Money market

[gypsie]

Can anyone recommend a good online bank for a money market account?

[debtmamma]

My Ameritrade accounts say money market but I don't even know what that means. If you do $50 in ACH transfer per month, they will give u $100 back at the end of the year if you go though here www.saveyourself.com code is 701. The interest rate is 3% something. I know nothing about accounts but will tell you they have great customer service and go all out to help you. The min deposit with the suze orman/saveyourself.com plan is only $50. They make it very easy to set up your bank account with them.

I love your avatar!

[gypsie]

My Ameritrade accounts say money market but I don't even know what that means. If you do $50 in ACH transfer per month, they will give u $100 back at the end of the year if you go though here www.saveyourself.com code is 701. The interest rate is 3% something. I know nothing about accounts but will tell you they have great customer service and go all out to help you. The min deposit with the suze orman/saveyourself.com plan is only $50. They make it very easy to set up your bank account with them.

I love your avatar!

I did see something about Ameritrade on Suze Orman's site, I'll check it out. Thanks- I love my avatar too!

[ShortBus]

Open an account at www.ingdirect.com instead. It's a high interest savings account rather than a money market account. So it's FDIC insured and there are no minimum balances. And the current yield is 4.1%.

[Freak]

I use HSBC's online savings account. I do have a Sharebuilder account which is now owned by ING. I would recommend it as well.

[insomniac]

Open an account at www.ingdirect.com instead. It's a high interest savings account rather than a money market account. So it's FDIC insured and there are no minimum balances. And the current yield is 4.1%.

Emigrant Direct is just as good with an even higher yield... FDIC-insured, no minimum balance. Either one of these is a great place to start.

[Hedwig]

I agree. Either ING Direct or Emigrant Direct. You want something that is FDIC insured that pays at least 4.5%.

Most of the trading sites (Sharebuilder, Ameritrade, etc) offer money market accounts. I don't think they are insured, as those aren't banks. Investment accounts are never insured.

Since ING Direct bought Sharebuilder, I don't know if they are going to have any deals for having accounts both places or not.

[gypsie]

Thanks ya'll for that great info. I'm going to open one tomorrow. FDIC is only up to $100,000.00 right?

[ShortBus]

Thanks ya'll for that great info. I'm going to open one tomorrow. FDIC is only up to $100,000.00 right?

Yeah.... only. You holding out on us?

I had a ShareBuilder account before I opened my ING Direct account (and before they bought them). Since getting my new job, what I do is direct deposit half my paycheck into my ING account. Then all but $200 of it is automatically transfered to ShareBuilder when it then automatically invests into five stocks, twice a month. Pretty cool, I never even see the money in my checking account.

It's definitely much more risky than keeping the bulk of it in my savings account, but I'm looking long term, hoping to save up for a down-payment on a house within a year or two.

[gypsie]

Yeah.... only. You holding out on us?

I had a ShareBuilder account before I opened my ING Direct account (and before they bought them). Since getting my new job, what I do is direct deposit half my paycheck into my ING account. Then all but $200 of it is automatically transfered to ShareBuilder when it then automatically invests into five stocks, twice a month. Pretty cool, I never even see the money in my checking account.

It's definitely much more risky than keeping the bulk of it in my savings account, but I'm looking long term, hoping to save up for a down-payment on a house within a year or two.

Haha, yep, I'm getting loaded! I'm saving to pay off the mortgage. My plan is to have it paid for in 3 years.

Did you pick the stocks yourself?

[ShortBus]

I'm getting loaded too!

Yeah, I picked them myself. Berkshire Hathaway (hard to go wrong there), a tech company that's got a strong product, a specialized energy company, and an IP company with a lot of patent holdings related to OLED technology. (Forgot I stopped Yahoo. While I think they're going to make a good comeback, I'd rather put my money elsewhere for now).

[Hedwig]

Since stocks are much riskier than savings/money market accounts, make sure you have at least 3-6 months worth of expenses in savings before doing the investing.

And you should be looking at five years (at least) as an investment horizon when choosing to go into stocks. If you need the money before that, stay in safer investments (CDs, money market, etc). You'll be more sure of having what you need when you need it.

[ShortBus]

The bulk of my investing is in Berkshire Hathaway. My thoughts are that the only way I won't get at least a 5% return is if Buffet croaks before I buy a house. The rest are more long term, esp the OLED stuff.

[gypsie]

I'm so glad I asked.... Ok, well then I have a plan, DH likes the look of the Emigrant Direct best for now. We're both going to open separate accounts tomorrow. After the mortgage is paid off, we'll look at more options with the accounts such as investing, maybe before- not sure yet.

We've already got the usual- IRA- vehicle for my mutual fund, 401k, 403b, but once the house is paid for, I want to really get into stocks.

I also read a book called the "smartest investment book you'll ever read" and he mentions investing in index funds.

Anyways, I'm excited

[DHK]

I also read a book called the "smartest investment book you'll ever read" and he mentions investing in index funds.

