As featured in The Wall Street Journal, Money Magazine, and more!

May 2008


At the end of each month, I recognize other websites for sending traffic to Consumerism Commentary during the last thirty days. This was another record month for Consumerism Commentary in terms of visitors, and I hope many of you were convinced to subscribe and return. Here is a list of websites, excluding search engines, RSS readers, and social media websites, that sent the most traffic to Consumerism Commentary over the past month. I’ve also included a number to show each site’s movement on the list since April.

  1. MSN MoneyCentral new
  2. Lifehacker -1
  3. Get Rich Slowly -1
  4. Blueprint for Financial Prosperity 0
  5. I Will Teach You to be Rich new
  6. MoneyBlogNetwork -1
  7. The Simple Dollar -4
  8. AllFinancialMatters -2
  9. Consumerist -2
  10. Free Money Finance -3
  11. Wise Bread new
  12. No Credit Needed -2

Here are the top 10 visited articles from the past month, based on visits to the web site. Readers who view articles in their RSS software but don’t visit the website directly are not included when calculating this list. Once again, the most visited article this month was the Economic Stimulus Tax Rebate Calculator, originally posted in January. That isn’t included in the list below; only articles written in May plus the last few days of April are figured when determining this list. The list below shows that the Economic Stimulus is still foremost on visitors’ minds.

  1. Didn’t Receive Your Economic Stimulus Payment Yet?
  2. Would You Tell Your Boyfriend You’re Rich?
  3. 1,500 Economic Stimulus Payments Sent to the Wrong Accounts
  4. If You Had Filing Fees Deducted From Your Tax Refund You Will Receive a Paper Check Rebate
  5. What to Do With Your Economic Stimulus Payment (or Any Found Money)
  6. The Only 7 Investments You Need
  7. Personal Balance Sheet, April 2008 ($151,079, +5.3%)
  8. Sallie Mae Reporting Incorrect to Equifax, Dropping FICO Scores
  9. Personal Income Statement, April 2008 (Net Income: $717)
  10. Chrysler’s $2.99 Gas Guarantee: A Bad Deal

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About the author: This is a guest article written by Dorian Wales, a 30-year-old economist with an MBA in finance. Dorian writes frequently on his own blog, The Personal Financier.

Most common investment mistakes are deeply rooted in psychology. Many of these mistakes can be avoided by allowing another person to take part in the process and by giving this person’s opinions and believes an equal weight in decisions taken.

This person could be an investment broker, a financial planner or a trusted friend. However, who is more appropriate and worthy to take part in such sensitive and significant decisions than your life partner?

At first, some might flinch at the thought of an inexperienced or unprofessional person suddenly participating in a process that clearly requires a certain level of understanding and proficiency. Others might claim a spouse has a right to affect the financial decisions of the household.

I believe both arguments hold certain truths. However, I intend to show how allowing another to take part in the financial decision process, more specifically when it comes to investments, common mistakes can be significantly reduced or avoided at all.

Furthermore, a deeper and more intimate relationship has a better chance at avoiding these mistakes due to the mutual respect and understanding between the two partners. This mutual respect will ensure both opinions are heard and decisions will be made together.

As I’ve already stated most common investment mistakes are deeply rooted in psychology. Some mistakes are a result of over-optimism and success-oriented planning. Others are a result of our innate inability to recognize our own mistakes (or success at times).

The following are three general common investment mistakes and how they can be significantly reduced or avoided by allowing your significant other in the decision process:

1. Planning for the wrong investment time frame. Many investors don’t understand their true time horizon, when you plan to need and liquidate your funds, and plan for either shorter or longer periods of investment. Getting the investment time frame wrong usually ends in loss as a result of either not taking enough risk or taking too much risk accordingly.

Deciding on your investment time frame with your partner may produce surprising results. Perhaps you think you will wait five years before having your first child; it’s possible your future wife has other plans. You may suddenly discover your husband isn’t as happy at work as you thought, and he is contemplating a career change requiring higher levels of liquidity.

Communication is an essential part of living together and it is also, therefore, an essential part of your mutual financial planning.

