With savings rates so low, it might be time to look at an internet savings account as a way to boost the interest earnings on your savings.

How The Accounts Work

An internet savings account is linked to your existing checking account when you setup the new account.  This means that you will be able to transfer money between the online savings account and your existing checking account.

The transfers are made by logging on to the internet savings account’s website and entering how much you want to transfer.

Some online accounts also offer a regularly scheduled transfer, so you can schedule to have a specific amount moved from your online savings account to your existing checking account, or the other way around, weekly or monthly.

Benefits

These accounts generally pay higher interest rates than a traditional savings account, since the online accounts don’t have to maintain a brick and mortar building, or pay tellers to process your transactions.  It’s all done by a computer.

Generally the accounts have no monthly fees, no deposit fee, no withdrawal fee, and no minimums.  And the deposits are FDIC insured.

The current FDIC limit is $250,000 per depositor.  So if you and your spouse are both on the account, it’s insured for $500,000.  Meaning, if the bank goes out of business, the FDIC will reimburse you up to $500,000.

Limitations

The limitations are due to how the accounts work.  You need to have a checking account to set them up.  You generally can’t make a payment directly out of the internet savings account, so you will have to transfer the money to your checking account first before making the payment.

Transfers to your existing checking account can take 2-3 business days.  So if the transfer goes over a weekend or a bank holiday, you’re transfer could take as many as 5 days to complete.

Providers

ING Direct – Currently offering 1.10%

ING does a good job with their internet saving accounts.  They have a interest counter that tells you daily how much interest you have earned.  It’s quite fun to watch.

They also have the option of setting up a checking account with them so that you can instantly transfer money from your internet savings account to the checking account.  This would allow you to avoid the 2-3 business day limitation mentioned above.

HSBC Advance (formerly HSBC Direct)- Currently offering 1.10%

HSBC is one of the best internet saving account options, and is the one I am currently using.  They have generally maintained the highest interest rates of all the offerings, and I have never had a problem with their customer service.

And, although I have never used it, they also have the option of getting a debit card attached to the account, and being able to make ATM withdrawals from the account.  As I understand it, this would also be a way to get around the 2-3 day business day limitation mentioned above.

Emigrant Direct – Currently offering 1.00%

Emigrant Direct is one I have used in the past, but do not recommend.

I moved most of my money from them to get a higher rate at a different bank (HSBC), but left $0.01 in the account in order to collect that month’s interest.  They closed the account and initially refused to give me that month’s interest.  After calling and talking to a manager, I was able to get that months interest paid out.  It all worked out in the end, but it left a bad taste in my mouth for this particular bank.

Cautions

Some banks are trying to compare themselves with an internet savings account, but are instead a money market account.

The difference between a money market account and an internet savings account is that money market accounts have federally set limitations on withdrawals.  For example, you can only make 6 withdrawals per month.  This may not be a limitation for your situation and so a money market might work for you and you might be able to get an even higher rate, but the above internet savings accounts do not have this limitation.

The intent of the No Lose Stocks (NLS) and Long Shot Options (LSO) strategies is to:

1) Protect my core capital, and yet
2) Still expose me to unlimited upside gains

Over the past few years we have experienced a large drop in overall market value and then a subsequent large gain in market value.

In October of 2007, the Dow Jones Industrial Average (DJIA) hit a high of about 14,000.

Roughly 17 months later, in March of 2009, the DJIA hit a low of about 6,600, a drop in value of roughly 53%.

Then roughly 13 months later, in April of 2010, the DJIA hit a high of about 11,200, a rise in value of roughly 69%.

These large moves are the kind of thing that these strategies were designed to capture, so I did some analyzing of the historical data to see whether or not the strategies actually did what they were intended to do.

Was core capital protected?

Happily, the answer to this is yes.
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In a recent blog post on using a HELOC to save interest costs on your mortgage, I mentioned that I had basically converted my $10k emergency fund into a variable rate HELOC. A reader called me on that and asked how I could do that and still claim to be risk-averse, so I figured it was time to explain what I mean by “risk-averse”.

The Yardstick

My main financial goal right now is to build my savings to a point where my investment income will cover my monthly expenses. Let’s call that point “financial independence”. At that point, I can still work if I choose to, but a job will no longer have any control over my life. I will be in control, and control over our own lives, or autonomy, is a very big component of our happiness.

