Archive for category Investing
For Landlords, the Numbers Are Starting to Look Better
Posted by Tetyana Matychak in Investing on March 5th, 2010
Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.
If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.
In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.
But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That’s up from roughly a 5% yield several years ago when prices were higher, he says. Read the rest of this entry »
High Yields Aren’t Always a Good Thing
Posted by Tetyana Matychak in Investing on March 1st, 2010
In the parched landscape of income investing, dozens of closed-end funds yield more than 10%.
Just as wanderers in the desert shouldn’t mistake a mirage for an oasis, investors shouldn’t regard these funds as salvation. Often, the income you earn in the short run mightn’t be worth the principal you lose in the long run.
Like mutual funds, closed-ends are baskets of stocks or bonds. Unlike a mutual fund, a closed-end trades like a stock; you can buy shares only from other investors. Thus the price isn’t set merely by the value of a closed-end’s investments, but by the whims of those who trade its shares. When investors pay more than the portfolio’s net asset value, that is called a “premium.” When the shares trade at less than NAV, that is a “discount.”
As of last week, 11 of the roughly 650 closed-ends tracked by Lipper Inc. traded for at least 20% more than their portfolios are worth. In many cases, investors are paying those big premiums in pursuit of high yields.
Buy such a fund, and you may double-dose on risk. A yield that looks stable can crumble; then the premium may collapse as panicked investors dump the fund. That leaves you with less income than you expected—and a big market loss to boot. Read the rest of this entry »
China vows to keep “hot money” out of property market
Posted by Tetyana Matychak in Investing on February 12th, 2010
China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan ($1.5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild. Read the rest of this entry »
3 ways to invest a $50,000 windfall
Posted by Tetyana Matychak in Investing on January 12th, 2010
Question: I’m 33 years old and seem to live paycheck to paycheck. I’ll be coming into $50,000 soon, however, and I don’t want to blow it. What’s your advice on how I should invest this money once I have it? –Jay, Lowell, Mass.
Answer: I applaud your desire to properly invest your $50,000 windfall. It’s great that you want to do the right thing with it.
But unless you find a way to stop lurching from one payday to the next, I fear that even the best investing strategy in the world isn’t going to improve your long-term financial prospects very much.
Why?
Well, the fact that you don’t mention having any savings already set aside plus your admission that you’re living paycheck to paycheck suggests to me that you don’t have your spending under control. Another way of saying that is that you spend whatever amount is available to you. Read the rest of this entry »
Best mutual funds and ETFs
Posted by Tetyana Matychak in Favourites, Investing on January 5th, 2010
Last year’s roller-coaster market showed why it pays to be patient with your investments. The Money 70, our recommended list of mutual funds and ETFs, will help you buy and hold your way to your long-term goals.
For the Money 70, our recommended list of mutual and exchange-traded funds, 2009 was a year of vindication. After the vast majority of the funds on our list suffered steep losses in 2008’s credit crisis, almost all rebounded strongly last year — with many posting double-digit gains. But short-term returns aren’t the point. It’s far more important for you to focus on long-term results.
This list was never intended to be a collection of hot funds. Instead, the point of the Money 70 is to give you a menu of high-quality funds and ETFs that you can use to construct a well-diversified portfolio, which in turn will help you achieve your long-term financial goals.
And over lengthy periods of time, Money 70 funds have proved worthwhile — provided you stuck with them in good times and bad. Take the case of Royce Pennsylvania Mutual. In a decade where gains were hard to come by in the U.S. stock market, this small-cap fund earned 9.5% a year vs. 3.9% for small stocks in general. Yet by moving money into and out of the fund at the worst possible times, Pennsylvania Mutual investors earned just 3.9% annually, according to Morningstar. Read the rest of this entry »
How to be an emotionless investor
Posted by Tetyana Matychak in Investing on October 30th, 2009
It’s one of the truths of mutual fund investing: You buy the manager as much as the prospectus. So it pays to have someone you trust.
Neil Hennessy, who runs the Hennessy Focus 30 fund (HFTFX), might be someone investors trust for what he does as much as what he doesn’t do. Since its September 2003 launch, the Focus 30 has returned 6.76% annually, beating the S&P 500 by an average of 4.8% a year by following a simple, quantitative strategy. Hennessy only reshuffles the fund’s 30 stocks once a year, usually in the fall. That means two things: He can’t time the market and he can’t let feelings get in the way.