2. Acting on impulse. Whether investing based on trends or on hot tips, selling at the wrong time, or making all-or-nothing decisions, every investor has been there. Every investor makes his share of mistakes. I believe we all had wished someone could have whispered a word of warning in our ears or had calmed us down before we made those hasty and costly decisions.

Another person actively taking part in the decision process acts as a voice of reason. Simply taking the time to consult will often be enough to prevent yet another spontaneous and costly decision.

On a more humorous note, imagine your wife after you’ve just told her about a great stock tip you got from a friend. One sour face and an “I don’t like him” just might cause you to forget you had ever thought about buying shares in that great bio-tech company you heard about.

3. Lack of self discipline. Two people have more discipline than just one. One individual constantly rationalizes reality to suit his wants and needs, convincing himself of certain scenarios and reasons and acting on them only to find reality backfiring on him.

Two people ground and anchor each other. If you’ve ever trained with another person you must know how harder it is to quit or give up on yourself.

Your significant other can help you stand fast against deviating from your goals and prior decisions. This is important when making investing decisions because constant buying or selling is costly in commissions and lost returns.

Naturally, there are many particular investment mistakes which could be classified under these three groups or any other generic list of mistakes. The important message I’ve tried to relay is that your partner is invaluable in the decision-making process.

A less known fact is that women are better investors than men. If you need proof just think about your TV watching habits, constantly zapping between stations (stocks?) never really making the most of a single show.

Consulting with your partner adds value, even if it’s a psychological message rather than professional advice. Who knows? They might like it and turn advisory skills into a profession or a serious hobby.

If you enjoyed this article, please visit The Personal Financier for more thoughts about investing wisely and economic trends from Dorian’s point of view. We would appreciate your comments and reactions, so if you would like to contribute to the discussion, add your comment below.

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Behavioral economics, a mix of psychology and finance, is an interesting field, and has taught those who choose to listen why they’re less likely to benefit from thinking they can predict the performance of a stock price.

The human brain is simply not wired to make good choices in the stock market. Traders will lose 3.8 percentage points annually (in a recent study) due to fees and poor decisions compared with a benchmark index. This is simply because we are overconfident. We know what we know, but we don’t know what we don’t know, and tend to discount the latter while giving more importance to the former.

As ordinary investors in the market, why do we believe that we have an advantage over the market as a whole? Why do traders insist that they have some knowledge of a bargain that no one else has? This recent article from the Washington Post, How Thinking Costs You, touches on behavioral economics and why we think we can make “informed” decisions about stock market transactions. I’ve heard this over and over again. Don’t believe you can beat the market. Don’t look at index funds as providing “average” returns; over long periods of time, this is the best you can get for the risk that you take.

[Terrance Odean, professor at the University of California at Berkeley] has gathered trading records from discount brokerage houses for hundreds of thousands of investors, and in several published studies, he has shown that when people had a choice of two stocks to sell, more often than not they sold the stock that did better in the future and held on to the one that did worse. And when they bought something new, they tended to buy a stock that did worse than the stock they just sold. As Kahneman once told Odean, “It is expensive for these people to have ideas… “What I believe is that individual investors probably as a group create the dynamics by which they lose money and institutions make money,” Odean said. “They create mispricings.”

Not all of my investments are in index funds. My 401(k) doesn’t offer pure index funds, and I had a small amount of free money to put into ETFs and individual stocks. But every large investment I make, if the time horizon for withdrawal is at least a decade away, will be in an index fund. There are hardly any expenses and my returns will match or come close to the overall market.

Since “thinking” (i.e., considering trades and acting on decisions) has a detrimental effect on investments, and investing in an index for the long term frees your mind from these decisions, index funds have been again proven to be the best option for long term investments.

I’m a smart guy but it would be egotistical for me to think that I know something about a publicly traded stock that the rest of the investing world doesn’t already know, even if I pored over quarterly reports and had lunch with the CEO every other day.

Would I invest in a private business? Possibly.

