Mid-Cap Viper

According to a report from Standard & Poor's, the year 2005 belonged to mid-cap stocks which gained 12.6% versus 4.9% for large-caps and 7.7% for small-company stocks. This year through May 10, the S&P MidCap 400 index, which measures companies with market capitalizations between $1 billion and $4 billion, rose 10.4%.

Vanguard has recently filed a registration statement with regulators for a pair of index funds and matching Vipers ETFs designed to track midcap stocks. If approved, these ETFs would cover the growth and value sections of mid-sized companies and would increase the company's total ETF count to 26 offerings. The pair would also round out Vanguard's lineup to cover all nine "style boxes" for U.S. stocks (A cross table comprising Large-, Mid-, Small- for rows and Value-, Growth-, Balanced- for columns or vice versa).

8 Dividend-seeking ETFs

Today we present a list of eight Exchange Traded Funds (ETFs) which invest in good companies that consistently pay out dividend:

In November 2003 Barclays Global Investors introduced the first dividend ETF, iShares Dow Jones Select Dividend (DVY). That fund carries an expense ratio of 0.4%. The timing of its introduction was perfect and it gained a lot taking advantage of the 2003 federal legislation that slashed the income tax rate to 15% on dividends paid out by corporations. The fund's tracking index targets the top 100 domestic stocks by dividend yield, screened by dividend-growth rates, payout ratio and trading volume.

PowerShares Capital Management offers as many as 4 ETFs that invest in income-producing stocks: PowerShares High Yield Equity Dividend Achievers (PEY) , PowerShares Dividend Achievers (PFM) and PowerShares High Growth Rate Dividend Achievers (PHJ) hold U.S. companies, while PowerShares International Dividend Achievers Portfolio (PID) tracks foreign stocks.

State Street Global Advisors manages the SPDR Dividend ETF (SDY), which follows a Standard & Poor's index measuring the performance of the 50 highest-yielding domestic stocks that have consistently raised dividends for at least 25 years.

First Trust Morningstar Dividend Leaders (FDL) is based on a benchmark of about 100 high-yielding companies with a history of consistent payouts.

Vanguard Dividend Appreciation Index Vipers (VIG) is the first dividend-seeking ETF from Vanguard Group and tracks the Mergent Dividend Achievers Select Index. It began trading on the American Stock Exchange in late April and carries a low expense ratio of 0.28%. "Vipers" (short for Vanguard Index Participation Equity Receipts) are ETFs designed as separate share classes of regular Vanguard index funds - in this case the Vanguard Dividend Appreciation Index Fund (VDAIX).

In one of our past postings we discussed relative merits and demerits of iShare's DVY and Powershare's PEY.

MyDollar 5-Stock Tech Invest: Week1

Last Friday (May 19) we purchased 5 technology stocks (read details) at the closing price of that week. We started with $10000 (about $2000 for each stock).

After one week at the close of trading today we stand at $10203, an increase of 2.04%. One week of investment performance means nothing to us, but anyway it's good to report a positive number than a negative one.

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $12.78 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $39.49 (was $39.35)
Seagate Technology (STX) : 80 at $24.21 (was $24.95)
Veeco Instruments (VECO): 82 at $24.39 (was $24.26)
Yahoo (YHOO) : 68 at 33.02 (was $29.53)

Disclaimer: We own all these stocks in our personal portfolio. Please do not make your investment decision based on this selection. Please do your own homework and/or take expert advice before investing in these stocks.

Mortgage & Housing Market

The Fixed and Adjustable rate mortgages diverged in their path this week. However, the general upward direction of rates as seen in last few months has certainly started taking its toll on the housing market. In the 1st quarter of 2006, the housing industry accounted for only 7% of real Gross Domestic Product (GDP). In the 4th quarter of 2005 it was about 19%.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.62% in the week that ended today. This is slightly higher than its 6.60% average last week. At this time last year, the loan averaged 5.65%. The 30-year mortgage has not been higher since the week ending June 20, 2002, when it averaged 6.63%. The 15-year fixed rate averaged at 6.23% this week, up from last week's 6.2%. At this time last year this rate was 5.21%.

However, the rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) moved down to 6.21% from 6.23% last week. This rate averaged 5.07% a year ago. The 1-year Treasury-indexed ARMs also moved down slightly this week to 5.61%, from 5.62%. At this time in 2005, the ARM averaged 4.21%.

iShares' New ETFs

In the early days of Exchange Traded Funds (ETF), most of the ETFs were designed to provide investors with diversified exposure to wide areas of the stock market. Examples are QQQ for Nasdaq 100 or SPY for S&P-500 or DIA for Dow Jones Industrial Average or iShares Russell 2000 (IWM). However, gradually all of the popular indexes were taken up and licensed by ETF providers. The attention has now fallen on more specialized industry offerings, as well as funds tracking alternative investments such as commodities and currencies.

On May 5th, Barclays Global Investors rolled out as many as 10 new ETF offerings which are focused on specialized subsector indexes.

