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June 2008

Once again, I have refreshed the list of ING Direct $25 bonus referral links. New customers are eligible for a $25 bonus just y opening an account and depositing at least $250. Consumerism Commentary readers have been very helpful by providing these links for other readers. As a reward, ING Direct provides the referrer with a $10 bonus in addition to the $25 to the new customer.

I’ve closed the waiting list for now, but subscribe to the Consumerism Commentary RSS feed to be informed when the waiting list is open again.

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The idea of “getting rich slowly” may well be a fallacy. While slow and steady is a great method of accumulating wealth over long periods of time thanks to compounding interest and returns, the power of inflation — real inflation, not government-reported inflation, eats away at the value of your funds almost ensuring you will never “get rich” from steady investment in a diversified portfolio of stocks. You may retire with a few million dollars thirty years from now, but by the time you’re contemplating your southern migration, time has eroded the value of a dollar to a fraction of today’s purchasing power.

So what is one to do?

Annie Logue from MSN Money has the answers, offering seven ways to get rich a little faster than “slowly.” There is a small problem with her advice though; the seven pieces of advice that can help you get rich are the same seven causes of total financial ruin. The difference between using any of these ideas to get rich and allowing these ideas to lead to financial ruin is not necessarily level of skill, perseverance, or positive thinking.

Here are Annie’s seven ways to get rich, which I argue could just as easily — more easily — have the opposite of the desired effect.

1. Concentrate. Annie says: “Diversification is great because it reduces risk. But at some point, you might want to build on your nicely diversified core with a big chunk of risk concentrated in one sector.” Her source adds: “The investments that have the smallest volatility also have the smallest end returns.”

It shouldn’t be hard, especially recently, to realize that the total stock market index is quite volatile in itself. A concentration in one segment adds volatility and risk, which means both the financial rewards and the financial suffering will be amplified. Concentration is great for a small portion of your portfolio that you can afford to lose. That portion will probably be too small to make you rich in the event of a sector’s success.

Let’s not forget about those who were heavily concentrated in the technology sector which crashed at the beginning of this century. There were lost fortunes all around because those invested in these particular stocks valued their concentration and faith.

2. Leverage up. Annie says: “One quick way to increase your risk and your potential return (as well as your downside) is to borrow money for your investment, usually through a margin account at a brokerage firm… It’s true that leverage can generate a return on money you don’t have, but it generates an outsized risk as well.”

Leverage is one of the main reasons our economy not well right now. Highly leveraged real estate allowed more people to enter the marketplace as buyers and more buyers led to higher, unsustainable prices in many markets. Businesses use leverage to a great advantage most of the time, but businesses who do not manage this risk are in danger.

Buying stocks on margin is one of the riskiest endeavors available to a typical individual investor. If the stock performs well, you have nothing to worry about, unless your success leads you to continue the cycle of investing on margin. You’re almost guaranteed to fail at some point, and the failure can easily wipe out all your gains. The risk is much greater on the downside because a drop in the stock price can quickly result in a margin call, in which case all your debt will be due to the broker immediately.

3. Hunt for bargains. Annie says: “Phillips recommends that investors consider distressed securities, such as bonds issued by companies near bankruptcy or, right now, stocks in banks that have heavy real-estate exposure.” Are you interested in junk bonds? When the economy is in the trough of a cycle, like now, you often hear about looking for bargain-priced investments.

This technique is stacked against the individual amateur investor. One can find a bargain with information about a company not known by the market at large, but if the information is out there to be known, you’re better bet is that the people who move significant sums around the market already have that information. Maybe you can ride the wave.

4. Be above brands. Annie says: “Many investors feel safest with something they know. But just because you have never heard of something doesn’t make it a bad investment.” I agree wholeheartedly. Once you’ve heard about a new brand, unless you are an industry insider or specialist, chances are the brand has already experienced the kind of growth that would make someone rich in a short amount of time.

So how do you become an industry insider or specialist? Well, it’s not going to come from reading the junk email you receive touting this or that penny stock. “Invest in what you know” is Peter Lynch’s mantra. He’s the investment star from Fidelity. “The more you know…” is the motto for NBC’s public service announcements. A combination of the two may be the only way to make this suggestion work.

5. Explore emerging markets. Annie says: “It’s a big world out there, and much of it is growing faster than the United States. There will be risk in all these markets as their citizens feel their way into modern economies…” I think it’s a good idea for the modern investor to start thinking about investing around the world rather than domestic vs. international. Like it or not, the world is getting metaphorically smaller, and nations’ economies are increasingly affected by other nations outside their borders.

