SMI Visitor's Weblog       

Welcome to the SMI Visitor's Blog where you'll find selected excerpts from our Member's Blog, plus occasional posts created especially for our visitors.

For SMI Web Members, click here to go to the SMI Member Blog.

SMI Dayton Club to host Mark Biller and Matthew Pryor

Last year, an SMI Investment Club was started in Dayton, Ohio.

Tomorrow, Executive Editor Mark Biller and myself will make a guest appearance. The club will meet from 6:30 - 8:00 PM at Far Hills Community Church. The church address is 5800 Clyo Road, Centerville, OH 45459. We will be here to share about SMI, explain how SMI can help you invest using Biblical principles, as well as answer questions.

If you're in the area, we hope you'll bring a friend and come visit. We'd love to meet you.

Top 3 Real Estate Myths for Home Sellers

Guest Post: Tre Pryor, oldest of Sound Mind Investing Editor Austin Pryor's three sons, is a Realtor® residing in Louisville, Kentucky. He is also the Editor-in-Chief of the LouisvilleHomesBlog.com where visitors can get targeted real estate news and advice for home buyers and sellers in the Louisville area.

Because there is so much information concerning the housing market flooding our lives these days, it's more important than ever to distinguish the truth from the myth. Whether myths about foreclosures or myths about home improvement, you should be informed—or team up with an a Realtor who is.

Myth #1: Sellers should price their home higher than market value to allow for negotiation room.

When the market eventually tilts toward the seller's advantage, this would be good advice. But in today's buyers market, there is a huge selection of homes and competition is fierce for each buyer's attention.

Today's buyer looks at an average of 12-18 homes before writing an offer. If a home seller prices his house above market value, that home may not "make the cut" to be one of those dozen or so homes that a buyer will visit in person. The longer a home is on the market, the greater the perception that the home is unwanted or undesirable. The thought process is, "Don't the best homes sell fast?"

Best Strategy: Get a solid Competitive Market Analysis (CMA) from your Realtor and price your home at market value. New listings have the most showings during the first 60 days. After that, traffic drops off considerably.

Myth #2: Selling a home For Sale By Owner (FSBO) makes the homeowner the most money.

There's a reason why Realtors are more valued than ever. The market grew tougher and the number of homes sold by their owners dropped to the lowest level in years—just 9%. Only eight years ago, 14% of all homes sold were FSBOs. (This includes transactions involving parties that knew each other, such as a parent selling a home to a child.)

Selling via this method is extremely difficult. In today's real estate market, expertise is needed to best evaluate, price, and promote a home to get it sold. It's also important to remember that if the homeowner doesn't have a firm grasp on the true value of their home, they could accidentally underprice the property and lose money.

Lastly, most buyers understand what FSBO sellers are trying to do ... save money. So when writing an offer on a FSBO property, home buyers are more likely to "low ball" and try to take a share of that unpaid commission for themselves.

Best Strategy: Find an experienced Realtor. Ask trusted friends/family for referrals and search online for top agents.

Myth #3: Don't update the home, just drop the asking price.

Remember when I said it was a tough market for home sellers? Yes, it's still true. The goal for every online listing, virtual tour, or property profile is to get a buyer in the home. But they won't come if the home doesn't look appealing in the photos.

For example, replacing some old, dingy carpeting with brand new flooring does a couple of things. First, it removes a big negative and possible hindrance to a showing. Second, the update is now something that can be promoted, which encourages a possible visit. It's a win-win!

The classic real estate saying that what sold a home was, "Location, location, location!" In today's real estate market, it's more likely to be "Condition, condition, condition!"

Best Strategy: Ask a trusted realtor which updates will give your home the best bang for the buck. Example, replacing your front door continues to rank the highest return on investment for home improvements.

Get a Free 30-Day Trial and Take Control of Your Finances

You’re not alone if your credit card bills are forcing you to realize you need to get serious about your finances and investing. It's time to put intention into action.

During January, we're offering a no-risk Free 30-Day Trial Web Membership where you get instant access to our market beating investing strategies.

You also get unlimited access to our web-only tools, including: Personal Portfolio Tracker, Income Portfolio Tool, Editors' Blog and Member Message Boards.

The start of a new year is a terrific time to begin your journey toward financial security and investing success, and we're here to help you every step of the way.

