MyDollar 5-stock Tech Invest: Week6

After 3 successive weeks of decline in our 5-stock technology portfolio, this week the trend is broken. As our regular readers know, on Friday, May 19th, we purchased 5 technology stocks (read details) at the closing price of that week. We started with $10000 (about $2000 for each stock).

After 6 weeks, at the close of trading today we stand at $9710, down by 2.89% in 6 weeks but a hike of 2.76% from last week.

This week brought two important news for two of our stocks. The first is about Yahoo. With Google Inc. taking a dominant lead in the Internet search market, it looks increasingly likely that Microsoft Corp. could make a large acquisition, such as of Yahoo Inc., Merrill Lynch said last Friday (report by Merrill Lynch analyst Justin Post). This is an interesting development and if such an acquisition happens, Yahoo stock would certainly move up at the cost of Google.

The second news came today. EMC Corporation the leader in information management and storage, and RSA Security Inc. (RSAS), the leader in protecting and managing identities and digital assets, today announced a definitive agreement for EMC to acquire RSA. Under the terms of the agreement, EMC will pay $28.00 per share (Friday's closing price $27.10 which increased by $4.22 or 18.4% today) in cash in exchange for each share of RSA and the assumption of outstanding options, for an aggregate purchase price of slightly less than $2.1 billion, net of RSA's existing cash balance. Some shareholders probably thought it as 'too pricey' a deal for EMC whose stock declined by 2.5% today. We still believe EMC has very good fundamentals and is shaping itself up in a good way for the future. It's very good stock for a long term play.

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $10.97 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $38.77 (was $39.35 on May 19)
Seagate Technology (STX) : 80 at $22.64 (was $24.95 on May 19)
Veeco Instruments (VECO): 82 at $23.84 (was $24.26 on May 19)
Yahoo (YHOO) : 68 at $33.00 (was $29.53 on May 19)

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 Rate 4 Years High

The mortgage rate moved up again this week for third week in a row. The 30-year fixed rates have moved up more than half a percentage point since the start of the year. This is slowly but surely cooling off the housing market.

The Office of Federal Housing Enterprise Oversight said today its home-price index was up 12.5% in the past year and up 2% from the 4th quarter to the 1st quarter. It was the slowest quarterly gain in prices since the 1st quarter of 2004. In the 4th quarter, prices were up 13.3% year-over-year and had risen 3.1% quarter to quarter. Among 275 metro areas, 53 saw prices decline from the 4th quarter to the 1st quarter, including some previous hot markets in California.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.78% in the week that ended today -- higher than its 6.71% average last week. At this time last year, the loan averaged 5.62%. The 30-year mortgage has not been higher since the week ending May 24, 2002, when it averaged 6.81%. The 15-year fixed rate averaged at 6.43% this week, up from last week's 6.36%. At this time last year this rate was 5.20%.

Rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) also went up this week to 6.39% from 6.32% last week. This rate averaged 5.19% a year ago. The 1-year Treasury-indexed ARMs also moved up this week to 5.82%, from 5.75% last week. At this time in 2005, the ARM averaged 4.33%.

Currency ETFs

In December last year, Rockville, MD-based Rydex Investments introduced the first currency Exchange Traded Fund (ETF): Euro Currency Trust (FXE) whose current asset value is about $635. The fund is designed to rise in value when the euro strengthens relative to the dollar, and fall when the euro weakens. So, such currency ETFs are similar to money-market funds but denominated in foreign currencies, which are held by the depository for the trusts, the London branch of J.P. Morgan Chase Bank.

Now, following up on the success of FXE, Rydex Investments listed six more currency-based ETFs on the New York Stock Exchange on Monday. The new funds are:
Currency Shares Mexican Peso Trust (FXM)
Currency Shares Swedish Krona Trust (FXS)
Currency Shares Australian Dollar Trust (FXA):
Currency Shares British Pound Sterling Trust (FXB)
Currency Shares Canadian Dollar Trust (FXC)
Currency Shares Swiss Franc Trust (FXF)
The first 2 funds hold about 1,000 pesos or kronas. The last 4 funds hold about 100 of their respective currency units.

All these funds have low expense ratios of 0.4% of assets. These ETFs also provide a yield based on overnight interest rates in the country of the currency it holds.

Hi Yield Savings Accounts

The Federal Reserve is meeting this week and the central bank is widely expected to hike the short term interest rate to 5.25%. Over the last few months the interest rates in Savings accounts followed the rising trend. Last week some of the leading banks have announced hike in their rates.

