October 12, 2008
from cnn
1. How to earn a yield of nearly 5%
Boost your take by putting some money into a higher-yielding stock ETF such as iShares Dow Jones Select Dividend Index (DVY), currently paying 4.4%, or SPDR S&P Dividend ETF (SDY), paying 4.2%.
Put the rest into low-cost bond funds and perhaps a REIT to add diversity and boost your yield. Because of their low expenses, I like the intermediate-term Vanguard Total Bond Market ETF (BND) (4.6%), Vanguard High-Yield Corporate Bond (8.1%) and Vanguard REIT Index (4.9%).
Allocate your money according to the suggestions below for a yield of 4.9% (you'll want to dial back on the stocks as the years go by:
30% Vanguard High Dividend Yield ETF
30% iShares Dow Jones Select Dividend Index ETF
20% Vanguard High-Yield Corporate Bond Fund
10% Vanguard Total Bond Market ETF
10% Vanguard REIT Index Fund --Michael Sivy
2. How to "ladder" CDs for safety and income
3. How to know when a stock is really a bargain
When the market plunges 5% in one day, lots of stocks might look like they're on sale. But are they? Here's how to ID the true values. (Get the data below at morningstar.com.)
Step 1 Look at a stock's forward P/E. This is the price investors are willing to pay for every dollar of expected earnings. Compare this ratio with that of the company's peers and industry benchmark. The S&P 500's forward P/E is 13.8. What you want to see: ratio lower than average but not too low (Matthew Sauer, a senior vice president at value-oriented Ariel Investments, is cautious about P/Es below 8).
Step 2 Look at the trailing P/E, which is based on a company's past earnings. It will show whether a stock was cheap before the market's recent free-fall. What you want to see: ratio lower than industry average.
Step 3 Check the price-to-cash-flow ratio. This shows how much cash a company generates per share. It's sometimes a more reliable measure of value than P/E because cash, unlike earnings, cannot be manipulated easily by accountants. Again, compare the ratio with the industry benchmark and peers. What you want to see: ratio lower than average.
Step 4 Look for stability. A company that isn't highly leveraged (laden with debt) has a better chance of riding out the economic downturn. To find out if that's the case, see the company's balance sheet at The SEC's Web site. Divide total assets by total equity. What you want to see: ratio of 2 or lower (10 or lower for financial firms).
Step 5 Read the news. No matter what the numbers say, a stock could be a rotten choice if, say, the company is embroiled in a potentially costly lawsuit. Not every stock that appears cheap is a good deal. What you want to see: no obvious problems. Bottom Line: If a stock passes all these tests, you could be onto a good buy. --Carolyn Bigda
4. How to rebalance your portfolio
5. How to raise your credit score
35% Your payment history Pay your bills on time. Automating payments online can help.
30% How much you owe Keep balances on credit cards and other revolving accounts below 50% of your credit limit (lower is better).
15% Length of your credit history Rather than let old cards go dormant, charge a latte a month (then pay it off). No activity lowers your score.
10% Your new credit Don't open unnecessary new accounts. And if you're rate shopping for a mortgage or an auto loan, do it within two weeks; multiple requests could ding your score.
10% Your mix of loans You can't do much to change this (except get a credit card if you don't have one).
Bonus Request a free copy from each of the three major credit-reporting agencies at annualcreditreport.com. Then tell them about any mistakes you find that are not in your favor. --George Mannes
6. How to buy treasurys without paying a commission
When you're buying supersafe T-bills, notes and bonds, why fork over fees that will eat away at already slim returns? Go to treasurydirect.gov and follow the directions for opening an account. You'll need to let the Treasury link to your bank account, so keep your bank info handy.
Once you're authenticated (usually a few minutes later), you'll be able to bid in auctions for Treasury bills, notes, bonds and TIPS (Treasury Inflation- Protected Securities). Sound intimidating? It's not.
"The big players end up setting the price," explains Stephen Meyerhardt of the Bureau of the Public Debt, an agency within the U.S. Treasury. All you do is submit what's known as a noncompetitive bid, and you'll get the same price that banks and brokers do.
Let's say you want to buy $10,000 worth of a 26-week T-bill. You'll see at the Web site that these bills are auctioned every Monday (except holidays).
Before the auction, place a bid online. After the auction, your bid will be accepted, and the Treasury will draw the money from your bank account. (It will draw less than $10,000; the exact amount depends on what the auction price is.)
And when the bill matures 182 days later? The Treasury returns the full face value of $10,000 (which includes the interest you earned) to your account automatically. --E.F.K.
7. How to get a great deal on a mortgage
8. How to maximize your take if you get laid off
9. How to estimate your true return
Sure, it's easy enough to click on our portfolio tracker and figure out the annual return of the various funds you own. But did your entire portfolio beat the market? To find out, complete this easy worksheet, suggests Colorado Springs financial planner Allan Roth.
A. The dollar value of your portfolio at the beginning of the period: __________
B. The portfolio value at the end of the period: _________
C. The net amount you added to or withdrew from your portfolio over the period (if it's a net withdrawal, the number will be negative): __________
D. Your portfolio's gain or loss (B minus C minus A): __________
E. Average amount in your portfolio during the period (A plus half of C): __________
F. Your estimated percent return (D divided by E times 100): __________
This worksheet isn't perfect. It assumes that all investments or withdrawals you made over the period in question happened in the middle of the period. But unless you made a huge withdrawal or investment at the very beginning or end, the results come pretty close. --Elizabeth Fenner
Posted by renh at October 12, 2008 11:35 PM