Success takes commitment. Decide today to take control of your finances!

Keeping separate finances is a bad plan for your money

Financial author Matt Bell tackles a problem we haven't written on lately: the rising proportion of couples who are keeping separate finances.

He cites a recent Money Magazine survey in which:

• 71 percent of married Americans acknowledged keeping secrets about their spending from their spouses
• 44 percent said keeping secrets about money is acceptable under certain circumstances
• 40 percent admitted that they tell their spouse they spent less on purchases than they actually did (women lied mostly about clothing, shoes, and things for kids; men lied mostly about things for the car, entertainment, and sports tickets)

Matt's perspective is in line with what we've written on the subject in SMI:

I don’t care how many people have gotten on the separate accounts bus. I’m clinging to my quaint, clearly out-of-fashion point of view that the ideal way for man and woman to get along financially is to practice full financial disclosure before marriage and complete financial transparency after marriage.

Full financial disclosure means talking about money before marriage. A lot. It means detailing how much debt you have, how you got it, and what you’re doing about it. It means revealing how much you have in savings and investments and how much you earn.

It isn’t about interrogating each other; it’s about talking with each other about something that’ll impact countless aspects of your relationship.

And here’s where I’ve really gone off the deep end. I have this odd point of view that if one person had a lot of debt before getting married, after the wedding, both spouses have a lot of debt. If one was rich before the wedding day, the minute the vows have been said, both spouses are rich.

This isn't a very popular opinion these days. And it's understandable why the numbers have shifted this direction over the years as divorce has become so much more common (if eventually separating seems like an eventual probability, it can feel like preparing for it financially is a smart, even necessary, move).

I found this comment to Matt's post particularly telling. (I've added the emphasis below.)

As a marriage counselor I concur with your statements about the need for joint financing. I cannot count the number of couples who come to see me with problems that seem to be unrelated to money yet when we look at the whole issue – separate money is at the root. I tell all couples, in new marriages and old that separate money is asking for trouble. When I counsel engaged couples I am particularly strong with them because I don’t want them coming back in 5 years!

If you're married and keeping separate money, I encourage you to prayerfully consider whether this is the right course of action. It might be worth picking up a copy of Matt's book (mentioned in the post; note that I haven't read it).

As always, I'm interested in your (non-judgmental) thoughts on this sensitive matter. You might have an insight that could really help someone else reading this (as iron sharpens iron...).

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 12:21 PM | Comments (5) | TrackBack
Category(s): Family Finances
Tag(s): budget, family finances

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Fidelity cuts its minimum holding period for NTF funds

After a quiet couple of years on the brokerage front, Fidelity unexpectedly shook things up this month. The big change: Fidelity cut its minimum holding period for NTF (no-transaction-fee) funds from 180 days to just 60 days. This is a significant shift in the landscape.

When we last updated our broker rankings two years ago, Schwab and Scottrade earned top marks, largely because of their 90-day holding periods for NTF funds. TD Ameritrade and Fidelity (and Vanguard) required an 180-day hold, which was a substantial handicap. SMI rarely sells a fund within 90 days (and never within 60 days), but 180 days isn't out of the question.

With this move, Fidelity moves to the front of the pack in the brokerage race. It now has the best NTF policy (rather than the worst). This impacts costs dramatically also, as their $75 short-term trading fee was a big deal before, but now will rarely ever come into play. Their $75 transaction fees look higher than Schwab's at first glance, until you realize that you only pay the $75 on one side of the transaction at Fidelity, as opposed to Schwab's $50 fee applying on both the buy and sell. So it's actually cheaper than Schwab on that score. And Fidelity already had a slight lead in fund availability.

Schwab has also tweaked their transaction fee fund pricing as of December, so the big boys seem to be going at it. That's good for investors.

We'll likely revamp our Brokerage Ratings in an upcoming newsletter, given that Fidelity is vaulting into the top position with this change. The key question: will Schwab (and/or any other competitors) make any changes of their own in response? Stay tuned.

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 3:45 PM | Comments (2) | TrackBack
Category(s): Retirement
Tag(s): Fidelity, holding periods, NTF, Schwab

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With 529 plans, some states are better than others

While it may indeed be true that some states are better than others in a general sense ("I'm looking at you _______!"), my context here is as it pertains to the generosity of various states in rewarding residents who contribute to their home state's 529 college savings plan. As it turns out, there is a wide disparity between how various states approach this.

