CC photo by VictoriaPeckham

The New Site

If you’re an RSS Reader or Email Subscriber who hasn’t been by the site lately, and had no reason to, I don’t blame you. I’ve always believed in my content, but was never proud of the site design.

It took me 11 months to come up with a new design for the site, and I’m finally happy with the design. Most notably there are improvements on the aesthetics, functionality, interactivity, and shareability.

If you have been by the site in the last week or so, my apologies for all of the tinkering that I’ve been doing, which could have disrupted your browsing experience. You may want to clear your cache and cookies if anything looks screwy on the site. 

Site Direction

I plan on posting a lot more to the site and in more easily digestible doses. I realize that a lot of my posts were lengthy, and that doesn’t fit everyone’s attention span. You’ll also see a lot more site interactivity and community features.

Features on the Site that will Allow you to Get the Most Out of it

1. Much more Commentator Friendly:

• Subscribe to Post Comments: at the bottom of posts is a little check box to indicate if you’d like to receive email updates from comments following yours on a given post. Want to see if someone responded to your comment rant? Now you easily can. Here’s what the box looks like.

• Recent Comments: In the footer, you will find the 5 most recent comments on the site.
• Top Commentators: In the footer, you will find the 5 most frequent commentators on the site, including number of comments. If you have a website, your site will be linked to. If you don’t, pride is at stake.

• Comments are now avatar enabled and you can now use tags.
• Please use the ‘ShareThis’ button after reading a post. If you like the post, please submit it to Digg, save it to del.iciou.us, Stumble it, email it to a friend, etc. All of these things can be done through the ‘ShareThis’ button. I need all the help I can get in promoting the site and if you get value from the site, please join me in promoting the content. Here’s what the button looks like:

Turns into this:

I appreciate all of your comments, and made these changes to encourage active participation on the site. Comment activity has really jumped since the changes have been made. Thanks for adding to the discussion!

2. More Chance to Express your Opinion:

• I’ve enabled polls in the sidebar and will include them in posts frequently. Additionally, there is now a polls archive.
• In the lower right footer there is a feature where you can leave a site comment for anyone to read.

3. Share Your Ideas

I’ll continue to actively respond to your comments. If you can’t find a post that interests you on the site, please use the new contact form to let me know of your idea.

4. Site Browseability

• The new site has a much improved search bar and archive pages. It’s a great way to navigate the site and is extremely accurate for Wordpress.

• All categories have been sectioned into five main personal finance categories: investing, live & career, money, protect, and retire. If you’d like to find more specific post categories, there is an ‘All Categories’ section in the sidebar that includes all of the old site categories sectioned into the 5 general theme categories.

General Categories

All Categories

• The home page includes ‘best of 20somethingfinance articles, the feature post, and snippets of most recent posts.
• In the lower left you’ll find the post with the latest video in it.
• In the lower right you’ll find ‘random posts’ by post image.

5. Get Content Delivered:

• If you’re not a current subscriber to the site, get all posts delivered to you for free via email/rss.

• You can also subscribe to each post’s comments as highlighted earlier.

Reader Feedback:

• What do you think of the new site - the good and the bad?
• What is your favorite new feature?
• How can the site be improved? What other features would you like to see?
• Do you see any value in Twitter or any of the other social media sites out there?

Thanks for the feedback, and I hope you enjoy the new site!

CC photo by Phillip

If you’re married and making less than $250,000 ($200,000 as an individual), you’re probably going to see your taxes drop. But when will Obama’s tax refunds take effect? First, let’s take a look at what you might be saving under Obama’s tax plan. 

How Much will my Taxes be Cut Under Obama?

• So long as Obama’s plan does as it promises, you will see:
• A tax refund of $500 per individual ($1,000 per married couple) if you’re making under $200,000 ($250,000 if married). If under those thresholds you will also not see your tax rate increase.
• If you’re a homeowner and don’t itemize your taxes, you can claim a 10% Universal Mortgage Credit. This averages out to $500 per homeowner.
• Your capital gains tax rate will stay the same unless you’re making more than the ‘$200K/$250K’ threshold. If you’re over, it’ll go up 25%.

When will Obama’s Tax Cuts Take Effect?

Obama’s tax cuts will effect your 2009 tax return (April of 2010). However, it’s been speculated that the $500/individual and $1,000/couple tax refund may also be included with your 2008 (April 2009) taxes as a second round of economic stimulus checks.