Citibank's rate of 5.0% APY is currently the highest without any minimum balance requirement. Previously, their rate was 4.75%.
OneUnited.com (of Los Angeles) is also offering 5.0% with a minimum deposit of only $10.
HSBCdirect and Emigrant-Direct also announced a rate of 4.80% (increased from 4.65%)with no minimum.
PayPal.com money market account currently has a yield of 4.77% with no minimum (not FDIC insured though)
CountryWide is giving 5.25% APY on a deposit of $50000 minimum.
IngDirect.com The current yield is 4.25% with no minimum.

With almost all fingers pointing to inflationary fear, the short term interest rate would probably rise more in coming months. So, it's still not time to lock your money in higher yield CDs. The best you can do to get more than these current rates of savings accounts is to purchase CDs with duration of 6 months or less. Banks like IndyMac.com are offering about 5.45% for a 7 month CD which will mature in January'2007 if you purchase now and is good to avoid paying tax on your 2006 income of interest.

MyDollar 5-stock Tech Invest: Week5

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

After 5 weeks, at the close of trading today we stand at $9448, down by 5.50% in 5 weeks and a drop of 0.47% from last week. This week turned out to be another bad week ahead of the Fed meeting, in which the central bank is widely expected to hike the short term interest rate to 5.25%. This is 3rd consecutive week of decline in our portfolio. We feel the market is showing too much of pessimism towards inflationary fear and possible hike in interest rate, even while the corporate profit picture stands at a good enough level. Right from the beginning we believe in long term investment and we are hopeful that our portfolio of 5 great technology stocks would come back to positive territory once this confusing state clears up and investors start believing in positive aspects of our economy.

We all know the basic rule of investing: 'Buy low and sell high' but it's always tough to find (unless you are God) where exactly those crests and troughs are in the path that time takes. So, it's important to identify potential stocks and to be there and invest with a longer time perspective and hope for the best. We are hopeful we'll rise above these short time fluctuations soon. That's the reason we started this portfolio on May 19th even though the general sentiment in Wall street was quite gloomy in that week.

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $11.53 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $38.15 (was $39.35 on May 19)
Seagate Technology (STX) : 80 at $20.99 (was $24.95 on May 19)
Veeco Instruments (VECO): 82 at $22.93 (was $24.26 on May 19)
Yahoo (YHOO) : 68 at $31.37 (was $29.53 on May 19)

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 Rate Up Again

The mortgage rate moved up again this week. Also, ahead of next week's Federal Reserve monetary policy meeting, the yield on the benchmark 10-year Treasury note ran up to 5.2% in the final hour of trading today. The central bank is expected to hike the overnight lending interest rate to 5.25% at the meeting.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.71% in the week that ended today -- higher than its 6.63% average last week. At this time last year, the loan averaged 5.57%. The 30-year mortgage has not been higher since the week ending May 31, 2002, when it averaged 6.76%. The 15-year fixed rate averaged at 6.36% this week, up from last week's 6.25%. At this time last year this rate was 5.16%.

Rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) also went up this week to 6.32% from 6.23% last week. This rate averaged 5.05% a year ago. The 1-year Treasury-indexed ARMs also moved up this week to 5.75%, from 5.66% last week. At this time in 2005, the ARM averaged 4.23%.

Despite recent rate fluctuations and an underlying upper trend, Freddie Mac still predicts 2006 will be the 3rd strongest year on record for the housing sector.

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.

MyDollar 5-stock Tech Invest: Week4

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

After 4 weeks, at the close of trading today we stand at $9492, down by 5.06% in 4 weeks and a drop of 1.58% from last week. This week turned out to be another bad week of the year in Wall Street. We feel the market is showing too much of pessimism towards inflationary fear and possible hike in interest rate, even while the corporate profit picture stands at a good enough level. Right from the beginning we believe in long term investment and we are hopeful that our portfolio of 5 great technology stocks would come back to positive territory once this confusing state clears up and investors start believing in positive aspects of our economy.

We all know the basic rule of investing: 'Buy low and sell high' but it's always tough to find (unless you are God) where exactly those crests and troughs are in the path that time takes. So, it's important to identify potential stocks and to be there and invest with a longer time perspective and hope for the best. Time surely irons out such fluctuations here and there. That's the reason we started this portfolio on May 19th even though the general sentiment in Wall street was quite gloomy in that week.

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $12.01 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $38.34 (was $39.35 on May 19)
Seagate Technology (STX) : 80 at $21.78 (was $24.95 on May 19)
Veeco Instruments (VECO): 82 at $23.54 (was $24.26 on May 19)
Yahoo (YHOO) : 68 at $30.36 (was $29.53 on May 19)

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 Rate Inched Up

After going down last week, the mortgage rate has inched up again this week.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.63% in the week that ended today. This is a little higher than its 6.62% average last week. At this time last year, the loan averaged 5.63%. The 30-year mortgage has not been higher since the week ending June 13, 2002, when it averaged 6.71%. The 15-year fixed rate averaged at 6.25% this week, up from last week's 6.23%. At this time last year this rate was 5.22%.

Rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) also went up this week to 6.23% from 6.20% last week. This rate averaged 5.10% a year ago. The 1-year Treasury-indexed ARMs also moved up this week to 5.66%, from 5.63% last week. At this time in 2005, the ARM averaged 4.25%.

Despite recent rate fluctuations and an underlying upper trend, Freddie Mac still predicts 2006 will be the 3rd strongest year on record for the housing sector.

Splits of International Funds

Nasdaq Global Funds Inc., a unit of the Nasdaq Stock Market Inc.(NDAQ) announced its plan for 3-for-1 stock splits of its international Exchange Traded Funds (ETFs) known as "Builders" (read our past posting) : BLDRS Asia 50 ADR Index Fund (ADRA), BLDRS Developed Markets 100 ADR Index Fund (ADRD) and BLDRS Europe 100 ADR Index Fund (ADRU). Nasdaq also has authorized a 4-for-1 split for BLDRS Emerging Markets 50 ADR Index Fund (ADRE) .

The four ETFs, which are structured as unit investment trusts, track indexes based on American Depository Receipts (ADR) of foreign companies. Annual expenses for each portfolio are 0.30%, not including broker commissions.

The payment date for the splits is July 7 for shareholders of record June 22. The decision was taken in an effort to make these funds more affordable for individual investors following their very strong run in recent months. However, in last few weeks these funds have taken big hits as world markets, and emerging markets in particular, tumbled on expectations for further interest-rate hikes by central bankers and concern that global economic growth will slow in months to come.

TIPS tips

The recent inflation rate is about 3.5% [To know latest numbers, visit U.S Department of labor] . The recent hikes in short term interest rates have made life tougher for borrowers and spenders but those sitting with cash did not get much of an advantage. The CDs and saving account yields (see our posting on best yields) are not yet good enough to win the race against inflation, if you consider the tax on these incomes.

Inflation-indexed securities (TIPS) seems to be the best way to beat both inflation and tax. It pays a fixed interest rate but its adjusts its principal to keep pace with the consumer price index. In recent times, 5-year TIPS have a yield about 2 percentage points above the inflation on a 5-year bond. Even though it's not much, it's safer and it is important if you are a reasonable guy who believes that diversification and not greed can make you a successful investor.

Note: When TIPS increase in value due to inflation adjustment, Uncle Sam considers that to be a reportable income, even though money does not reach your hand before the bonds mature. So, TIPS would give you more profit if you hold it in your retirement account.

MyDollar 5-Stock Tech Invest: Week3

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

After 3 weeks, at the close of trading today we stand at $9646, down by 3.53% in 3 weeks and a drop of 5.1% from last week. This week turned out to be the worst week of the year in Wall Street. We feel the market is showing too much of pessimism towards inflationary fear, even while the corporate profit picture stands at a good enough level. Right from the beginning we believe in long term investment and we are hopeful that our portfolio of 5 great technology stocks would come back to positive territory once the clouds pass over.

In particular, there is very good news from Seagate Technology who announced several new products on Wednesday this week (Read this posting in 2Technology).

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $11.82 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $38.15 (was $39.35 on May 19)
Seagate Technology (STX) : 80 at $23.11 (was $24.95 on May 19)
Veeco Instruments (VECO): 82 at $23.54 (was $24.26 on May 19)
Yahoo (YHOO) : 68 at $30.37 (was $29.53 on May 19)

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 Rate Down

After an upward trend in last 3 weeks, mortgage rates are down a bit this week on news of disappointing job growth in May coupled with downward revisions for the previous two months. The market is probably having a slight hope that the inflation would be contained.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.62% in the week that ended today. This is higher than its 6.67% average last week. At this time last year, the loan averaged 5.56%. The 30-year mortgage has not been higher since the week ending June 13, 2002, when it averaged 6.71%. The 15-year fixed rate averaged at 6.23% this week, down from last week's 6.26%. At this time last year this rate was 5.14%.

Rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) also went lower this week to 6.20% from 6.26% last week. This rate averaged 5.01% a year ago. The 1-year Treasury-indexed ARMs also moved down this week to 5.61%, from 5.68%. At this time in 2005, the ARM averaged 4.21%.

Solo 401(k)

If you are self-employed and donot foresee hiring employees in future for your small business, the Solo or Individual version of 401(k) retirement plan may be just right for you. Recently, a growing number of financial Services firms have started offering individual 401(k) plans, boasting many of the same features as their corporate counterpart. And it has truely become quite popular.

