bright investing

Is another mutual fund scandal brewing?

More than two dozen mutual fund companies are under investigation for allegedly accepting hundreds of millions of dollars in kickbacks from outside contractors, according to a published report Thursday.

The Securities and Exchange Commission probe was sparked by a $21.4 million settlement it reached in September with Bisys Fund Services Inc., The Wall Street Journal reported.

Bankrate.com currently lists over 25 savings and money market accounts with annual yields of 5% or more. Many require a minimum deposit of just $1. So why is the average savings account paying something like 0.5%?

Bueprint for Financial Prosperity has a great post titled “25 Steps To A Wildly Successful Personal Finance Blog” that I’m studying carefully.

Wal Mart cuts prices as Christmas nears:

Wal-Mart cut prices on more than 100 toys and games. Hot Wheels Radar Gun from Mattel was cut to $20 from $29.74; Amazing Allesen and Amazing Amanda dolls were cut to $69 each from $99 and Dora the Explorer Talking Kitchen was cut to $65 from $89.84.

As a parent with two semi-spoiled kids, I welcome any and all price slashing on toys and games.  Bring it on.

Do The Donald and that Rich Dad dude really want you to be rich? Who knows, but Kiplinger’s thinks their new joint effort falls short. It sounds like their collaborative book boils down to “borrow money and buy real estate.” What could go wrong?

Personally, I find Kiyosaki’s pessimism about the stock market and the United States economy depressing and unwarranted.

From Money Magazine, 25 Rules to grow rich by.  How many do you follow?

Banks are getting a little carried away with the fees they charge.

Penalties are supposed to be a deterrant to keep people from making late payments.  But banks and card issuers have turned these fees into a profit center instead, actually counting on late payment fees as a revenue stream.

If you want to know why credit card fees and penalties, in particular, are so outrageous, or if you think it just sort of happenned, you need to watch the Frontline episode called The Secret History of the Credit Card (watch it online here).  The fee and penalty structure used by the industry was designed as a profit center, in addition to the interest rates charged.  This is from the Frontline description:

But other consumers, like actor and author Ben Stein, use plastic purely for convenience. While it would appear that Stein — who says he charges a small fortune every month on his credit cards — is the ideal customer, in reality, he is what some in the industry call a “deadbeat.” That’s because he pays his balance in full every month.

That’s right, in the insane world of consumer credit, you’re a deadbeat if you pay your balance off every month.

If you want to know who to blame, Andrew Kahr is a good start.  He’s responsible for much of what’s wrong with the industry. From Andrew Kahr’s Wikipedia entry:

In a July 1998 memorandum to David Alvarez and Dawn Greiner, Kahr urged the company not to tell customers that some credit cards don’t have “grace periods,” a limited time for paying off balances before finance charges kick in. And in a September 1998 memo to marketing executive Greg Pacheco, Kahr suggested how to promote a for-fee cardholder buyers club program that in most cases offered tiny 1 % rebates at selected stores: “A 1 % rebate is a ‘discount on everything you buy.’ We could easily make that discount ‘up to 30 %’ just by randomly or systematically giving a few customers a big rebate.”

In a September 1998 memo to Mehta, Kahr advised calculating the credit protection charge as a percentage of the customer’s credit line:“The (credit protection) fee can be denominated at 9.8 cents per hundred dollars of line, or whatever, and this has the additional merit of making the $96 go away from the disclosure box.” The recommendation was underlined and the notation “excellent suggestion,” followed by the CEO’s initials, was penned in the margin.

Nice.

Wise words from Knight Kiplinger…

The biggest barrier to becoming rich is living like you’re rich before you are.

Read the rest.

The average Wall Street salary is $300,000, which is decent money unless you happen to live and work in, you know, New York.

NEW YORK (Reuters) — Wall Street workers took home nearly $300,000 on average last year as profits from trading and merger advising fueled record earnings, New York State Comptroller Alan Hevesi said.

Wall Street compensation averaged $289,664 per person, 5.1 times the average $56,634 for workers citywide, the comptroller said in a study released Tuesday. The highest-paid bankers and traders can command eight-figure pay packages.

Reality check: The overall cost of living in New York is 364% the national average, and apartments rentals average $1,600 (if you can find one). Good luck affording a nice house on 300 grand a year. But you can find a nice — if small — apartment for, on average, a million bucks.

Of course, with the average New York income at $56,634, it’s a lot tougher on the average Gotham dweller than on the elusive Wall Street worker. In fact, almost half of New York households are considered “low income” by the Department of Housing and Urban Development. And then there’s this discouraging bit:

Usually housing is considered unaffordable if it costs a household more than 30 percent of its income. With that definition, about 1.1 million of the 3 million households (36.7 percent) are living in housing that is not affordable to them. In fact, over 600,000 (19.9 percent) spend more than 50 percent of their income on housing.

But millions of New Yorkers wouldn’t consider living anywhere else, so they obviously know something I don’t.

Now that free online broker Zecco is up and running, I’d like to hear some reviews and first impressions. If you have any experience with Zecco, or if you find a link to a good review, post it in the comments. If nothing else, they’ve got a very slick, web 2.0-ish web site.

This is a little terrifying:

High-tech crooks are hijacking online brokerage accounts using spyware and operating from remote locations, sometimes in Eastern Europe, U.S. market regulators said on Friday.

Of course, common sense steps like keeping your pc clean of spyware and avoiding public computers will make such hijackings unlikely.

A common sense do it yourelf mortgage accelerator plan is described on MSNBC. A good idea, if you can spare a little extra money each month.

DRIPs and direct purchase plans seem sort of old-fashioned now, but some folks still manage to get excited by what was once a very clever idea — buy stocks directly from the company and avoid outrageous transaction costs and minimum investment requirements of traditional brokers.  There’s just one problem — traditional brokers are an endangered species.  Thanks to deeply discounted online brokers, transaction costs can now be just $4 a trade or less — with no minimum investment requirement. Think ShareBuilder, SogoInvest, and others.  These alternatives to DRIP plans also give you a heck of a lot more flexability.  Don’t get me wrong…there’s nothing necessarily bad about investing through a company’s DRIP program.  It’s just getting a lot harder to make the case that there’s any real advantage to DRIPs for most investors.

If you disagree, let me know why in the comments.

Forbes has run the numbers to see which income earners should be considering a Roth 401(k). As you probably know, with a Roth 401(k), contributions are after-tax, but all the money that comes out at the other end is tax free. This is a tempting feature for many people. Check out the guide and calculator to see if this new option makes sense for you.

I’m sure plenty of online banks are offering great incentives to open accounts, but this offer from NetBank and Tiger Direct caught my eye.  Just open a NetBank checking account and maintain an average daily balance of $500 for 1 month, and get a $70 Tiger Direct gift card.  That’s not a bad return on a no-risk 30 day investment.  And if you don’t mind tying up a little more money, you can also open a Net Bank money market account and maintain a $1,000 balance for a month to get another $70 Tiger Direct gift card (the offers are stackable).