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Here's a Valentine's Day Gift That'll Outlast Roses: Well-Ordered Finances

Dayana Yochim — Wed, 13 Feb 2013 10:30:00 EST

Filed under: Family Money, Budgeting, Marriage

Let's face it -- if you're reading this, then you're probably simultaneously doing one of three things:

Clicking around the Web, while on hold with your florist, who, with her hand cupped over the receiver and in a very audible stage whisper, is saying to her colleagues, "Get this -- someone wants to know if we have any roses left!"
Slapping your forehead against your computer monitor before Googling "last-minute Valentine's Day gifts in (insert your city)."
Smugly savoring a Necco Valentine candy, while other poor schlubs curse Hallmark.

Want some help avoiding the doghouse on this holiest of lovers' days? Go home early and present your sweetheart with a fresh, color-coordinated bouquet of organized financial files.

No, this is not a setup. While there may be more conventionally romantic ways to shower your loved one with proof of your everlasting devotion, roses and massage gift certificates expire a lot faster than do lovingly reconciled account statements and up-to-date files.

When your significant other fails to find the words to express their thanks for your thoughtfulness, simply explain that although money issues continue to be one of the leading causes of relationship strife, you're not going to let that happen to you two lovebirds.

How to Mix the Perfect Love-Money Cocktail

Need a few ideas to take the sting out of financial issues in your household? Consider these:

Reel in your significant other with some sweet talk. If your better half isn't interested in talking finances, lure him in with an enticing reward. What kind of couch, vacation, home, retirement, plasma TV does he envision? When you explore the possibilities that well-managed finances could afford, your reluctant partner is more likely to become a willing participant.

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Split up ... your financial tasks, that is. Managing your money relationship is a two-person job. (Couched resentment is very unbecoming and can lead to premature wrinkles.) Take equal responsibility for keeping your joint finances on track. If you pay the bills, have him organize the financial files. Or consider an equitable distribution of other chores, and have your sweetheart take on some household task that you deplore in exchange for you tackling a money management task she hates.

Schedule a summit. The financial world is fond of quarterly reports -- go ahead and set a date for the inaugural event. Your State of the Union address should cover (1) the amount of money you currently have together, (2) the percentage of change from the previous quarter, and (3) any transactions (buying, selling, saving, overspending, getting a puppy). Doing this on a regular basis will keep you both in the loop and hopefully inspire more discipline for reaching your future joint goals.

Build a budget for two (or more). There are no hard-and-fast rules to budgeting that you must follow till death do you part. There are some rules of thumb, though. One of my personal favorites on budgeting is "The 60% Solution," proposed by author Richard Jenkins. It's a simple way for math phobics to organize their spending. He proposes that 60 percent of your income should go to "committed expenses" (mortgage, food, utilities, etc.), 10 percent for irregular expenses (your short-term savings), 10 percent for retirement savings, 10 percent for long-term saving and/or debt reduction, and 10 percent for "fun money." Consider this a starting point for your own budget; bend the rules to fit your own situation.

Along the way, come up with rewards for meeting some of your savings goals. Get creative. Oh, all right: Make it fresh flowers, if you must.

Motley Fool editor Dayana Yochim is the author of The Motley Fool's Guide to Couples & Cash.

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Your 7-Step Midyear Money Checkup

Dayana Yochim — Sat, 19 May 2012 05:00:00 EST

Filed under: Budgeting, IRA

You always remember to change the oil in your car ... when the red warning light comes on. You get diligent about flossing ... when the dentist mails the reminder postcard to make an appointment for your six-month checkup. So consider this article your warning light/postcard to get ready for your midyear money review.

With six months of earning, saving, and spending under your belt, you've got plenty of data to project how 2012 is going to play out. So let's lift the hood on your finances and give everything a good once over.

Gallery: Your 7-Step Financial Tune-up Agenda

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How to Avoid Your Next Money Crisis: A 5-Step Prep Plan

Dayana Yochim — Wed, 09 May 2012 14:45:00 EST

Filed under: Budgeting

What's a surefire way to inspire yourself to clean the house? Schedule a party. And there's nothing like unexpected visitors to get the job done even faster.

Deadlines -- or out-of-the-blue events -- are also great motivators when it comes to financial housekeeping. Baby on the way? Adjustable mortgage rate about to re-set? Portfolio allocation all out of whack? Household income suddenly cut in half? Give us a pressing reason to get our money affairs in order, and the job may just get done.

But there's a big difference between getting it done quickly and getting it done right.

Financial frenzies come in many flavors. But the most common triggers that send folks into money triage mode are the death of a loved one, divorce/marriage, dealing with complex financial products, and preparing for retirement.

These life/money events are fraught with emotion and unfamiliar challenges, and there is no more lethal cocktail than anxiety, complexity and a tight deadline. Even worse, spur-of-the-moment money decisions often lead to even bigger problems down the road.

But you can avoid all this unpleasantness. The key to sailing through a crisis is simple: Prepare in advance.

