Peer-to-Peer Lending: Crazy Idea or Smart Investment?

Would you give $1,000 to a stranger? Who’ve you’ve never met in person? Who lives on the other side of the world?

Well, as crazy as this may seem, this is the concept behind the hot investment called Peer-to-Peer lending or P2P for those in the know. And I just read a great article about it by Farnoosh Torabi on TheStreet.com.

Yes, the idea is that you lend someone somewhere in the world a certain amount of money, say $1,000. And they promise to pay it back to you plus interest that can reach up to about 12%. And you do it all online.

So, you’re probably asking yourself two questions right now. The first one probably is “Are you crazy?” And the second one probably is “OK, how can I do it?”

Well yes, this could seem like a crazy, risky idea. But a lot of people have been doing it successfully for a while now. And with minimum loans as little as $50 and with average returns higher than your average savings accounts or CDs, P2P could be a way for you to make a nice return on your money. Read more

11 Ways to Become a More Successful Stock Trader

Do you know the difference between a stock trader and an investor? I didn’t know until I lost a ton of money of some unsuccessful trades.

At that point, I learned that a trader is someone who “speculates” on a stock in an effort to make a great gain – usually a short or medium-term gain. An investor is someone who “buys a good company” through its stock and looks for a longer-term gain.

This article is about stock trading. Here is that I learned the hard way.

1. Write a Trading Plan, sign it and follow it religiously.
What’s a Trading Plan? It’s your partner in your effort to become a more successful trader. When you write your plan, make it as specific as possible. For instance, your plan should spell out:
A. How much of your trading account are you willing to spend on one trade
B. What type of stocks to consider
C. The reason a certain stock is a smart buy now
D. What share price you’ll buy that stock at
E. What rate of return you’re shooting for
F. How much loss you’re willing to take
G. What share price you’ll sell the stock at

After you write your plan, sign it to show that you’re committed to it. Then follow it to the T. Read more

How Much Is A Dollar Worth? How About $53.70.

In the past year, we all experienced the dramatic fall of our Almighty Dollar. It’s been pounded by the British Pound (bad pun intended), smashed by the Euro, trounced by the Canadian Loonie.

Today, it’s the butt of jokes from New York to New Delhi.

But with all the trouble the dollar has been going through, it still must have some value. Right?

So, this got me thinking about the value of a dollar over time. Now, I’m not talking about the buying power of a dollar or the effect of inflation on the dollar. I’m just talking about a basic calculation of how much a dollar can grow over time.

To figure this out, I went to BankRate.com and used their Savings Calculator. I wanted to see how much a dollar can grow by earning 8% annually, compounded monthly, and 10% annually, compounded monthly. This range of 8% to 10% Annual Interest seems to be quite possible over the long haul when invested in solid mutual funds or blue chip stocks.

After running the numbers, I have to say that I was stunned by some of them. Check ‘em out.

The difference between 8% a year and 10% a year isn’t that much – until you get to 20, 30 and especially 40 years.

I mean, $53.70 after 40 years? That’s amazing.

So, the next time you’re putting down 4 bucks for that double mocha latte, take your time and really enjoy it. Because 40 years from now, you could’ve had an extra $200.

The Only Investments You Really Need?

When I see a magazine cover with a headline like “The Only 7 Investments You Need Now.”, I have to read it. At least for curiosity’s sake. And who knows? I might learn something about earning or growing my wealth.

So, when I saw that headline on the cover of this month’s Money magazine, I put down my $3.99, took it home and read it.

The important point that the article makes is that you don’t need to complicate your portfolio. Especially now, in a bear market that’s so unpredictable. That’s a good point.

But when it came to suggesting what investments you need now, the article suggests just 7 basic investment areas (i.e. Blue Chip U. S. Stock Fund, Small-Company Fund, etc.) and 1 fund in each area.

According to Money magazine, not me, this is all you need right now, along with the funds that they highlight for each selection. (Full disclosure: I don’t own any of the funds in this article.)
1. A Blue-Chip U.S. Stock Fund, like Fidelity Spartan 500 Index (FSMKX)
2. A Blue-Chip Foreign Stock Fund, like Vanguard Total International Stock Index (VGTSX)
3. A Small-Company Fund, like T. Rowe Price True Horizons (PRNHX)
4. A Value Fund, like Vanguard Value Index (VIVAX)
5. A High-Quality Bond Fund, like Vanguard Total Bond Market Index (VBMFX)
6. An Inflation-Protected Bond Fund, like Vanguard Inflation-Protected Securities Fund (VIPSX)
7. A Money-Market Fund, like Fidelity Cash Reserves (FDRXX)

To me, this article doesn’t go far enough. It doesn’t talk about asset allocation or portfolio construction. And it only gives us 1 fund in each area, with a very heavy emphasis on Vanguard Funds. So, it seems like just another old-time generic investment guide. One from Column A, one from Column B and so on.