As this SmartMoney article describes, at one end of the spectrum are 16 states that offer no tax benefit to their contributing residents. On the other, tax deductions can rise as high as $26,000 per year (Pennsylvania). Three states offer tax credits rather than deductions, including a generous $1,000 max credit in Indiana.

(click for larger image)

SMI's advice concerning 529 plans has always been to check your own state's plan first, because some states offer such compelling benefits. But don't be so overwhelmed with a small up-front tax savings that you overlook a mediocre (or worse) investing plan. In most cases, the way the money is invested is going to dwarf the eventual impact of the initial tax benefits offered to lure you to your home state's plan.

Generally speaking, we recommend finding a plan that has a stock/bond allocation track that you're comfortable with (if you opt to not set your own allocations). Beyond that, we suggest finding a plan that offers good, low-cost index funds among the investment choices. Since you can't upgrade within a 529 plan, an indexing approach is usually the next best thing.

Big picture though, the most important thing is to get started. If you intend to save for your child's (or other relative's) higher education expenses, don't let the paralysis of there being so many plans to sort through bog you down. There are some great resources that can help you whittle the field down in no time. Check out Joe Hurley's SavingforCollege site for a good overview of all the plans. Knowing what you're looking for, as I've described above, is half the battle.

Worst case, you can transfer your plan to another plan once per year, so it's not as if you're locked in forever if you choose one plan and then find a better one later. But you've got to get started. Time is your biggest ally.

For a more thorough treatment of the whole college savings issue, see our June 2011 cover article, Making the Most of Your College-Savings Program ( Members Only).

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 8:31 AM | Comments (0) | TrackBack
Category(s): College
Tag(s): 529s, college savings

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Sound Mind Investing profiled by MarketWatch

It's pretty rare for SMI to get national media attention, so we were pleasantly surprised to unexpectedly see this flattering profile by Peter Brimelow of Marketwatch recently. The author didn't talk with anyone here, so we had no idea it was coming.

Brimelow works with Mark Hulbert at the Hulbert Financial Digest. For those unfamiliar with Hulbert, they are sort of the third-party scorekeeper of investment newsletters. They subscribe to all the known investment letters and then monitor the performance of each one in real-time to provide an independent source of investment performance. Think Consumer Reports for investment letters. While we've had some issues with how they've calculated SMI's performance in the past (they average all our JtB and Upgrading portfolio allocations, then compare those to the stock market averages), they serve an important purpose and generally get things pretty much correct.

Brimelow correctly notes SMI's strong focus on asset allocation:

Sound Mind Investing takes an unusually comprehensive and disciplined financial-planning approach. It attempts to establish its reader’s “investment temperament” by means of an online quiz (“If you’re married, it’s a good idea to have your spouse take the quiz, too”) and focuses on tax-advantaged asset allocation, by far the most powerful decision for any investor, albeit one often neglected in favor of glamorous equity portfolios alone. Sound Mind also urges saving and getting out of debt.

Significantly, he also took the time to break out the performance of SMI's 100% stock Upgrading portfolio separately. (This has really been the sticking point with us regarding how they present our performance — this has tended to get buried.)

Its top-performing Fund Upgrading Strategy: 100% Stock Portfolio has appreciated an impressive 9.1% annualized since the HFD began following it in 1995, vs. just 6.7 % annualized for the Wilshire.

That type of outperformance is no surprise to readers who have been around long enough to experience those gains. But for newer readers, or prospective readers trying to decide whether to jump aboard, it's extremely helpful to see those long-term performance numbers confirmed and validated by a totally-independent third party source who has been accumulating that data month by month over the entire period.

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 9:34 AM | Comments (4) | TrackBack
Category(s): SMI General Announcements, SMI Model Portfolios
Tag(s): Model portfolio, performance, upgrading

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Save money by using Upromise

Hello again friends! Hope everyone had a great Thanksgiving.