Five Steps for Preparing for the Expected and the Unexpected

Here's a five-step plan that'll ensure you're prepared for issues you've already identified, along with any crises that might pop up out of the blue.

1. Take a Snapshot of Your Finances

"Be prepared" is a good motto for scouts and income-earning adults alike. At the very least, you want a snapshot of your overall financial landscape -- how much you own, what you owe, a sense of your general financial priorities. Use this must-do quarterly review checklist to get your personal balance sheet in order in a snap. The more soul-searching you do now, the better you'll be able to identify any money messes that need to be contained.

2. Earmark Any Issues

Think about your immediate money questions ("Is it worthwhile to refinance?" "Should I sell this stock?") and your future ones ("What if Biff doesn't get a football scholarship?" "What if Fluffy needs long-term pet care?"). Are there any financial "uh-ohs" on the horizon? You actually can prepare for unexpected emergencies with an adequate emergency cash cushion. (Use these guidelines to determine how much emergency savings should you have.) Other issues may require that you seek outside counsel. If that's the case ...

3. Decide What Kind of Outside Help You Want

What kind of professional opinion do you need? You probably need a lawyer to help you write a will, but perhaps you can find the right insurance on your own. Figure out how much hand-holding you want before you seek paid professional advice. Some factors that will determine what kind of help and how much you need include:

How much money you have
The complexity of your finances
Your interest in learning about/researching financial products
Your available time to devote to managing/researching financial matters
Your level of expertise in investing, asset allocation, estate planning, etc.
How confident you are in your level of understanding

There are all kinds of advice for sale. (Heck, the number of professional acronyms we've seen on business cards makes full use of the entire alphabet 10 times over.) In "You Need a Financial Advisor," my colleague Robert Brokamp goes through the various flavors of financial advisors.

4. Consider Costs

Financial advice can cost hundreds to thousands of dollars -- on an ongoing, single-use, or occasional basis. You might be surprised to learn, however, that finding out how your advisor gets paid is even more important to your bottom line than how much he or she charges to dispense financial advice.

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Before you go shopping for a money cleanup team -- or hire someone to give you a one-time second opinion -- find out how your pro earns a paycheck. Is the advisor paid via flat fee? Hourly? Asset-based? By commission? (Here's a guide to how money pros make their money.) The answer to that question is the easiest way to determine whether the recommendations you'll receive are based on what's best for your financial situation, or what's most lucrative for theirs.

If you're looking for affordable, unbiased help on specific issues, finding a fee-only advisor who charges by the hour or by the project makes the most sense. Of course, you'll need to ask other questions to make sure you two are a good fit. Here's a free advisor questionnaire to use as you interview potential help.

5. Act!

You've paid for good advice from a trusted source. The next step may seem obvious -- put the plan in action! -- but you might be surprised how many people fail on the follow-through. Don't wait for a moment of crisis to act. While you've got the time and wherewithal to put things in their proper place, use the momentum (hey, you're already done most of the heavy lifting!) to get the job done -- and done right.

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What Would You Grab If Your House Were on Fire?

Dayana Yochim — Tue, 08 May 2012 11:00:00 EST

Filed under: Budgeting

Occasionally, I play a grim game I call "Grab and Run" -- a mental exercise in which I plan which items I would take with me were I to flee an impending disaster, such as a tornado, hurricane or flood. It goes something like this: dog, leash, sneakers (the cute ones), cell phone, saline solution, photo album, mascara and iPod.

Everyone plays this game, right? No? Just me?

Fine, so my occasional forays into catastrophic fantasyland may be a sign of a low-level anxiety disorder. Still, preparation is the best defense against the demons of disaster. If a fire, flood, killer bee swarm or alien invasion happened right now, how prepared would you be to deal with the aftermath?

The Right Way to Worry

While having a beekeeper's suit or a personal bomb shelter might help you rest easier at night, there are more practical ways to protect your treasures.

Personal safety always comes first, of course. But after that, insurance companies and state and federal agencies bear the burden of helping families rebuild and replace material possessions. However, it's not the blender that brings most families comfort and joy. It's peace of mind.

When wildfires threatened estate planner and author Martin Kuritz's home in California, he realized the value of things he could never replace: a five-page letter his mother wrote to him before she passed away and a stack of letters his dad sent to his mom during World War II. His important papers, documents and computer files were also threatened.

Fortunately, Kuritz's home and possessions were spared. But the scare inspired him to develop a list of tips to help others avoid the tragedy of losing irreplaceable belongings and a family's legacy. These include keeping a small fireproof/watertight safe and plastic file boxes around to both protect such treasures and make them easily portable.

8 Ways to Safeguard Your Financial House

Safeguarding beloved belongings is only part of the preparation process. Every year we get plenty of extreme weather reminders that underscore the importance of disaster-proofing our financial houses as well as our physical ones. Just ask anyone who has had to recreate a lifetime paper trail with waterlogged wills and insurance policies.

