Vonage Mobile–Essential for Frequent Travelers

If you are an international traveler mammoth mobile bills are a common pain. Vonage Mobile has an irresistible worldwide calling plan which promises to cut down your bills drastically. All you need is a Wi-Fi signal to turn your iPod Touch into a phone.

Blackberry or iPhone models can also take advantage of this. The special US – Canada rates of 1 cent a minute is unbeatable.

Vonage Mobile is a free application from Apple. All you need is a headphone set and a wireless connection to make your iPod a phone. You may also download it from Vonage Mobile websites when using phones.

For the frequent traveler, Vonage’s world mobile plan offers unlimited calling to 60 countries for a nominal monthly charge of $24.99. You may have to pay per minute rates ranging from 2 cents to $13.92 depending on the country you want to call. The call quality is generally good, depending on the wireless signal and microphone used.


Dave Ramsey’s 7 Baby Steps

I like to go back and take a look at Dave Ramsey’s 7 Baby Steps from time to time.  I think they are very helpful and a great plan to follow.

The Seven Baby Steps

Baby Step 1

$1,000 to start an Emergency Fund

An emergency fund is for those unexpected events in life that you can’t plan for: the loss of a job, an unexpected pregnancy, a faulty car transmission, and the list goes on and on. It’s not a matter of if these events will happen; it’s simply a matter of when they will happen. Learn more

Baby Step 2

Pay off all debt using the Debt Snowball

List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. Learn more

Baby Step 3

3 to 6 months of expenses in savings

Once you complete the first two baby steps, you will have built serious momentum. But don’t start throwing all your “extra” money into investments quite yet. It’s time to build your full emergency fund. Learn more

Baby Step 4

Invest 15% of household income into Roth IRAs and pre-tax retirement

When you reach this step, you’ll have no payments—except the house—and a fully funded emergency fund. Now it’s time to get serious about building wealth. Learn more

Baby Step 5

College funding for children

By this point, you should have already started Baby Step 4—investing 15% of your income—before saving for college. Whether you are saving for you or your child to go to college, you need to start nowLearn more

Baby Step 6

Pay off home early

Now it’s time to begin chunking all of your extra money toward the mortgage. You are getting closer to realizing the dream of a life with no house payments. Learn more

Baby Step 7

Build wealth and give!

It’s time to build wealth and give like never before. Leave an inheritance for future generations, and bless others now with your excess. It’s really the only way to live! Learn more

Nice Article from Div Growth Investor

6 Great Dividend Stocks to Consider

Johnson & Johnson engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates through three segments: Consumer, Pharmaceutical, Medical Devices and Diagnostics. Johnson & Johnson has consistently increased dividends for 46 years in a row. The stock yields 3.40%. The yield on cost on stock purchased at the end of 1989 is 29.10%. (analysis)

The Procter & Gamble Company (PG) engages in the manufacture and sale of consumer goods worldwide. The company operates in three global business units (GBUs): Beauty, Health and Well-Being, and Household Care. The company has rewarded stockholders with dividend increases for 53 consecutive years. Check my analysis of the stock.

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. The world’s largest retailer has a 35 year record of annual dividend raises. I would be a buyer of WMT on dips. Check my analysis of the stock.

McDonald’s Corporation (MCD), together with its subsidiaries, franchises and operates McDonald’s restaurants in the food service industry worldwide. The company’s share of the US fast food market is several times larger than its closest competitors, Burger King (BKC) and Wendy’s (WEN). McDonald’s is a major component of the S&P 500 and Dow Industrials indexes. The company is also a dividend aristocrat, which has been consistently increasing its dividends for 33 consecutive years. (analysis)

Consolidated Edison provides electric, gas, and steam utility services in the United States. This dividend aristocrat has raised annual distributions for 36 years in a row. The stock spots a yield of 5.3%, which a good compensation if you seek current income for the next 5 – 10 years. Check my analysis of Consolidated Edison.

Kinder Morgan (KMP) owns and manages energy transportation and storage assets in North America. This dividend achiever has raised annual distributions for the past 14 years. The stock currently yields 6.50%. Check my analysis of Kinder Morgan.

