money

You wanna try PayPerPost? Go ahead!

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Payperpost has been going quite a few months now. It’s a great way to provide a stream of income for your blog as it will provide a stream of posts for you to write about. So you can earn a little blog money, by joining up and posting about good products and services. Actually, Payperpost can be good for your blog in a number of ways:

  • 1. you can generate some good posts
  • 2. it encourages you to post regularly
  • 3. you join a community of other great bloggers
  • 4. you can earn a little money,
  • 5. it encourages readers to read regularly, too.

So what are you waiting for? Join up today. If your blog isn’t quite 90 days old, yet. Never fear. You can always come back and register soon!

Assets vs. Liabilities

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A reprise of Rich Dad Poor Dad. There has been much discussion of the authenticity of RDPD’s and the background of the author. You can read about that at other blogs: Rich Dad, Poor Dad, Liar Dad, Thief.  However, one criticism of the book is below along with my own interpretation of RDPD’s theories.

Jeff writes – “You tried to demonstrate that a house is a liability because you pay property tax on it. That is irrelevant. You also have to pay a tax on your car (license fee). Does that make your car a liability? You pay taxes on your income. Does that mean that earned income is a liability?”

Actually, RDPD clearly defines an asset as something that puts money in your pocket and a liability as something that takes money out of your pocket. So, if you live in your house, you pay a mortgage, taxes, etc., it is effectively a liability because the money comes out of your salary to pay this stuff. In other words, the house is costing YOU money.

Whereas if you rent out a house to someone who pays rent, as long as the rental income covers ALL expenses (inc. taxes) plus a little, the house becomes an ASSET, ie. it is making money for you.

In truth, this is a simplification of the situation, as in a balance sheet, a house with a mortgage would be recorded twice, as an Asset and a Liability. Anyway, he makes an interesting point that our passion for buying houses to live in really isn’t such a great way to make wealth (except through capital gains) as it produces no regular benefit.

But I do think he makes an interesting point: somethings that we attribute as having asset value aren’t really assets at all. A Car is a quickly depreciating asset, and if you are paying car loans, some of the time, the net difference between the value of your car and your outstanding loan may turn it into a clear liability on your personal balance sheet, esp. in the first six months where you haven’t paid anything off, and the car has suffered the sharpest decline in its value.

“A house is an asset, period. ”

Another point that RDPD makes is that yes, the house is an asset, but the question is whose? If you buy a house and its price decreases, your mortgage (assuming you have one) shifts into negative equity position, ie. if you sold, you would still have to repay the amount of the loan beyond the sale price of the house. Could it be said to be an asset then?

And if you don’t believe, do you honestly think that housing prices will keep heading up as they have been doing so ‘Mmm’.

Does this clarify things a little?

What I admire is RDPD’s ability to string simple observations out to a whole book! That’s quite an achievement. I did enjoy playing the game, though it is pricy.

Kenneth

Rookie: About to get rooked?

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I am a rookie investor who doesn’t know much about stocks, etc. I want to invest a small amount, maybe 3000 USD (100,000 NT) or so. I am willing to take medium risk, but don’t have much time to research or deal with this investment everyday. I just want to put it somewhere for like half a year or a year, forget about it, and come back and hopefully it’ll make some money for me.
So now the questions are:
1) Are mutual funds the best choice in this scenario? If not, what do you suggest?
2) What are the chances of losing money with a fund?
3) I realize that there are many types of funds. Which type is suitable for me? I don’t want to be super conservative, I am willing to take some risk. But of course I don’t want to lose money. Is there a fund that generates over 30% in one year, that’s got acceptable risk levels? I understand you can never know…but what about your past experiences? What’s the most you’ve made or lost in a 1 year period with funds?

I wrote

Truthfully, Tycoon’s advice is pretty good. 

Don’t waste your time in MFs… The expense ratios will KILL your investment over the short-term. The medium term isn’t much better due to a tendency to average performance. So, only in the longer term, there’s a chance that your MF will be okay. But remember about 80% of MF underperform the market…! Hah!

Upfront charges will likely eat into your funds, leaving you underwater almost immediately. Anyway, many MFs have minimum amounts to invest, typically $2500-5000.

#1 Why not just simply open a broker account with $7 to $10 trades, choose a few ‘safe’ ETFs (maximum three, to keep your costs under control), your expense ratio would be about 1% for purchase, and hopefully less than 1% for sale.

#2 Then do some basic research here http://finance.yahoo.com/etf

#3 Then purchase a couple of broader market funds, like DIA or QQQQ or Spiders, then one with the exposure you want.

Do NOT trade this account. Only add money regularly to make sure that the balance is appropriate. Ignore it otherwise.

#4 Then start reading. It is really boring, there are no guarantees, but it will limit your cost structure.

Lastly, beware the risk of currency exchange, you may not want to exchange all your money at one time, but trickle feed it into the fund, so that any improvement in the exchange rate will be reflected in your exchange at least partly!

Good luck, don’t forget the reading!

Kenneth