The new ETFs are:
iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO)
iShares Dow Jones U.S. Oil Equipment & Services (IEZ)
iShares Dow Jones U.S. Pharmaceuticals (IHE)
iShares Dow Jones U.S. Healthcare Providers (IHF)
iShares Dow Jones U.S. Medical Devices (IHI)
iShares Dow Jones U.S. Broker-Dealers (IAI)
iShares Dow Jones U.S. Insurance (IAK)
iShares Dow Jones U.S. Regional Banks (IAT)
iShares Dow Jones U.S. Aerospace & Defense (ITA)
iShares Dow Jones U.S. Home Construction (ITB)

All these funds have expense ratio of 0.48% of their assets.

MyDollar 5-Stock Tech Investment

From today we start a new feature. We'll track a portfolio of only 5 stocks from technology sector, which we believe will do good in long term. We'll report our progress from time to time.

Note that we firmly believe in the importance of diversification. One shouldn't keep only Technology stocks in portfolio. This represents only a part of the full portfolio that one might have. This part would represent only the technology investment part of a full portfolio.

Here is how we'll track it: We start with a capital of $10000 and purchase the following 5 technology stocks of our choice at the closing price of last Friday. Each stock is bought for approximately $2000. So, our portfolio is:

EMC Corporation (EMC) : 157 stocks at $12.73 : It gained a healthy level of diversification in its products in both hardware and software.
Nasdaq-100 Trust (QQQ): 51 stocks at $39.35 : Investment in Broad Technology sector.
Seagate Technology (STX) : 80 stocks at $24.95 : We like it for its pioneering role in developing and implementing the technology of perpendicular recording in high capacity hard drives (read these postings in our sister Blog 2Technology: 1, 2, 3)
Veeco Instruments (VECO): 82 stocks at $24.26 : Electronic equipment maker. A play in emerging Nanotechnology sector.
Yahoo (YHOO) : 68 stocks at $29.53 : A choice for its valuation and the foothold it gained in advertisement sector.

We may sell off some stocks from time to time (but not too often -- we believe in long term play) and buy new ones but our aim would be to keep our number of stocks limited to only 5 or very rarely 5 plus or minus 1. We'll not subtract any amount as transactional cost -- Neither will we add any dividend to our investment amount. It's pure stock-price play.

Disclaimer: We own all these stocks in our personal portfolio. Please do not make your investment decision based on this selection. Please do your own homework and/or take expert advice before investing in these stocks.

Mortgage at 4-year High

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.60% nationally in the week ending Thursday, up from 6.58% a week ago. Last year at this time, the 30-year loan averaged 5.71%. This is almost a four-year peak. The rate has not been higher since the week ending June 20, 2002, when it averaged 6.63%.

The 15-year fixed-rate mortgage (a popular refinancing choice until a few months back), increased to 6.20% from 6.17%. A year ago, the 15-year averaged 5.27%.

The 1-year Treasury-indexed adjustable-rate mortgage (ARM) was unchanged at 5.62%. At this time last year, this rate averaged 4.26%. The 5-year hybrid ARM rose slightly to 6.23% from 6.22%. A year ago, the 5-year ARM averaged 5.07%.

Experts at Freddie Mac now expect the 30-year fixed mortgage rate to average 6.7% in the 4th quarter and the introductory rate on the 1-year ARM to rise to 5.8%.

China Funds

Here are 3 good options for investing in China. The first two have more diversified portfolios and we prefer those keeping in long term gain and risk factors in mind

(i) Fidelity China Region Fund (FHKCX) whose year-to-date gain is 16.27% and has expense ratio of 1.16%. Minimum investment amount is $2500.

(ii) The PowerShares Golden Dragon Halter USX China Portfolio (PGJ) Exchange Traded Fund (ETF) is composed of 51 U.S.-listed companies that derive most of their revenue from China. It has an expense ratio of 0.6%.

(iii) The iShares FTSE/Xinhua China 25 Index (FXI) ETF tracks the 25 largest and most liquid Chinese companies trading on the Hong Kong exchange. As a result its portfolio is less diversified than other two funds. It had a better gain than others but may also turn out to be more volatile. Its expense ratio is 0.74%.

[Disclaimer: We donot personally possess any of these funds]

50-year Mortgage

With increasing home prices and mortgage rates and more competition for catching the attention of future homebuyers, lenders are desparately figuring out ways to keep the dream alive for millions of people who want to own their own home. Most banks already offer 40-year mortgages, which account for about 5% of all home loans. And now comes the 50-year mortgage. A handful number of lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low but wish to own a property.

If you wish to try this, you may note the following important points: A borrower with the 50-year mortgage builds equity very slowly. And because rates on the loans are adjustable, a borrower's monthly payments could rise in future and a risk on your affordability always remains.

It may work out good for you if your plan is to own the home for about 5 years, while the loan's interest rate remains fixed. For those who wish to make a longer term commitment to their residence, it would be better to give a hard look at your current and future financial state and then decide.