Want to Find Out More on how Obama’s Tax Plan will Effect you?

• Check out the Obama Taxcut Calculator.
• Read into the details in Obama’s tax plan factsheet.
• Or, check out the Tax Policy Center’s take on Obama’s plan.

Reader Feedback:

• How much will Obama’s tax plan save/or increase your taxes?
• Do you think Obama’s tax plan is fair?

If you found this article helpful, you can subscribe to the 20somethingfinance RSS feed, or sign up for free email updates. You may also find the following articles of interest:

Who Will Cut my Taxes More, Obama or McCain?

Three Reasons why Tax Allowances are Bad & How Allowances can Help

This is a guest post from Joanne Kwan, who provides sound advice for those facing the used versus new car decision for the first time.

When it comes to buying a car, there are two options: new and used, and as a young professional, for whom this may be the first automobile purchase not funded by the Bank of Mom and Dad, there are valid reasons to consider each. Used cars are less expensive to buy, and are often less expensive to insure as well, while new cars often have a much broader array of safety and anti-theft devices. There are a number of excellent websites at your disposal to help you locate used car deals, new car rebates, and more information than you probably thought possible about mileage, performance, engine specs, and prices. 

Questions to Ask Before you Purchase

Even with the abundance of information at your disposal, there are three basic questions you need to answer, before you begin to shop:

1. What is the reason for the purchase? Are you buying a new car because you need to replace a vehicle that isn’t working correctly, or are you upgrading your car to reflect a recent promotion or other change in status?
2. How much can you afford? Even with rebates, new cars are significantly more expensive than used cars, and if you go to a dealer even previously-owned vehicles can be financed. Do you have a down payment? How much of a monthly payment can you make?
3. How will you use this car? If you’re the type who drives between home, work, and the grocery store, and maybe goes to dinner with friends, or on a date with your significant other from time to time, you might be fine in a vehicle that’s a little older. On the other hand, if you’re in a sales position, and have to travel for work, or like to take off on long weekend road trips, a new car may be the wisest choice for you.

Generally speaking, if you have enough money to make a decent down payment without dipping into your investments, and can make a monthly payment for three or four years without stretching your budget too badly, and have good-to-excellent credit, a new car is within your reach. If any of these things pose a problem, you may want to consider a used vehicle, at least for now.

Advantages of Buying New Cars:

The advantages of new cars include:

• Most up-to-date safety and anti-theft devices
• Less likely to require maintenance
• Better performance
• Vehicle will be under warranty

Before going to a dealer to shop for new cars, you should find a lender and set up financing. While you can use dealer-provided financing, you are not required to do so, and may get a better APR (annual percentage rate) by arranging your own. If you are a member of a credit union, you probably have access to excellent auto loan opportunities.

As well, you should hit the Internet and do some research on the specific makes and models you’re considering. Compare safety features and fuel economy, check suggested prices, and determine which optional accessories you need and which you merely want, or can live without. By doing this, you’ll be negotiating from a more equal position, and will be able to get the lowest price possible.

Advantages of Buying Used Cars

Used cars are not without their advantages, either. Among them are:

• Less expensive to buy
• Insurance tends to cost less.
• Unless the vehicle is rare or otherwise unique, they’re less likely to be stolen

Questions to Ask yourself when Purchasing a Used Car

Purchasing a used car takes a bit more education than buying a new car. Whether you’re going through a dealer for one of their “previously owned” vehicles, or buying direct from an individual, you should consider the following:

• What is the car’s condition? Are the parts original, or have they been replaced? How old are the parts? Has the vehicle been well-maintained?
• How old is the car? If it’s more than six years old, or the mileage seems either too high or too low relative to the age of the car, be very wary.
• How’s the paint job? Does the paint feel smooth and sleek, or does it seem to be hiding dents or rust. Does it feel patchy? Perhaps there was body damage.
• Is the original paperwork, including the owner’s manual, available?

If all of these questions have been answered to your satisfaction, you’ll want to obtain a vehicle history report from a service such as CarFax (most used-car dealers will provide this. Insist upon it if they don’t), to make sure the car was never reported stolen or involved in an accident that caused significant damage. It’s also a good idea to find out what similar cars are selling for, to make sure the price you pay is fair.