Before diving back into market stuff, I thought I'd comment on a pleasant surprise from this past weekend. Like many Americans, I took advantage of some of the deep store discounts offered. The combination of my loathing of physical shopping and my researcher temperament makes me a natural for the online madness that has become the "Black Friday - Cyber Monday" weekend. Not that I'll go buy a bunch of stuff I wasn't going to buy otherwise, but I will try to think through things I'm going to be buying soon and make those purchases while they're sharply discounted.

(That's one of the benefits of being debt-free and having a savings reserve, by the way. You can dictate your own purchase schedule to take advantage of opportunities, instead of having to wait until a crisis hits and pay whatever the current price is.)

As I've mentioned before ( Members Only), I've been a Upromise member for roughly a decade now. Upromise is basically a rewards program that deposits your savings into a college 529 plan account. (You can read more about how it works here.) 529 plans are a great way to save for college, the Upromise arrangement takes virtually no effort on our part, and I have young kids, so it's been a good fit for us.

I should note that nearly all of the benefit we've received from Upromise has been as a result of earning 1% back on all of the purchases made with our Upromise Mastercard. We don't think about it — it's very similar to earning 1% back from Discover or a whole host of other cards.

Anyway, a week or so ago, I got a mailing from Upromise touting a great savings opportunity they were providing between now and the end of the year. Normally that stuff goes straight in the trash, but for some reason I actually noticed it and took the time to look it over (hire that marketing person!). Bottom-line: Upromise was offering an additional 10% cash back on any online purchases made with the Upromise Mastercard at their roster of vendors. (You have to go through the Upromise site first and link to the partner's site from there, but then you're just shopping the vendor's normal webpage.)

In addition to that, they had a calendar laid out of all the vendors that were offering special savings rates. For example, Best Buy normally pays 2% back to Upromise members online. But for a particular week (and as it turns out, most of this past weekend), they were bumping that to 10%. So for someone like me with a Upromise Mastercard, the total contribution to the 529 plan on Best Buy purchases would run to 21% on those days (10% from the vendor, 10% extra Upromise offer for their Mastercard users, plus the standard 1% for those MC users). And that's after whatever sales/markdowns they were already running for Black Friday, etc.

Best of all, the roster of vendors is surprisingly robust, and a bunch of heavyweights are part of the expanded savings calendar. Add it all up and there was serious savings to be had.

Again, I should reiterate that if you're the type to get sucked into buying more (very easy to do) because of the illusion of savings, this is not necessarily a good thing for you. But we got some fantastic savings on some things this past weekend.

For example, this week's featured vendor is Sears. We've been planning to replace our 15+ year old washing machine, given that the wash tub is quite small and our kids' clothes are getting bigger and bigger (we don't know how old it actually is — it came with our first house over 15 years ago). My wife is the rare gem who would actually ask for that as a Christmas present, so I was already looking and doing my homework when I realized the potential savings at Sears.

We've had very good past success buying Kenmore appliances that are highly rated by Consumer Reports. One I was considering was already on sale this past weekend, marked down from $822 to $599, with free shipping. Sears was also running a Cyber Monday promotion that knocked an additional 10% off. Finally, by purchasing through Upromise with their MasterCard, a further 21% discount applied (technically the final 21% isn't a discount off the price, it's money that will be deposited in our 529 account).

Final tally: that $822 washer was available for $426. That's nearly half off.

I admit, I've never bothered to shop through the Upromise website before. But my experience this weekend (coupled with Matthew's October Level 1 article) have opened my eyes to the potential.

I'm sure my friends at Dave Ramsey would cringe to read this, because they'd argue I'd be better off without the credit card, paying cash instead. Overall, they'd likely be right. But the reality is I'm going to buy a certain amount of stuff online like this. In the past, most of that has gone through Amazon. Now, I'll at least take a quick peak at the Upromise options first. And that's exactly why it's worth it to those vendors to rebate in this way.

If you're a current college saver and are looking for a good rewards card, you might want to check out Upromise. Naturally all the usual disclaimers apply: don't do this unless you are very disciplined, pay your balance in full each month, and so on. You need to know yourself and evaluate whether this will be a helpful tool or a trap for you.

(This post may sound like a paid endorsement for Upromise, but it's not. There's no relationship or benefit being conveyed in any way...it's just my reporting on something I found beneficial. If some number of readers can benefit as well, that would be great.)

Anyone else taking advantage of Upromise's discounts this year?

