Top money-saving tips for holiday shopping

Stores are already full of Christmas merchandise and Thanksgiving is days away, so this looks like a good time to share some of my favorite money-saving holiday shopping tips.

In addition to planning ahead, staying on budget, and watching for sales and discounts, there are many opportunities to save money. That’s true whether you’re buying gifts, or just shopping.

Here are some examples:

Discount gift cards: Gift cards may be purchased as gifts, but they can also be used to make your own purchases. If you’re planning to do a lot of shopping, or dining, at a particular place, check out reputable online resellers of gift cards, and you could get one at a nice discount to face value.

Gift cards are just another form of money. If you can get a $100 gift card for $90, you made money. Just make sure to only buy gift cards you’ll use.

Some discount examples I found: You could buy a $100 gift card for Bass Pro Shops for $88 (cardcash.com), a $75 AutoZone gift card for $67.50 (raise.com), or a $50 P.F. Chang’s gift card for $39.75 (cardpool.com). Note that, sometimes, gift cards are sold in electronic versions that can only be used online.

Gift card bonuses: Keep an eye out for bonus offers that can multiply your money. Restaurant chains, drug stores and even specialty retailers usually offer deals during the holiday shopping season in which the gift cards you buy may be worth 10 percent to 30 percent more than you paid for them.

That’s helpful for gift-giving, or to save money at places you regularly shop or dine. Note that a “gift card” does not expire, but a bonus might come in a different form that could have an expiration date. So, you might buy a $50 restaurant gift card that doesn’t expire, and also get a $10 “bonus card” with an expiration date.

Membership discounts: Say you want to give some movie tickets as gifts. If you’re an AAA or AARP member, you can buy them at discounted prices.

Credit/debit card cash-back: Many credit and debit cards provide rebates in the form of cash-back, or points. Some offer larger rebates at particular stores, and many offer even larger rebates for online shopping launched from their website’s online shopping portal.

Get in the habit of launching your online shopping from your credit or debit cards online shopping portal, and you’ll save more money. If you’re a member of an airline loyalty program with miles or points that can expire, use the airline’s shopping portal to shop and you’ll reset the expiration date on your mileage program.

Valuable protection: Take the time to know the benefits provided by different credit and debit cards, so you’ll know the best ones to use.

American Express’ “purchase protection” will cover a purchase if it’s stolen or accidentally broken within 90 days — a great benefit, which I’ve used in the past, that’s particularly helpful for purchases of small electronics that will be gifted to young people. Dropped your new smartphone in a lake? No problem.

Citi “price rewind” will let you register a purchase, track the price, and give you money back if better deals turn up. Some cards will automatically extend a warranty, or the time period when returns are allowed.

Speaking of credit cards, shoppers are likely to be solicited at checkout, both in person and online, with offers to immediately save money on their purchase by signing up for the store’s credit card. Weigh such offers carefully, because store-branded credit cards typically offer lower incentives for signing up, come with fewer benefits and carry high interest rates.

Signing up for a credit card shouldn’t be an impulse decision. Some store-affiliated cards may make sense if they have no annual fee, you shop there often and they provide ongoing discounts. As with any credit card, store-branded cards are only a good thing for people who avoid interest charges by paying off the balance due each month.

Invest With Courage in Our Harsh World

Inequality flourishes everywhere. Just read the front page of The New York Times. The Big Board is still the perfect metaphor for the widening gap between haves and have-nots. Internet properties, Alphabet accepted, still doing twice the market’s 10% gain. Nobody wants small cap goods or even mid cap properties.

Consider Facebook. With a market cap approximating $500 billion, it sells around 7.5 times book value, and at 25 times my estimate of forward 12 months’ earnings. Share based compensation tots up to 25% of earnings and outstanding shares are growing at 1.5%.

Facebook holds over $35 billion in cash with $18 billion in goodwill on the balance sheet. To renew itself continuously, R&D runs at 20% of revenues, a most notable number. Apple spends around 5% on R&D. Facebook’s operating margin has expanded to 47% of revenues. This is a work in progress, and I like the vibes.

Enormous variance permeates top 100 names in the S&P 500 Index. General Electric, IBM, Coca-Cola and Pfizer are dead paper. But, railroads sell at 20 times next year’s earnings power. Schlumberger and Halliburton sell between 30 and 40 times current earnings, as if they’re entering an energy super cycle. You can own JPMorgan Chase and Citigroup at 11 times conservative estimates for 2018, a deep market discount, almost 40%.

Net, net, corporations like GE, IBM and Coca-Cola seem too big to reinvent themselves. They were the momentum stocks during the sixties. Does anyone but me remember when the Watson’s bet the company (IBM) on their introduction of the 360 Computer? The also-rans remind me of New York State’s northern cities – Buffalo, Utica, even Rochester that flourished when the Erie Canal opened for trade in the 19th century. In the seventies Eastman Kodak was a Nifty fifty stock.

