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Sunday, 9 December 2012

10 Numbers That Can Change Your Life


At some point, every investor who is planning to retire must confront his or her financial future. For most people, basic retirement planning can be distilled into 10 numbers.

As I worked with thousands of people over the years, and I saw over and over that when these numbers come into focus, the future starts looking clearer and less mysterious.

As you work to nail down these numbers, I suggest you regard the process as an exercise in discovery. Some items are easy to determine, while others may require some digging and careful thought. I think you will do a much better job if you use a competent financial adviser to help you get the right numbers and see what they mean for you.

One: Your current cost of living. This is the foundation of everything that follows. You could go into great detail on this, but a quick-and-dirty approach may be enough to get the process started: Identify your current gross income and subtract whatever you are saving for the future, including contributions to any IRA and employee retirement accounts. That's your cost of living, including taxes.

Two: The rate of future inflation. You will have to estimate this, of course. We all know that $100 isn't what it used to be, and inflation isn't likely to go away. Since 1926, inflation has been 3%. Over the years, that can do much more damage to your finances than you might think.

Three: The number of years before you will retire. This isn't as simple as it seems. We can't always control when we stop working. And baby boomers increasingly retire in stages. But getting a useful financial snapshot requires a number here. So for this exercise, choose a future date when you want to be financially ready to leave the workforce "cold turkey."

Four: Your inflation-adjusted cost of living in your first year of retirement. While you can crunch the number yourself with a financial calculator, this item can have lots of moving parts.

How will your taxes change? Will you spend more money on travel and hobbies? Less on commuting and clothes but more on health care? Will you move in search of lower housing costs, a better climate or to be closer to your kids? I suggest you use an adviser to help make sure you have not overlooked something important.

The noninvestment retirement income you can count on. Probably this will include Social Security. It might also include a pension or rental income. Don't include interest, dividends and capital gains; they come into play next.

Six: The retirement income you will need from your portfolio. If you have the first five answers, this one requires only simple math. You know how much you'll need in that first year of retirement, and you know how much you can count on. The difference must come from somewhere else, most likely your portfolio.

Seven: The size of the portfolio you'll need when you retire. If your investments are properly balanced between well-diversified stock funds and low-cost bond funds, you should be able to withdraw 4% of your portfolio annually without much risk of running out of money.

Multiply the result you obtained in the previous step by 25. That's how big your portfolio should be on Day 1 of retirement. If this number seems impossibly large, don't panic. There are lots of things you can do about it.

Eight: The current size of your portfolio, excluding real estate and other nonliquid assets. For most pre-retirees, this number will be less than what you will need when you retire. The next items will help you build it up.

Nine: The amount you're saving for retirement every year. You should already know this from the very first calculation. If your annual savings plus your present portfolio will equal the result from Item seven, then you're in fine shape. More likely, these savings alone won't be enough. That's why you need some growth in your portfolio.

Ten: The annual return you need from now until you retire. While you can make this computation with a financial calculator, I suggest you discuss this point with an adviser to make sure you have reached a reasonable result.

The point of this exercise is to get a snapshot of your retirement readiness. I found an online calculator that, while it doesn't cover all the information I have described, will give you a quick idea of whether or not you are on the right track.

Several times I have recommended using a financial adviser to help you through these calculations, and you can do that without establishing a long-term relationship. You can hire one by the hour to check your work and make sure you have an action plan to get you where you want to go.

If you do that, these 10 numbers can change your life.

8 Ways to Boost Your Income Now

With salaries up only 1.7 percent for the year--a repeat of last year's meager 1.6 percent--many Americans must look beyond their regular jobs to boost their incomes. There are ways to make extra money, some of them new, others tried-and-true, says Randall Hansen, founder of the career development website Quintessential Careers. Couple your ingenuity with your skills and, in some cases, Internet-based opportunities, and you can expand your bottom line even in these tight times.

Crowdfund your invention. As recently as a few years ago, inventors required bankers or venture capitalists to realize their ideas and move them to the marketplace. Now, crowdfunding sites like and allow anyone to raise money from friends and strangers who want little more than to help bring an offering to life. Of the more than 30,000 projects successfully funded on Kickstarter since its 2009 launch, the vast majority have been the work of an individual, not companies, says a Kickstarter spokesperson. One recent project sought $250,000 to mass-produce "Impossible Instant Lab," a cool gadget that turns your digital iPhone pictures into actual Polaroid analog photos. Users set their phone screen onto a cradle atop the lab and press a button. The lab then spits out a picture. Contributors who pledged $149 or more received, at minimum, a discount on a limited edition Lab with free film. The largest givers received additional freebies.

To participate on Kickstarter, you simply create an online account, write a brief description of your vision (in a few cases, like technology projects, Kickstarter requires a working prototype); decide what goodies to offer donors in exchange for their financial contributions, such as an early sample of the product or a phone call from you; and designate a total dollar target. The site usually emails you within one to two days as to whether your project has met its guidelines--which include fitting into its established categories ranging from art, publishing, and games to music, film and technology--and is accepted. You only receive money if you reach your goal within the specified time period, which can be anywhere between one and 60 days. Kickstarter deducts a 5 percent fee, but only if you hit your target. Several projects have raised more than a million dollars, but the company says the average is about $5,000. And, for many people, that can be the difference between getting their product to market and leaving the idea in their desk drawers.
Indiegogo is more wide open. It does not vet its projects and offers participants the option of collecting contributions even if they don't reach their targets. The fee is 4 percent if you reach your goal and 9 percent if you fall short.

One other point to consider: In September, Kickstarter ranked 348th in the country in site traffic, according to the traffic monitor, compared to 759th for Indiegogo, which means it offers a significantly larger donor pool for participants to tap into.

Moonlight. Some 3.6 million Americans took on a second job part time in 2011, according to the Bureau of Labor Statistics. Aside from providing extra money, holding additional jobs can help you explore a potential career or learn skills that may apply to your primary employment, Hansen points out. Moonlighting often brings to mind holiday hiring by retailers, which can yield attractive discounts, too. In general, though, you will make better money capitalizing on your specific work skills, he notes. For example, if you have writing talent, can design websites, keep business books, pet sit, or fix computer problems, you can advertise your services on sites like Craigslist or offer your talents directly to local businesses or individuals.
You can also teach what you know to others as a tutor. Gaye Weintraub, 38, of Katy, Texas, has done this since 2009, when she began supplementing her full-time paralegal income by helping local students with their English writing assignments. Soon, she expanded to additional subjects: creating a PowerPoint presentation, photography, elementary math, study skills, and how to use YouTube and other online websites (which she taught to a 93-year-old client, among others). After Weintraub was laid off in 2011, her thriving side business provided a valuable safety net. She has since expanded it to include writing and other freelance work in addition to tutoring.

Besides spreading the word locally, would-be tutors can post their offerings on websites like or And people who are strong in math, science, or other sought-after school subjects can teach individual students online through websites like

Share your home. One way to lower monthly housing costs is to take a renter into your home. According to the U.S. Census Bureau, 6.2 million adults lived with someone who wasn't a relative in 2010 (the most recent figures), up from 5.3 million in 2007.

When her marriage ended and her women's clothing business went on the rocks two years ago, Beth Gross-Santos decided to rent out two bedrooms in the five-bedroom, Portsmouth, N.H., house that she shares with her teenage sons. Thanks to the Indian, Polish, and Peruvian natives she has rented to so far, the living arrangement not only pays nearly half of her mortgage and home equity loan, which she took out to try to save her business, Gross-Santos says, but it has also turned her home "into a mini-United Nations, which has been great for my boys."

City dwellers who don't want to take on a long-term tenant can consider hosting tourists passing through town. Mikey Rox and Everett Morrow regularly rent the guest bedroom in their New York City condo to visitors who pay nearly $90 a night. In three years, they've made more than $75,000 by advertising on Craigslist, and and, which both take a percentage of the total booking fee paid by the guest. Rox and Morrow tend to prefer guests referred through the latter two sites because they gather more information on travelers, which seems to invite better behavior. They have had a couple of unpleasant experiences over the years of petty theft, says Rox, but ultimately, "the pros outweigh the cons."