Great Article on Index Investing

Improving Your Finances What the Bogleheads Know for Sure

By Christine Benz | 03-03-10 | 06:00 AM | E-mail Article

If you’ve frequented the “Discuss” area of Morningstar.com, chances are you know the name Taylor Larimore. Taylor, a former IRS officer and retired chief of the Small Business Association’s finance division in South Florida, has contributed more than 24,000 posts to the Morningstar.com discussion boards for more than a decade, and also posts on a related site, http://www.bogleheads.org. He is also co-author of two Bogleheads’ books: The Bogleheads’ Guide to Investing (Wiley, 2007) and The Bogleheads’ Guide to Retirement Planning (Wiley, 2009).

I recently caught up with Taylor to discuss his investment philosophy and his view that the simplest investment plans are usually the most effective.

1. What was the genesis of the Vanguard Diehards forum on


I have long been a student of mutual fund investing, and Morningstar is by far the best source of reliable mutual fund information. It is where I go to learn. When Morningstar started its first public forum in 1997, I began asking questions on the John Rekenthaler Forum. John is now Morningstar’s vice president of research and was a wonderful source of information and sound advice. For some reason, a large percentage of the questions (and answers) on the site were from Vanguard investors. Several of us asked the forum administrator at that time, Jenny Barrie, to start a Vanguard Forum. We argued so long and loudly that Morningstar gave us its first company forum and that’s why Morningstar called it “Vanguard Diehards.” I posted in the first conversation in March 1998.

2. You’re a big fan of simplicity when it comes to investing, and that comes through loud and clear in the two Bogleheads’ books. What are some key pieces of advice for those wishing to simplify their investment lives?

I have been investing more than 50 years. Most of those years I spent constructing complex portfolios and often using market-timing strategies–all in an attempt to beat the market. Well, guess what? Despite all the time and effort I was spending trying to beat the market–the market was beating me–especially after taxes. I’ve now come to realize that the best portfolios for ordinary investors are low-cost and simple to understand and maintain. Most unbiased investing experts agree. Index funds are a great starting point for those looking to simplify their investment lives. Jack Bogle introduced the first index fund for retail investors in 1976–the Vanguard S&P 500 Index Fund (VFINX). That fund represents about 75% of the U.S. stock market in market value. Fidelity called his fund, “Bogle’s Folly,” but it is interesting to learn what’s happened. In the 40-year period ending December 2008, $10,000 invested in Vanguard’s S&P Index Fund would have grown to $346,117. During the same period the average managed domestic equity fund increased to$201,513–a huge difference.

The Arithmetic of Active Management by Nobel Laureate William Sharpe explains why an average actively managed fund must have a lower return than the average index fund. Other significant advantages of index funds are less volatility, neverbelow-average returns, no manager changes, no overlap, no style drift, tax efficiency, and peace of mind leaving more time for family and other endeavors.

Total market index funds make it even easier to build and oversee a simple and effective portfolio. Vanguard Total Bond Market Index Fund (VBMFX) was launched in 1986, followed by Total Stock Market Index Fund (VTSMX) in 1992 and Total International Stock Index Fund (VGTSX) in 1996. Using just these three funds, representing more than 10,000 individual securities, today’s investor can achieve market returns (less costs) with diversification that was unheard of when I started investing. A second key to investment simplicity is to stay the course. Once we have decided on our asset allocation, it is important to do nothing (except rebalance). This is much harder than it sounds because Wall Street’s marketing machine, aided by the media, is constantly urging us to take action. Bogleheads call this “investment pornography.” Mr. Bogle wrote in Common Sense on Mutual Funds: “‘Stay the course.’ It is the most important single piece of investment wisdom I can give to you.” Other investing experts agree.

3. Your latest book, The Bogleheads’ Guide to Retirement Planning, was a collaborative effort with several other longtime Bogleheads. What are some of the key pieces of advice you would give to retirees attempting to navigate the current environment of very low yields?

Safe investment options are currently limited to low returns. Higher return nearly always means higher risk. In our retirement account, my wife, Pat, and I currently hold 50% in Vanguard Total Bond Market Index Fund and 50% in Vanguard Inflation-Protected Securities Fund (VIPSX). The worst annual return for either fund was negative 2.6% in 2004. We can live with that. Another option, especially for older retirees, is a single-premium immediate annuity. It is the only type of annuity I like, but a SPIA will provide the largest guaranteed lifetime income of any investment. We purchased two SPIAs when we were in our late 70s. It was comforting to have their steady income during the recent bear market and to know that we won’t run out of money before running out of life. I think the key piece of advice for most retirees is to do what is necessary to keep what they’ve accumulated. This usually means a large allocation to relatively safe investments such as money market funds, CDs, and good-quality bonds. I like Mr. Bogle’s rule that our allocation to bonds should about equal our age. Stocks are very unpredictable. The Dow plunged 89% during my lifetime. Retirees must resistthe urge to seek higher returns if it means taking unnecessary risk.