I do bet on remakes that could work, starting with AT&T. Last week the market finally liked something about T. Earnings were an upside surprise. The brass ring is the buyout of Time Warner gains approval by yearend, a true media transformation on a piece of paper yielding 5%.

I see General Motors as something better than a cyclical metal bender. It’s cheap if you give ‘em average earnings power of even $3 a share over 3 years. Currently, the number is $6, the dividend over 4%, at just $1.52. Hopefully, payout is headed to 2 bucks a year or 2 out.

I like the way management is playing gin rummy with offshore properties, keeping China and discarding most of Europe and South America. Yes, I know, they needed a $50 billion bailout to survive, but Citigroup was goat meat, too, back in 2009.

Never underestimate how long it takes to make things right in the country. Guys in workboots sensed this, buying into the Murphy man’s patter on jobs. How many steelworkers appreciate excess capacity in steel has reigned for over 30 years? Infrastructure spending? No funds coming.

Because the country faces deep-seated issues of lopsided income distribution and a progressively defanged, even deranged Oval Office, don’t extrapolate more than moderate momentum for GDP. Low interest rates could prevail for years to come. Janet Yellen can’t find any inflation using both her hands and feet. Historically speaking, mortgage rates hovering around 4% are a Consumer Reports Best Buy.

The Big Board’s largess should prevail, and I’ll try hard not to feel guilty about participation. Reciprocal of low interest rates is growth stocks. Alibaba, I love you, but you don’t even know it! I’m not giving up on Wall Street getting an increasing share of GDP, but it won’t be easy unless “risk on” prevails.

Deep seated issues don’t fade away. By 2030, the Social Security system falls into negative ground. The push to lower benefits or raise taxes therein hovers out there, maybe in the next Presidential term. They could bump up the qualifying age level a couple of years, and solve it actuarily with a stroke of the pen.

My chart on compensation of employees past 3 decades as a percentage of GDP shows a wipeout. Labor’s take contracted from 67% to 57%. How many labor union leaders or even Congressmen have processed this depressing trajectory?

Contrapuntally, pressure from the corporate sector to lower their tax rate is very noisy. The Koch brothers openly proclaim they’ll spend what it takes to lobby this issue. But, how many Congressmen have reviewed the chart on tax rates for U.S. nonfinancial corporations?

Early fifties, we’re talking taxes in upper sixties. Consider, we’ve been below 30% for much of the past 3 decades. Today, savvy major corporations have whittled down taxes to low-to-mid-twenties. Not much different than the industrial world’s norm.

Sadly, the Occupy Wall Street crowd waxed vociferous, but shouldered no specific ideology or agenda for change. They should a dug down into the Labor Department’s long term stats or perused a dozen proxy statements of tech houses to unveil the scope of corporate management’s methodical rapacity blessed by hired consultants. The SEC forever is silent, too busy with insider trading cases so irrelevant to financial markets’ health but do gather headlines.

Past 30 years, the middle class lost income share to the top 20%. Income inequality actually increased for the last generation. I define wealthy as the adjective for anyone who doesn’t need to work. Their wealth exceeds 30 times middle class income. I’m assuming a realistic after tax income flow of 3.3%, what you’d get on longer maturity tax exempt’s. Without a nest egg of $3 million you don’t qualify. Sorry!

Equity for the middle class largely resides in home ownership. Average equity produces no more than $75,000 net of mortgage debt. Hot real estate locations like Williamsburg in Brooklyn are exceptions. Incidentally, New York City politicians studiously avoided the issue of grossing up for tax purposes huge increases in home values these past 5 decades. Brownstones changing hands today at $2 million carry a tax load around $6,000. Homeowners rejoice, but silently. These homes sold for $15,000 early postwar decade.

Never forget, the market is the Great Humbler, smarter than us. My putting bank stocks at a valuation above 60% of the market are dangerous. Citigroup’s leveraged exposure of $2.4 trillion in assets is backed by tangible equity of $183 billion. This is the typical bank construct, leveraged at least at 10 to 1. That said, I own Citigroup – big because there’re so few others sectors to play for operating leverage.

Industrials need a zippy economy, while traditional retailing is assailed by Amazon. Energy quotes are anyone’s guess. Cola water has topped out while Procter & Gamble’s topline rests sluggish. The existing pharma model of bumping up prices 5% to 10% per annum faces regulatory challenges. I’ve just eliminated over half the S&P 500’s sector weightings.

Internet properties, several now with market capitalizations of $500 billion or more could easily end up at 20% of the Index’s valuation. Forget ExxonMobil. Anyone underweighted in Facebook and Alibaba needs to perform some serious introspection.