Be sure your rental complies with local laws and your condo or homeowner association rules, cautions Annamarie Pluhar, author of Sharing Housing: a Guidebook for Finding and Keeping Good Housemates. You will have to pay taxes on the income, but you can deduct a percentage of your mortgage or rent, electric bill, and maintenance costs based on the size of the space you're renting and how many days it was occupied. Before anyone moves in for longer than a weekend, everyone should agree on shared living rules, including cleanliness standards, chore distribution, guest policies, daily routines, and acceptable noise levels, Pluhar says.

If it's a more permanent arrangement that you're looking for, potential roommates can be found through Craigslist or paid services like, which match landlords with would-be tenants registered on the sites.

Turn a hobby into cash. Craft sites like Etsy and ArtFire aren't just for artists selling their works; people make money selling a wide range of products, including handmade furniture and purses. Two years ago, Dennis and Sylvia Lai of South Florida decided to turn the wedding favor they had created for their own nuptials two years earlier into an offering on Etsy and other sites. The Lais mix and design unique blends of spices and seasonings, then personalize the bottles with photos and descriptions of the bride and groom.
So far, they've brought in $7,500; not enough to quit their day jobs (yet), but "we get to express our creativity and also bring in bonus income," Dennis says. Etsy takes a cut from each sale amounting to 3.5 percent of the sale price; ArtFire charges sellers $12.95 per month.

In some cases, you can cut out the middleman and sell from your own website. Although Jennifer James McCollum bought her first camera only five years ago, the executive director of the nonprofit Oklahomans for the Arts, in Oklahoma City, has turned her budding love of photography into a profitable side business. The thousand dollars she averages each month taking commissioned photos for various organizations around the state, as well as selling notecards through her personal blog and online sales page, "has been enough to pay the monthly mortgage for the past three years," she says.

Meanwhile, the explosive popularity of eBooks has made it much easier to turn your prose into extra income. In 2010, Web strategist Scott McIntosh dashed off a 61-page eBook based on his knowledge of search engine optimization, then uploaded it onto the websites of Amazon for the Kindle and Barnes & Noble for the Nook. While Google Juice may not ever be a bestseller, it has netted McIntosh several thousand dollars.

Not a techie? Free software, such as Calibre, can be found online that will convert your Word document into all the popular eBook formats with the click of a button.

Create an app. Benny Hsu knew nothing about programming when the 35-year-old manager of his family's Jacksonville, Fla., restaurant seized on an idea last year that he thought would make a perfect iPhone app. What soon became the hot selling Photo 365 enables users to take and save (or post to a social media site) a single photo each day, in effect creating a visual diary of the year.
Hsu's total cost was just $1,900, much of that the fee he had to pay the programmer he found by posting at is a similar site that he now also uses to find other contractors. The $.99 app proved so user-friendly it was featured by Apple, and it has so far earned Hsu $55,000. He recently released his second app, Gratitude 365, a daily diary of appreciation.

Programming for the increasingly popular Android phones may be even easier to accomplish, now that Google and the Massachusetts Institute of Technology have launched a new online tool, App Inventor ( "It's a real game-changer in that it was designed so that folks with no experience can begin building apps almost immediately, without learning to write code," says David Wolber, professor of computer science at the University of San Francisco. Other resources for navigating the app world are iPhone Application Development for Dummies, Android Application Development for Dummies, and Wolber's tutorial at

Profit from your videos. Professional filmmakers aren't the only ones who can make money from their creations, as Wayne Perry of Schenectady, N.Y., discovered this year. Like millions of other parents, Perry had filmed his newborn's first moments in 2010 and posted the results for friends and relatives to watch on YouTube. Because his newborn had grabbed hold of the doctor's instrument, Perry intriguingly titled it: "Newborn baby helps doctor cut umbilical cord" (
A few months later, Perry was shocked to discover that his home movie had reached 50,000 views. Last October, when it hit 750,000 (it's now 1.7 million, and growing), he signed up for Adsense ( and checked the box allowing commercials to run before his four-minute video. Since then, between $1,000 and $1,500 each month has been automatically deposited in his bank account. Of course, luck also plays a role: Perry has since uploaded several animal videos, but none has made even close to that amount.

Another way to profit from your videos is to sign up for the free YouTube Partner Program ( In effect, this gives you your own "channel" on the site, something that may be worthwhile if you plan to upload a series of well-done works with a common theme. Humor represents four out of the top five channels on YouTube. Gaming represents the fifth. Anyone can opt in to monetize his videos if he is the intellectual property owner, confirms YouTube spokesperson Kate Mason, who notes that thousands of channels brought in six-figure incomes this year. In addition to allowing ads, the program offers training and mentoring to improve your video skills.

Cobble together odd jobs. People with access to a computer can get paid to do a variety of unique activities on their own timetable, says Christine Durst, a home-based career expert and co-founder of Each assignment pays from $5 to $50. Some examples:
-- Put your high-speed Internet access to use securing tickets for popular concerts and other events. pays an average of $10 to $20 for successful "pulls," which usually consist of more than one ticket--and you use their money for the purchase, not yours. Because tickets are sold to the buyers at face value, this is perfectly legal, the site says. Your commissions are drawn from a percentage the client pays as a "convenience charge."

-- Individuals who need someone to physically check something far from where they are--whether it's a pricey item they are considering buying on eBay or the status of their rental home after a storm--describe their request on, which pays $25 and up for each completed task.
-- Act as a juror and render a nonbinding verdict for legal cases online, at and, as a way to help lawyers test the strength of their case. Pay is from $5 to $50, depending on the complexity.
-- Provide candid feedback via audio and video of your gut reaction as you visit and navigate a designated website at, which charges companies for this valuable information. You get $10 and up per completed review.

Ask for a raise. Wages are stagnant in many sectors, but that doesn't mean it's impossible to get a raise. Especially if you are a top performer, you may be able to make a successful case, Hansen says. According to a study by Towers Watson, a professional services consulting firm, companies are planning to give pay increases averaging 4.7 percent in 2013 to exempt employees receiving high performance ratings. The key to getting a raise is documenting everything so you can make your case with specifics. Keep a log detailing all your accomplishments both at and away from your job, including new degrees or certifications and ways you've saved the company money or have enhanced revenues.

In addition, it's smart to carefully research, through industry associations and sites such as and, the going salary for someone with your education, skills, and experience. When you meet with your boss, don't say you are asking for extra money because you need it; instead, make the case for how you've strengthened the company's bottom line. If the type of job you have doesn't directly lead to profits, you'll likely have a tougher time, but it still may be worth trying.

Whether you think you can get extra money or not, be sure to get your annual review. This is the best way to identify the skills your boss believes you need to develop to earn a raise or a promotion, if not now, when the economy eventually improves.

Wednesday, 28 November 2012

The Five-Year Funk: OECD Slashes Global Growth Estimates

Three mediocre years after the last recession ended, one of the world's leading economic policy advisers is warning that another may be on the way, as dawdling leaders in Europe and the U.S. fail to deliver the comprehensive solutions needed to restore growth.

"After five years of crisis, the global economy is weakening again," says OECD's top economist in its semi-annual assessment entitled Global Economy Facing Hesitant and Uneven Recovery. Since the Paris-based think tank's last report just six short months ago, the outlook for growth has worsened in all but three of its 34 member nations — including a forecast for two more years of mild recession in the euro zone, as well as a call for just 2% growth next year in the U.S.