And even if your decision is 'yes', try to select a home that is below your affordability level. Do not stretch yourself too much to commit to a larger loan amount. Your luxury of today may turn out to be lots of pain for future years.

Agents' Share in Your Home

The value of your home might have increased quite a bit but it's actually only 94% of what you think the price should be! A 6% commission is taken away by the real estate agents. For a long time both buyers and sellers were nurturing this grudge inside their mind while making the transaction, but things are changing for the better. A new breed of realtors are coming up to sneak into the market just by addressing this issue of importance.

BuySideRealty.com, which has launched in California, Illinois and Florida and expects to be nationwide by early 2008, returns 3/4th of the buyer's agent's share to clients.

Seattle, Washington based Redfin.com, which is also expanding to California this year, rebates 2/3rd of its commissions.

RebateReps.com gives back 1% of the home's selling price (about 1/3rd the commission) to buyers.

They are mainly taking advantage of the growing trend among potential buyers to use internet in making a choice, thus allowing buyers to do much of their work and in that process giving them back a portion of the traditionally fat commission. These agents are thus getting more transactions in their hands than what the traditional brokers are having.

Uranium: The Precious Element

The ever-increasing oil and gas prices have sparked a worldwide revival of interest in nuclear power... which is in turn pushing uranium prices and stocks of related compnaies through the roof. Already, raw uranium prices have jumped nearly 500%. But that’s nothing compared to the gains uranium mining companies are enjoying. This list is worth taking a serious look:

• Cameco Corp. (CCJ) : up 1,100% since 2002
• Frontier Development Group (FRG.TO) : up 1,400% since 2004
• International Uranium (IUC.TO) : up 2,600% since 2003
• Strathmore Minerals (STM.V) : up 2,850% since 2003
• UEX Corp. (UEX.TO) : up 4,900% since 2003
• Western Prospector Group (WNP.V) : up 6,100% since 2003

The demand for uranium is growing rapidly. As far as we know, 35 nuclear power reactors are in the planning stages worldwide and proposals for another 35 are on the table of several governments:

• India - 9 under construction, 24 proposed
• South Korea - 8 under construction
• China - 4 under construction, 6 planned, 20 more proposed
• Japan - 3 under construction, 12 planned

It seems the bus has not gone too far away. Should we run to catch it? Well... as always, if you have some spare money which you can put without much of an anxiety, Uranium stocks might be just right for you.

New Gold-related ETF

Van Eck Associates Corp.'s Market Vectors Trust has registered an Exchange Traded Fund (ETF) designed to track shares of public gold miners. The fund, if approved, would track the Amex Gold Miners Index (GDX). The index has 43 companies and top holdings include Newmont Mining Corp (NEM), Barrick Gold Corp. (ABX) and Goldcorp Inc. (GG) . The new ETF from Van Eck will have a total expense ratio of 0.55%.

Mining stocks tend to be more volatile than the metal because of the associated risk of company's mistakes and other geopolitical factors. These stocks, however, receive kinder tax treatment than bullion. Precious metals are classified as a "collectible" by the IRS. If Gold metal is held for more than one year, gains are taxed at a 28% rate, compared with the 15% rate applicable to long-term capital gains on most stocks including the mining stocks.

To remind our readers, ETFs for Gold metal have been introduced last year and had great run over the last few months. These are StreetTracks Gold Trust (GLD) and Barclays' iShares Comex Gold Trust (IAU) [read our past posting].

Resources: Financial Planning

Today we post contact information and pointer to websites of some useful
organizations whom you may approach as individual or as a team to get
advice and guidance for financial planning:

For information on a variety of money-related topics
American Institute of Certified Public Accountants (800) 862-4272
The Financial Planning Association (800) 282-7526
International Association of Registered Financial Planners
(800) 749-7947

Especially for guidance needed to start an investment club, visit
National Association of Investors Corporation (810) 583-6242

For information from and about fee-only financial planners, contact
National Association of Personal Financial Advisors (NAPFA)
(800)366-2732

Reverse Mortgage

Reverse Mortgage is a kind of loan that you can get on the equity built up over years of home mortgage payments. It is getting very popular among senior citizens. The money can come back to you in different possible ways: In a one time lump sum, in monthly payments for life or designated length of time or in a credit line that allows the homeowner to decide when and how much they want to be paid. With a reverse mortgage you no longer make monthly payments. For a change, you start receiving them.

Here we present a few important details that are common among all kinds of reverse mortgages:

• Within each program of reverse mortgage, the amount of loan you can get generally depends on your age and your home's value. The older you are and the more your home is worth, the more cash you can get.
• The proceeds from a Reverse Mortgage are Tax-Free.
• You continue to be the owner of your home and remain responsible for paying your property taxes and home-owner insurance and for making property repairs, just like you are with your forward mortgage. Failure to these may lead to termination of your mortgage contract and the lender may impose repayment.
• All reverse mortgages are due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home, which means that none of the co-borrowers has lived in the home for one continuous year.