Here are eight tips on keeping financial damage to a minimum:

1. Open a safe deposit box at your local bank. Make sure it's large enough to accommodate your valuables, and keep an updated inventory of its contents. Also make sure the box can be accessed by another trusted person should you be unable to do so.

2. Make paper and/or electronic copies (or get duplicates) of every important document in your file cabinet. These include wills, trusts, health-care directives, and powers of attorney. If you don't have these documents in place already, here's how to get started. If you need help setting up a solid estate plan, a fee-only financial pro can help.

3. Store these documents and any others containing confidential or sensitive data in your safe deposit box or home fire-proof safe. A safe is also a good spot for your spare keys, irreplaceable items, and valuables (such as jewelry and coin and stamp collections). Originals or duplicates of photos, negatives, and other paperwork should be kept off-premises -- at your office, perhaps, or a trusted friend's home.

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4. Maintain a current list of secret passwords, access codes, PINs, the combination of your home safe (or the location of the spare key), and other confidential data. Store this and other confidential information (along with the spare key to your safe deposit box) at a secure, but readily accessible, location.

5. Make important items portable. Items that cannot be photocopied and/or must be kept at your home should be stored in portable file boxes. Write "Take" on the tops and sides of the boxes and store them in a place where they can be easily accessed in the event you are forced to evacuate. Keep an empty file box at the ready for the contents of your home safe. If you are planning to be away, consider storing these items with someone who can remove and/or protect them should a disaster occur in your absence.

6. Make a current inventory. A room-by-room written (or video) inventory of all of your possessions will help speed the process of insurance claims should it come to that. Include items in your garage, basement, and attic, plus serial numbers, dates of purchase, and purchase prices where applicable. Store this information in your safe deposit box.

7. Create Command Central for your family. Life is complicated, and unfortunately, so is death or incapacitation. If you were unable, would your loved ones be capable of taking over the family finances in a pinch? You can make it easier on your family with a "Grab-and-Go" box containing all the key information needed to keep your finances on track. See "Get It Done: Create a Grab-and-Go Box" for a rundown of items to include.

8. Preserve the memory of items like artwork and plaques by taking digital photos of them to be stored off-premises. During an evacuation, it might be hard to cart off a sculpture while wrangling dogs and kids. The same goes for computer data. Back up your hard drive frequently and store it in the safe, in the cloud or off-site.

Start with one or two items on this list and work your way down. Doing so will ensure that your stuff will be around for future generations ... so that they can play "Grab and Run," too.

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Busted! 5 Outlandish Insurance Claims Overturned in 2011

Dayana Yochim — Fri, 30 Dec 2011 13:00:00 EST

Filed under: Insurance, Ripoffs & Scams

Bogus burglaries, fake funerals, self-inflicted air rifle assaults -- people go to great lengths to convince insurers to cut a check to cover their personal and financial losses. But the financial gain from phony pain and suffering is often short-lived.

Here are a handful of outlandish insurance claims that were overturned in 2011.

1. Art Heist Hijinks

While Jason Sheedy waited for work to be completed so he could move into his new condo in Minneapolis in 2007, he packed some of his prized possessions -- almost $275,000 in fine art and collectibles -- into a van that he left parked outside of his St. Paul, Minn., home. Cue forehead slapping and eye rolling. Sheedy informed his insurer that the truck's precious cargo was stolen after a thief cut open the padlock. He then collected more than $250,000 from AXA Art Insurance Corp.

Flash forward to Spring 2011, when works by Rembrandt, Salvador Dali and Peter Max -- the very same pieces stolen from Sheedy four years earlier -- were put up for auction on Artbrokerage.com. The art, according to AXA, was put up for sale (cue ominous organ music) by none other than Sheedy himself. After further digging, investigators discovered that this wasn't the first time the collector has trotted out his "stolen" collection for personal gain. Several times Sheedy used it as collateral at a pawn shop to get loans which he then paid off and then reclaimed the artwork, according to an FBI statement.

2. Crocodile Tears and an Empty Casket

The first funeral for James Davis was lovely -- a touching graveside ceremony at a Los Angeles-area cemetery. Later his coffin was exhumed, his remains cremated, and his ashes reportedly scattered at sea. But it turns out the only true thing about the entire charade was the $950,000 in life insurance proceeds paid out to two funeral home workers who concocted the whole plan.

According to the Coalition Against Insurance Fraud, the elaborate charade included fake mourners and a coffin filled with cow meat and bones and a mannequin (so the weight of the casket would feel right). When an insurance investigator started looking into the scheme, the workers turned the evidence into ashes. Their plan went up in smoke when they attempted to bribe a doctor into creating fake medical documents for the non-existent Davis and the doctor would not cooperate. In January, one of the perpetrators was sentenced to 2 years in a federal penitentiary.

3. The $2 Million Car Wash

In November, a federal judge ruled that that an alleged insurance fraud case surrounding a 2009 car crash should be tried before a jury. The ruling made headlines because this wasn't just any run-of-the-mill wreck: The car was a multimillion dollar Bugatti Veyron carrying $2 million in collector-car insurance.