Emerging markets is great for diversification, but it’s not a way for the individual investor to get rich. There is more of a likelihood for getting rich through direct investment in a country that has the potential for growth by moving to the country, building land, and directly assisting their economy through local businesses. Investing in emerging markets from the comfort of your recliner is safer but ultimately less effective.

Once you move to the country in the emerging market you like, you run the risk of government seizure, rebellious uprisings, xenophobia, embargoes, stiff regulations, invasion or war, or political unrest. This is a dangerous move if you’re investing your life savings.

6. Consider commodities. Annie says: “In a world economy that is growing rapidly, demand for commodities — such as oil, cotton and corn — is bound to grow. As demand grows, prices of commodities are likely to rise. Individual investors can get exposure to growing global demand for commodities through commodity-based exchange-traded funds.”

Anytime someone claims that any particular type of investment will continue to rise, you should be skeptical. I agree that consumption across the world will continue to grow, but that’s a long term view that doesn’t match the article’s purpose of “getting rich quickly.”

7. Do your research. Annie says: “The more risk you want to take, the more work you’ll have to do… The advice of steel tycoon Andrew Carnegie was that it’s OK to put all your eggs in one basket, as long as you watch the basket pretty carefully.”

I still find it very unlikely that any research you uncover isn’t already known by people with much more money to move in the market. Are there are particular niches in the market that are not being researched right now by those who make research their living? I would find that very hard to believe. Unless you have non-public, insider knowledge — and if you had, it would be against SEC regulations for you to invest — someone has already made money on the findings of your research.

While it is certainly possible to get rich in quick fashion using some or all of the suggestions provided above, it seems unlikely and not worth the risk, particularly if you can’t hedge against your bets.

7 ways to get rich faster, Annie Logue, MSN Money, June 23, 2008


I have posted all new bonus links for new ING Direct savings accounts as of today. If you are a new customer to ING Direct, one of the first internet-only banks that took advantage of low overhead to offer great interest rates on savings accounts, you can receive $25 for opening a new account. They require that your initial deposit is at least $250.

The Consumerism Commentary readers who provided these links will receive $10 when their links are used. I’ve used all of my available referral links for the savings accounts, so I am not earning anything (other than perhaps the admiration of readers I’ve helped earn a few bucks).

For those hoping to have their own referral links posted for the benefit of new customers, the waiting list is now full. Subscribe to the Consumerism Commentary RSS feed to be notified when I’ll be looking to add people to the waiting list.

Get the $25 ING Direct bonus links here.


Here is the third part of the list of gas stations in New Jersey that are ripping off customers. For more information, see this first part and the second part.

The first part also contains a map of every gas station fined for violation of a variety of regulations.

This list begins with Morris County. Read the full article →


List of New Jersey Gas Stations in Violation, Part 2

by Luke Landes

Here is the second part of the list of gas stations in New Jersey that are ripping off customers. For more information, see this first part. The first part also contains a map of every gas station fined for violation of a variety of regulations. This list begins with Essex County.

10 comments Read the full article →

Getting Ripped Off for New Jersey Gasoline: Inaccurately Calibrated Pumps

by Luke Landes

If you buy gasoline in New Jersey, you may want to avoid the gas stations listed in this article. The New Jersey Division of Consumer Affairs has fined 350 stations out of 1,025 total inspected during a recent three-day operation across the entire state. Most of the stations fined were guilty of innacurate pump calibration, ... Continue reading this article…

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New York Philharmonic’s Free Concerts in the Parks

by Luke Landes

Throughout the summer, as they have been doing for the past 43 years, the greatest orchestra in the world is offering free concerts to the public. Last night, I saw the first of the “Concerts in the Parks” series in Central Park, Manhattan, New York City, presented by the New York Philharmonic. The weather was ... Continue reading this article…

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Rich People Spend Their Time Stressed

by Luke Landes

The American Dream in terms of being wealthy, is to work only four hours a week, outsource your tedious chores to those whose time is worth less than yours, and to put your feet up and relax while being pampered from all sides. With more money, you’ll get there, right? It turns out that wealth ... Continue reading this article…