Just like the corporate 401(k) or SEP-IRAs designed for the self-employed, Solo 401(k)s also allow you to invest a part of your income on a pre-tax basis - and the contributions grow tax deferred. But unlike SEP, one can borrow against one's account and also the contribution limits are a lot higher.

With a solo 401(k), annual contributions consist of two parts. In 2006 can contribute up to 100% of the first $15,000 of your 2006 compensation or self-employment income ($20,000 if age 50 or older) . And there's more: the profit sharing contribution just like what you can do with a traditional small-business retirement plan like SEP-IRAs . You can contribute and deduct an additional amount of up to 25% of your compensation income, or 20% of your self-employment income. Combined contributions (both salary deferrals and profit sharing) cannot exceed the lesser of 100% of compensation or $44,000 in 2006 or $48000 if one is 50 or older.

Now let us crunch some numbers. If your corporation pays you $100,000 this year, the maximum deductible contribution to your solo 401(k) account would be $40,000 [$15,000 + (25% of $100,000)]. That's a lot more than the $25,000 you could contribute to a traditional plan (25% of $100,000). If you earn $100,000 from your sole proprietorship. The maximum solo 401(k) contribution would be $35,000 [$15,000 + (20% of $100,000)]. With a traditional plan, your maximum contribution would have been a mere $20,000 (20% of $100,000).

However, if you are planning to expand your business by hiring employees, the individual 401(k) is not a right plan for you. In that case you will have to convert to the more complicated employer's 401(k). Also, remember that, even though the law allows you to take loan upto 50% of your individual 401(k), upto a limit of $50,000, not every provider offers such an option. So, be careful in selecting a right provider for you. Also, do not forget to compare set-up fee, annual fee and other charges of different providers.

June: Consolidate Student Loan

Rates for college loan are reset every year based on what the 3-month Treasury yield is at the end of May. So, your payments will be going up on July 1 due to recent increase in interest rates. Since this time last year, that yield has increased nearly 2 percentage points.

So, the repayment rate on Stafford loan (the federal loans for students) is expected to jump to about 7.3% from its current level of 5.3%. You are entitled to get a lower rate if you had start repaying your loans while you're still in school or up to 6 months after graduation. That 'lower' rate is expected to rise to about 6.7% from its current 4.7%. The rate on PLUS loans (student loans taken by parents) is likely to rise to roughly 8.1% from 6.1%.

So, June is the month to consolidate your loan to lock in a lower rate. Remember that by law you're only permitted to consolidate your student loans once. So if you've done so before, you can't repeat that again.

At the time of consolidating you roll all your loans into one and lock in a single rate on the money you owe. If you consolidate your loans in June, you can get a rate of 5.375% for regular student loan repayment, and 4.75% if you're still in school or in the grace period (That applies to Stafford loans obtained after June 1998). For PLUS loans, the consolidation rate is 6.125%.

MyDollar 5-Stock Tech Invest: Week2

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

After 2 weeks, at the close of trading today we stand at $10163, an increase of 1.64% in 2 weeks but a drop of 0.38% from last week. One week of investment performance means nothing to us, but anyway it's good to report a positive number than a negative one, particularly in a week that saw lots of up and down.

Current Value of portfolio:
EMC Corporation (EMC) : 157 at $12.89 (was $12.73 on May 19)
Nasdaq-100 Trust (QQQQ): 51 at $39.64 (was $39.35 on May 19)
Seagate Technology (STX) : 80 at $24.12 (was $24.95 on May 19)
Veeco Instruments (VECO): 82 at $24.94 (was $24.26 on May 19)
Yahoo (YHOO) : 68 at $31.52 (was $29.53 on May 19)

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 Rate Up

Mortgage rates of all types moved up this week mainly due to inflationary fears. The minutes of the most recent FOMC meeting showed that some members were concerned about inflationary pressure. This also caused the bond market yields to rise.

According to Freddie Mac's weekly survey, the 30-year fixed-rate mortgage averaged 6.67% in the week that ended today. This is higher than its 6.62% average last week. At this time last year, the loan averaged 5.62%. The 30-year mortgage has not been higher since the week ending June 13, 2002, when it averaged 6.71%. The 15-year fixed rate averaged at 6.26% this week, up from last week's 6.23%. At this time last year this rate was 5.2%.

However, the rate for 5-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) went higher this week to 6.26% from 6.21% last week. This rate averaged 5.1% a year ago. The 1-year Treasury-indexed ARMs also moved up this week to 5.68%, from 5.61%. At this time in 2005, the ARM averaged 4.26%. The 1-year ARM is currently at its highest level in nearly five years.