After writing about his flagship fund back in February, we recently checked in with Hennessy. He had just finished rebalancing the Focus 30 in September, which meant screening 10,000 companies to find mid-cap U.S. securities that pass his requirements for price-to-sales ratio, increased annual earnings, and recent rallies. If a company makes it to the top 30, it’s given equal weight: Each stock makes up 3.33% of the fund.
Last year consumer discretionary stocks composed a third of the portfolio. That led to a paltry 0.7% gain for the portfolio in the past year, but it still beats the S&P 500’s (SPX) 5% drop. Read the rest of this entry »
Gold stays above $920
Posted by Tetyana Matychak in Investing on June 26th, 2009
Gold steadied above $920 on Wednesday, off the previous session’s six-week low as traders awaited the outcome of a key Federal Reserve meeting on interest rates.
The precious metal bounced back from the six-week low of $912.90 as the dollar, the main driver of the current market, was hit by concerns that the Fed would reduce expectations of higher interest rates when it concludes its meeting on Wednesday.
Bullion, which has been sliding since failing to top $1,000 this month, is expected to trade within a narrow range on Wednesday ahead of the conclusion of the Fed’s meeting.
Traders said speculators clearing long positions and receding worries about inflation have pressured gold since it touched a three-month high of $989.80 in early June.
“The gold market’s waiting for material to trade on,” said Koji Suzuki, a senior analyst at SBI Futures Co Ltd. Read the rest of this entry »
Dollar Weakens; Stocks Rebound
Posted by Tetyana Matychak in Favourites, Investing on June 24th, 2009
The dollar weakened on concern that the Federal Reserve will signal it has no intention of raising interest rates with the global economy in its worst recession since World War II. Metals rose, buoying emerging-market stocks.
The U.S. currency lost 0.2 percent against the euro at 9:50 a.m. in London, 1 percent versus the Norwegian krone and 0.9 percent compared with the New Zealand dollar. Copper led an advance in industrial metals. The MSCI Emerging Markets Index rose 1.9 percent, the biggest increase in two weeks, and the Dow Jones Stoxx 600 Index of European shares rebounded from its worst two-day decline since April.
“Speculation about ongoing low-rate policy by the Fed is a burden to the U.S. dollar,” a team of analysts led by Viola Stork at Helaba Landesbank Hessen Thueringen in Frankfurt wrote in a research note today. There is an “expectation that the Fed is not going to signal any change in its rate policy today,” the report said.
The chances that the U.S. central bank will increase its target interest rate for overnight loans by the end of the year diminished to 40 percent from 50 percent a week ago, based on trading in Fed funds futures. Policy makers’ determination to prop up the world’s biggest economy prompted investors to seek higher returns outside the U.S. The Organization for Economic Cooperation and Development said today the world’s most- industrialized economies will contract 4.1 percent this year and grow 0.7 percent in 2010. Read the rest of this entry »
Buying at the Bottom
Posted by Tetyana Matychak in Investing on June 18th, 2009
As the real-estate market heads for the ground, certain investors find themselves uttering some surprising words: “I’ll take two.”
Davis Nguyen thought long and hard about investing in foreclosed homes, but plunging interest rates convinced him that it was time to dive into the housing market.
So the San Jose, California, man bought not one, but two investment properties.
“I decided to jump in because the sales price is reasonable to make a long-term investment,” Nguyen said. “I’m looking for something that is easy to rent because I need to make a little bit of profit.”
Since last fall, Nguyen began looking for three-bedroom, two-bath homes ranging in price from $290,000 to $350,000 in three zip codes: 95121, 95148, and 95112. Read the rest of this entry »
Madoff Trustee Sues Fairfield Group for $3.5 Billion
Posted by Tetyana Matychak in Investing on May 19th, 2009
The trustee for Bernard Madoff on Monday sued funds run by Fairfield Greenwich Group, the confessed swindler’s largest “feeder fund,” for $3.5 billion, claiming it should have been aware he was engaged in fraud.
Connecticut-based Fairfield Greenwich Group “worked closely” with Madoff and “knew or should have known” that he was engaged in fraud, according to documents that Madoff’s trustee Picard filed in Manhattan bankruptcy court.
The trustee says Fairfield Greenwich continued to work with Madoff even though it knew his firm was the subject of a U.S. Securities and Exchange Commission investigation in 2005, and that Fairfield also ignored other warning signs.
The $3.5 billion figure represents money Fairfield Greenwich received from Madoff on behalf of clients. Read the rest of this entry »
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