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February 2009

My First Stock Purchase

This article was written by in Investing. 14 comments.


So, I got this credit card that deposits 2% cash back into a brokerage account. I started using it for all my daily purchases, paying off the statement balance each month. At the end of January, my points on the card were redeemed for the first time, and a few impatient days later, I had $38 dollars to start investing.

I could just set up a transfer from the brokerage account to my regular checking account and use this free money for other purposes, but I’ve always wanted to try investing in the market, and because it’s free money, I’m allowing myself to do so.

I figured that I could buy 3 shares of an ETF called PBW, which is a collection of companies specializing in renewable energy, which seemed like a good fit because:

  1. I didn’t feel like I have the time needed to do the right amount of research to buy shares in only one company
  2. I’m an aspiring hippie
  3. I knew that the American Recovery and Reinvestment Act of 2009 was in the works, and it set aside a serious amount of money for renewable energy projects

Here’s the funny part: that $38 dollars that Charles Schwab gave me for free? It was double the amount that they should have given me. So a few days later, I noticed in my portfolio that $19 was missing. It took me three tries to get the credit card and the free brokerage account linked in the first place, so this was extremely frustrating. I assume it was an honest mistake on Schwab’s part, but I had gotten myself in the position where I was investing with my own money, and not with free money, anymore.

I still think that this card/brokerage setup is a good idea, but if you’re setting this up for the first time, keep a close eye on the amounts being moved around.

Incidentally, I’ve only lost $17.66 on my investment so far, including the $12.95 commission. I can laugh about it, because it’s free money.

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E*TRADE has decided to discontinue its collection of index mutual funds. If you hold shares of ETSPX (S&P 500 index fund), ETRUX (Russell 2000 index fund), ETTIX (technology sector index fund), or ETINX (international index fund), E*TRADE or your broker will automatically sell your shares by March 27, 2009.

Even though index funds are likely the best way for most people to invest in the stock market thanks to low fees and returns that match the index, brokerages don’t have much motivation to offer them. Thanks to the low fees, fund managers don’t generate that much income. Without that income, the managers can’t advertise as prominently. E*TRADE’s S&P 500 index fund is quite competitive, with a expense ratio of 0.09%, lower than Vanguard‘s 0.15% for VFINX. But VFINX is much more popular.

E*TRADE will likely try to convert index fund customers to managed fund customers. That’s probably the only way for the company to make money. But keeping the customer in mind, I would recommend using the liquidated funds to buy the equivalent low-cost index fund from Vanguard or Fidelity.

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Editor’s Note:  This offer is no longer available. 

See our update with a new code.

The bank Washington Mutual isn’t completely dead yet. Here is a new promotion code that will provide a $100 bonus for opening a new checking account. There are a few requirements in order to receive the bonus, however. You must open the account before March 28, 2009 with a minimum opening deposit of $100 (not including the bonus). If the account remains in good standing, you will receive the $100 bonus within twelve weeks after initiating the first direct deposit into the account. A monthly (or more frequent) direct deposit is necessary in order to qualify for the $100 bonus, and you have only sixty days to send the first direct deposit.

Here is the code: 2960-ADHH-5041 (Expired)
Generate your own $100 Chase Checking Coupon HERE. (Expires August 14th, 2010)

Enter the above code to apply for the account and earn the $100 bonus.

Thanks to Consumerism Commentary reader Yana who let me know about this new bonus. If you have tips about free money or anything else you think would interest readers, send us an email at tips at this domain name or send me a message on Twitter.

In addition to the Chase $100 Checking Account Bonus, Chase is also offering a $100 cash back bonus on their Chase Freedom®

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In 2008, millions of people received checks or direct deposits from the government in an effort to stimulate the economy. The extra cash certainly helped many families and individuals, who, like the banks that received TARP funds later in the year, cushioned their bank accounts and paid off debt. Some used the found money to contribute directly to the economy, but not enough people purchased products and services to prevent the global economy from collapsing. It’s usually argued that one of the strongest aspects of distributing checks of this type to the public is to boost confidence in both the market and those in power.

The economy is now worse than it was when the 2008 economic stimulus payments were sent out. The American Recovery and Reinvestment Act of 2009 was recently created to continue the attempts to boost the economy. This time, however, there will be no stimulus checks. Instead there is a new tax credit, the “Making Work Pay” credit, which will allow employees to keep more of the money they receive in each paycheck.