If your used car is coming from a dealer, be sure to ask about any warranties or guarantees. Most certified pre-owned vehicles come with some sort of protection plan.

Getting the Best Deal on Car Insurance

Whether you ultimately choose to purchase a new or used vehicle, be certain to arrange for your car insurance quotes at the same time you arrange financing. Be prepared for the fact that a financed car will generally have to be covered with comprehensive and collision policies as well as your state’s required liability and uninsured motorist coverage.

If you own a house or are self employed, you’ll want to make sure your auto insurance coverage is more than the minimums, so that you can protect your home or business if you are sued because of involvement in an accident, and never, EVER, let your insurance lapse.

A new car, whether it’s fresh from the dealer’s lot, or merely new-to-you is always exciting. By using the tools available on the ‘net, and knowing what to ask about when you shop, your new car experience will be a pleasant one.

If you found this article helpful, subscribe to my free RSS feed, or sign up for free email updates! You may also find the following articles of interest:

How Old Are Your Tires? Your Safety May Depend on the Answer

How to Save on Auto Insurance

CC photo by William Hook

Being an early mover on the latest technological gadgets can be exciting, get you attention (both good and bad), and possibly lead to increased efficiencies. However, these benefits typically come at a great expense.

Often times over the last decade or so I have felt a little left out when it comes to having the hottest new technologies and services. Before I get your views on ‘must-haves’ and ‘do withouts’, here’s a list of the things I passed on that many other twentysomething’s have embellished on and how much it has saved me.

I Passed on these Technologies & Services

• pager - never had one. Do they still exist? They use to run about $50 with $10 a month recurring fees from what I remember.
• cell phone - OK, I didn’t pass completely, but didn’t have my first until 2004. Six years of not having one saved me about $3,500.
• text message plan - I send about 3 a month @ 10 cents each. Most plans I’ve seen cost about $5/mo.
• Blackberry - about $500 for a decent one plus the data plan.
• iPod - call me old school, but I still don’t have an mp3 player. These guys use to cost $400 out of the box.
• cell phone data plan - nowadays they run $20/mo.
• Tivo - DVR costs $150 plus $13/mo.
• XM radio - $50 for the hardware, $13/mo. for the service.
• Netflix - Plans vary, but $9/mo. seems to be the standard. This is the lesser of two evils, and if I wanted to go really hardcore, I could rely on the library.
• XBox, Wii, Nintendo, Playstations - the last gaming system I had was the Super Nintendo (and it still rocks). Not spending a dime on all the latest systems and games has saved me untold thousands. I’ll make a conservative estimate of $2,500.

I estimate that passing on these things has saved me up front costs of $1,500 plus monthly service costs of approximately $8,500 for a total of $10,000.

But… I Couldn’t Resist These Technologies & Services

Despite all of my restraint, I haven’t been able to pass on the following, and it’s cost me quite a bit:

• cell phone - I’ve had for 5 years. Have never paid for a phone, but pay about $35/mo. for a basic plan at a total expense of $2,100.
• cable TV - I’ve paid for it for the last 5 years for a total cost of $3,000.
• HD service - $10/mo. for the last year. $120 total.
• HD TV - I dropped $1,000 on a 42″ 1080p. I bought from Costco at a price that was about half off anything comparable at the time.
• high speed internet - I didn’t make the upgrade to cable until this year, previously DSL. Over 5 years, it’s cost me about $1,200.

Total cost for all of this technology and service: $7,420.

The Lessons in All of this:

1. Even the very frugal can get caught up in technology and service fees (for me, the service fees have really cut into my savings).
2. Cutting back on some non-necessities can really save you a ton. Not having the latest greatest thing will probably have no adverse effect on your life. Rather, eliminating that dependency might actually make you happier.
3. The latest, greatest, quickly become obsolete. Pagers, old gaming systems, flat screen TV’s, cell phones, computers are not built to stand the test of time. While they are here, they can wreck your finances.

Reader Feedback:

• What technologies and services have you been able to sacrifice over the years?
• What technologies and services have you not been able to live without?
• What role does technology take on in your life?