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The complaint alleges two men conspired to defraud the insurance company: The original owner of the Bugatti gave the second man a $1-million interest-free loan to buy the car, which he drove into a Galveston, Texas, saltwater lagoon. The driver claims to have been distracted by a low flying pelican which made him drop his cell phone and veer off the road. The costly car wash -- minus any pelican cameo -- was captured on video and posted on YouTube by a bystander.

4. Ice heist inspired by Hollywood

Supposedly inspired by the movie Snatch, two New York diamond dealers -- desperate for cash to pay off their failing business's debts -- were convicted in May of scripting and acting out an elaborate plan to steal their own baubles for the insurance money. Now they will spend between 20 months and 5 years in jail -- plenty of time to review the many ways their bungled heist and $7 million insurance claim backfired.

The biggest blunder was their inability to disarm their own security cameras. The failed attempt was, ironically, caught on tape. As cameras continued to defiantly roll, we see the pair removing the contents of the safe before the "burglars" even arrive, and then place the empty boxes back inside for the crooks to confiscate. In the next scene the two hired accomplices -- dressed as Hasidic Jews and armed with plastic guns -- are buzzed in without even being asked, "Who's there?" Spoiler alert: The stolen goods have not been recovered, and the costumed extras have simply vanished.

5. Lone Gunman Nabbed for (Very) Personal Assault

Talk about going to extremes. A longtime insurance fraudster was finally caught after being shot in the chest in March. It turns out that the gunman was -- pause for effect -- also the victim. According to the U.K.'s Financial News, the man confessed to turning the barrel on himself so he could collect compensation for the harm.

Personal injury claims, it turns out, has been a specialty of his for the past 16 years -- including an air rifle injury in 1995, an accidental stabbing by a family member in 2004, and an injury sustained after slipping in a public toilet in Corwen in Wales.

Bonus Claims: Travel Travails

Cancelled flights, lost luggage, stolen wallets, food poisoning -- there are a lot of things that can ruin a vacation. Insurers are used to dealing with ho-hum claims for things like cancelled cruises and damaged property. But some vacationers are beset by more unusual maladies -- concussions from falling coconuts, a herd of cows licking the paint from a parked car. According to the Telegraph, insurers paid the claim submitted by a couple who said that marauding monkeys broke into their lodge and flung their clothes across a Malaysian rainforest. A family camping in Wales wasn't as lucky: Their claim for damage to camping equipment due to a parachutist landing on their gear was denied.

Motley Fool writer Dayana Yochim has made no outrageous claims in 2011.

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7 Ways to Teach Your Kids the Importance of Saving ... and Giving

Dayana Yochim — Fri, 02 Dec 2011 07:00:00 EST

Filed under: Charity, Family Money

As the season of giving brushes elbows with the cabal of commercialism, we're presented with -- to borrow from the classic education vernacular -- an ideal "teachable moment."

Here are seven ways to show material boys and girls that saving -- and giving -- can be just as rewarding as getting.

1. Hand over the spending power. Tired of playing shopping cart bad cop? Turn the yes/no verdict over to Junior. Give your children control over their weekly "entertainment allowance" and see what happens. Children who are free to spend their money on whatever they want (provided it doesn't require gunpowder, gasoline, or a parental signature on a safety waiver) tend to be more thoughtful and less impulsive.

2. Make dollar decisions tangible. If it's hard for adults to visualize mounting debt or increased savings, imagine how abstract these concepts are to the little one. Visual cues can help. Illustrate important allocation lessons of short-term and long-term savings and charity with separate piggy banks for each, or even with a running tally on a whiteboard.

3. Pull back the curtain on retail marketing tricks. No one likes being told what to do, especially kids. Show them that advertisers are bossier than Mom and Dad are with a set of interactive lessons on common marketing mind tricks, available at pbskids.org/dontbuyit.

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4. Reward savings behavior. Positive financial reinforcement is a powerful tool. Encourage responsible cash conduct by making it worthwhile every time your child decides to save instead of spend. Set up a kiddie version of a 401(k) and offer to match money that they sock away for themselves and others (e.g., $0.50 for every dollar they save for themselves or a dollar-for-dollar match for money they raise for a good cause).

5. Let them pick a charity. Giving is just as important as getting -- and that good feeling can last a lot longer than the giddiness over a new toy. Involve your children in charitable acts. Get online together and find a cause they can relate to. (Try charitynavigator.org, worldvision.org and givewell.org.) Or find a local charity and take your kids there to see firsthand how their bequests will help. Have them deliver the donations (cash, toys, clothes, etc.) themselves.

6. Get them excited about stocks, not stuff. The stock market (and the passage of time) can also reward the little ones in a big way. Engaging kids in investing pursuits is easy: Just explain that when they buy a share of stock, they become part owners of the company, not just a customer. (A seat on the board, however, may have to wait until after they're old enough to drive.) Show them how they are surrounded by investment ideas, starting with breakfast (Kellogg (K)) to lunch and snacks (Kraft (KFT) and Coca-Cola (KO)), to entertainment (Disney (DIS)), to what flick they pick for Saturday night (Netflix (NFLX)). And if saving money to buy more stock replaces saving money to buy more stuff, even better.