Starting in April, employers will adjust withholding automatically for qualified workers. This will result in $44 additional take-home pay after taxes for individuals, and $89 additional for those who selected “married” on the W-4 employee withholding form. Economists believe this small increase in pay will stimulate the economy more effectively than the equivalent lump sum payment of $400 ($800 for married couples). A lump sum payment is more likely to be saved, used to pay off debt, or spent all in the same place, while a little extra in each paycheck will help families incorporate the money into regular spending, like dining out in restaurants or buying groceries. This helps taxpayers circulate the money in the community rather than hoarding it in a bank account.

But lump sum payments are often better for the individual, even if they don’t stimulate the broader economy as effectively. So here are eight ways you can create your own stimulus check by turning the small weekly or biweekly increase into a larger benefit or by finding other income or savings that can be effectively used to boost your finances.

1. Save the Making Work Pay credit. If you receive a paycheck biweekly, you will be taking home $20 or $39 extra each time. Set up direct deposit to automatically transfer that amount into a high-yield savings account like FNBO Direct. With the interest you earn, by the end of the year you’ll have more than the $400 (single) or $800 (married).

2. Work extra hours. If your boss allows you (mine doesn’t) and if you get paid extra for doing so (I wouldn’t), spend an extra hour a day in the office. Assuming a salary of $40,000 or $20 per hour, and a benefit of time-and-a-half for working beyond 40 hours a week, you could earn an extra $7,500 by working one extra hour a day for one year.

3. Turn your hobby into a business. If you like creating and assembling furniture, building computers, knitting, or making jewelery, consider getting serious about selling your products. These could be things you don’t need to make yourself, as well. A coworker of mine recently started hosting jewelery parties, where she enlists her friends to host their own jewelery parties. I believe it’s some kind of multilevel marketing scheme, but it works for her. With this kind of side job, she doesn’t have to make her own jewelery; she just receives a percentage of what is sold as well as free jewelery.

4. Become a tutor. You can leverage your knowledge by offering to share it with others, perhaps middle school or high school students, for a fee. You only need a few students a week to earn a couple hundred dollars a month. Science and mathematics are always in demand, but you can do well if you have skill with musical instruments, test taking, or a foreign languages.

5. Get your bar tending license. A former coworker found that my company wasn’t providing her with enough income, so she started working in a friendly neighborhood bar on the weekend and one day during the week. With tips, she was able to earn several hundred dollars a night.

6. Sell your stuff. You must have unnecessary items around the house. eBay and the Amazon.com Marketplace come in handy here. Thanks to the websites’ reach, you can find buyers for almost everything. Old books, DVDs, electronics equipment, and games are all items you may no longer want but might be in demand.

7. Cut back your spending. Yes, this is typical financial advice you can find anywhere, good for any economic condition. But if you’re financially struggling right now, it’s time to take this idea seriously. I don’t have to tell you many of the easy ways to quickly reduce your spending, such as reducing your ECRD Factor, cutting back your cable bill, switching to compact fluorescent light bulbs, and reducing your energy consumption.

8. Request your cash back rewards. It’s getting much more difficult to take advantage of credit card offers. Credit card companies are dropping rewards programs, raising interest rates, and lowering credit limits. But if you do use a cash back credit card, claim your rewards. I request a check about once a year for a few hundred dollars from one card, while the business card automatically credits my account once a year. These payments provide me with a “stimulus” that I don’t take into account until I realize it’s time to receive the reward.

What else can you do to find extra money to stimulate your own personal economy?

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How to Claim the $8,000 Home Buyer Tax Credit of 2009

by Luke Landes

Claim the tax credit with Intuit TurboTax or H&R Block At Home. Are you claiming the home buyer tax credit with your 2009 income tax return? Read these new instructions. The credit has been extended and expanded to qualify for more people, including long-time homeowners. I’ve included some of the basic information below. Because the ... Continue reading this article…

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FNBO Direct Drops Interest Rate to 2.4% APY

by Luke Landes

I received the bad news earlier today. Continuing the trend across the banking industry, FNBO Direct has determined that it can afford to lower the interest rate offered on the bank’s savings account from 2.6 percent to 2.4 percent APY. Compared to many other popular online banks, this rate is still very competitive, and I can practically ... Continue reading this article…

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The Paradox of “Buy Low, Sell High”

by Luke Landes

If everyone could “buy low and sell high” when making investment decisions, everyone would be a successful investor. I would never give this advice to anyone. First, it is obvious to anyone who understands basic arithmetic. If you want to make money, you have to sell something for more than you paid for it. This ... Continue reading this article…