If you found this article helpful, subscribe to my free RSS feed, or sign up for free email updates! You may also find the following articles of interest:

How to Wipe Out Credit Card Late Fees & Bank Overdrafts

How to Get out of Debt: Step 1, Stop the Bleeding

Clever Ways to Delay Instant Purchase Gratification

CC photo by Aprillyn77

One of the joys of being married is not having to worry about the dreaded “who’s going to pick up the tab?” question during a date. Nonetheless, it will always be a hot topic that many have strong opinions on, and this is a personal finance blog for youthful adults after all, so let’s explore. This is a fun topic, and I’d love to get your comments.

A Little History on the Date Paying Issue

Basically the tradition of the male being expected to pick up the tab started way back in the 1920’s when dating became common because few women had high paying jobs or any jobs at all relative to their male counterparts. Nowadays, circumstances have changed, yet the tradition has been carried on by many. But should it?

Who Should Pay for the Date? Some Cold Hard Numbers

Earlier this year, and Elle/MSNBC survey of 74,000 online readers found that:

• 66% of men wanted women to chip in after a few dates.
• 44% of women were bothered by being expected to help chip in.
• 57% of women offer to pay (including the first date) - 34% were bothered if the man accepts, and 46% were bothered if he refuses.
• 75% of men felt guilty when they let the woman pay, even if she has a higher income.
• 66% of women try to keep their income secret from their dates.
• 80% of men say they end up paying most date expenses.

These findings illustrate a point that many men have known for years - we’re damned if we do and damned if we don’t. Is it any wonder why guys obsess over this dilemma?

Your Options

I think there’s three solid options, and it’d definitely worth discussing with your significant other once you are committed. It’s not an easy thing to discuss if you’re not or on your first few dates. Obviously all three are going to have a different impact on your finances:

1. The Man always pays - i think this option is too traditional and somewhat disrespectful to modern social situations.
2. Whomever makes more pays - this the most humanitarian of the options.
3. Equal duty regardless of pay - if both are earning an ‘honest income’, it is somewhat just. I tend to like this option the best if income’s are similar, but it’s not an easy conversation to have, especially in the first few dates.

I can tell you this, if you’re a guy reading this, avoid the 44% of women that are bothered by being expected to help and the 34% that are bothered by a man accepting their offer to help (yes, I realize this limits your options, but you’ll thank me down the road).

Women, you should probably avoid the guy who wants to pay every time and you should probably be the one to break the ice on the fair pay topic at some point. What are your thoughts?

Reader Feedback:

• Who should pay for the first date? 3rd date?
• What should the rules be?
• Women: are you bothered if your date expects you to help?
• Men: would you accept if your date offered to pay?
• Women: would you be mad if he did accept your offer to pay?
• Gays: what rules do you play by?

If you found this article helpful, you can subscribe to the 20somethingfinance RSS feed, or sign up for free email updates. You may also find the following articles of interest:

Warren Buffett is Moving 100% into U.S. Stocks. Should You?

How to Make a Stock Trade

8 Rules you Must Follow when Buying Stocks During a Recession

CC photo by reenie- just reenie

Kiplinger.com recently made the argument that despite all of the market turmoil, there are some things going right. I thought the list was worth repeating, since we need some positives in these tough times. Rather than trying to fool yourself into thinking that things aren’t so bad, you may want to look at these as opportunities to take advantage of. I’ve added some personal commentary and thoughts on how to take advantage of some of these opportunities. 

1. Oil Loses It’s Swagger

Sure, gas has fallen to under $2.50 per gallon. On the surface this looks great, but I worry that if this trend continues, then buying habits are going to trend back towards large gas guzzling vehicles. Look at this as an opportunity to perhaps get a fair value for a gas guzzler that you’ve been trying to unload. I don’t see oil staying this low for long.

2. A Tipping Point for the Auto Industry

A dip in auto sales is a positive in that if you are in the market for a new vehicle you can surely find some great deals out there on 2009 models, and even better deals on 2008’s. Automakers are using these incentives to lower their inventory. As they cut production capacity to align with lower sales, incentives will be harder to find. If you were going to buy a vehicle in the next year or so, now would be a good time.

3. Interest Rates are Low and Headed Lower

The fed just lowered rates again, and they don’t have much lower to go. Rates on long-term loans may have a little further to drop (30 year fixed is a 6.5% at the time of this post), but they are still near historical lows of 5.8%. This presents a good opportunity if you plan on buying a home.