"The most troubling aspect of this was their take on the U.S.," my co-host Jeff Macke says in the attached video. "They took our 2013 growth rate down to just 2% — and that's a best-case scenario that assumes we get a fiscal cliff deal done," he adds, calling the report more of an observation than an actual plan.
For its part, OECD is calling on global central banks to be prepared to take more action in the face of worsening conditions and the likelihood that elected officials, here and abroad, won't have the fortitude to properly address their fiscal imbalances and short-term threats. At the same time, the organization is also warning governments against becoming overzealous in their austerity efforts, saying that the simultaneous and cumulative effect of so many nations belt-tightening at the same time poses a serious threat of recession. On the other side of the equation, the group says even relatively prosperous places like Germany and China should consider implementing fresh stimulus plans of their own.

And so, just when you thought it was safe to get back in the water, as they say in the film "Jaws," we get a fresh reminder that the health, wealth and prosperity that all of us want from the New Year may actually just be more of the same. Expect another year of lukewarm growth and political hand wringing as we seek easy ways to get out of (or delay) our painful fiscal reality.

Tuesday, 30 October 2012

6 Ways to Screw Up Your Retirement Plan

Contributing to an employer-sponsored retirement plan is an important step toward a secure future, but experts warn that, like any other financial asset, it takes oversight as well as common sense to reap its benefits.

Avoid these six critical mistakes to improve your chances of having a successful retirement.

Mistake No. 1: opting out

One of the biggest mistakes is to decide not to participate, says Robert Gordon, senior financial adviser at Miami-based Investor Solutions.
"As the saying goes, 'you've got to be in it to win it,'" he says. "Be it a 401(k), 403(b), 457 or other similarly numbered options, the responsibility is on the employee to take the initiative and complete the paperwork."
In an attempt to encourage more people to take advantage of employer-sponsored retirement plans, the 2006 Pension Protection Act provides safe harbor to companies who offer automatic enrollment that requires employees to opt out rather than opt in, says CFP Artie Green, a professional investment adviser at PWJohnson Wealth Management in Sunnyvale, Calif.
"That has not taken hold to the degree the government was hoping," says Glenn A. Hottin, a CFP at M&H Advisors in New Haven, Conn. "The majority who don't elect to join generally are confused by their choices, and the confused mind does nothing."
Definitely don't opt out if your company offers automatic enrollment. It will also automatically select an investment option for you -- often a target-date fund. Once you're in the plan, take time to acquaint yourself with all its investment options so you can determine if the preselected fund is the best choice or if there's one that better meets your goals, time horizon and risk tolerance.

Mistake No. 2: borrowing from your plan

Your company retirement plan is not a piggy bank. Treating it like one has very expensive consequences.
"Borrowing from a retirement account has become more prevalent," Hottin says. "For someone out of work, it may be the only way to address some large expenses.
"My suggestion is always to exhaust other options prior to going into your 401(k), because it's so expensive to do so. It could cost you as much as 40 cents on the dollar -- and that is money you never recover." That could occur if you borrow the money and then default on the loan, which results in a deemed distribution on which you would owe taxes and a penalty if you're under a certain age.
"Some things are legal but just not wise," Investor Solutions' Gordon says. "This is one of those things."

Mistake No. 3: cashing out in a job change

"I am always amazed by the number of people who cash out their plan when they leave their previous employer," Gordon says. "I hear excuses like, 'It was easier than rolling it over,' 'I needed the money for moving expenses,' or, the best, 'I used the money to fund my vacation before I started the new job.'"
Cashing out at 59 ½ years of age or younger, he says, carries a 10 percent penalty. "It doesn't make sense to take the funds on which you have been earning less than 2 percent and pay a guaranteed penalty of 10 percent," says Gordon.
Of course, this would be in addition to the taxes you would owe.
This also doesn't take into account the returns you forfeit by not staying invested. Even small amounts cashed out when you're young can prevent you from amassing a large nest egg. For example, if you had kept $5,000 in your retirement account 20 years ago instead of cashing it out, that amount could have grown to nearly $14,590 today, assuming a 5.5 percent annualized return.
While the last 10 years or so have been a challenge for investors, the stock market's historical returns have rewarded them.

Mistake No. 4: leaving the account in limbo
Just leaving your retirement account with a former employer is also a bad option, Hottin says.
"If your former company downsizes or is acquired by another firm," he says, "finding some contact who can help you retrieve it at a later time could be a hassle.
"It's better to take your 401(k) with you and mix it in with your new employer's plan -- or roll it into an individual retirement account of some type so you can manage it a bit better." If you do an IRA rollover, make sure it's a trustee-to-trustee transfer.
Rolling it into your new employer's account will give you continued creditor protection, says Green. "Even if you default on loans or you're a defendant in a lawsuit and lose, nobody can touch the money in your 401(k) or 403(b)." Depending on the state you live in, he says, your money might also be protected in an IRA.

Mistake No. 5: too much company stock

Financial advisers caution you should have no more than 10 percent of your retirement account in your employer's company stock. If you're concentrated in a single security, you get hit with a double whammy if your company hits hard times and you lose your job.
"Having company stock in a 401(k) plan is good for the company in a few ways, but it's a bad idea for the nonowner employees in many ways," Gordon says. "If you're thinking, 'What about the Facebook or Google employees who are now millionaires because of their stock?' don't confuse luck with skill. On the streets of this nation, there are many former employees of Enron, PanAm, WorldCom and others who also believed in their company's stock."
Sometimes, companies make their stock available to employees at a discount through stock options or other direct purchase programs, he says. If you're tempted, "you are probably best served by taking advantage of the discount and realizing the gain on the 'discount' as soon as (feasible)."

Mistake No. 6: ignoring the big picture
Your employer-sponsored retirement plan is just one leg of the proverbial three-legged stool of a retirement plan.
"One of the largest mistakes is lack of planning in a holistic sense," Hottin says. "People fail to consider their retirement plans as part of the bigger picture. Your employee retirement account should be part of an overall strategy of financial well-being."
In other words, Green says, the term "retirement plan" should refer not just to tax-qualified plans such as IRAs and 401(k)s, but also other sources of income such as Social Security, company pensions, part-time work and other money saved up -- "your overall plan for how you're going to get through the remainder of your life."
Of course, many variables are beyond your control: You don't know how long you will live, how your investments will perform or whether you'll encounter an unforeseen expense that can derail your plans. So the best way to plan for the unexpected is to spend less, invest as much as you can and choose investments wisely.


Wednesday, 24 October 2012

‘Era of Uncertainty’ May Be Drawing to a Close

If economists, business executives and investors have been sure of one thing this year, it is that uncertainty — over economic policies, political leadership and central-bank actions — is largely to blame for the shambling global economic pace, spotty job growth and serial bouts of anxiety in financial markets.

But the bull market in "uncertainty" has likely peaked -- not that many have noticed amid the political noise and unsettled stock market, which is falling sharply Tuesday amid disappointing earnings and worries over Spain.

Like most overplayed market themes, there's a set of plausible facts and resonant conditions at the core of the uncertainty obsession:
  • A close and contentious presidential race, with economic philosophies at its core, is about to culminate.
  • The "fiscal cliff," in which spending cuts and tax increases of up to $600 billion could be triggered, is just ahead in January.
  • China is undertaking a once-a-decade leadership succession as it strains to re-energize economic growth.
  • Europe's debt crisis has eased under European Central Bank promises and prescriptions but meets no one's definition of being solved.
For sure, some business investment spending seems truly to have been postponed as executives wait to see how the fiscal situation shakes up. Lend an ear to a few company earnings conference calls and it begins to seem the same "uncertain" investor-relations staff is writing all the scripts.
But the run of ugly corporate earnings outlooks is almost entirely explainable as a mature profit cycle in a slow-growth, post-crisis world. And it appears the markets themselves have, in general, made a halting peace with the hard-to-predict impending economic-cum-political events that, after all, have been universally anticipated for months.
  • Yields on Treasury bonds, which typically drop in tough-to-figure-out periods, have risen substantially since late summer, surrendering some of the "safe harbor" premium built up in the past several months.
  • The Bloomberg Euro-Area Financial Conditions Index is near a post-crisis high, as is the domestic Chicago Fed's National Financial Conditions Index.
  • U.S. stock-market volatility has been remarkably low in recent months, even including the past week's turbulence and Tuesday's swoon, which has the VIX (VIX) up near 20.
  • The S&P 500 Index is riding its longest stretch without at least a 5% weekly dip since 2002 (this could change depending on how the rest of this week plays out).
The Uncertainty Index

Economists at Stanford have designed the Economic Policy Uncertainty Index, which draws from media mentions of economic uncertainty, the number of tax provisions set to expire in coming years and the variation in economic-growth forecasts among professional economists.