7. Show your gratitude for your family's gifts every day. The most powerful illustration of the good that comes from giving is gratitude. Share how grateful you are to be able to afford new school supplies and how much you appreciate gifts (tangible and intangible) from others. Talk to them about how you arepaying it forward, and openly share the joy you get from helping others. Being thankful is a lesson worth revisiting year-round.

Motley Fool consumer finance expert Dayana Yochim does not own shares in any company mentioned in this article.

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What Your Disaster Preparedness Emergency Kit Is Missing

Dayana Yochim — Fri, 26 Aug 2011 11:45:00 EST

Filed under: Family Money

When it comes to putting together a disaster preparedness kit, most people think about stocking up on emergency must-haves such as canned goods, batteries, prescriptions, and bottled water.

But if you were displaced for a few days or even longer, would you know where to mail your child's tuition check? Or how to get in touch with that roofer who fixed your chimney years ago? Or the name of that mechanic whose business card is tucked in the drawer of the desk in your home office?

To minimize the damage, both financially and psychologically, take a cue from the foul-weather preparedness handbook and put together a special kind of emergency kit: one that will prevent a personal crisis from turning into a full-blown financial disaster.

Don't Leave Home Without This

We've had plenty of recent reminders underscore the importance of disaster-proofing our financial houses, as well as our physical ones. (My calendar this week is filling up with grim appointments. Tuesday afternoon: Earthquake. Weekend plans: Flash flooding and high winds. Next week: Tentatively, locusts; the plague of missing socks.) Even burst water pipes and medical emergencies can spell trouble for your finances if you're not prepared.

To keep your family finances running smoothly in the midst of chaos, you need a financial emergency kit.

Think of this financial "Command Central" as a road map to your daily life. It should contain everything you need to keep things humming along, as well as essential items to help speed along your financial recovery.

I call it the "Grab and Go" kit -- it should be small enough that you can literally run a mile with it tucked under your arm. (Or, OK, walk briskly around the block without having it feel overly cumbersome.) And while you might not be able to get to your Grab and Go kit right away because you're, say, in a company meeting when an earthquake strikes, at least you and family members will know what to grab when you are able to access it.

Financial Command Central Basics

There are pre-assembled kits for sale that help you organize and store your important papers. But if you don't want to spring for next-day shipping, you can easily pull most of the essentials you need on your own.

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Your mobile emergency kit should contain copies (not the originals!) of some vital personal and financial information. Store it in a safe place, and tell everyone in the household, plus a trusted neighbor or friend, where it is. A fireproof locked box is advised. But in a pinch any old container will do.

Let's go over the vital items you will need. Start with at least the bare-bones items on this list -- those things that are essential to keeping your family finances on track. When time permits, fill out your financial Command Central and regularly update the items as your circumstances and service providers change.

8 essential items for your "Grab and Go" emergency kit

A list of contacts: Note the phone numbers, addresses, and email addresses for family, friends, schools, medical and financial advisors, utilities, and service providers -- even the cleaners and gardeners. Designate an out-of-town contact for everyone to call.

Identification: Assemble passports (or at least copies of them), a current picture of each family member and pets, and copies of birth and marriage certificates.

Emergency currency: Include in your kit enough cash to cover what you need to survive for a few days, just in case ATMs aren't operable or accessible. Also handy are prepaid phone and charge cards.

Medical information: Pull together health insurance policy information and blank claims forms, and make copies of insurance cards. Also handy is a contact list of hospitals, doctors, pharmacies, and current prescriptions; and medical histories.

Insurance recovery information: Make copies of your homeowner's (or renter's), auto, life, disability and health insurance policies and cards (and be sure there is legible contact information on each). Also print out some blank claims forms and a list of local insurance adjusters. If you don't already have one, make a current inventory of your possessions and include a copy in your financial emergency kit. (Use the Insurance Information Institute's free home inventory software at knowyourstuff.org.) Having an itemized list of your assets gives you a running head start if disaster strikes.

Monthly financial obligations: Online banking and bill payment is super-convenient in emergency situations. But it doesn't help if you can't get online or if your household's CEO is unable to perform his or her duties and other family members don't know whom to pay, how much, and when. So your kit should include a rundown of all of your payment obligations (mortgage, credit cards, utilities, and auto, student, and any other loans), as well as the due dates, minimum required payments, and any other payment information needed.

Long-term financial information: Create a rundown of account numbers, the branch locations, websites, phone numbers, and the passwords (only if kept secure) for your bank, credit card and investment accounts, and mortgage lender. If you have a safe-deposit box, be sure to include the location, spare key, and list of contents, and make sure a loved one or trusted advisor has been granted access.

Legal papers: Make sure you've included copies of your living will, health-care proxy or medical directive, will, durable power of attorney, and the deed to the house. If you don't have these legal documents in place, here's what you need and how to get them set up.