4. Homes are More Affordable

I can see home prices dropping a little further in the next year or so, but not too much. The housing market has really taken a hit, and it looks like we’re nearing a bottom. These things are always hard to predict, but if you’re in the market for a house, there might not be a better time to buy than right now.

5. Your Bank Savings have Never Been Safer

As part of the financial bailout, the Fed raised FDIC insurance coverage from $100,000 to $250,000. I don’t see this as much of a benefit to readers of this blog unless you had more than $100,000 in a bank account. If you’re under 60 years old, you probably shouldn’t have that much in a bank account, your money should be working for you elsewhere.

6. Stocks are on Sale, and Many Bonds Offer Terrific Yields

This is indeed a great opportunity to buy great stocks at a steep discount to where they should probably be priced. I’m not an expert on bonds, but if someone reading this is, please chime in.

7. The Miracle of Technological Innovation Continues

Kiplinger refers to tv’s, laptops, and home theaters being cheaper than ever. Not sure why they raised this point, considering the fact that they are a personal finance content publisher that advocates frugal spending. One of the biggest drivers of debt is the feeling of need to own the latest technological gadgets. Save your money, keeping up with technology isn’t a battle that can be won without high expenditure.

8. Prosperity Reigns in the Heartland

The fall harvest is shaping up as one of the best ever, despite the destructive weather and floods in the Mississippi River corridor since last spring. Exports of U.S. farm products will increase more than 40% by value this year. And recent years of high profits have allowed farmers to pay down debt so low that it accounts for a measly 9% of their assets — providing all the credit they’ll need for 2009 operations. At home, while food prices jumped sharply earlier this year, the weak economy is now expected to slow further price increases. (Consider Maine Lobster, now selling for only $5.99 a pound).

I have nothing to add to this other than I think it’s great that prices increases will slow, but with the price of oil sliding and the economy slowing, we should truly see food prices decline. Unfortunately, I seriously doubt this will happen.

9. A New Tone and Direction in Washington

Financial markets should see a boost with a new President in office (things can only get better, right?). This is just another reason why stocks might be in buy territory. It also looks like you’re probably going to be seeing less of a tax burden over the next four years despite who wins the election.

10. Shoppers Can Expect Great Gift Buys this Season

This is a good thing if you like to buy people a lot of junk around the holidays. I tend to opt for experience gifts such as tickets to entertainment, dinner and movie, sporting events, etc., so I personally don’t see much of a benefit here, but you may.

What other opportunities do you see right now that could have a positive impact on your finances?

If you found this article helpful, you can subscribe to the 20somethingfinance RSS feed, or sign up for free email updates. You may also find the following articles of interest:

Warren Buffett is Moving 100% into U.S. Stocks. Should You?

How to Make a Stock Trade

8 Rules you Must Follow when Buying Stocks During a Recession

CC photo credit: Crossing Sparks

A welcome goes out to all visitors from the Mint.com blog. If you visit their blog, you’ll notice a post that I completed, titled “How Each Candidate will Impact your Bottom Line“ The goal was to take an unbiased, numbers-focused look at how each candidate would effect your finances in respect to a wide variety of issues. Whether you’re on the fence or not, it may be of interest to you.

If you’re a visitor from Mint who likes the content that you see, you can subscribe to the 20somethingfinance RSS feed here or get email updates here.

CC Photo by Arturo de Albornoz

Buffett thinks it’s a good time to get into the market, and I agree with him for a number of reasons. I’m sure you’re thinking, “That’s great. Now What?”. When looking long-term (the next decade plus), there are a number of sectors that should produce solid returns for various reasons. However, the waters are murky, so you must be disciplined and follow the right rules.

Undoubtedly, socioeconomic and political factors are going to have a profound impact on the market over the next decade as they have over the past 10 years. This validates taking a common sense approach to investing versus pouring through data and charts (which have their purpose). Let’s cover some developing trends that should create some winners and losers in different market sectors. I’d be curious to see what trends you see developing. Here’s where I’m placing my bets: 

5 Sectors to Invest in Over the Next Decade

1. Health Care: the number of seniors in the U.S. is rapidly growing, and there seems to not be enough health care professionals to meet the needs of our population. At the same time, health care is one of the last things people will sacrifice in a tough economy. Revenue and earnings are bound to increase.

2. Oil and other Fossil Fuels: the recent dip in energy prices presents a good buying opportunity. Despite an almost guaranteed recession, the demand for fossil fuels will trend upwards as the economy stabilizes, and supply production will eventually hit a peak. Energy stocks have very low valuations right now, resulting in high dividend yields.