The index has been elevated all year -- no surprise given the abundance of tax statutes scheduled to sunset in January. Yet the spike in the uncertainty index to 2012 highs in July was mostly driven by its news-coverage component, a circular effect of uncertainty chatter feeding into measured uncertainty. The index has since receded a bit, in sync with the stock market's steady if not quite convincing grind to recent five-year highs.
Ajay Kapur, Asia-markets strategist at Deutsche Bank, ventures we've likely seen the worst of the uncertainty theme, in part because the measured political polarization of the main U.S. governing parties has hit a 130-year peak, based on how infrequently Democrats and Republicans in Congress break with their party in voting. In other words, it's hard to see how it can get worse than a 130-year extreme, and is more likely to give way to at least slightly less polarization in coming Congresses.

Assuming a clear presidential winner Nov. 6, one can at least take a stab at analyzing which fiscal cliff elements will go away and which might be extended. In nearly every scenario, the incentives to forestall an outright gallop over the cliff should be pretty strong. Unlike the 2011 debt-ceiling standoff, which blindsided the markets, the cliff is not so much an either/or choice between cataclysm invited or averted. It likely will involve not a market-seizing shock but a mix of negative yet measurable outcomes that would act as a bigger or smaller economic drag over time.

Europe's Lehman Moment May Have Already Happened

Similarly, investors await the return of palpable financial danger from Europe. Henry McVey, head of the global macro and asset allocation team at Kohlberg Kravis Roberts & Co., remarks he is "constantly struck by the fact that investors keep waiting for a Lehman-type moment in Europe." He ventures the notion that "maybe it has already occurred" in the less-dramatic form of the wealthy EU members forcing investors to take a "haircut" on Greek government debt holdings. The tentative truce in European debt markets among debtors, creditors and investors is only as good as European Central Bank Chairman Mario Draghi's professed resolve to do "whatever it takes" to support stability — but it's at least that good, which is an improvement over a year ago.

One final thought on the policy equation: For most of the past three years, there was a constant debate raging about whether the Fed would follow one asset-purchase, money-conjuring program with another. And if so, when and how big?

Since September, with the Fed's announcement of an indefinite asset-buying campaign totaling $40 billion a month until unemployment is notably lower, this policy argument officially is over. The plan may not work job-creation magic, but it frees investors from having to handicap the Fed's next move for the foreseeable future. Even Tuesday's chatter about Chairman Ben Bernanke not standing for a third term beginning January 2014 underscores the emerging stability in Fed policy: When in recent history has a potential shift in central-banking philosophy 14 months away constituted a daunting level of uncertainty?

Even if it's true the uncertainty bubble is starting to deflate, it doesn't mean stocks are necessarily poised to quickly shake off their earnings-driven woes, or that companies are about to binge on new equipment and staff.

It does mean investors could soon return to the old-fashioned task of determining how this business cycle will play out from here for corporate profits and risk appetites on a company-by-company basis, without the all-consuming focus on a lack of certainty which, like the weather, everyone discusses but no one can do anything about.

7 ways to save money in your 20s

There is a paradox that exists when you're in your 20s; you have the energy and freedom to do whatever you want, but not necessarily the funds to do so. Often the two sides are at odds with one another, but they don't inevitably have to be. There are a number of ways to exercise your youthful exuberance, whether it be venturing out into the world on your own or pursuing your passions, without hemorrhaging money.

 Here are a few tips to survive and thrive in your 20s without breaking the bank.

Live with Roommates

If you attended college and shared a place with peers, why not continue to do so after you enter the workforce? It's a good way to begin the onset of personal budgeting and household running without having to incur the higher prices that come with a single-bedroom residence. Living with roommates will also allow you to build up some experience dealing with financial responsibility and living under the same roof as other people before you dive headfirst into purchasing property with a spouse. Splitting rent with three other people for a place with a single bathroom, or sharing a fridge, may not be the most glamorous of accommodations to have in your 20s, but a few years down the line it will save you money while allowing you to maintain some financial independence.

Rent appliances

Instead of purchasing appliances try to rent appliances so if you have to suddenly move out you have to bear no re-location charges or risk damaged goods in transition. 

Invest in a bicycle instead of motorcycle or car

You’ve just landed a job and the motor cycle looks really tempting, but you could save up that money and buy a bicycle instead and work up those muscles. You can always cycle to work if you live close enough or leave it at the metro/train station. This would also save you your gym subscription. The car can wait till you manage to save enough for a decent down payment. 

Learn to Cook

Learning how to cook can boost your finances and cut out unnecessary fat, both literally and figuratively. Suppose you spend at least Rs 200 on meals each day of a full week - you're looking at a food budget of 1400 a week, excluding snacks and beverages. For the same amount, you can visit your local grocery store and purchase produce, meats, spices and grains which will yield a wide variety of healthy meals that can last you for more than a week. 

Cancel Your Cable TV Subscription

As the generation that heralded in the advent of the Internet, you have to honestly ask yourself: do you truly need to pay Rs 400 a month on cable television? With a basic broadband Internet connection, you can be connected to hours of free media from sites such as YouTube. Why then, coupled with the cost of your Internet connection, would you pay for a cable package that provide dozens of networks that you likely do not watch? There are multiple subscriptions that the average frugal 20-year-old can cut from his or her monthly budget, but given the amount of media available for a fraction of the cost of a basic package, the choice to let go of cable television seems to be the first obvious choice.

Steer clear of credit cards

You’ve only just started earning; do you really want to be in debt just yet? Living without a credit card is a good way to learn to live within your means. You can always create a fund and save up for a few months for the 42 inch plasma TV that you’ve been eyes since college. You’ve waited so far, wait just a little bit longer. 

Volunteer With an Organization

Do you like looking at fine art? Attending concerts? Playing with dogs? Look for a business or organization in your area looking for volunteers. You might be surprised at how many of the places you enjoy frequenting will let you volunteer. What these opportunities lack in compensation, they make up for volunteer perks. For instance, some music venues look for ushers and bartenders to work at shows and in return allow volunteers to watch performances for free.

While letting you enjoy your passions at no cost besides your time, volunteering has the added opportunity for you to mingle and meet new people.

Sunday, 14 October 2012

What to Do When You're Denied a Promotion

If you were expecting to get promoted, but got passed over, you're understandably confused and probably frustrated. But how you react and what you choose to do next can greatly affect your career path, so carefully consider your actions.

Withhold the negative emotions. If you feel like you deserved the promotion, you probably are angry, confused, and have a short fuse. But keep it under wraps until you know the entire situation. After all, you may not know the whole story; maybe someone was better qualified than you, or maybe your boss envisions you in a different role down the road.

No matter what you're feeling, try to be diplomatic and neutral in your reaction. Flying off the handle won't better your position. Instead, take time to regroup and consider your next steps.

Find out truth. If you're comfortable talking to your boss about why you were passed over, you might find out some key areas you can improve. Perhaps you were deficient in one area that the promotion required; in that case, focus on beefing up your skills so that the next time around, your boss has no reason to turn you down. Rather than sulking because you weren't promoted, focus on using this as a learning experience to better yourself professionally.

Set milestones for yourself. Armed with information about the professional areas you need to develop, create a game plan for how you will develop the skills you need to move up the corporate ladder. While you can set internal milestones you personally want to achieve, you can also speak to your boss to set a plan where you reach certain milestones to be reconsidered for the promotion.