Add any items to this list that are essential to keeping your family finances on track.

For Added Peace of Mind

Personal safety is always first, of course. But after that, insurance companies and state and federal agencies bear the burden of helping families rebuild and replace material possessions. However, it's not the blender that brings most families comfort and joy. It's peace of mind.

Take this opportunity to check all of the locks on your insurance coverage and review your emergency plan with your family.

Share Your Survival Tips

Have you been through a crisis? What advice do you have for others as they prepare for disasters -- natural or manmade? Provide tips and insights in the comments area below.

Motley Fool columnist (and one-half of the band Addieville) Dayana Yochim's "Grab and Go" checklist includes: important papers, the dog, her glasses, and, if she can manage, her cello.

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After the Fall: Where to Put Your Money Now

Dayana Yochim — Fri, 05 Aug 2011 13:45:00 EST

Filed under: IBM, Google, Pepsico, Apple, Stock Picks, General Motors, Drug Companies, Oil & Gas Industry, Investing

Investing is all about perspective. While all the headlines scream about doom, despair, and agony, there are plenty of investors who have a different read on the situation: They see promise, value and opportunity peeking out of the rubble left by this week's stock market shakeup.

Instead of sitting on the sidelines and rubbernecking, put your money to work for the future. To get you started, we asked 10 Motley Fool writers, analysts, and market watchers how they're deploying their investment dollars right now and what stocks, mutual funds, ETFs, and other opportunities investors should have on their radars right now.

Anders Bylund, a self-described nerdy growth-stock junkie, is going ga-ga for Google:

Over the last five years, online titan Google (GOOG) has grown sales, earnings, and operating cash flows at an annual clip of over 30% each. Yet the stock has only gained 10% a year, held back by fears of growing competition and a supposed One-Trick Pony Syndrome.

Lucky for you, share prices keep dropping to ridiculously affordable levels on a regular basis, and this is one of those buy-in windows.

I can't think of a single thing I'd rather do with excess cash today than stuff it into Google shares. We're talking about a company that turned the smartphone and GPS markets on their respective heads, invested in wind power and driverless cars, and is exploring new markets such as home entertainment systems and social networking. And I'm just scratching the surface here. Search-fueled advertising clicks may provide Big G's dominant melody, but we're hardly looking at a one-note Neil Young guitar solo.

Anders owns shares of Google.

Rick Aristotle Munarriz, envious opportunist, is looking forward to getting a cheap shot at a few recently hot IPOs:

Like most investors, I don't have access to IPOs before they hit the market. I don't manage a hot mutual fund. I didn't go to school with a bigwig underwriter. My lavish yacht is docked solely in my vivid imagination. However, a funny thing happens when stock prices begin cascading during a market downturn. Hot IPOs become busted IPOs.

Pandora (P) went public at $16, traded as high as $26, but the fast-growing -- though profitless -- music discovery site is now trading in the low teens. Similarly, shares of headphone maker Skullcandy (SKUL), dating website operator FriendFinder Network (FFN), Florida-based banker BankUnited (BKU), and Chinese social networking leader Renren (RENN) are all trading below their IPOs at the moment.

Many of them are trading low for a reason, but think about it: Here is your chance to buy into these companies for less than what institutional investors and underwriter school chums paid up for them as daring debutantes earlier this year. It's one way to help that imaginary yacht get closer to becoming real.

Jim Mueller loves to take advantage of other people's irrationality, and he's considering filling his portfolio's tank with some cheap black gold:

Yesterday's dramatic drop in crude oil prices, and the resulting drop in the share prices of companies all over the oil industry spectrum, give savvy investors another chance to profitably invest in this commodity:

Oil giant ExxonMobil (XOM) dropped 5% and is down 13.3% from its recent high.
Brazilian producer Petrobras (NYSE: PBR) fell 8.5% yesterday.
Under-a-cloud driller Transocean (NYSE: RIG) fell a similar amount yesterday and is down 22% from its May high.

Yet the long-term earnings and cash-generating power of these companies haven't changed one iota, just because some people became afraid of the near-term future.

Oil is becoming harder both to find and extract. Petrobras' newest oil fields are at the bottom of the Atlantic Ocean, a far cry from the easy-to-access fields in the Middle East. It will take the skills of Transocean and other deepwater drillers to get it out. On the other side of the equation, demand is growing. We burn oil not only to drive or fly around, but also to generate electricity or heat. It's also a major input for the plastics and chemical industries. That combination means higher oil prices over the long term, which means these companies will make more money giving the world what it wants more of.

Don't let the daily fluctuations of a crazy market scare you away from this opportunity. In a few years, you'll be laughing all the way to the bank.

Jim owns shares of Exxon and Transocean.