4. You once ran a contest on Morningstar.com to illustrate the futility of

timing the market. What would you say to individual investors and advisors timing the market. What would you say to individual investors and advisors who employ more tactical approaches?

I would repeat what I learned in your Morningstar Course 106: “We’re not keen on market-timing. It just doesn’t work.” Every reliable study I’ve seen arrives at this same conclusion. Mr. Bogle wrote in his great book, Common Sense on Mutual Funds: “After nearly fifty years in this business, I do not know of anybody who has done market timing successfully and consistently. I don’t even know anybody who knows anybody who as done it successfully and consistently.” It seems to be human nature to think we can forecast the stock market. To demonstrate how difficult it is, at the beginning of 2001, I started a Boglehead Contest on the Morningstar Diehard forum. I asked each Boglehead to guess what the U.S. stock market return would be at year-end. The average Boglehead forecast a 6% gain. Instead, the market lost 11%. Last year we had 282 Bogleheads register. Their year-end forecasts for the S&P 500 Index, made in January 2009, ranged all the way from a decline of 40% to a gain of 27%. No one really knows what the securities markets will do tomorrow, next year, or the next 10 years. Ten years ago virtually no one was forecasting that bonds would outperform stocks 10 years later.

I think the best strategy is to spend time creating a sensible, long-term asset allocation plan, then stick with it. My friend Bill Bernstein wrote: “If over the past 10 or 20 years, you had simply held a portfolio consisting of one quarter each of indexes of large U.S. stocks, small U.S. stocks, foreign stocks, and high-quality U.S. bonds, you would have beaten over 90% of all professional money managers and with considerably less risk.”

5. If you could sum up what you have learned during a lifetime of investing experience, what would you say?

My advice to be a successful investor is this: Save regularly, develop a personal asset-allocation plan, use a few broad market index funds, keep costs low (including taxes), avoid mistakes, strive for simplicity, and stay the course.

Opening a Vanguard Account

I just opened a new Vanguard Account.  The process took about 10 minutes and was very easy.  The only thing to be aware of is that a new account requires a minimum of $3,000. for each fund that is opened.  The great thing about Vanguard is the account expense fees are very low.  Most of the mutual funds at Vanguard have an expense fee of around 0.20%.  Mutual funds generally have fees in the 1% range.  So the savings are substantial.

I decided to open the Vanguard account in order to diversify my portfolio and reduce risk just in case another major financial institution goes broke.  I currently have an E-Trade account that is used to purchase stocks that focus on dividend yield.  I also have a Merrill Lynch Account that is professionally managed.

I will post my mutual fund strategy in the next blog.

Merrill Lynch v. E-Trade v. Scott-Trade

I have posted in the past a ranking of brokers that was published in Smart Money. I wanted to give my impressions after using 3 different brokers:

1) Merrill Lynch--Merrill Lynch is one of the most well known companies on Wall Street. They have excellent customer service and my financial advisor is not only a close friend but I trust his judgment without question. ML is great for someone that wants an advisor to manage their IRAs or Brokerage Accounts. The Fees for Stock Trades is higher than E-Trade or Scott-Trade but you are also getting full service. The thing that is not good at ML is their web-page it seems to always be 24 hours behind. The other problem is that when you look at posted (credits/debits) transactions to the account it does not show you a running balance.

2) Scott-Trade-has a good service–very good customer service–simple web-page that is easy to understand and get around. The Fees are the lowest of the three only $7 per trade. The thing that led me to switch to E-Trade has to do wit the banking features. The problem with Scott-Trade is that you can electronically transfer money into the account but you cannot electronically transfer money out. This just does not make sense. Why do they need to send you a check. If you are in need of your money quickly this is just not convenient.

3) E-Trade–has a great web-site–lot of information that is easy to access. The fees are a bit higher than Scott-Trade but the banking features are much better. You can also get one of the highest interest rates around by putting money into their Savings Accounts–3.3% currently. The good thing is that you can electronically get your money out. So far I am very happy with E-Trade.