Make sure the milestones are clearly defined. Sometimes employers are vague about what they're looking for, which can just send confusing signals to you. Make a list and agree upon it together.

Tips for Increasing Your Chance of Getting That Promotion The Second Time Around
--If you know the skills you need for the position you want, you can make the effort to get the skills you're lacking. Take it upon yourself to improve your promotability by taking classes, training, or getting involved in extra projects.
--Don't burn bridges; just because your boss didn't promote you doesn't mean he doesn't think you're a skilled worker. Keep the lines of communication open.
--Agree upon milestones you can work to achieve to qualify for the promotion the next time.
--Talk to others who have moved into similar roles to get advice about how you can better fit the job requirements.
--Keep networking; the more people you meet, the more advice you can get to help you.

When to walk away. Sometimes people aren't promoted not out of lack of merit, but simply because employers are biased or have no intention of offering a qualified employee a deserved promotion. In this situation, you may need to consider switching jobs. As an employee, you want to be recognized for your hard work, and if you're not after several years and conversations, you may need to move on.

If you can't work out any hope of being promoted if you improve your job skills, begin looking for another position elsewhere, or even in another department. Be honest with yourself, too: Perhaps being overlooked for a promotion means you're not cut out for the job you thought you were, which means you should consider other roles.

Lindsay Olson is a founding partner and public relations recruiter with Paradigm Staffing and, a niche job board for public relations, communications, and social media jobs. She blogs at, where she discusses recruiting and job search issues.

Worried About Global Economy? Here's One Possible Refuge

As slowing global growth bites into multinationals' earnings, investors may be more willing to give small-cap US stocks a look.

The New York Stock Exchange.The Russell 2000 (^RUT) is up 12 percent for the year, trailing the 14 percent gain in the S&P 500. But micro caps are up 17 percent, in line with the Nasdaq's gains.
"I think you've got a lot of nervousness coming up to earnings. With small caps, you don't have to worry so much because they're more domestic and you don't have a lot of international exposure," said Lori Calvasina, small-cap and mid-cap equity strategist at Credit Suisse.

She said the Russell 2000 stocks generate just 19 percent of their revenues internationally. As for the S&P 500, 46 percent of revenues are from overseas sources.

Through Thursday, the S&P 500 lost 2 percent over a five day period, while small caps were down just 1.8 percent. The small-cap energy sector was actually up 0.3 percent in that same period, while mega cap energy stocks were down 1.5 percent. Small-cap consumer discretionary stocks were down 1.5 percent, while the larger cap discretionary sector was down 2.6 percent in the same period.

The comments from big U.S. companies with foreign earnings exposure just in the past week shows a worrying trend. The latest was Advanced Micro Devices (AMD) which said late Thursday that its third quarter revenue will probably be 10 percent lower than last quarter due to the weak global economy and also as more consumers choose tablets, over PCs. Engine maker Cummins (CMI) also warned about slowing growth, as did Alcoa (AA) and Avnet (AVT).

Goldman Sachs analysts Thursday issued a note on small-cap opportunities, in stocks with market capitalizations of less than $3.5 billion. The analysts noted that only a quarter of the small cap managers are beating their benchmarks for the year. They pointed out that investors are most overweight industrials and materials, but underweight health care and financials, two of the three best performing sectors so far this year.

"The stock-picking environment for small caps has improved on both an absolute and relative basis to large caps," the Goldman analysts wrote. "Indeed, the three-month correlation for the Russell 2000 are at three-year lows. When looking at dispersion of returns...we note that they remain most acute in energy and health care."

The Goldman analysts recommend "under-earners," companies with room for margin expansion, like Owens Illinois (OI), Global Payments (GPN), and Manitowoc (MTW). They also like companies with attractive yields and dividend growth like Great Plains Energy (GXP) and Cinemark (CNK). Other names on their "Conviction Buy" list include Domino's Pizza (DPZ), PerkinElmer (PKI), Tenneco (TEN), Volcano Corp. (VOLC), SunCoke Energy (SXC), and NeuStar (NSR).

Calvasina said she is maintaining her 850 target on the Russell. "We're not changing our target but we can't get bearish right now ... and I'm kind of a bearish person by nature," said Calvasina.

She said her quarterly survey of small cap investors showed that 56 percent said in September that they were bullish over the next six months, compared to 40 percent in her second quarter survey. Unlike other surveys, she said her survey of about 100 clients is not contrarian when it comes to bullishness.

Small caps are out of favor among many investors who were interested in the high quality big cap names and dividend payers this year. "People can talk about large caps all they want, but that's not really happened this year. The smaller you go down in terms of market cap, the more domestic you are and you really saw microcaps doing well when the domestic theme picked up. And the only place you saw inflows was into small cap ETFs. The active managers haven't gotten the inflows."

Calvasina said the names that were most widely held by small-cap funds underperformed in the second quarter, but made a comeback in the third quarter.

Some of those most widely held include Hexcel (HXL), Genessee and Wyoming (GWR), Netgear (NTGR), Dana Holding (DAN), and Portfolio Recovery (PRAA).

"The market's going up but people are pretty much risk averse ... I think we're still in the middle of something that hasn't played out yet," she said. She said some investors expect a big sell-off and are looking for a buying opportunity in small cap names later this year. But she said she's not sure that sell-off is going to be all that big.

"I don't think they're going to blow up. I don't think they're going to see a lot of fast money in there right now," she said. "I don't get a lot of calls from the multi-cap investors or the hedge fund crowd...I feel the only people interested in small caps right now are the small cap guys."

She said the multiple of small caps, like the rest of the market, is down from where it was in the spring of 2011, when it was at 17.7. It's now at a price-to-earnings ratio of 14.7. Among the sectors that could see upside is energy, she said. In the small cap universe, the energy sector represents a lot of the U.S. natural gas industry, as opposed to the multinational oil companies of the S&P 500.

"Energy was at a historical low relative to the Russell on a valuation basis. It's at a historical low on earnings momentum. I just think it got way too out of favor," she said. Year-to-date, Russell 2000 energy stocks are down 3.4 percent, compared to the 5 percent gain in the S&P energy sector.

Thursday, 6 September 2012

21 Ways Rich People Think Differently

World's richest woman Gina Rinehart is enduring a media firestorm over an article in which she takes the "jealous" middle class to task for "drinking, or smoking and socializing" rather than working to earn their own fortune.

What if she has a point?

Steve Siebold, author of "How Rich People Think," spent nearly three decades interviewing millionaires around the world to find out what separates them from everyone else.

It had little to do with money itself, he told Business Insider. It was about their mentality.

"[The middle class] tells people to be happy with what they have," he said. "And on the whole, most people are steeped in fear when it comes to money."

Flickr / C. Pajunen1. Average people think MONEY is the root of all evil. Rich people believe POVERTY is the root of all evil.

"The average person has been brainwashed to believe rich people are lucky or dishonest," Siebold writes.

That's why there's a certain shame that comes along with "getting rich" in lower-income communities.

"The world class knows that while having money doesn't guarantee happiness, it does make your life easier and more enjoyable."

2. Average people think selfishness is a vice. Rich people think selfishness is a virtue.

"The rich go out there and try to make themselves happy. They don't try to pretend to save the world," Siebold told Business Insider.

The problem is that middle class people see that as a negative––and it's keeping them poor, he writes.

"If you're not taking care of you, you're not in a position to help anyone else. You can't give what you don't have."

Getty Images3. Average people have a lottery mentality. Rich people have an action mentality.

"While the masses are waiting to pick the right numbers and praying for prosperity, the great ones are solving problems," Siebold writes.

"The hero [middle class people] are waiting for may be God, government, their boss or their spouse. It's the average person's level of thinking that breeds this approach to life and living while the clock keeps ticking away."

4. Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.

"Many world-class performers have little formal education, and have amassed their wealth through the acquisition and subsequent sale of specific knowledge," he writes.