But don’t take my word for it. Check it out yourself. And let us know what you think.

The Bear Stearns Interns Reading List. Did the Top Guys read these, too?

I was just looking thru some old files (this one is from Sept. 12, 2007) that I saved on my computer and came across this - the Reading List for the new Interns at Bear Stearns. Yes, that Bear Stearns. The one that the Fed recently delivered to JPMorgan Chase in the biggest shotgun marriage/merger/discount purchase in the history of the financial industry.

It seems that those Ivy League MBAs who were “lucky” enough to snag internships at Bear Stearns were given a little reading to do, to prepare them for the rigors of working at what used to be one of Wall Street’s most prestigious firms.

So, without further ado, here’s the Bear Stearns Reading List for Interns: Read more

Free Coffee? Sure, if you own stock in Starbucks.

In a market like this, where stocks seem to be getting slammed every day, there is a bright spot to owning certain stocks.

You see, some stockholders get extra perks, even if they own just as 1 share of stock.

For instance, if you own stock in Berkshire Hathaway, you get discounts from some of the companies that Berkshire owns - like GEICO insurance. Plus, they get invited to its famous annual meeting where they can take in the wisdom of Warren Buffett.

Investors who own at least 100 shares of Royal Caribbean stock get great savings on the company’s cruises.

And if you’re a Starbucks stockholder? Well, you get a gift card that’s just enough to cover the cost of one of their coffees. Hey, it ain’t much. But it’s better than nothing.

Check it some more stockholder perks in this Motley Fool article. And tell us if you get any perks from the stocks that you own.

Leveraged ETFs: Triple the Returns. Triple the Risk?

Just read an article on today’s MarketWatch.com by John Spence about an investment product I’ve never heard of before – Leveraged ETFs.

These are ETFs that attempt to triple the returns of their particular segment of the stock market. So, if the S&P 500 index rose 2%, the Leveraged ETF that tracks it would shoot up 6%.

The investment company that came up with these funds is Direxion Funds. And their new supercharged ETFs would track U.S. benchmarks like the S&P 500, the Dow Industrial and the NASDAQ 100.

As good as triple returns sounds, remember that on the flip side, these supercharged ETFs could also triple their losses. As they say in investing, the more risk, the more return. But are these too risky?

Well, each of us have to decide that for ourselves. We all have different circumstances, needs and levels of risk comfort. But I think these ETFs are at least something to look into.

Check out the article and let us know what you’re thinking.

Turn $1,000 into (fill in the blank).

So, I’m reading the home page of the Fool today and I see a blood red Ferrari with the headline “How to Turn a Water Heater into a Ferrari” next to it. So, since I’m a die-hard car guy and a Ferrari fanatic, I had to click thru to see what the story was.

Turns out that was an article by James Early about turning $1,000 into enough money that it’ll blow your mind by following these 3 steps:
1. Ignore the hype that you secretly want to believe
2. Befriend the dorkiest guys you know
3. Decide whether you’re a man or a mouse

It’s a pretty interesting piece. I know that many times in my life I’ve turn $1,000 into $0 without really trying. So, this article taught me a few things. Check it out. And give us your take.

Why am I a great fake trader, but a bad real trader?

So I got my weekly email this morning from Marketocracy, the online paper-trading site. It’s a site where you can practice your trading by making fake trades with fake money. And after seeing my results, I can’t help ask myself “Why am I a great fake trader, but a bad real trader?”

My fake account is doing great considering the downward spiraling market that we’re in. But my real portfolio is stagnant. So, why is this? Why can I pick fake trades that return 6.79% for the past 7 days and beat the S&P 500 (4.31%), the NASDAQ (4.92%) and the Dow (4.25%)? But when I make real trades in my real portfolio they usually turn out to be crap?

Oh, and to make me feel even worse, my (fake) account returned 16.26% over the past 30 days and also beat the S&P (7.08%), NASDAQ (8.73% and Dow (6.20%). So, what do you think is going on inside my head when it comes to trading? I’d really like to hear your take on it.

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