3. Alternative Energy: What is shaping up to be an Obama victory would result in $150 billion in spending towards the development of alternative energy infrastructure. It seems inevitable that the established players in wind, solar, hydro and other sources will eventually become highly profitable with scaled and financed operations. Some are predicting that alternative energy and green jobs will lead to the next economic boom.

4. Water: This is a sector that has not boomed yet, and it is bound to. The world’s freshwater resources are diminishing, demand is increasing, and companies that invest in cleansing technology and infrastructure will prosper.

5. Precious Metals: Silver and gold, which can be purchased through the ETF’s SLV and GLD, are near 52 week lows and I cannot understand why. They have been lumped in with all commodities, which had a huge peak and bust in the last year. Precious metals have always performed well when currencies struggle due to high inflation. The current credit crisis has led to an unprecedented level of debt and printing of money to rescue failed institutions. These things are bound to lead to higher inflation levels and weaker dollar values. All the more reason to own something tangible like precious metals.

5 Sectors to Avoid Over the Next Decade:

When looking at where to pull money off the table, a few sectors could potentially be laggards in comparison to others. Sure there will be standout companies that are market leaders in each sector which should do well, and if you can find them at a good price, don’t let anyone discourage you.

1. Retail: Retailers struggle during recessions because people are tighter with their money. Many retailers are already seeing significant drops in same-store sales year over year. These trends should continue in the near future.

2. Tech: Tech startups are heavily reliant on credit to finance their operations. With limited available credit, especially for risky startups, many companies will not be able to survive, and those that do will have slower growth rates than in recent times.

3. Finance: There are some great values out there in the finance world right now, but it is very hard to tell which investments are free of risk at this point. In general, this is not the type of market to be playing with fire.

4. Industrials: During economic downturns, industry tends to slow down significantly. All you need to do is take a look at the auto industry to see that it will take a few years for a recovery to occur.

5. Transportation: Until economies of scale are fully exercised in terms of utilizing alternative energy sources, the transportation sector should see profits squeezed by high energy prices. The recent dip in oil prices seems to be more of a rest than a continuing trend.

Reader Feedback:

• What sectors of the market do you think will perform the best over the next 5 or 10 years?
• Which will perform the worst?
• What trends do you see continuing, developing, or disappearing that will effect the market significantly?

If you found this article helpful, you can subscribe to the 20somethingfinance RSS feed, or sign up for free email updates. You may also find the following articles of interest:

Warren Buffett is Moving 100% into U.S. Stocks. Should You?

How to Make a Stock Trade

8 Rules you Must Follow when Buying Stocks During a Recession

 photo credit: Jsome1

The other day I reviewed Warren Buffett’s comments regarding moving 100% into U.S. stocks. Despite, or perhaps because of, the widespread volatility and fear in the market, right now may be a great time to find some very solid stocks on the cheap.

If the market downturn has you excited about finding bargain equities, you’re going to want to be very careful about what you choose to invest in. Let’s cover some rules to follow and metrics to look at given current economic, environmental, and global conditions.  

8 Rules to Follow when Buying Stocks During a Tough Economy:

In a certain recession like this there are some general rules you must follow in order to avoid being burned when purchasing stocks or other equities:

1. Look for equities that you can own for at least 3-5 years.

2. Unless you’re a professional day trader, don’t watch the ticker on a daily basis. You’ll go insane and you’ll be tempted to start making short-term trades. You don’t have the know-how, technology, and connections to compete with the pros, so don’t try.

3. When (not if) your equity dips in price, hold onto it if the fundamental reasons you bought it remain true.

4. Increase your position on dips.

5. If your equity becomes overvalued, sell it.

6. Use limit orders only. For further guidance on how to make a stock trade, check out this post: 

7. Don’t trade after hours.

8. If you’re not willing to do the research, don’t buy stocks at all. Instead, choose ETF’s or mutual funds from beaten down and undervalued market sectors.

6 Metrics to Look at when Buying Equities During a Recession:

1. Revenue Growth rate versus its P/E (price to earnings ratio). If revenue growth rate is higher, you may have found a good value.

2. Cash is King. How much cash does the company have on hand? If total cash holdings are higher than the company’s market valuation, you may have found a company that is built to survive and thrive during a credit crisis.