"Meanwhile, the masses are convinced that master's degrees and doctorates are the way to wealth, mostly because they are trapped in the linear line of thought that holds them back from higher levels of consciousness...The wealthy aren't interested in the means, only the end."

I Love Lucy screencap5. Average people long for the good old days. Rich people dream of the future.

"Self-made millionaires get rich because they're willing to bet on themselves and project their dreams, goals and ideas into an unknown future," Siebold writes.

"People who believe their best days are behind them rarely get rich, and often struggle with unhappiness and depression."

6. Average people see money through the eyes of emotion. Rich people think about money logically.

"An ordinarily smart, well-educated and otherwise successful person can be instantly transformed into a fear-based, scarcity driven thinker whose greatest financial aspiration is to retire comfortably," he writes.

"The world class sees money for what it is and what it's not, through the eyes of logic. The great ones know money is a critical tool that presents options and opportunities."

7. Average people earn money doing things they don't love. Rich people follow their passion.

"To the average person, it looks like the rich are working all the time," Siebold says. "But one of the smartest strategies of the world class is doing what they love and finding a way to get paid for it."

On the other hand, middle class take jobs they don't enjoy "because they need the money and they've been trained in school and conditioned by society to live in a linear thinking world that equates earning money with physical or mental effort."

8. Average people set low expectations so they're never disappointed. Rich people are up for the challenge.

"Psychologists and other mental health experts often advise people to set low expectations for their life to ensure they are not disappointed," Siebold writes.

"No one would ever strike it rich and live their dreams without huge expectations."

BarackObamadotcom via YouTube9. Average people believe you have to DO something to get rich. Rich people believe you have to BE something to get rich.

"That's why people like Donald Trump go from millionaire to nine billion dollars in debt and come back richer than ever," he writes.

"While the masses are fixated on the doing and the immediate results of their actions, the great ones are learning and growing from every experience, whether it's a success or a failure, knowing their true reward is becoming a human success machine that eventually produces outstanding results."

10. Average people believe you need money to make money. Rich people use other people's money.

Linear thought might tell people to make money in order to earn more, but Siebold says the rich aren't afraid to fund their future from other people's pockets.

"Rich people know not being solvent enough to personally afford something is not relevant. The real question is, 'Is this worth buying, investing in, or pursuing?'" he writes.

11. Average people believe the markets are driven by logic and strategy. Rich people know they're driven by emotion and greed.

Investing successfully in the stock market isn't just about a fancy math formula.

"The rich know that the primary emotions that drive financial markets are fear and greed, and they factor this into all trades and trends they observe," Siebold writes.

"This knowledge of human nature and its overlapping impact on trading give them strategic advantage in building greater wealth through leverage."

12. Average people live beyond their means. Rich people live below theirs.

"Here's how to live below your means and tap into the secret wealthy people have used for centuries: Get rich so you can afford to," he writes. 

"The rich live below their means, not because they're so savvy, but because they make so much money that they can afford to live like royalty while still having a king's ransom socked away for the future."

richkidsofinstagram.tumblr.com13. Average people teach their children how to survive. Rich people teach their kids to get rich.

Rich parents teach their kids from an early age about the world of "haves" and "have-nots," Siebold says. Even he admits many people have argued that he's supporting the idea of elitism.

He disagrees.

"[People] say parents are teaching their kids to look down on the masses because they're poor. This isn't true," he writes. "What they're teaching their kids is to see the world through the eyes of objective reality––the way society really is."

If children understand wealth early on, they'll be more likely to strive for it later in life.

14. Average people let money stress them out. Rich people find peace of mind in wealth.

The reason wealthy people earn more wealth is that they're not afraid to admit that money can solve most problems, Siebold says.

"[The middle class] sees money as a never-ending necessary evil that must be endured as part of life. The world class sees money as the great liberator, and with enough of it, they are able to purchase financial peace of mind."

Kim Bhasin / Business Insider15. Average people would rather be entertained than educated. Rich people would rather be educated than entertained.

While the rich don't put much stock in furthering wealth through formal education, they appreciate the power of learning long after college is over, Siebold says.

"Walk into a wealthy person's home and one of the first things you'll see is an extensive library of books they've used to educate themselves on how to become more successful," he writes.

"The middle class reads novels, tabloids and entertainment magazines."

16. Average people think rich people are snobs. Rich people just want to surround themselves with like-minded people.

The negative money mentality poisoning the middle class is what keeps the rich hanging out with the rich, he says.

"[Rich people] can't afford the messages of doom and gloom," he writes. "This is often misinterpreted by the masses as snobbery.

Labeling the world class as snobs is another way the middle class finds to feel better bout themselves and their chosen path of mediocrity."

Flickr / Wei Tchou17. Average people focus on saving. Rich people focus on earning.

Siebold theorizes that the wealthy focus on what they'll gain by taking risks, rather than how to save what they have.

"The masses are so focused on clipping coupons and living frugally they miss major opportunities," he writes.

"Even in the midst of a cash flow crisis, the rich reject the nickle and dime thinking of the masses. They are the masters of focusing their mental energy where it belongs: on the big money."

18. Average people play it safe with money. Rich people know when to take risks.

"Leverage is the watchword of the rich," Siebold writes.

"Every investor loses money on occasion, but the world class knows no matter what happens, they will aways be able to earn more."

Flickr / Ibrahim Iujaz19. Average people love to be comfortable. Rich people find comfort in uncertainty.

For the most part, it takes guts to take the risks necessary to make it as a millionaire––a challenge most middle class thinkers aren't comfortable living with.

"Physical, psychological, and emotional comfort is the primary goal of the middle class mindset," Siebold writes.

World class thinkers learn early on that becoming a millionaire isn't easy and the need for comfort can be devastating. They learn to be comfortable while operating in a state of ongoing uncertainty."

20. Average people never make the connection between money and health. Rich people know money can save your life.

While the middle class squabbles over the virtues of Obamacare and their company's health plan, the super wealthy are enrolled in a super elite "boutique medical care" association, Siebold says.

"They pay a substantial yearly membership fee that guarantees them 24-hour access to a private physician who only serves a small group of members," he writes.

"Some wealthy neighborhoods have implemented this strategy and even require the physician to live in the neighborhood."

Getty Images21. Average people believe they must choose between a great family and being rich. Rich people know you can have it all.

The idea the wealth must come at the expense of family time is nothing but a "cop-out", Siebold says.

"The masses have been brainwashed to believe it's an either/or equation," he writes. "The rich know you can have anything you want if you approach the challenge with a mindset rooted in love and abundance."

From Steve Siebold, author of "How Rich People Think."

The Worst Retirement Investing Mistake

William Bernstein has a gift not only for grasping the complex but for helping the rest of us get it too.
He spent the first chunk of his career as a neurologist practicing on the coast of Oregon but cut back on his work hours in 1990. A few years later he focused on a new fascination: investing. He launched an online journal (a sort of proto-blog) called and wrote "The Intelligent Asset Allocator," the first of several books. (He has also written for MONEY.)

Now he's an investment adviser for a handful of high-net-worth clients. Bernstein's writing often explores academic financial theory, but he manages to turn it into practical, plain-English advice.
His latest obsession, resulting in the short e-book "The Ages of the Investor," is what economists call the life-cycle theory, which dictates that your asset allocation should be tied to your earnings power throughout your career.

Bernstein, 64, spoke with senior editor George Mannes; their conversation was edited.

There's a debate going on now among economists about how much exposure people should have to stocks. What made you weigh in?

It's almost like a political issue. There's a "right wing" of very smart, authoritative people who think that savers and retirees should be investing conservatively because stocks are so risky. And then there's a "left wing" of equally smart and authoritative people who believe the opposite.

I was trying to reconcile the two views. Plus, I wanted to deal with what happened in the 2008 financial crisis, which changed how people, myself included, think about risk.

How so?