Speeding up Mortgage Payments

The best way to reduce your home mortgage quickly is to participate in a 26 Payment Plan. Usually these plans are free and offered by all mortgage companies. In this plan instead of paying your mortgage once a month you will pay half the amount every 2 weeks. In addition, you will make 1 extra payment per year or a 13th payment under a traditional plan. By paying every 2 weeks interest does not build up all month since you are paying more frequently.

I know that paying 1 extra payment per year can be difficult but the upside is that it will generally take 7.5 years off a 30 year fixed mortgage. If you use a mortgage calculator you will see that it will save you 10,000s of dollars.

Money 70: The best mutual funds you can buy

Money 70: The best mutual funds you can buy

  • if (location.pathname.match(‘/magazines/moneymag/bestfunds/2008/’)) { document.write(‘The Money 70’); } else { document.write(‘The Money 70‘); } The Money 70
  • if (location.pathname.match(‘/2008/01/03/pf/funds/money70_2008.moneymag/’)) { document.write(‘Funds for the long run’); } else { document.write(‘Funds for the long run‘); } Funds for the long run
Money Makeovers:
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  2. if (location.pathname.match(‘/2007/12/26/pf/funds/strategies_haskins.moneymag/’)) { document.write(‘A thirtysomething\’s search for financial security’); } else { document.write(‘A thirtysomething\’s search for financial security‘); } A thirtysomething’s search for financial security
  3. if (location.pathname.match(‘/2007/12/26/pf/funds/strategies_morrow.moneymag/’)) { document.write(‘Mid-career: Reduce retirement plan risk’); } else { document.write(‘Mid-career: Reduce retirement plan risk‘); } Mid-career: Reduce retirement plan risk
  4. if (location.pathname.match(‘/2007/12/26/pf/funds/strategies_paine.moneymag/’)) { document.write(‘The home stretch to retirement’); } else { document.write(‘The home stretch to retirement‘); } The home stretch to retirement
  5. if (location.pathname.match(‘/2007/12/26/pf/funds/strategies_marlowe.moneymag/’)) { document.write(‘Retired – and ready to play it safe’); } else { document.write(‘Retired – and ready to play it safe‘); } Retired – and ready to play it safe

Money Magazine’s list of recommended funds is not about aiming for the highest short-term returns. Our lineup is designed to let you build a well-balanced portfolio that will help you reach your most important financial goals, like putting your kids through college, starting a business or achieving a comfortable retirement.

We focus on criteria that have real predictive value: low expenses, a strong record for putting share-holder interests first, a consistent investment strategy and experienced managers.

A fund that meets our standards typically ends up delivering above-average returns – over the past five years, 73 percent of the actively managed funds on our roster outperformed their category average. Even in 2007’s difficult market, 57 percent delivered returns that rank in the top half of their category.

The Money 70 is designed to help you construct all aspects of your portfolio. It includes a range of actively managed stock and bond funds, as well as low-cost index and exchange-traded funds. Or you can put your investments on cruise control with one of our target-date retirement portfolios, which give you a preset mix of funds that automatically becomes more conservative as you near retirement.

See more on how we picked the funds and what changes we’ve made since last year.

Ticker Fund name 1-yr
FSMKX Fidelity Spartan 500 Index Investor -6.8% 7.5% 9.7% 0.1% $10,000 Blend
FSTMX Fidelity Spartan Total Market Index Inv -6.3% 8.3% 10.8% 0.1% $10,000 Blend
VFINX Vanguard 500 Index -6.8% 7.4% 9.6% 0.1% $3,000 Blend
VTSMX Vanguard Total Stock Mkt Idx -6.3% 8.2% 10.7% 0.1% $3,000 Blend
VIMSX Vanguard Mid Capitalization Index -6.5% 10.6% 14.9% 0.2% $3,000 Blend
NAESX Vanguard Small Cap Index -8.2% 9.1% 14.1% 0.2% $3,000 Blend
VGSIX Vanguard REIT Index -12.4% 10.5% 16.9% 0.2% $3,000 Real estate
FSIIX Fidelity Spartan International Index Inv -2.3% 16.9% 19.1% 0.1% $10,000 Blend
VEIEX Vanguard Emerging Mkts Stock Idx 21.3% 31.9% 33.6% 0.4% $3,000 Emerging markets
VGTSX Vanguard Total Intl Stock Index 1.6% 19.1% 21.2% 0.0% $3,000 Blend
VBISX Vanguard Short-Term Bond Index 7.1% 4.5% 3.2% 0.2% $3,000 Bonds
VBMFX Vanguard Total Bond Market Index 6.4% 4.1% 3.7% 0.2% $3,000 Bonds
Data as of: May 30, 2008

SmartMoney 2008 Broker Survey

SmartMoney 2008 Broker Survey

Smart Money reviews brokers every single year and they recently just gave a preview to their results. Rather than give the straight ranking, they discussed some headline categories (Commissions & Fees, Research, Trading Tools) and then listed the best and worst from each category.