Not too long ago, I figured out that I could attain this goal of financial independence in a reasonable amount of time without any investment gains at all simply through saving a large percentage of my income and by lowering my monthly expenses. So when I’m looking at some financial move, I check that move against this goal. So for me, “risk” is anything that could endanger this goal, or push out the timeline that I’m currently looking at.

For example, investing my savings in the buy and hold strategy is risky from this perspective because the market could go down unexpectedly, generate large losses, and push out my timeline. So I avoid that strategy and instead go with strategies like No Lose Stocks and Long Shot Options that guarantee very limited losses compared to my overall savings.

Applying this yardstick to the HELOC, the worst case scenario would be that the bank cancels my HELOC, and I need the $10k for an emergency. If that happened, I would pull the $10k from an IRA. I currently have both a Roth and a Traditional IRA. The Roth IRA allows you to withdraw money that you have deposited without paying income tax or penalties, so that option would only cost me $10k. The Traditional IRA requires paying taxes and a 10% penalty when you make a withdraw, so that option would cost me about $13.5k. A loss of $10k or $13.5k is not going to significantly affect my timeline. Seen from this light, not having a $10k emergency fund in cash is not a risk because it doesn’t endanger my goal.

Cheap Happiness

Before anyone goes off thinking that financial independence requires a huge salary, or that it means I’ll be “rich” when I am financially independent, I’d like to point out that my goal will be attained on a fairly small amount of money. A central theme of happiness research is that wealth, stuff, and money are not requirements for happiness. So I’m voluntarily keeping my spending and accumulation of stuff low, which won’t affect my happiness, in order to achieve my goal, which will affect my happiness.

Since I don’t plan to be rich when I’m financially independent, that might affect which IRA I should be withdrawing from in the case of an emergency. The purpose of a Roth IRA is to get tax-free income (and you don’t have to wait until you’re 65). To be financially independent, I only need enough income to cover my monthly expenses. If my monthly expenses are low enough, then I probably won’t be paying much in taxes anyway.

When I reach my goal, I won’t have any FICA taxes to pay, so I’ll already need 7.5% less income than I currently do. Then the standard deduction for 2009 is $11,400. The personal exemption is $3650, and so for my wife and I, that’s $7300. Total that’s a currently allowed tax-free income of $18,700 per year (which gets indexed for inflation). So if I can get my monthly expenses under ($18,700/12 months) $1558.33, then I’d be paying zero taxes. That might seem crazy low, but I keep track of all my spending in a budget and my current monthly expenses are $2600, $800 of which is a mortgage payment (principal and interest only). So after I pay off the mortgage, my monthly expenses will be only only $1800. So if I were financially independent in the current tax environment, and didn’t have a mortgage, I’d be paying 10% in taxes on about $250 a month, or $25 a month.

Monthly expenses of $2600 would require a savings fund of $780k earning 4% per year. Monthly expenses of $1800 would require a savings fund of $540k earning 4% per year. So by paying off my mortgage, I can become financially independent for $240k less than otherwise. In addition, that $800 that used to go towards my mortgage, will instead go towards my savings and my goal.

What this has really made me consider is whether or not I need to pull all the deposits to my Roth IRAs out and pay them against my mortgage. If I don’t need the tax-free income later, then I might do better to get the reduced monthly living expenses now in order to achieve my goal faster.

Insurance

Since a very large financial loss would jeopardize my savings and my goal, I maintain insurance to protect against those kinds of losses. Generally, though, I only insure against risks that I can’t quantify or that after quantifying prove to be too big to bear.

A loss that would be too big to bear would be the loss of my house for example. If my retirement fund is only $540k, and my house is $180k, then replacing my house out of pocket would be a large financial burden. So I will maintain homeowner’s insurance even after the mortgage is paid off.

Risks that I can’t quantify include health costs and accidental damage to other people’s property.

For health risks, I maintain health insurance, but I’m only concerned with insuring against catastrophic loss. So I have a high-deductible HSA plan that covers costs 100% after the deductible is met in any given year.