A lot of people had won the game before the crisis happened: They had pretty much saved enough for retirement, and they were continuing to take risk by investing in equities.

Afterward, many of them sold either at or near the bottom and never bought back into it. And those people have irretrievably damaged themselves.

I began to understand this point 10 or 15 years ago, but now I'm convinced: When you've won the game, why keep playing it?

How risky stocks are to a given investor depends upon which part of the life cycle he or she is in. For a younger investor, stocks aren't as risky as they seem. For the middle-aged, they're pretty risky. And for a retired person, they can be nuclear-level toxic.

But at retirement you could be investing for several more decades. Don't you have time to make up for short-term losses?

At the end of your career, you have no more earnings capacity left beyond Social Security or a pension. You have less of what life-cycle theory calls "human capital."

So if you have a long series of bad returns, plus you're withdrawing 4% or 5% of your portfolio to live on it, then in 10 to 12 years, you may not have anything left. Withdrawals during the distribution phase combined with a bad bear market can completely destroy a retirement.

So how should I be investing near and after retirement?

You want to end up with a portfolio that matches your liabilities, meaning the amount you'll need to spend in retirement. The rule of thumb I came up with, based on annuity payouts and spending patterns late in life, is that you should save 20 to 25 times your residual living expenses -- that is, the yearly shortfall you have to make up after Social Security and any pension.

This portfolio should be in safe assets: Treasury Inflation-Protected Securities, annuities, or even short-term bonds.

Anything above that, you can invest in risky assets. That's your risk portfolio. If you dream about taking an around-the-world trip, and the risk portfolio does well, you can use it for that. If the risk portfolio doesn't do well, at least you're not pushing a shopping cart under an overpass.

What if you are nearing retirement age and you don't have that 20 to 25 years saved?

You should be working until you get that number. If you're 65 and you've only got half of your living expenses saved, you can retire and you may skate through.

You may die early, or you may have a good market. But there's a significant chance you're going to be eating Alpo when you're 85. That's the risk you're taking. The other choice you have is to work a few more years and reduce expenses.

One thing that we point out to our readers is that if you don't have stocks in your portfolio, you expose yourself to inflation risk.

That's true. By owning stocks you do mitigate inflation risk, but of course, you're exposing yourself to equity risk to do it. It's sort of like all these people who are now buying dividend-yielding stocks because Treasury bonds don't have any yield; they're exchanging a riskless asset for a risky asset.

But there's another asset class that people really don't think about when they think about inflation protection, which is short, high-quality bonds with a maturity of less than three years. If we ever do get an inflationary shock, investors will demand a high real short-term rate of return. It's what happened during the late '70s and early '80s.

Even though interest rates are terrible right now, if inflation recurs -- as I think it probably will -- short-term bonds are a fine place to be, as are individual Treasuries or certificates of deposit. Since they mature soon, you can replace them quickly with newer, higher-interest bonds.

Interest rates usually more than keep up with inflation. It's true that real yields right now are historically low, but as a student of financial history I have to believe that's not going to last forever.

Okay, so stocks are risky at retirement. What about when I'm young?

For the average person, you'll want a very high stock allocation. Let's imagine you start working at age 25, and let's say for the sake of argument you have 35 years worth of human capital -- that is, 35 years of salary left in you. That's an asset that you own. What you've saved in one year for retirement is still minuscule compared to that 34 years of earning and saving that you have left.

So even if your investment capital when you're 26 years old falls by one-half, your total worth has fallen by only a couple of percent because you still have that 34 years of human capital left. Your ability to earn and save dwarfs the loss in your portfolio.

And what about when I'm in the middle of my career?

That's the key phase. You need to start bailing out of risky assets as you get closer to achieving that liability-matching portfolio?when you can "win the game" without taking so much risk.

Instead of cutting your stock allocation one percentage point a year -- the standard formula -- in a year with absolutely spectacular returns, you might want to take 4% or 5% off the table. In a series of years when stock returns have been poor, you don't take anything off the table. And over time you start laying down a floor of safe assets with the proceeds from the stocks you've sold.

When exactly am I doing this?

Getting close to hitting your number is usually going to happen during a bull market, so the psychology of doing this right is tricky. It's hard to cut back on risk and accept lower returns when your neighbors are getting rich.

If you're very lucky and very frugal, hitting your number might happen when you're 45. In the worst-case scenario, you do everything right and still come up short at 65, so you wind up working longer or greatly paring back your expectations.

It sounds like retirement success depends on when you were born.

Yeah, that is certainly true. Young people should get down on their knees and pray for a brutal bear market at the beginning of their savings career, because that's going to enable them to buy a large number of shares cheaply. Having a sequence of bad returns first, followed by strong returns, is the best-case scenario.

I did a little thought experiment in which I calculated how many years it took people starting work in different years to make their number. I realized that the cohort that started working during the worst of economic times is the one that did the best.

The last cohort that actually was able to make their number started their careers in 1980, and they made their number in 19 years. And the graph ends in 1980, because no cohort that started work after 1980 actually made the number.

Ouch. Can the average person overcome that using the investing strategy you lay out?

I've flown airplanes, and as a doctor, I've taken care of kids who can't walk. Investing for retirement is probably harder than either of those first two activities, yet we expect people to be able to do it on their own.

An alternative would be to have a pension system such as in Singapore, where the government forces people to put money into a dedicated investment pool that it manages at minimal expense. And when people get to be of retirement age, they are forced to annuitize some of those savings, which turns into safe income.

The political chances for a plan like that in the U.S. seem low.

Yeah, I'm definitely in tune with the times.

What about target-date mutual funds, which gradually take on less risk as you age?

They're better than what 95% of people are going to do, particularly if they're run with low expenses. If you're not capable of doing what I suggest, then a target-date fund is not a bad solution.

What if you want an adviser to help you? How do you find a good one?

Interview one and say, "Look, this is my portfolio now," and you show him or her a simple, cheap index-fund portfolio.

And if he says, "You know, this is really good, you've got the right idea, I think we can diversify you a little more by using some more cheap index funds," that's the answer you want to hear. You've probably found an honest adviser. And someone who adheres to an index-fund portfolio will probably be more likely to adhere to the policy because you've got someone who has some humility and realizes he doesn't know how to time the market.

Sunday, 12 August 2012

A College Degree Doesn’t Guarantee a Good Job: Gary Shilling

Anyone who has a kid in college knows that August can be the cruelest month. That's when the bill for the fall semester is due and usually it's higher than the bill for any previous semester.

Over the past decade college tuition and fees have been increasing much faster than the rate of inflation. The average annual cost for tuition, fees and room and board is $38,600 for a private 4-year college and $17,000 for a public 4-year college (for out-of state residents it's $30,000), according to the College Board.
These rising costs coupled with a sluggish economy are driving more students and their families to borrow for college. Outstanding student loan debt now tops $1 trillion, exceeding the amount of total credit card debt in the U.S.

An increasing number of those borrowers come from middle to upper middle class households, with incomes between $94,000 and $205,000. According to a Wall Street Journal analysis of recent Federal Reserve data, 26% of those households borrowed for college in 2010, up from 19.5% in 2007. They owed an average of $32,900 in 2010 — 24% more than they owed in 2007.

"The middle class is getting squeezed on college costs," economist Gary Shilling tells The Daily Ticker in the accompanying video.

At the same time, college graduates are having a tough time finding work. A recent analysis of government data conducted by Northeastern University and the Economic Policy Institute for the Associated Press found that roughly 1.5 million, or 54% of recent college graduates, were either unemployed or underemployed — working at jobs that do not require a college degree. That compares to 41% in 2000.

"Going to college doesn't guarantee a good job," says Shilling, president of A. Gary Shilling & Co. "A lot of people are coming out of college with huge student debt yet have no marketable skills."