While I'm not really for investing in an index, let me just suggest that if you're going to do it, invest in the index with Vanguard.

Vanguard is the CHEAPEST way to invest in an index fund.

Fidelity charges about 5x at much as Vanguard as an ongoing expense.

I saw a State Farm S&P 500 index fund once -- it was class B. Class B means that if you pull the money out within 5-6 years, you get hit with a surrender fee. Also, the expenses were about 1.5% ongong. It was a rip-off in the worst way.

I think Vanguard's S&P 500 fee will be about .10%.

[gypsie]

While I'm not really for investing in an index, let me just suggest that if you're going to do it, invest in the index with Vanguard.

Vanguard is the CHEAPEST way to invest in an index fund.

Fidelity charges about 5x at much as Vanguard as an ongoing expense.

I saw a State Farm S&P 500 index fund once -- it was class B. Class B means that if you pull the money out within 5-6 years, you get hit with a surrender fee. Also, the expenses were about 1.5% ongong. It was a rip-off in the worst way.

I think Vanguard's S&P 500 fee will be about .10%.

I wondered when you were going to pop in.

The book recommends the Vanguard way too- VTSMX, VGTSX, and VBMFX

I don't really like the performance of the 3rd one.

Do Tell- what are reasons as to why you wouldn't recommend investing in an index?

[DHK]

Okay, I’m going to get REALLY technical and nerdy on this response.

For reference, I like “Google Finance” because I can see MPT (Modern Portfolio Theory) statistics for each mutual fund.

For Example:

Alpha – return factor compared to an index

o If it’s greater than zero, then you are getting a GREATER return than the benchmark index.

o If it’s LESS than zero, you’re getting LESS return than the benchmark index.

Beta – RISK factor compared to an index

o If it’s 1, then it IS an index.

o If it’s GREATER than 1, it is MORE volatile than the index.

o If it’s LESS than 1, it is LESS volatile than the index.

R-squared – how much of this fund’s return is attributable JUST because of market fluctuations.

o If it’s 100, then 100% of the returns of the fund is attributable to the market.

o If it’s less than 100, (for example: 70) then that % of the returns are attributable to the market.

§ In an inverse way, if 70% of a funds returns are attributable to the market, then the other 30% is attributable to fund managers and other factors NOT directly related to market performance.

VTSMX – Vanguard Total Stock Market Index

http://finance.google.com/finance?client=ob&q=VTSMX

VGTSX – Vanguard Total International Stock Market Index

http://finance.google.com/finance?q=VGTSX&hl=en

VGMFX – Vanguard Total Bond Index

http://finance.google.com/finance?q=VBMFX&hl=en&meta=hl%3Den

Because these are ALL index funds, the Alpha is near 0, the Beta is 1 and the R-squared is 100.

Why does this matter?

- Because not everyone can stand the tolerance of being on the same RISK factor as the market.

- What if you can REDUCE your volatility (risk) and INCREASE your returns?

Take a look at my 2 favorite funds (and you’ll begin to see why they’re my favorites):

CAIBX – American Funds Capital Income Builder – A

http://finance.google.com/finance?q=CAIBX&hl=en&meta=hl%3Den

Let’s look at a 5-year time horizon (my recommended time horizon to invest):

Alpha – 2.93 (HIGHER return compared to index)

Beta - .87 (LOWER volatility compared to index)

R-Squared – 72.21 (Attributable to investment manager style)

Why take on more risk if you don’t have to?

CWGIX – American Funds Capital World Growth & Income – A

http://finance.google.com/finance?q=CWGIX&hl=en&meta=hl%3Den

5-year time horizon for this one:

Alpha – 3.08 (again HIGHER return compared to index)

Beta - .85 (again LOWER volatility compared to index)

R-Squared – 90.98 (attributable to the fact that international markets have just done quite well)

Now, how about a BAD fund:

FTCAX – Franklin Technology – A

http://finance.google.com/finance?q=NASDAQ%3AFTCAX

Alpha - .18 (not quite as good as the other two I mentioned)

Beta – 1.48 (VERY volatile compared to the index)

R-Squared – 58.16 (low factor, normally good, but the return and risk aren’t)

Why would I invest in this portfolio, when I can LOWER my risk and INCREASE my return with the (GASP!) loaded funds?

Just a little bit on how I evaluate mutual funds for my clients.

[DHK]

BTW, since I did mention expenses/fees, you can see the expense ratios on each of the links I posted.

You'll see that each Vanguard fund has VERY low expenses.

Compare it to American Funds, and AF is a little higher.

Take a look at the Franklin fund I posted. 1.86%!!! Do you think that might have an additional affect on your realized return? I would think so.

Don't forget my 3 criteria and to BALANCE your decisions with all 3:

- Risk (volatility)

- Return

- Cost (your expenses to acquire and hold the investment).

[Freak]

Oh my head...

[gypsie]

Thank you DHK!!!!!

That took a while for me to digest, in fact I'm still digesting it. But very helpful! Thank you for that insightful answer