For accidental damage, it’s possible that I could be at fault in a car accident with a number of vehicles or with a very expensive vehicle. Either way I can’t really quantify what the upper bound of that amount would be, so I maintain the highest levels of liability insurance. But I don’t carry any collision insurance on my car or my wife’s. I know how much those cars are worth and how much it would cost to replace them, and we can cover those costs out of pocket.

Currently we also have life insurance, but the amount is only enough to get the survivor to the financially independent point. We don’t maintain “lottery” level life insurance. And the policy is term life. So once we get to the point that we are financially independent, this insurance will be dropped as it will no longer be needed.

Getting back to the emergency fund and HELOC question again, at a mortgage rate of 4.625%, keeping the $10k in my bank account instead of paying down my mortgage would cost me $38.50 per month. Essentially, that $38.50 per month would be an insurance premium that guaranteed me $10k in coverage. Putting that in perspective, I pay $40 per month for homeowner’s insurance and that protects me from more than 10 times as much loss. So for me, the better option here is to pay down the mortgage and take the relatively small loss in IRA funds if it ever comes to needing the emergency fund.

Risk-averse, not Loss-averse

There is a difference between being risk-averse and being loss-averse. I am risk-averse when it comes to risks related to my happiness. However I’m willing to risk losing small amounts of money (a few thousand) if it means I can more quickly get to my financial independence goal and reduce my happiness risk. So I regularly try out different things that might lower my monthly expenses in the long run.

For example, I recently tried out Cricket wireless because they are cheaper than my AT&T plan. Unfortunately the Cricket service reception at my house is too poor for me to use it. I spent $85 trying that out. But I had set that money aside to lose, so it wasn’t a risk to my happiness. This is similar to what I do with Long Shot Options. You could look at the service and say that I’m losing money every month since I’m spending the interest earned on my core capital on options that will most often expire worthless. But my perception of this is that I’m not losing my core capital, or endangering my goal, and so my expectations are not violated.

Perception

I read an interview with Taleb recently that talks about how he manages the perception of loss.

At the beginning of the year he sets aside a certain amount of money to cover any surprise expenses, like lost or damaged property, parking tickets, speeding tickets, or any other annoyance. At the end of the year, anything left goes to charity. So if he does get a parking ticket, it’s no big deal because he’s already paid for it, and expected not to have that money anyway. His day isn’t ruined.

In fact, he may have a better day than someone else would. Consider the situation where you’re driving around trying to get a parking spot so you can get into a show before it starts. Time is running out, but there are just no spots left, except the handicap ones, or maybe some other ticketable spots.

For Taleb, I imagine the answer is simple, just park in a ticketable spot and enjoy the show. If it turns out he doesn’t get a ticket, it’s that much better, but there’s no pain if he does get a ticket. For someone else, they’ll probably drive around until they’ve already missed part of the show. Maybe park very far away, or risk it and park in a ticketable spot. Then throughout the show, instead of enjoying themselves, they’ll be wondering if they’ve been ticketed yet. They won’t be enjoying the show at all.

Wrapping Up

So the trick is to quantify your risks and potential losses to make sure they can’t harm you. If they can harm you, then insure against them. Then mentally reframe a potential loss as the expected scenario, and become used to that as your reality. Then you can live life without worrying about losses. Any losses you suffer will be expected, and any non-losses will be pleasant surprises.

Its about managing your expectations and not defying them. In my opinion, the worst thing to risk is your happiness.

I went searching recently to see if I could find all the ex-dividend calendars out there. Here’s what I found:

Dividendium.com – Ex-Dividend Calendar – My site of course showed up. I give the actual payout, a fair list of stocks, and the ability to download the listings as a spreadsheet. One thing I found is that I’m missing some stocks from my listings. So I need to fix that. If you notice a stock missing from my listings, email me about it.

UPDATE: I have added a new feature to the dividend lists. If you scroll to the bottom of the dividend lists there’s a message that says “Notice a stock missing? Add it!”. Clicking this will allow anyone to add a stock symbol that’s missing from the lists.

TheStreet.com – Ex-Dividend Calendar – Quite good. It gives the actual payout, and a pretty thorough list of stocks. The only complaint I had is that if you check it on the weekend, it doesn’t default to the upcoming Monday, you have to actually click on Monday’s date.