Travis Hoium loves to make big bets when the market is bluffing. He's placing his chips on a few choice gambling stocks:

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When the market starts to panic in any way, gambling stocks are some of the first stocks to be put through the ringer. Casino companies are generally highly leveraged with debt, and conventional wisdom would say that gaming tables will sit empty if there's not disposable income to dispose of. But conventional wisdom doesn't rule gambling in Asia, the one place I would be willing to bet on gambling today. When it comes to gambling on gaming stocks, Wynn Resorts (WYNN) has the odds stacked in its favor.

The new gambling hub of the world, Macau, grew gaming revenue 48.4% in July, despite a slow worldwide economy, and it will likely grow well over 40% for the year. With a limit on the number of competing casinos, that means more for all operators. Wynn tops competitors like Melco Crown (MPEL) and Las Vegas Sands (LVS) by virtue of its stronger balance sheet; it's also the only one of these companies to pay a dividend.

Rich Smith is proud to be a "heartless capitalist" (his words, not mine!). In more genteel terms he likes to zig when the market zags, and is getting ready for even more sagging:

When Mr. Market gets fearful, I get greedy. Right now, I've got a large chunk of my assets in cash, but I've been waiting for a chance to deploy those assets for maximum gain. The hissy fit Mr. Market threw on Thursday -- utterly out of proportion to any actual news we saw -- tells me the time is ripe to begin putting money to work.

I plan to begin moving funds from my bank account, where they've lain dormant collecting token annual interest for months, and using them to top off my discount brokerage account. If the market bounces today -- fine and dandy. The money will just sit in its new different basket until the next sell-off. If the market keeps falling, though, as I believe it will, then I'm going to take advantage of the panic. Yesterday, shares of Apple (AAPL) became 4% cheaper for no reason whatsoever. General Motors (GM) likewise lost 4% despite reporting blowout earnings. That's just crazy -- and I plan to profit as American markets sink deeper into madness.

Fool.com writer/editor and CFP Dan Caplinger recommends that investors take a holistic approach to the dip and scoop up shares of companies that add diversity to one's portfolio:

Now's a great time to invest in something new with your money. If you already have a good stock portfolio, consider investing in an area of the market you've never looked at before. For instance, metals stocks like Freeport-McMoRan Copper & Gold (FCX) got hit hard this week, but with long-term demand from emerging market countries, a temporary blip in the economy gives you a good buying opportunity.

Even if you've never invested before, household names like PepsiCo (PEP) and Johnson & Johnson (JNJ) pay great dividends and offer stability and value. If you've got all your money in a savings account earning nothing, stocks are cheaper than they've been in a long time

Uncertainty doesn't sit well with Motley Fool writer Cindy Johnson. This value-conscious investor likes companies that are safe bets in any economy:

For a company with an uncanny ability to weather an uncertain economy, look no further than IBM (IBM). It has extensive experience delivering impressive EPS growth with only lackluster revenue growth. That's compelling if the economy muddles along for years, as many experts expect. The company is currently benefiting from early investments in developing markets, business analytics, cloud computing, and smarter planet initiatives.

IBM also does a remarkable job of delivering value to shareholders. Over the last five years, its dividend has more than tripled, growing at an average annualized rate of 27%. That's cash you can live on, even if inflation heats up. From 2005 through 2010, EPS grew at an average annualized rate of 19% ... with unusually high quality of earnings. Management has a well-thought-out plan to grow EPS by at least 11% annualized through 2015-and a history of beating its plans. That should support continued strong dividend growth. The stock is trading at a reasonable 13.9 P/E ratio and yields 1.7%. For a value-conscious investor like me, IBM is a safe stock for any economy.

Resident economy watchdog Morgan Housel has a long-term time horizon and the temperament to go on vacation for a while and let his investments ride:

My investing style revolves around simplicity and diversification. If that sounds like you, too, I'd consider looking at some of the dividend-centric ETFs. Two I like are the SPDR S&P Dividend ETF (SDY), and the Vanguard Dividend Appreciation ETF (VIG).

Both funds select stocks with long track records of reliable dividend payouts and consistent dividend growth. Most of these are large-cap, multinational blue chip stocks with names you'd recognize. But both funds are fairly diverse, so there's no real need to track individual companies. It's more of a set-it-and-forget-it style.

Neither fund will shoot the lights out, but both should offer good returns for shareholders who have a long time horizon and the patience to accumulate steady dividends over time. After days like yesterday, an investor shouldn't ask for much more.

The stock market isn't the only place to put your dollars to work in this market. Motley Fool writer and fix-it girl Tierney Plumb recommends that future home sellers consider investing in improvements to increase their asking price down the road:

When it comes time to stick a for-sale sign in your front yard, deploying dollars into home-improvement projects is a smart investment. Considering that home prices in 20 major cities fell 4.5% year over year in May, according to S&P/Case-Shiller's late July report, potential sellers should consider some of these price tag-raising tactics.

Smaller-scale upgrades -- replacing an entry or garage door, minor kitchen remodeling or wood deck additions -- result in the most bang for your buck, according to Remodeling Magazine's most recent annual survey comparing the price of popular home improvement projects to their resale value.