For best commissions and fees, they listed Interactive Brokers, a brokerage firm I hadn’t heard of but does charge pretty rock bottom fees (half a cent per share on equity trades). They also showed the spread was anywhere from $4.95 for TradeKing to $112.50 for Fidelity on broker-executed trades. Zecco was also mentioned with a $0 per trade but no discussion of why they didn’t take the top spot.

For research, my Roth IRA brokerage, TD Ameritrade, took the top honors with Zecco and SoGoTrade splitting the worst place ribbon. One interesting point made was that J.D. Power’s research showed that good research trumps trade execution and customer service with regards to overall satisfaction. I found that pretty surprising since there is a wealth of free investing information out there but trade execution and customer service is where the rubber actually meets the road. If they can’t execute your trade or if you can’t get on the phone with someone in a few minutes, that’d be a deal breaker for me.

Last but not least, E*Trade and TD Ameritrade snatched the number one and one-a spot for trading tools with Sharebuilder playing caboose. It’s not surprising because Sharebuilder isn’t for the typical trader, it’s for people looking for an easy way to reinvest their dividends back into equities. TradeKing’s social networking area got a shout out as did Zecco and WellsTrade, but that was because they offered less than half the thirteen tools their researchers were looking for. Thirteen tools? Wow.

Anyway, check out the preview, I’m eagerly anticipating their results and whether TradeKing will need to update their current banner and call it a three-peat.

SmartMoney’s 2008 Broker Survey

The Importance of an Emergency Fund

Why You Need an Emergency Fund

Emergency funds are an absolute necessity for financial security because they give you funds to fall back on if you become ill or disabled and can’t work, or if you or your spouse lose your job, incur large medical bills, or have an unexpected large bill such as a major car or home repair.

Without an emergency fund, you may be forced to incur credit card debt that could take you many years to pay off and end up costing you much more in the long run.

You never want to be in the position where you have to buy daily necessities like food, transportation, and housing on credit. Imagine still making payments on groceries you bought (and ate) three years ago, at 10-18% interest. Pretty depressing.

How Much You Need in Your Emergency Fund

The minimum amount in your emergency fund should be three to six months worth of basic living expenses. Singles who don’t have dependents who rely on them may be able to get by with three months’ worth (although it makes me cringe to say so), but couples or anyone with dependents should definitely shoot for six months worth. The more people you support, the more likely you are to have unexpected or unplanned costs.

What are I Series Bonds?


This is a government bond that has two components which are adjusted every six months: the fixed portion and the inflation adjusted portion. The fixed portion remains the same over the life of the bond while the inflation adjusted part is changed every 6 months to the current rate of inflation. I-bonds serve as a hedge against inflation.

You must hold I-bonds 1 year but you can hold them up to 30 years. If you sell the I-Bond after holding it 1 year, but before 5 years are up, there is a 3 month interest penalty for the withdrawal.

I-Bonds have the following characteristics:

Federal Guarantee I-Bonds are completely guaranteed by the United States government. You earn a set variable interest rate which changes and is set every 6 months which varies depending on inflation.

Taxes Advantage You have deferred federal taxes until you sell the bonds. Also, the gains are completely state tax free! If you are in a high tax state, this is important. If you have children, I-bonds can be federal tax exempt if you fall into set income limits and use the proceeds for college expenses.

You can get more information on I-Bonds at I-BondRate.com

How long will it take you to double your money?

The rule of 72 is a very useful rule to not only figure out how long it will take you to double your money but it also helps demonstrate how 1-2% increase in interest rates can speed up accumulation of wealth. To quickly calculate how long it will take to double your money you simply take 72 and divide it by the interest rate or yield. So if you invest money in the stock market and get the traditional 12% return that the historical averages dictates it will take 72/12 = 6 years to double your money. But if you have your money in a 3% CD it will take you 18 years to double.