FullDisclosure.com or Earnings.com – Ex-Dividend Calendar – Really thorough list of stocks. Maybe too thorough. It also gives the actual payout. Here also you need to click the Monday’s date if you’re looking on the weekend.

Ex-Dividend.com – Ex-Dividend Calendar – You have to click the “Search Date” button to see the data, and it’s only AMEX stocks.

DividendInvestor.com – Ex-Dividend Calendar – You have to click “Go” to get the data for the selected date. Also it looks like knowing which stocks are in the list is a subscription only thing. But they still give their “AllStar Ranking” for each of the stocks, so if you wanted to, you could use any of the other ex-dividend calendars to figure out which stocks those were by matching up the payout amounts and closing prices.

Dividend.com – Ex-Dividend Calendar – Gives the annual dividend, rather than the actual payout for the given ex-dividend date. And there are stocks going ex-dividend that are missing from the list.

DividendStocksOnline.com – Ex-Dividend Calendar – You have to click the month you want to view. And then it lists all the days in the month. It also only lists the annual yield percentage, and only lists stocks with a 4% yield or higher.

DividendInformation.com – Dividend Calendar – You have to click the “Dividend Calendar” tab. You can change the date by clicking the calendar icon. But I think they are listing the data by paid date, and not by ex-dividend date. So maybe if you looked a month into the future, you could use it to figure out when an ex-dividend date might be.

DividendsCalendar.com – Dividend Calendar – This lists stocks by their dividend payout date, not the ex-dividend date. It also seems to be only historical as it has no data beyond December right now.

If you’re wondering why I might find it worthwhile to list out the competition, here’s a previous post I wrote about acknowledging the competition and using that pressure to get better, so that’s pretty much the reason for this post.

If you know of or find any other ex-dividend calendar websites, feel free to post them in the comments.

Lately, I’ve been looking for a way to earn more money on my savings. The 1.25% I’m getting right now just isn’t cutting it. But, I’m very risk averse, so I’m not sticking the savings in the market. And some of the savings I’m earning interest on will be needed in less than a year, so I can’t tie the savings up in a long-term CD for example.

A buddy of mine has a similar problem. He’s a partner in a business and so has to keep a large amount of cash on hand to pay his quarterly taxes. So he was also looking for a way to get a better return on these savings, and he stumbled upon something called “Mortgage Cycling”.

I had read about this a long while back, but it wasn’t something I could take advantage of at the time. But circumstances have changed, and I’m now in a position to put this strategy into effect for my own savings. Here’s how it works.

Mortgage Cycling

First, you must have a mortgage, and it must be one that you actually need to have. Meaning you couldn’t afford to live in your house without the mortgage. So this isn’t for people who have paid off their house. They’re already in a better position than this.

Second, you must be able to get a Home Equity Line of Credit, or HELOC. The requirements for a HELOC (at least in Texas) are that you must have more than 20% equity in your house. Or stated otherwise, your mortgage plus the HELOC cannot be more than 80% of the home’s market value. (This was the circumstance that prevented me from taking advantage of this in the past.)

Third, you must have some amount of money left over at the end of the month. This would be the savings you want to earn a higher return on. As part of our budget, my wife and I set aside money each month for large annual or bi-annual expenses like car insurance, home insurance, life insurance, real estate taxes, Christmas gifts, and IRA deposits. We also have categories that we stash money away in for when we want or need to spend it later like car expenses, home expenses, medical/dental expenses, pet expenses, entertainment, and vacations. So in any given month we have up to $2k that basically goes in a bank account to wait until it’s needed.

Now, the key to understanding this strategy is that you pay interest on your current mortgage balance each month. If you can lower that monthly balance, even temporarily, then you’ll save money by not paying interest on the amount that you lowered it by. And that saved money is equivalent to making a higher rate of return on that money.

So say you owe $100k on your mortgage and your annual interest rate is 6%. That means for the current month, you would owe the bank ($100k * 6%/12) $500 in interest. If you paid an extra $2k against your mortgage, then your balance would be $98k, and you’d only owe $490 in interest. You’d have saved $10. Which is equivalent to earning an annualized 6% on the $2k.

Next month, you put another $2k against the mortgage, and you save another $10 per month. So this month you saved $20. With the $10 from last month, that’s $30 total so far for the year.