3. Market Leaders. What companies are the leaders within their industry? Those with a small and/or declining market share may not have the strength to get through a recession, while those who are gaining share are probably going to come out even stronger

4. High dividend yields. There are some very attractive dividends out there right now in the range of 5-7%. If you can find a company that has a high yield, an increase in income, and is not in serious financial trouble, you have a bargain. Also, companies with a long history of increasing their dividends do so because they are usually loaded with cash and want to reward investors. Be wary of declining companies that keep high dividends so as to not lose investors.

5. Price/Book ratio. Look for 1.5 or below.

6. EPS growth. It may be hard to find in this market, but look for companies with an EPS that has increased year over year over the last 5 years.

How Do I Find Stocks that Meet the Criteria that I’m Looking for?

Fortunately, there are a number of free stock screeners out there to help you find what you’re looking for:

• Google Stock Screener - quick and easy to use interface.
• MSN Pro Stock Screener - perhaps the most in-depth in terms of number of metrics to look at.
• Morningstar Stock Screener - also includes Morningstar ratings.

photo credit: Ethan Bloch

Warren Buffett made news the other day in a New York Times opinion piece where he stated that he is moving 100% of his assets from U.S. government bonds into U.S. equities (stocks). When the richest guy in the world, a man who made his fortune through wise value investing, says that it’s time to buy, people tend to listen. Let’s take a look at what Buffett says.

Warren Buffet’s Reasons for Moving 100% of his Assets into U.S. Stocks:

1. Buffett invests by the motto “be fearful when others are greedy, and greedy when others are fearful”. If you believe in Buffett’s motto, then now is a great time to buy. We haven’t seen this much fear and volatility in the market since the Great Depression. Could people get more fearful than this?

2. Buffett believes that a rebound will happen prior to economic conditions improving. He believes this because during the Great Depression, the Dow hit it’s low in July of 1932 even though economic conditions worsened until FDR took office in March of 1933. Despite the economic decline, the Dow advanced 30%. Those who waited for the economic recovery missed out on the gains.

3. We’ve been through so many tumultuous periods of time and equity value has increased. Buffett calmly states that the 20th Century provided “two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

4. Cash is a terrible long-term asset that is certain to depreciate in value. On this point, Buffett is correct. If you stay in cash, you’re bound to get dominated by inflation over time. Buffett then goes on to state that “the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.” I couldn’t agree more with this statement.

My Thoughts on Buffett’s Statements:

I agree with just about everything Buffett stated. He was very careful not to say that he doesn’t know where the market will be tomorrow, in a month, or even in a year, but does think that in 5, 10, or 20 years, stocks will go up.

I do think he could have further clarified what type of stocks to look for in this type of a market versus giving a blanket statement that he’s getting 100% into them. Many companies will not survive this credit crisis because they don’t have enough cash on hand and won’t be able to meet stricter lending standards.

I am also a little surprised that Buffett was 100% into U.S. Government bonds prior to making this statement. This implies that he is a market ‘timer’. Was his decision to do so smart? In hindsight, absolutely. If only I had listened to my senses when the Dow was overvalued at 14,000 a year ago, I wouldn’t mind dumping more money into the market right now either (I probably will anyways).

What if Buffett is Wrong?

There is always a possibility that the economy won’t recover and is headed lower 5, 10, and 20 years from where it is now. If this is the case, my guess is that we’ll have catastrophic conditions worldwide and 401K statements will be the least of our concerns.

One thing seems almost certain - we’re going to encounter higher inflation levels than we’ve enjoyed over the last 15-20 years. Cash is not the way to go. Gold, silver, tangibles, TIPS, and undervalued market leading equities seem like a solid bet.

If you are going to go the stock route, which would not be a bad choice, you must choose the right type of stocks. More to come on this shortly.

Reader Feedback:

• Do you agree with Buffett?
• Where is your money right now?
• Does Buffett’s piece inspire you to get back into stocks if you had moved to cash?

If you found this article helpful, you can subscribe to the 20somethingfinance RSS feed, or sign up for free email updates. You may also find the following articles of interest:

Sign Up for your Trans Union Class Action Settlement Benefits - Free Credit Report, Credit Score, & Cash

Free Google Docs and Excel Personal Budget Planner Spreadsheets!