A REIT (Real estate investment trust) is defined as a company that invests in real estate with the intention of reducing their net income tax liability. Therefore, by law they are required to distribute 90 percent of their income to shareholders. This occurs by way of dividends, usually cash but can also be stock.
I recently found a REIT called Resource Capital Corporation (RSO) at $7.65. For the past month it has been on a complete tear. At one point it hit a high of $10.54 (37 percent increase) but is currently at 8.92 (16 percent increase). The other thing I really like about this is that the dividend yield is close to 16 percent. Every quarter it pays out $0.41 per share.
On the negative side of the coin, REITs can also be very dangerous especially with the current state of the market. With housing foreclosures, many REITs are bound to fail.
Another good pick: RAS
Monday, May 26, 2008
Saturday, May 24, 2008
Types of Stocks - the basics
If you were to group stocks into three categories, it would be as follows:
Income - just what it says. Offers unusually higher dividend yields to provide a flow of steady income.
Growth - people who invest in these expect the security to increase substantially and 'grow'. Growth stocks typically produce zero or little dividend as they are re-invested back into the company for further growth.
Value - these securities are felt to be a good bang for the buck. Many feel the stocks are undervalued and will increase in value.
Very basic overview but a good start.
Income - just what it says. Offers unusually higher dividend yields to provide a flow of steady income.
Growth - people who invest in these expect the security to increase substantially and 'grow'. Growth stocks typically produce zero or little dividend as they are re-invested back into the company for further growth.
Value - these securities are felt to be a good bang for the buck. Many feel the stocks are undervalued and will increase in value.
Very basic overview but a good start.
Tuesday, May 20, 2008
The Rule of 72
When investing everyone wants a great return on their money. The Rule of 72 will allow you to determine an estimate on how many years it will take you to will double your money.
Simple:
Take 72 and divide it by your annualized return on investment.
Example:
72/8% annualized return = 9 years.
Be aware this is a simple way of estimating but is not exact.
For this example, the exact number of years would be 8.043 years.
Simple:
Take 72 and divide it by your annualized return on investment.
Example:
72/8% annualized return = 9 years.
Be aware this is a simple way of estimating but is not exact.
For this example, the exact number of years would be 8.043 years.
Thursday, May 15, 2008
The Power of Compound Interest
Let’s say you have a one time deposit of $1000 into a savings account yielding 3 percent interest on January 1.
Here is the math:
First we need to calculate the monthly interest rate (interest is paid out monthly): 3% divided by 12 months = 0.25% monthly.
After one year:
Simple: 3.00% = $1030
Compound: 3.04% = $1031.41
The difference between 3 and 3.04 is minimal. But extend that out a number of years and then you can see the difference.
Ten years:
Simple: $1304.77
Compound: $1349.35
*Keep in mind this is a one time deposit. If the $1000 was deposited every year, the return was grow exponentially.
Here is the math:
First we need to calculate the monthly interest rate (interest is paid out monthly): 3% divided by 12 months = 0.25% monthly.
After one year:
Simple: 3.00% = $1030
Compound: 3.04% = $1031.41
The difference between 3 and 3.04 is minimal. But extend that out a number of years and then you can see the difference.
Ten years:
Simple: $1304.77
Compound: $1349.35
*Keep in mind this is a one time deposit. If the $1000 was deposited every year, the return was grow exponentially.
Wednesday, May 14, 2008
Accounts Everyone Our Age Should Have!
1. Everyone should have access to a major banking institution such as Bank of America, Citizens Bank, Sovereign Bank, etc. These banks provide online banking which is the most basic, yet an essential service. If you do not have online access, it is very easy to setup and may take only about 10 minutes. You can log in from anywhere and check your account, before you make that big purchase of course.
2. Online Banks - I absolutely love these 'high yield' savings accounts. Most are easy to use and are good savings mechanisms. I put high yield in quotes because since I began my ING account, the interest rate has gone from 5 % to 3%. Of course this is due to the fed constantly lowering the rates over the past year.
3. Mint.com - Mint is a newer company (free service) that tracks your accounts for you. The site allows you to link all your banks to one common platform in order to view your money more easily. They also notify you of deals that can save you money or even make you money. Weekly emails are sent out as a summary of your accounts - which is helpful. I recently received an email from Mint stating that they are now including investment accounts. Nice new service.
4. Sharebuilder - this is not a must have. Sharebuilder is for those of us who want to invest our little money. It allows you to make trades for practically nothing ($4). The only issue I have with it is that in order to take advantage of the cheap trading fees, you must adhere to their investment schedule. All trades are completed on Tuesdays. Real time trades are available for $9.95 per trade but for me that doesn't make sense.
5. Prosper - recently just signed up for this. It is a peer to peer lending site. Prosper provides two things, lenders to make great returns on their money and borrowers a platform to almost create the terms of their loan. The borrowers have the ability to set their own interest rates (dependent on credit score of course). I am trying this out with $50 to see how well this really works.
More posts to follow on each of these types of accounts.
2. Online Banks - I absolutely love these 'high yield' savings accounts. Most are easy to use and are good savings mechanisms. I put high yield in quotes because since I began my ING account, the interest rate has gone from 5 % to 3%. Of course this is due to the fed constantly lowering the rates over the past year.
3. Mint.com - Mint is a newer company (free service) that tracks your accounts for you. The site allows you to link all your banks to one common platform in order to view your money more easily. They also notify you of deals that can save you money or even make you money. Weekly emails are sent out as a summary of your accounts - which is helpful. I recently received an email from Mint stating that they are now including investment accounts. Nice new service.
4. Sharebuilder - this is not a must have. Sharebuilder is for those of us who want to invest our little money. It allows you to make trades for practically nothing ($4). The only issue I have with it is that in order to take advantage of the cheap trading fees, you must adhere to their investment schedule. All trades are completed on Tuesdays. Real time trades are available for $9.95 per trade but for me that doesn't make sense.
5. Prosper - recently just signed up for this. It is a peer to peer lending site. Prosper provides two things, lenders to make great returns on their money and borrowers a platform to almost create the terms of their loan. The borrowers have the ability to set their own interest rates (dependent on credit score of course). I am trying this out with $50 to see how well this really works.
More posts to follow on each of these types of accounts.
Tuesday, May 13, 2008
Welcome
Hello all,
I have been reading personal finance blogs for about a year now. All are very informative but one problem, the net wealth updates are out of control; these people have net worths of $500,000+. As a 25 year old MBA student, I feel it is important to educate the "children of the 1980s". We don't have crazy net worths, we are working stiffs trying to make a few bucks while having a good time.
It is my goal to educate those individuals about a number of personal finance topics including, debt management, savings, investments, and retirement. I encourage you to read my posts and make comments, whether you agree or not.
Look forward to it all!
I have been reading personal finance blogs for about a year now. All are very informative but one problem, the net wealth updates are out of control; these people have net worths of $500,000+. As a 25 year old MBA student, I feel it is important to educate the "children of the 1980s". We don't have crazy net worths, we are working stiffs trying to make a few bucks while having a good time.
It is my goal to educate those individuals about a number of personal finance topics including, debt management, savings, investments, and retirement. I encourage you to read my posts and make comments, whether you agree or not.
Look forward to it all!
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