Then as the months roll by, $30 becomes $60, $60 becomes $100, $100 becomes $150, and so on up to $780 total for the year in month 12. Month 12 is when I need some of the money that I’ve been saving to pay for real estate taxes, insurance, gifts, and IRA deposits.

At this point, I can take a draw against my HELOC, and pay those expenses with that. So now I have my mortgage, plus a debt on my HELOC to pay off. The HELOC will probably be a variable rate, or if not a variable rate, then a fixed rate which is higher than my mortgage. So in coming months, my $2k deposits will go against paying off the HELOC until it’s paid back down to zero, and then the $2k deposits will go against my mortgage again.

Note though, that I’m not pulling out the full $24k that I saved up over the year. There were those other non-annual expenses (car, home, medical/dental, etc) that I didn’t necessarily need to pull money out for. So those other savings are continuing to “earn” the 6% interest.

So where is that $780 then? Well, you’re still making your regular mortgage payments, so the $780 actually went to pay down the value of your mortgage. So not only are you making a better return on your short-term (and/or long-term) savings, you’re also paying off your mortgage faster.

How much faster? Well, paying $780 on a $100k mortgage each year is like making an extra mortgage payment each year, which would pay off the mortgage in about 25 years as opposed to 30 years.

Risks

There are a few risks, but they are remote in my opinion.

One possible risk is that your HELOC could be canceled. Maybe the bank goes out of business, or some other unforeseen circumstance occurs and your HELOC is not accessible. If that happens, then you wouldn’t be able to immediately get the extra funds back. I see this as very unlikely to happen. If it did happen, then I’d borrow money some other way at the time, either opening another HELOC with a different bank or borrowing on a credit card, or whatever.

Another possible risk is that your variable rate HELOC’s interest rate could shoot up. In this case, I would just pay down the balance on the HELOC as fast as possible. And if rates were really going up, then savings rates would also be going up, and I might consider switching to putting my savings in a savings account again.

Where to get a HELOC

So the only other question my buddy had was where to get the HELOC. My suggestion for any loan or savings product is to always check the credit unions in your area first. They have a natural advantage against the banks in that they pay less taxes. So the banks have to charge higher fees to make the same profit and provide the same service as the credit union.

It used to be kind of difficult to join a credit union. You used to have to satisfy some fairly tight restrictions to join. But it seems like lately anyone can join any of them by jumping through some fairly easy hoops. For example, in my area, there’s a place called A+ Federal Credit Union. I think it was originally a teacher’s credit union. But under the requirements now, you can get in if you have a kid in any of the schools around here. And if that doesn’t get you in, then you can donate $10 to a charity fund they have for supporting teachers.

So basically, if you pay $10, you’re in. They charge 1% of the Line of Credit Limit, plus about $150 to establish the HELOC. The current interest rate is 4.625% according to their webpage.

Another Credit Union in my area is Austin Telco FCU. They don’t advertise their HELOC’s very well…or at all really, but they pay all closing costs, so establishing the HELOC is free. The only catch with theirs is that you can only make 6 draws on the HELOC for the life of the HELOC. Since I’m only planning on doing 1 per year, that might work for me. They also say you can only open one HELOC per 12 months. So worst case, I just close the HELOC after 12 months and open another to get another 6 draws on the HELOC. Theirs is also variable, and it’s 4.5% right now.

And still another Credit Union is University Federal Credit Union (UFCU). They have a fixed rate 6% HELOC, and the closing costs are not to exceed 3% of the Line of Credit limit.

So there’s lots of options for establishing the HELOC and getting this strategy going.

Wrap Up

So there you go. A way to get a higher return on your short-term savings by paying off your mortgage faster and without tying up your money long-term.

[EDIT] Postscript

My buddy pointed out that there is another way to implement this strategy that hadn’t occurred to me.

His implementation of the strategy would be to replace his mortgage with a HELOC. So he would get a HELOC for the amount of his current mortgage, and then pay off his mortgage. This would likely need to be done all at once by the bank as part of the closing. But as long as you owe less than 80% of the value of your house you should be able to do it.