These stocks are ahead year-to-date at least double the market’s 10% gain. BABA ranges above 50%, and as yet isn’t part of the S&P 500, an ironic twist for my favorite piece of paper. Would an added 1% to S&P’s performance. Reciprocally, I’m a player in stocks where I think the consensus is obtuse. Include AT&T, GM and Citigroup, as just too cheap.

Is It Time To Invest In A Tactical Investment Portfolio?

During the past few months, I frequently came across story after story about record flows to exchange traded funds (ETFs) that track the S&P 500. Such ETFs include SPY, VOO, and IVV. The main reason for these record flows is obvious — the U.S. stock markets have been doing very well this past year.

But why are investors particularly flocking to ETFs that merely track an index? There are two reasons. First, these ETFs are pretty cheap. Second, when stock markets are rallying, it seems easy to make money investing. All of a sudden, we may even feel like investment pros. In psychology, the tendency to think we are better than we really are is known as an overconfidence effect. The way this effect can manifest itself in investment decision-making is that we may misattribute our current success in the stock markets to our investing skills, when in fact most of us probably do not know much about investing. A lot of research has been conducted on overconfident investors. In the long run, they do not perform well. Here’s a study on overconfident investors in the United States. Here’s a study that I did on overconfident investors in China.

I became curious about these recent ETF flows and so I decided to check out them out for myself. I went to http://www.etf.com to find information about ETF flows, and I chose to look at flows to the SPY ETF simply because it is probably the most well-known, largest, and oldest ETF that tracks the S&P 500. During the past year, from August 1, 2016, to August 1, 2017, about $16.7 billion flowed into SPY ETFs. I wasn’t sure if this was a large amount, so I kept going backwards, looking at August-to-August annual SPY ETF flows, and discovered that yes, $16.7 billion was a pretty big annual flow, but then I came across the SPY ETF flow from August 2007 to August 2008. It was over $30 billion. Was this an outlier, or was this normal? I continued to go back to 2000, and discovered that no other year’s flow to SPY ETFs came close to the $30 billion flow that occurred from August 2007 to August 2008. I became curious, and so I decided to look at August-to-August annual S&P 500 returns. I discovered that during the year prior to $30 billion flow to SPY ETFs, the S&P 500 had a 13.1% return, which at that point was the largest August-to-August annual S&P 500 return since in the turn of the millennium.

What’s my point? Well, it seems that people do gravitate to low-cost ETFs that merely track an index when markets are rallying. But we all know what happened immediately after August 2008 — the stock markets crashed. By the end of 2008, the S&P 500 fell by over 35 percent since August 1, 2008. The S&P 500 continued to crash in January 2009. So, those many investors that bought $30 billion worth of SPY ETFs lost a lot of money from the market crash if they didn’t immediately sell those ETFs. In fact, if investors purchased a SPY ETF during the market peak in 2008 and finally sold it less than a year later at the market bottom in 2009, then those investors lost about half their money. Yep, half.

So, what should investors do when markets are at all-time highs? They should probably be cautious. After all, what goes skyrocketing up can come crashing down. This past year, I have personally witnessed a lot of investors gravitating to tactically managed or actively managed portfolios (in the investments profession, “tactically managed” and “actively managed” are often used interchangeably), instead of to passively managed portfolios or to ETFs that merely track indexes. Why are they doing this? Tactical money managers usually attempt to protect their investors from stock market crashes. So, many investors and their financial advisers who are leery of the current record-high stock market valuations are now searching for “downside protection.” If you are an older investor, someone who is nearing, or is at, retirement, then it may be prudent for you to seek actively managed portfolios that can offer you protection from market downturns.

You are now probably wondering if tactical money managers are good at what they do. This Federal Reserve Board study, coauthored with finance professors at the University of California at Irvine, finds that actively managed portfolios can successfully protect their investors from market downturns. Here’s an excerpt from the study:

“Using data from 1980-2008, we find that the most active funds outperform the least active ones by 4.5 percent to 6.1 percent per year in down markets after adjusting for risk and expenses… A further investigation of the sources of fund performance suggests that active funds show better stock picking skills in the down markets. The results are robust to different measures of fund activeness and definitions of up and down markets.”

So, it seems that on average, active money managers can protect their investors from stock market crashes.

By the way, if you’ve read some of my previous Forbes columns, then you know that I am not a fan of mutual funds. I’ve previously described their huge costs, some of which are hidden, and their sneaky behaviors. So, how can you invest in a tactically managed portfolio if you don’t want to invest in a mutual fund? I’ve previously describe the many benefits of separately managed accounts (SMAs). You might think that SMAs are usually reserved for the super-rich. That used to be the case. But today, some investment firms are offering non-wealthy investors the opportunity to invest in SMAs with small account sizes. So you no longer have to be super rich to invest in an SMA. And in case you’re wondering, investors in SMAs did better than mutual funds during the 2008 stock market crash.