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A few months ago, my girlfriend moved her checking and savings accounts, which where previously in separate, small, community-based banks, to Commerce Bank, a larger bank based mostly in New Jersey and New York City. I particularly like their long hours and the fact that they’re open on Sunday, and signed up for an account myself, given the branch’s proximity to my home.

When she signed up for an account, the sales representative let us know that the bank would soon be merged with TD Bank Financial Group and would become “TD Commerce Bank.” My biggest concern would be the stability of the level of service, but they assured us that nothing would change. I am hoping to see some improvements in their website technology but that may be asking too much.

The deal is done, but the branches have not yet started to change their branding and signage. That is scheduled to begin later this year. So far, I’ve seen no changes in service.

Yesterday, I received a letter from the President & CEO of Commerce Bank, and I would expect all of their customers received one as well. The letter contains self-praise for the current bank’s reputation for service as well as assurance that nothing other than the name and logo will change. The envelope also contained a pamphlet with questions and answers about the acquisition.

There are some interesting notes.

Will my accounts and services change? It’s business as usual, for now. There is no action required on your part and all your existing accounts, terms and agreements remain the same. You can continue to bank the way you do today, at any convenient Commerce location, over the phone, or online. We will keep you informed of changes that make impact you.

The last sentence is the most important point. There will be changes in the future, and at some point you may have to select a new savings or checking product in order to avoid fees. This is common in bank mergers in my experience; they want to move customers from legacy products and systems into whatever new products are available.

What is happening to the Penny Arcades in my Commerce store? Your Penny Arcades will continue to be available. We look forward to making more Penny Arcades available in the future through the new TD Commerce Bank locations.

The “Penny Arcade” is a large coin sorting machine. If you are a customer, you can bring bags of coins into your local branch, dump them into a machine which will then count your money, take a receipt to the teller, and deposit your funds or receive cash. I brought in a bag of nickels and the machine’s count was off by $0.05, and I’ve seen coins being left uncounted on a tray inside the machine before, so I don’t know if I fully trust this technology. But it is convenient.

Commerce gives treats to my kids and my dog, will you be changing this? No! We love your kids and your pets. You can continue to bank at the same locations and get the same great service you currently enjoy. This includes treats for the kids and your dog.

First, I’ve never seen anyone bring a dog into a bank branch. Is this common, outside of seeing eye dogs (who would not likely be allowed to take a treat)? Second, they love our kids?

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What We Learned by Being Open with Our Friends

by Smithee

I’ve never been squeamish talking about finances with friends and acquaintances (partly, I suspect, because of my lack of an internal dialog filter), but I have learned over time that not everybody else is as comfortable as I am, so I try not to use too many specifics when having financial discussions. However, I think ... Continue reading this article…

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My Stimulus Payment Check Arrived, Now What?

by Luke Landes

For those of you still concerned about receiving your economic stimulus payment, don’t give up hope. Last week, I received a letter from the United States Treasury informing me my wait would soon be over. The letter indicated that I can expect my payment of $600 (which was accurately predicted by the stimulus payment calculator) ... Continue reading this article…

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Best Online Discount Brokers, November 2011

by Luke Landes

Unlike long-term investing for the future, active stock trading has qualities in common with gambling. On top of that, it’s expensive gambling. When you step up to a quarter slot machine, you know each bet will cost a quarter. You don’t lose a nickel on each spin as a “transaction fee.” In order to play ... Continue reading this article…

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Carnival of Debt Reduction #141: Enemies of the Doctor

by Luke Landes

Welcome to Consumerism Commentary for the 141st edition of the Carnival of Debt Reduction! This carnival is a traveling showcase of the best articles about the process of eliminating debt. Submissions are normally accepted from one week prior to the release of the edition and come from various blogs. The theme for this week is ... Continue reading this article…

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How to Track Your Spending: From Obsession to Reasonability

by Luke Landes

When it comes to tracking my daily spending, I’m not as diligent as I used to be. That’s due in part to laziness and part to the lack of necessity. Let me explain. First, this topic was inspired by a recent email I received from a Consumerism Commentary reader. Nat asked: How do you keep ... Continue reading this article…