For that particular implementation, you would probably want the interest rate to be fixed because you’re likely going to have a large amount of debt sitting in the HELOC. The UFCU 6% fixed rate HELOC would work for this. The website says they have 5 to 15 year terms. So if you had less than 15 years left on your mortgage, you could switch to the HELOC and not pay off the debt on your house any faster than currently. Getting into specifics though, since the UFCU HELOC has 3% closing costs, you would need to make sure that you’re going to use this strategy to save at least that much.

I played with some spreadsheet numbers quite a bit, and here’s what I found out…

Of course, if your new HELOC interest rate is less than your mortgage interest rate, then you’ll save money. Make sure to figure in the closing costs to the amount you would save in interest to make sure you’re saving money overall.

If your new HELOC has a higher interest rate than your mortgage, then it gets a little less clear. The scenario I worked up was if your mortgage rate was 5% fixed and your new HELOC rate was 6%. And you planned to make extra payments throughout the year, and then pull out all the extra payments at the end of the year.

If your mortgage was $100k, you would need to make extra monthly payments of about $2500, and then pull out $30k at the end of the year. This would save you just over $3k for the life of the mortgage/HELOC, and so you would only just barely be making up for the closing costs on the HELOC.

If your mortgage was $50k, you would need to make extra monthly payments of about $1750, and then pull out $21k at the end of the year. This would save you just over $1.5k for the life of the mortgage/HELOC, and so you would only just barely be making up for the closing costs on the HELOC.

If you don’t use this implementation of replacing your mortgage with a HELOC, and instead just augment the current mortgage with a HELOC, like in my original explanation above, then what you are really doing is paying off your mortgage faster. And that’s where the savings come from. This happens to work out for me, but it’s not going to be what everyone wants.

I’ve been looking at my taxes for 2009 to see if I needed to make any last minute moves to lower my tax bill. One strategy that I use for this is called “bunching tax deductions” or just “bunching”. But this year deserves a little extra consideration because of a new deduction for real estate taxes.

Standard Deduction vs. Itemized Deductions

Every year the IRS gives you an option. You can either itemize your deductions, or you can take the standard deduction. If you itemize, then you add up all of your tax deductible expenses for the year like real estate taxes, mortgage interest, sales taxes, donations, and medical expenses, and that amount is subtracted from your income.

So if you made $50k for the year, and you had $11k in mortgage interest, real estate taxes, sales taxes, and donations, then you would pay taxes on ($50k – $11k) $39k instead of on $50k. That’s a simplified example, but that’s the gist.

If you use the standard deduction, then you just take whatever number the IRS says is the standard deduction for that year, and you subtract that from your annual earnings. For 2009 the standard deduction is $11,400. So if you made $50k for the year, and you take the standard deduction, then you would pay taxes on ($50k – $11,400) $38,600.

You always want to pay less in taxes, so in the above situation, you’d take the standard deduction, and pay taxes on $38,600 instead of paying taxes on $39,000. That’s a difference of ($39,000 – $38,600) $400, which at a tax rate of 15% would save you $60.

This is pretty much the standard procedure that everyone takes every year. The IRS forms even walk you through this decision and all the tax software out there does the same thing, so you always end up taking the better deal, itemized deductions or standard deduction.

But it always bugs me to see that $11k in deductions basically just get wasted. Enter bunching.

Bunching

Taxes are figured on an annual basis. So for a deductible expense to be counted on your taxes, you have to have paid the expense in the given tax year. This combined with the option to take a standard deduction gives us some room to maneuver and squeeze a little more money out of our tax deductions. We could for example, pay our real estate taxes in January 2010 instead of December 2009, and then pay our 2010 real estate taxes on December 2010. That would mean we bunched our real estate tax deductions and got a double deduction of real estate taxes for 2010.

So from the example above, if your real estate taxes were $3k per year, and you paid them in January 2010, then you would only have ($11k – $3k) $8k in itemized deductions for 2009. But you were already going to take the standard deduction for 2009, so that doesn’t matter. However, you’ve now pushed that real estate tax deduction into 2010, so if you pay your 2010 real estate taxes in December 2010, you’ll have ($11k + $3k) $14k in itemized deductions.