So, is it time for you to invest in a tactically managed SMA? I don’t know you, so I don’t know. You should talk to your financial adviser. They know your personal financial situation, circumstances, risk-aversion, and goals. And they should know a thing or two about investing.

I get similar results if I use January-to-January annual SPY ETFs flows and January-to-January annual S&P 500 returns. I just picked August because that’s the current month, and I wanted to go backwards in one-year increments.

13 Personal Finance Tips that we can learn from the World’s Richest People

It’s no secret that a lot of us want to be rich. After all, who doesn’t want to live a life of leisure in luxury? However, while a lot of us also know that to get there requires a lot of hard work, there are a few other steps you need to become acquainted with.

As there’s no such thing as overnight success, the habits you pick up to grow your wealth are going to require some patience and practice but will be well-worth it in the end. Check them out below:

Pick up a side hustle

Having a side hustle is going to be one the first ways you can not only gain some extra income but establish yourself for a skill or service. This can mean anything from hosting a drop shipping business to even just running a store on Etsy. Look into what you’re passionate about, and who knows? Maybe it’ll become your full-time gig.

Have saving goals

As you’ve probably heard 100 times before, saving money is absolutely imperative for financial freedom. However, it’s something that collectively we haven’t been as attuned with, as according to GoBankingRates, a shocking 69 percent of Americans has less than $1,000 in their savings account. Take the time to set aside some of your paychecks as you never know when a rainy day is going to come.

Budget for the experiences

Another practice of the super wealthy when it comes to savings is setting aside funds for the experiences they want to have. Regardless of income, everyone has some dream vacation or adventure they want to go on, which you shouldn’t feel guilty for wanting to pursue. Whether it is a wine tour through Napa Valley or hiking in Peru, make an effort to put these activities as a priority.

Spend money where it counts

There are certain events in life that you’re going to want to remember forever, but come with a hefty price tag. Which, if you already know the cost of a wedding or how much a car is going to be, then why try to finagle your way around it? Be honest about the experiences you’ll want to have, and the reward will be much richer.

Pay attention to your credit

Your credit score is going to be the lifeblood of how much people are going to be willing to lend to you, so it’s best to utilize it wisely. If you’re unsure or don’t know how you’ll get out of the hole, not to worry, as there are plenty of firms out there whose job is to fix credit. Make an effort to develop this, as it will serve you well in the long run.

Invest early

While a lot of people fear the stock market in thinking it’s a gambling person’s game, it can actually be a great way to get rich slowly. Yet, not everyone sees it this way, because as noted by Gallup, only 52 percent of Americans have money in the market, a record low. Some places to consider include Index Funds, Roth accounts, or even a 401k.

Cut out some of the short-term spending

Noting our point above on saving for experiences, it’s important to consider the little things you’re spending money on unnecessarily. This includes activities like going out to eat, which according to CNBC, accounts to approximately $140 per month in excess costs.

Don’t buy expensive just because you can afford it

Do you want to know what the most popular car choice of the wealthy is? According to a study by Experian, Honda, Fords, and Toyotas. The rich don’t always want to show off their wealth, but even more, they view their car as a utility, something that doesn’t need to be excessive.

Real estate can have good returns

Perhaps one of the soundest investments you can make long-term is with real estate. According to Investopedia, investment in commercial real estate comes around 9.5 percent, with residential around 10.6percent. These figures beat out the S&P 500’s rate at 8.6 percent, even when factoring in recessions.

Stay away from loaning money

It’s true that there’s such a thing as ‘healthy’ debt, where you’re not biting off more than you can chew, as well as can make payments on-time over the course of a couple of years. However, be very wary of things like credit card debt or loaning money for leisurely activities, as according to NerdWallet, the average credit card debt is $16,883. The interest alone on a balance like that could be crippling, so be mindful of being able to pay every month.

Always focus on your passion

A big thing any wealthy person will tell you is to focus on your passions, and the rest will come. While it sounds cliche, being excited about going to work every day will seriously increase your drive and hustle.

Stay grounded in your decisions

Whether it be investing in the stock market, a startup, or even a piece of property, always is mindful of the risk involved. Sure, taking big risks can have big rewards, but also some sizable losses as well. As noted by MarketWatch, those who are after a five-year return fall within a range of +33.35 percent to a -13.22 percent. That’s a pretty wide spread and one that should not be taken lightly.

Turn yourself into a business

As we mentioned above on your side-hustle, turning yourself into a business/becoming self-employed is one of the most important ways of getting rich. There’s just so much more upside in setting your own price, schedule, and work/life balance. Plus, as the Bureau of Labor Statistic notes, 10 percent of all workers are now self-employed, a number that’s only going to increase steadily.