Homeowners can score great deals on enhancement projects these days, thanks to cheap materials and many unemployed builders willing to take on jobs for less. Just be wary of improvements that will adversely affect a home's value, such as decreasing bedroom counts and making the house "unique" in some way, which may impact the sales price down the road.

Jonathan Berr hopes to strike it rich one day on "Antiques Roadshow." Until then, he'll daydream about what he would do with his millions - and float this investment idea for those who already have a fat balance in their accounts:

Some modern art and iconic collectibles have been known to hold their values better than stocks. However, investing in collectibles really is only recommended for the extremely wealthy. Consider that a painting by the Austrian painter Egon Schiele sold for $40 million at Christie's, almost double the previous record for the artist. A hat worn by Babe Ruth sold for $328,000 in 2008. That said, even if you can afford to acquire such treasures, consider the problem of liquidity: Finding buyers for this stuff is not easy. Still, we all can dream, right?

The Motley Fool has a disclosure policy that's a pleasant distraction for those who need a little something to calm their nerves today.

Get info on stocks mentioned in this article:

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Are Emotions Ruining Your Investment Returns?

Dayana Yochim — Wed, 06 Jul 2011 16:00:00 EST

Filed under: Market News, Investing

Money is fraught with emotional baggage. However, all of the external influences that affect our fiscal decisions -- how mom and dad managed family money, the daily headlines warning of pending doom -- are nothing compared to the naturally occurring power struggle taking place in our brains.

That's right: One of the biggest stumbling blocks to financial security and superior investment returns is the way we're wired. But with self-awareness and a few practical tips, you can tame your gray matter and neutralize the emotional tripwires in your head.

Rein in Your Caveman Brain
For eons, our brain chemistry was just peachy at keeping us out of harm's way -- to seek more and more data or information, to look for patterns, to flee to safety at the first sign of trouble. Unfortunately, those same natural instincts compel modern-day man (and woman) to make boneheaded mistakes when it comes to managing our finances.

Here are four "cognitive biases," to use the language of behavioral economists, and ways to spot mind games before they get the better of you.

1. "Eek! I Gotta Sell Now!" Being a bona fide long-term investor is easy ... until it's not. When things go well, we're content to keep our eye on the long-term prize. When bad news comes -- and keeps flooding in -- our time horizons shrink dramatically. Investing is then no longer about what happens during the next three to five years. Instead, we focus on what happens over the next three to five minutes.

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The technical term for this compunction to cut our losses when the waters get choppy is myopic loss aversion. When you start thinking like a short-term trader, you start acting like one.

Hard times can be learning opportunities, which is a lot more productive than curling up in the fetal position and rocking back and forth for hours. When the urge to cut and run strikes, remind yourself that investing success is not measured in minutes or even months. Before you even invest in a company, write down your reasons for buying -- and things that would make you sell (such as a change in management or a particular product that falls out of favor). That way, when the ebbs and flows start ebbing and flowing, you have a record of your thinking from when your mind was calm and you were thinking long term.

2. 'I Can't Turn Off the TV; I'll Miss Something Important!" With stock market news dominating every major outlet, we're bombarded with information -- and we keep watching because we just can't seem to get enough. Watching the market's conniptions and CNBC pundits' breathless banter simply makes the situation seem more dire.

When you find it hard to tear yourself away, set a timer (five minutes of rubbernecking is adequate) and jot down what it is that you're hearing/reading that you think is going to help you make better buy or sell decisions. When the alarm sounds, go make yourself a sandwich and review your notes. What you'll discover is that most of the "information" bombarding your senses isn't even relevant to the real decisions you need to make.

3. "They Must Know Something I Don't." It's easy to assume that when the market drops 18% over the course of the week, "they" know something we don't. That assumption gains credence as others presume the same. Cue "herd mentality" (or "social proof") -- which leads to mass sell-offs.

Instead of following the crowd, look for ways to make money from their panic attacks. While everyone else is trying to game the system, you should be on the lookout for the opportunity to buy great businesses, with strong balance sheets, on sale.

4. "What a Great Deal! I Saved $1,000!" Suppose you go to a used-car dealership and find a car priced at $8,000. You return later that afternoon to find that it has been marked up to $10,000. Ten grand strikes you as too expensive, even though you know nothing about the actual value of the vehicle. However, had you first seen the car priced at $12,250 and talked the salesperson down to $10,000, your mind would tell you that you were getting a great deal. The car is downright cheap! In both cases you "anchored" on a number -- a completely arbitrary number.

Anchoring is devastating in investing terms. Think about it: A stock isn't "cheap" because it was more expensive yesterday or even last year. You have to have a sense of its true value before you can make a smart investment decision.

Rather than anchoring on price, anchor on value. Do your research and determine the price you're willing to pay for the company's future earnings stream before you look at the stock price.

What mental hiccups have gotten in your way as an investor? Chime in below, and tell us what you do to make sure mind games don't get the best of you.

Dayana Yochim is a columnist for The Motley Fool and does not blame her mother for any of her own investing mistakes.

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