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$250,000 Tax Rates and You

by Smithee

We’re still waiting to hear the official proposal, but you’re bound to hear a lot of talk this week in the mainstream media about the U.S. budget, deficit, and the plan to let the “Bush tax cuts” expire. Reporters are going to use the phrase “people earning more than $250,000 a year” with respect to ... Continue reading this article…

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Is “Buy and Hold” Still a Good Investing Strategy?

by Luke Landes

From the time I started investing for the long term, almost all the advice I’ve read has pointed towards buying stocks (usually in the form of index mutual funds) and holding them for decades, rather than following trends in the news and trying to buy and sell stocks frequently. The reasons for this strategy were ... Continue reading this article…

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Should You Walk Away From a House and Mortgage?

by Luke Landes

In the real estate boom, many homebuyers extended themselves financially to buy a house that may have been beyond their means. With the exuberant market, people were encouraged to buy with low introductory interest rates and interest-only loans, the belief that their income would increase to meet their payments, predictions that real estate prices would ... Continue reading this article…

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UBS Ending Offshore Swiss Bank Accounts

by Luke Landes

If you are one of the many Americans with an offshore bank account with UBS, the largest bank based in Switzerland, your name may be among those reported to the IRS. UBS has admitted that the bank has been conspiring to defraud the United States and the Internal Revenue Service. The bank will pay $780 ... Continue reading this article…

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Increase Your Net Worth at Mint.com

by Smithee

Mint.com, a free online money tracking system, has just started including property values like houses and vehicles when calculating your net worth. Previously, the service would total up your cash and other positive account balances, then subtract your credit card debt, loans and mortgage amounts, leaving you with an almost certainly negative net worth. In ... Continue reading this article…

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These Banks Don’t Want Your Money

by Luke Landes

Note: The information in this article is no longer current. It was updated September 2, 2011 and originally published February 18, 2009. It’s true that high-yield savings accounts offer interest multiples above what you can usually find from your typical state or national bank. For example, a “high performance” money market account ( savings account) ... Continue reading this article…

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Obama Sends $75 Billion to Homeowners in Foreclosure

by Luke Landes

If real estate is truly the root of the economic recession, then this new proposal from President Obama should help. The plan calls for $75 billion to help 9 million homeowners who can no longer afford their monthly mortgage payments and are at risk for foreclosure. Here is how this plan would help. If you ... Continue reading this article…

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Quicken Online Adds New Cash Tracking Feature

by Luke Landes

This week, Quicken Online (reviewed here), a free service, has added a few new features to help you more accurately and efficiently track your spending and manage your finances. As credit card offer increasingly unfavorable terms and abandon rewards, and as fewer people qualify for credit cards, more are turning to spending using cold hard ... Continue reading this article…

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The $400 Stimulus Payments Could’ve Been Dumber

by Smithee

The American Recovery and Reinvestment Act of 2009 includes, along with all the spending, the biggest middle-class tax cut in American history. Ignoring all the stuff about housing and small businesses and car sales, this will mean a yearly saving of $400 for individuals, or $800 for couples. It’s not a lot of money. People ... Continue reading this article…

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What Is a Refundable Tax Credit?

by Luke Landes

When I first came across the term “refundable tax credit,” I have to admit I was confused about its meaning. And now that the economic stimulus bill has been signed into law, and as other refundable credits have made the news, I’ve seen that my misconception is shared by others. A tax credit is a ... Continue reading this article…

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2009 Stimulus Bill: Day One

by Smithee

Just a quick update this morning to point out something I think has been under-reported: President Barack Obama should be signing into law the American Recovery and Reinvestment Act today, which means that States (and Commonwealths) requested federal stimulus money have forty-five days to start spending some of that money on public works and improvements. ... Continue reading this article…

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Is Your Home an Asset or Liability?

by Luke Landes

When is your house a liability? Does the fact that you have a mortgage make your house a liability? Or do you have to owe more than the house is worth? What is a liability, anyway? Well, it depends. Looking at your house from a financial perspective, which you should do because if you’re like ... Continue reading this article…

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The Paradox of The Paradox of Thrift

by Luke Landes

If you’ve been paying attention lately, you might have heard that throughout the economic recession, Americans have been saving more of their income. Some economists worry that saving, while good for the individual, can be harmful to the economy as a whole. This is commonly called, “the paradox of thrift,” a theory developed by John ... Continue reading this article…

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