It’s important to note here that the standard deduction is adjusted up for inflation each year. So 2007 was $10,700, 2008 was $10,900, and 2009 will be $11,400. So 2010 will likely be higher than $11,400, like maybe $11,900. But $14k is still higher than $11,900. So you would take the itemized deductions instead of the standard deduction, which would mean paying taxes on $2,100 less, which would save you $315 in taxes.

Some mortgage holders will allow you to tell them when to pay your real estate taxes, but I self-escrow so I can make sure the taxes are paid when I want them paid. I don’t want to miss out on $315 just because of a procedural mess up at my bank.

Note that my example revolves around bunching real estate taxes, but you could bunch any deductible expenses. You could pay your last mortgage payment of the year in the next year to bunch the mortgage interest. You could postpone a medical expense into the next year. You could bunch your charitable donations into the same year. And so on.

So that’s bunching. You choose to “bunch” deductible expenses you would make anyway by paying them all in the same calendar year and attempt to get your itemized deductions above the standard deduction for the next year, or rather for every other year. So you would use the standard deduction for 2009, then bunch in 2010, then standard in 2011, then bunch in 2012. And then according to the Incan calendar the world ends, so it doesn’t matter after that.

Real Estate Tax Deduction

The catch for 2009 is that there was a change to the tax law for 2008 and 2009 that now allows up to $1000 (for married couples, $500 for singles) to be deducted for real estate taxes even if you take the standard deduction. So if you pay at least $1000 in real estate taxes in 2009, then your standard deduction would actually be ($11,400 + $1,000) $12,400.

But if we “bunch” our real estate taxes into 2010, our standard deduction would still only be $11,400. The best would be if we could take advantage of this new deduction in 2009 and still do bunching for 2010. The way to do this is to only pay $1000 of your 2009 real estate tax bill in December 2009 and pay the remaining amount in January 2010. I’m guessing your mortgage holder would definitely not be open to this, so you would probably need to be self-escrowing to do this.

So from the example above, your 2009 taxes would be on ($50k – $12,400) $37,600, which would save you $150 over the $38,600 from before. And now your 2010 taxes would have ($14k – $1k) $13k in tax deductions. If the 2010 standard deduction is $11,900, then you would be paying taxes on $1,100 less than the standard deduction. Which would save you $165 over the standard deduction.

So in the bunching only situation, you saved $315 in taxes, and in this situation you save ($150 + $165) $315. So you pretty much just get the $150 a year earlier. That may seem trivial, but I prefer to keep my money as long as possible.

For some tax situations, moving $1000 in real estate tax deductions to 2009 may not leave enough bunched deductions in 2010 to get over the standard deduction. So in those cases, it may make sense to pay the 2010 real estate taxes in January 2011, and so bunch in 2011 instead of 2010.

(EDIT: I have consolidated all of the Saturday Selections posts into this post. They are below in chronological order separated by dotted lines.)

In the last post on the recent changes to Dividendium I said I would start posting what I would do with the Investing Strategies data. Note of course that these are just my opinions and let me state for the record that I don’t have any more insight than any other person into how the market is going to move in the future. So take this all with a massive block of salt.

I’ll be going through each Investing Strategy one by one, and referring to the trades by their Trade ID from the data spreadsheets.

These picks are from the 11/13/2009 spreadsheets.

Inflatable Dividends

My disclaimer here is that I do not personally use the Inflatable Dividends strategy. For my own investing goals this strategy is too risky.

I determined a while back that I could save my way to financial independence, and that I was happy with the time frame that saving alone would get me there in. So my focus is on not losing money, rather than on making gains. Any gains I make are just going to get me to financial independence faster, but I definitely don’t want to get there slower. Inflatable Dividends exposes me to too much risk because there is a chance that the market could move against me, and I wouldn’t be able to buy back the call in order to unwind the trade.

But if I put on the hat of someone that is willing to take the risks involved with this strategy, here’s the thought process I would go through to make my picks from the Friday, 11/13/2009, spreadsheet.

I always look at the stock charts for the stocks first. I use www.bigcharts.com. I’m looking for stocks that don’t look like they could fall at any moment. To me, this means that the stock price seems to be in a “range” for the recent past.

Recent past would be maybe double the amount of time to expiration. In this case there are 6 days until expiration, so I’m looking back about 12 days, or about 2 weeks to get a feel for how the stock is moving. Based on this alone I would kick out Trade IDs 1, 4, 7, 9, 12, 13, 14.