Given the rising cost for college and the smaller payoff, families may ask: Is college worth it? Many say it is.
Earnings for college graduates are more than double that of high school graduates over a lifetime, according to the Georgetown University Center on Education and the Workforce. The unemployment rate for people 25 years or older who graduate from college is 4.3% compared to 9.3% for high school graduates, according to the latest data from the U.S. Labor Department.

"We may be in a state now where people looking at the costs are beginning to say is this really worth it?" Shiller asks. He says expect an "agonizing reappraisal of going to college."

Friday, 6 July 2012

15 Things You Should Give Up To Be Happy

Here is a list of 15 things which, if you give up on them, will make your life a lot easier and much, much happier. We hold on to so many things that cause us a great deal of pain, stress and suffering – and instead of letting them all go, instead of allowing ourselves to be stress free and happy – we cling on to them. Not anymore. Starting today we will give up on all those things that no longer serve us, and we will embrace change. Ready? Here we go:
1. Give up your need to always be right
 There are so many of us who can’t stand the idea of being wrong – wanting to always be right – even at the risk of ending great relationships or causing a great deal of stress and pain, for us and for others. It’s just not worth it. Whenever you feel the ‘urgent’ need to jump into a fight over who is right and who is wrong, ask yourself this question: “Would I rather be right, or would I rather be kind?” Wayne Dyer. What difference will that make? Is your ego really that big?
2. Give up your need for control
Be willing to give up your need to always control everything that happens to you and around you – situations, events, people, etc. Whether they are loved ones, coworkers, or just strangers you meet on the street – just allow them to be. Allow everything and everyone to be just as they are and you will see how much better will that make you feel.

“By letting it go it all gets done. The world is won by those who let it go. But when you try and try. The world is beyond winning.” Lao Tzu
3. Give up on blame
 Give up on your need to blame others for what you have or don’t have, for what you feel or don’t feel. Stop giving your powers away and start taking responsibility for your life.
4. Give up your self-defeating self-talk
 Oh my. How many people are hurting themselves because of their negative, polluted and repetitive self-defeating mindset? Don’t believe everything that your mind is telling you – especially if it’s negative and self-defeating. You are better than that.
“The mind is a superb instrument if used rightly. Used wrongly, however, it becomes very destructive.” Eckhart Tolle
5. Give up your limiting beliefs
about what you can or cannot do, about what is possible or impossible. From now on, you are no longer going to allow your limiting beliefs to keep you stuck in the wrong place. Spread your wings and fly!
“A belief is not an idea held by the mind, it is an idea that holds the mind” Elly Roselle
6. Give up complaining
 Give up your constant need to complain about those many, many, maaany things – people, situations, events that make you unhappy, sad and depressed. Nobody can make you unhappy, no situation can make you sad or miserable unless you allow it to. It’s not the situation that triggers those feelings in you, but how you choose to look at it. Never underestimate the power of positive thinking.
7. Give up the luxury of criticism
Give up your need to criticize things, events or people that are different than you. We are all different, yet we are all the same. We all want to be happy, we all want to love and be loved and we all want to be understood. We all want something, and something is wished by us all.
8. Give up your need to impress others
Stop trying so hard to be something that you’re not just to make others like you. It doesn’t work this way. The moment you stop trying so hard to be something that you’re not, the moment you take off all your masks, the moment you accept and embrace the real you, you will find people will be drawn to you, effortlessly.
9. Give up your resistance to change
 Change is good. Change will help you move from A to B. Change will help you make improvements in your life and also the lives of those around you. Follow your bliss, embrace change – don’t resist it.
“Follow your bliss and the universe will open doors for you where there were only walls” 
Joseph Campbell
10. Give up labels
 Stop labeling those things, people or events that you don’t understand as being weird or different and try opening your mind, little by little. Minds only work when open. “The highest form of ignorance is when you reject something you don’t know anything about.” Wayne Dyer
11. Give up on your fears
Fear is just an illusion, it doesn’t exist – you created it. It’s all in your mind. Correct the inside and the outside will fall into place.
“The only thing we have to fear, is fear itself.”
 Franklin D. Roosevelt
12. Give up your excuses
Send them packing and tell them they’re fired. You no longer need them. A lot of times we limit ourselves because of the many excuses we use. Instead of growing and working on improving ourselves and our lives, we get stuck, lying to ourselves, using all kind of excuses – excuses that 99.9% of the time are not even real.
13. Give up the past
I know, I know. It’s hard. Especially when the past looks so much better than the present and the future looks so frightening, but you have to take into consideration the fact that the present moment is all you have and all you will ever have. The past you are now longing for – the past that you are now dreaming about – was ignored by you when it was present. Stop deluding yourself. Be present in everything you do and enjoy life. After all life is a journey not a destination. Have a clear vision for the future, prepare yourself, but always be present in the now.
14. Give up attachment
This is a concept that, for most of us is so hard to grasp and I have to tell you that it was for me too, (it still is) but it’s not something impossible. You get better and better at with time and practice. The moment you detach yourself from all things, (and that doesn’t mean you give up your love for them – because love and attachment have nothing to do with one another,  attachment comes from a place of fear, while love… well, real love is pure, kind, and self less, where there is love there can’t be fear, and because of that, attachment and love cannot coexist) you become so peaceful, so tolerant, so kind, and so serene. You will get to a place where you will be able to understand all things without even trying. A state beyond words.
15. Give up living your life to other people’s expectations
Way too many people are living a life that is not theirs to live. They live their lives according to what others think is best for them, they live their lives according to what their parents think is best for them, to what their friends, their enemies and their teachers, their government and the media think is best for them. They ignore their inner voice, that inner calling. They are so busy with pleasing everybody, with living up to other people’s expectations, that they lose control over their lives. They forget what makes them happy, what they want, what they need….and eventually they forget about themselves.  You have one life – this one right now – you must live it, own it, and especially don’t let other people’s opinions distract you from your path.

Thursday, 28 June 2012

Want to Live to 100? Sleep

Your chances of reaching age 100 could be better than you think – especially if you get some additional sleep and improve your diet.

New research from UnitedHealthcare looks at centenarians and baby boomers, asking the former about the “secrets of aging success” and evaluating whether the latter are taking the necessary steps to celebrate a 100th birthday.

The primary findings: Many boomers are embracing lifestyles that could lead to a long and rewarding life – with two exceptions. More than seven in 10 centenarians – 71% – say they get eight hours or more of sleep each night. By contrast, only 38% of boomers say they get the same amount of rest. And when it comes to eating right, more than eight in 10 centenarians say they regularly consume a balanced meal, compared with just over two-thirds (68%) of baby boomers.

The report – “100@100 Survey” – begins with some startling numbers. As of late 2010, the U.S. had an estimated 72,000 centenarians, according to the Census Bureau. By the year 2050, that number – with the aging of the baby-boom generation – is expected to reach more than 600,000. Meanwhile, an estimated 10,000 boomers each and every day – for the next decade – will turn 65.

How to reach 100? Centenarians point to social connections, exercise and spiritual activity as some of the keys to successful aging. Among surveyed centenarians, almost nine in 10 – fully 89% – say they communicate with a family member or friend every day; about two thirds (67%) pray, meditate or engage in some form of spiritual activity; and just over half (51%) say they exercise almost daily.

In each of these areas, baby boomers, as it turns out, match up fairly well. The same percentage of boomers as centenarians – 89% – say they’re in touch with friends or family members on a regular basis. Sixty percent of surveyed baby-boomers say spiritual activity is an important part of their lives, and almost six in 10 boomers (59%) exercise regularly.

Again, sleep and diet are the two areas where baby boomers come up short. Not surprisingly, the one area where boomers are more active is the workplace. Three-quarters (76%) of surveyed baby boomers say they work at a job or hobby almost every day; that compares with 16% of centenarians.

Finally, researchers turned to cultural affairs and asked centenarians and boomers to identify – from a list of 14 notable people (including President Obama, singer Paul McCartney and actors Tom Hanks and Julia Roberts) – their preferred dinner guest. The top choice among centenarians and boomers alike: the comedian Betty White.

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