent shares of ownership in a public company.

Bonds: Bonds are basically a chance for you to lend your money to the government or a company. You can receive interest and your principle back over predetermined amounts of time.

Mutual Funds: A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities. By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own.

Diversification: The idea of spreading out your money across many different types of investments. Choosing to diversify your investment holddings reduces your risk tremendously.

Bull Market: A prolonged period if time when prices are rising in a financial market faster than their historical average.

Bear Market: A prolonged period of time when prices are falling. It is usually marked by a price decline of 20% or more in a key stock market index from a recent peak over at least a two-month period.

Market Correction: A drop of at least 10%, but not more than 20%

Bear Market Rally: A rise of at least 10% but not more than 20%.

The Balance of Risk and Reward


Dirty Little Secrets of Investing

  1. The S&P 500 usually outperforms 75% of the actively managed stock funds.
  2. The average US stock mutual fund’s expense ratio hovers at around 1.5% of assets, not including trading costs.
  3. The front-end load (commission) for the average equity fund has increased to 5.36% from 5.18% in just three years.
  4. Stay away from 1 or 2 year HOT funds
  5. Look at the Long Term Performance (5-7 years)
  6. Don’t buy what is being talked about
  7. Research the fund manager to ensure that he/she has a history of success, and is not learning the ropes with your money.
  8. Buy NO-LOAD (no commissions) funds if available
  9. Look at the funds internal expenses (the lower the better)
  10. Use Index Funds for Large US Companies (i.e. S&P 500 Companies)
  11. Buy, Hold, and use Dollar Cost Averaging
  12. Diversify your investments

Homework/Additional Reading:





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