30 comments Read the full article →

Get Ready to Consolidate Your Student Loans

by Luke Landes

If you have variable rate student loans, mark July 1, 2008 on your calendar. After that date, you can lock in interest rates 3 percentage points lower than what’s available now. I’m not eligible for lowering the rates on my student loans because I’ve already consolidated and I have no new student loans to add ... Continue reading this article…

12 comments Read the full article →

Are You Expecting an Inheritance?

by Luke Landes

According to a 2004 survey, 21 percent of people born in 1964 or later expect to inherit money from family some time in the future. Many expecting recipients may be in for a surprise, however. A recent article by Ron Lieber at the New York Times identifies eight reasons why inheritances, perhaps not those in ... Continue reading this article…

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Purchased a Hoover SteamVac to Deep Clean My Carpets

by Luke Landes

When I first moved into my apartment a year ago, my carpets looked brand new. Even though I vacuum regularly, months of shoe and sneaker traffic, feline hairballs, and who knows what else has diminished the look of the most lived-in portion of the dwelling. In my old apartment, I didn’t care much for the ... Continue reading this article…

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Managing Your Money Vs. Micromanaging Your Money

by Luke Landes

When first attempting to gain some control over your finances, it’s particularly helpful to micromanage. If your money is in a state of disarray due to spending more than you’re earning, then it’s helpful to look at every little expense, at least for a time. This will help give you a more accurate picture of ... Continue reading this article…

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Weekend Blog Roundup: Emergency Charity Fund, MLM, and AMT

by Luke Landes

Here are a few articles worthy of review. Lazy Man and Money wonders whether you should have an emergency charity fund. He plans on splitting his charitable giving in three parts: 50 percent to the American Cancer Society and split the rest between Kiva and any natural disaster that happens to strike. Generation X Finance suggests ... Continue reading this article…

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Waste of Money: Excessive Oil Changes (Every 3,000 Miles?)

by Luke Landes

When I graduated college almost ten years ago and was moving out of the dorms on campus, my father picked me up in his graduation gift to me, a “new” (to me) 1988 Toyota Celica. From this point on, it was my responsibility to care for and maintain the car, but I didn’t really know ... Continue reading this article…

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The Benefits of Target Retirement Funds

by Guest Author

About the author: The following is a guest article written by Kevin from No Debt Plan. He writes to help readers eliminate debt, learn how to budget and save, and move themselves towards financial freedom. The first investment we made in one of our Roth IRAs was in a Vanguard Target Retirement fund. Generally target ... Continue reading this article…

3 comments Read the full article →

Fidelity and Vanguard Creating Investments to Compete With Annuities

by Luke Landes

Fidelity and Vanguard, monsters in the world of mutual funds, are busy creating new products catering to the vast number of baby-boomers approaching retirement. These products are designed to compete with annuities, insurance products with guaranteed income, but are investments products so they offer no guarantees. Like target retirement funds, the asset allocation of these ... Continue reading this article…

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New ING Direct Bonus Referral Codes

by Luke Landes

I’ve once again updated the list of $25 ING Direct Referral Bonus Links. (Ed. note: ING Direct became Capital One 360 in 2013.) Thanks to Consumerism Commentary readers who have contributed their links to the site for the benefit of other readers. If you are not a current customer of ING Direct and you’re interested ... Continue reading this article…

4 comments Read the full article →

Target Retirement Funds (Also Known As Lifecycle Funds)

by Luke Landes

Target retirement funds are increasing in popularity. The funds, and they may be called “lifecycle funds” or “target date funds” or “age-based funds” or a variety of other terms are mutual funds comprising other mutual funds. The allocation percentages of the constituent mutual funds change as time progresses, theoretically becoming more conservative as you approach ... Continue reading this article…

9 comments Read the full article →

McCain Proposes Summer Gas Tax Holiday (Again)

by Luke Landes

The presidential candidates are fighting hard for your vote, and the economy seems to be one of the top issues. To soothe jitters over an economically turbulent near future, Senator Barack Obama proposed a second economic stimulus payment, similar to the one proposed and passed by President Bush and Nancy Pelosi earlier this year. It’s ... Continue reading this article…

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One Hundred Pushup Challenge and Midweek Blog Roundup

by Luke Landes

I’ve decided to join my colleagues like J.D. by taking the One Hundred Pushup Challenge. I started on Monday and I plan to continue with my second day of training Wednesday evening. I’ve been meaning to improve my health and fitness — I promise myself to do so every year but find it hard to ... Continue reading this article…

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