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The $155 That Almost Wasn’t

by Smithee

It was only back in April that Flexo wrote about MissingMoney.com. I had heard about it once before through a friend on Twitter who said he’d had some success and so I figured, “What have I got to lose?” They don’t charge anything, it’s just a convenient way to get at some abandoned money that ... Continue reading this article…

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Looking Back: The Difference 9 Years Makes

by Luke Landes

9 years ago, I was a fresh college graduate with a degree in music education, living close to campus and looking for full-time teaching jobs while working as a substitute teacher. If I remember correctly, the pay was about $70 per day. My one-bedroom apartment, almost completely unfurnished, was $600 per month if I remember ... Continue reading this article…

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Wall Street Journal Podcast: Professional Blogging

by Luke Landes

Today, the Wall Street Journal’s Tech News Briefing podcast includes an interview with me about the growth or demise of professional blogging. Here are the Wall Street Journal’s podcasts and the RSS feed to subscribe to the Tech News Briefing. My interview starts at about 7:40. I share some of my experiences with blogging particularly ... Continue reading this article…

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Payment Method Discrimination Strikes Again at the Gas Station

by Luke Landes

Last June, I noticed that a few gas stations in my area were charging different prices for gas depending on whether your method of payment was cash or credit. My biggest problem was that this wasn’t advertised on the large signs attracting drivers to the station. The station later changed its signs, though the cash ... Continue reading this article…

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Capital One Money Market Offers Higher Rate for Costco Members

by Luke Landes

I wouldn’t suggest becoming a member of Costco just for this particular benefit, but if you are already a member and looking for a place to stash your cash, you can consider Capital One. Capital One’s direct banking department is offering a 3.2 percent APY compared to 3.0 percent APY for non-members on the bank’s money market ... Continue reading this article…

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Weekend Blog Roundup: Pennies, Budgets, and Social Security

by Luke Landes

Here are some articles I’ve enjoyed reading this past week. How Much Could You Have if Social Security Was Your Money? AllFinancialMatters shows what could possibly be the result if instead of paying into Social Security with each paycheck, employees were allowed to invest that money. It’s important to remember that Social Security is not ... Continue reading this article…

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If You Had Filing Fees Deducted From Your Tax Refund, You Will Receive a Paper Check Rebate

by Luke Landes

This has been noted on Consumerism Commentary many times in the last month. If you filed your taxes using third party software like TurboTax or H&R Block, were owed a tax refund, had your filing fees or tax preparation fees deducted from your refund, and qualified for an economic stimulus payment, then you will not ... Continue reading this article…

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The Only 7 Investments You Need

by Luke Landes

Money Magazine is recommending that those wishing to build their net worth over a long period of time simplify matters by putting all their eggs into seven baskets in the form of mutual funds. 1. Fidelity Spartan 500 Index (FSMKX). This fund’s total expense ratio is a minuscule 0.10 percent. It tracks the S&P 500 index. ... Continue reading this article…

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1,500 Economic Stimulus Payments Sent To Wrong Accounts

by Luke Landes

The 2008 economic stimulus package is a story that won’t die. Many people have been concerned that they haven’t received their stimulus payment via direct deposit by the date originally scheduled based on the last two digits of their Social Security number. The Associated Press is now reporting that 1,500 stimulus payments have been sent ... Continue reading this article…

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Maimonides’ 8 Levels of Charity

by Luke Landes

In researching historical and religious views on charitable giving, I came across Maimonides’ hierarchy. He believed that there are 8 degrees of charity. These deal primarily with providing for the poor. Here are his 8 levels, from the highest to lowest. Do you agree with this assessment? How high are you on the list? Investing ... Continue reading this article…

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Early Morning Blog Roundup: Suckers, Micropayments, and Obsession

by Luke Landes

Here are some articles from around the web that I’ve enjoyed recently. Maybe you will, as well. Hedge Against Your Bills By Owning the Company. When your bills go up, it’s possible that the company’s profits go up as well. As an investor, you can benefit from the company’s success. So while your bills go ... Continue reading this article…

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