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 3:55 PM | Comments (0) | TrackBack
Category(s): Family Finances
Tag(s): family finances, save money, Upromise

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Christian financial principles are rooted in God's Word

SMI helps “prepare God’s people for works of service, so that the body of Christ may be built up until we all reach unity in the faith and in the knowledge of the Son of God and become mature...” (Ephesians 4:12-13).

We focus on teaching Christians how to set and implement financial priorities that are honoring toward God. Therefore, our teaching begins with the principle that the things most worth knowing are rooted in God’s Word:

• “All Scripture is God-breathed and is useful for teaching, rebuking, correcting and training in righteousness” (2 Timothy 3:16). It’s worth knowing that we should look primarily to God’s wisdom, not the conventional wisdom, for principles to guide our decision-making. The principles God has given us are practical and personally relevant.
• “Now it is required that those who have been given a trust must prove faithful” (1 Corinthians 4:2). It’s worth knowing that we must each accept personal responsibility for making knowledgeable, biblically-consistent financial decisions. We cannot look to others to make the tough choices for us.
• “The rich rule over the poor, and the borrower is a servant to the lender” (Proverbs 22:7). It’s worth knowing that debt is enslaving and that we should avoid it as much as possible.
• “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has” (Proverbs 21:20). It’s worth knowing that maintaining a proper balance
  between current spending and long-term saving is a sign of wisdom.
• “The plans of the diligent lead to profit as surely as haste leads to poverty” (Proverbs 21:5). It’s worth knowing that we should consistently invest from a carefully considered strategy rather than impulsively on a case by case basis.
• “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth” (Ecclesiastes 11:2). It’s worth knowing that we should rely on diversification—rather than a preoccupation with market cycles—as a means of controlling risk and protecting our capital.
• “Do not wear yourself out to get rich; have the wisdom to show restraint” (Proverbs 23:4). It’s worth knowing that we must be on guard against greed and spending our energies in a futile attempt to get the highest possible returns.

As Christians, it’s a constant challenge to stay faithful to the financial principles found in God’s word and not allow ourselves to be swayed by worldly wisdom.

God has given us protective principles to help make day-to-day financial decisions. By following these principles consistently, you and I can have confidence that, whatever the short-term sacrifices may be, we are making wise spending, saving, and investing choices. That frees us to leave the results with God, knowing that “Godliness with contentment is great gain” (1 Timothy 6:6).

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Austin | 10:46 AM | Comments (0) | TrackBack
Category(s): Christian Interest, Family Finances, Giving and Stewardship, Investing Principles
Tag(s): Christian interest, giving and stewardship, investing principles

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How unique has this market been? Pretty unique.

Based on the title of this post, you're probably thinking I'm going to talk about this year's market, or maybe the market over the past three years since the financial crisis. Wrong.

I'm talking about the market over the past 30 years (through Sept 30).

And really, it's two markets in combination that have produced such a unique outcome. The stock market has played a role, but really it's been a once-in-a-lifetime bond market that's driven the unique circumstances.

From Bloomberg:

The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.

Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.

Amazing, particularly in light of how awesome the 1982-1999 stock market run appeared at the time. Of course, nobody knew stocks would stall for the next 12 years while the bond rally would continue to boom.

So what are the chances this could happen again? Pretty slim. As Bill Gross says:

“The rally in bonds is a once in a millennium event, but it’s absolutely mathematically impossible for bonds to get any kind of returns like this going forward whereas stock returns can repeat themselves, and are likely to outperform,” he said. “If you missed the rally in bonds, well, then that’s it.”

And that makes sense. Long-term bonds were able to eek out a victory over stocks based on the fact that interest rates fell from the mid-teens to low single digits during this period. Given that bond values rise as interest rates fall, that produced huge gains for bonds. But it's mathematically impossible to repeat unless bond yields were to once again start at very high levels.

7 Key Principles for Christian Investing

IRAs, 401(k)s and Social Security: A Retirement Planning Primer

Gold as an Investment: Will Precious Metals Continue To Shine?

Inflation History: The Rise and Fall of the U.S. Dollar

Posted by Mark | 9:21 AM | Comments (2) | TrackBack
Category(s): Current Market Events
Tag(s): bonds, interest rates, market history

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