This leaves 2, 3, 5, 6, 8, 10, 11.

2 and 3 drop out because their ex-dividend dates are on Monday, so it was already too late to put those trades on when this data was posted. This is a minor bug in the service that I’ll be fixing. It should be figuring in weekends when it determines if you could buy a trade based on the ex-dividend date.

I would also kick out 11 because it has a lot of news around it in the current environment. News can make a stock’s price move erratically. For this strategy I want to have a stock that just plods along and pays out the dividend without stirring up any dust.

So this leaves 5, 6, 8, and 10. Next I verify that all of the stocks are actually paying dividends as Dividendium says they are. Dividendium takes an educated guess at what an upcoming dividend payment will be, so it’s good to independently verify. I use the www.bigcharts.com “detailed quote” for this. In this case they all look good.

So those Trade IDs 5, 6, 8, and 10, in that order are the ones I would buy if I was using this strategy.

No Lose Stocks

I do use the No Lose Stocks strategy, but I make sure that I don’t invest in trades that could lose more than 3% annualized.

The data in the spreadsheet is sorted by “Annualized Percent to Profit”, which means I’m looking for the stocks that have to rise the smallest amount per year to give me a gain. Sometimes the gains needed seem really high, like 30%, but again, I don’t know any better than anyone else where that stock will be in 2 years. So as long as I don’t lose money on the transaction, I’m willing to “fish for luck” by putting my money where it might make gains, even if gains don’t seem likely.

For this strategy, the first thing I look at is whether or not the stock has recently shot up in price and come to a very level price range. Trade ID 1 is a good example of this chart formation. If the stock has done this, then it usually means that the stock is a buyout target, which Trade ID 1 is. When I see this chart formation, I will usually check the news around the stock for the last year, and usually there will be an article talking about the stock getting bought out in the near future.

I skip these buyout stocks because the only scenarios I see are that the stock stays at the buyout price, or the buyout falls through and the price drops precipitously. With this strategy, I’m looking to buy dividend stock put combinations that can only go up. Since this situation is very unlikely to go up, it doesn’t really fit. Also, once the buyout happens, the dividend is usually no longer going to be paid out. So skip Trade ID 1 and 3 (same stock for both).

Trade ID 2 is also out. The “Annualized Maximum Percent Loss No Dividend” is -27%, which means that if I do this trade and the dividend is cut or suspended or the stock is bought out during the trade, then I could potentially be losing 27% of my invested funds per year. That’s way above my 3% loss tolerance stated above.

Trade ID 4 looks good. (Full Disclosure, I own an earlier expiration date of this same trade, which I purchased a while back.) I always like to check Dividendium’s educated guesses on whether or not a stock has consistent enough dividends for this strategy, and whether or not the predicted dividends look correct for this particular trade. For Trade ID 4, the dividends look correct to me. Actually they might be a little low as it looks like this company has been raising it’s dividend.

The other thing to look at with Trade ID 4 is the “Interest Rate Where Call Is Better (%)”. For this one, that’s 0.66%. So if you took the money you were going to invest in the Stock and Put and instead put that money in a savings account earning more than 0.66%, you would have enough to buy the call at the same strike price as the Put. The call being better assumes that the dividends are not raised over the life of the trade.

So in this case, if you like this trade, it might be better to stash your cash in savings and use the interest to buy the call. The call could very well expire worthless, so don’t put anything other than the interest earned into the call. Also note that if you buy the call instead of the stock put combo, you have no dividend risk, meaning there’s no possibility of loss due to the dividend being cut or the stock being bought out.

I used to prefer to buy the stock and put combo, mainly I think because it seemed cleverer, but I’ve come to see the wisdom in the simplicity of just buying the call. For this reason, I would buy the call for Trade IDs 4 through 13, and 16, since they are all cheaper given an interest rate of less than 1%.

Also note that since this strategy is essentially “fishing for luck”, I want to spread my investable funds over as many of the stocks as possible to get the most exposure to possible gains. So I will buy as many 100 share and put combos, or 100 share call options as I have the funds to cover, and usually not double up on a particular stock. Occasionally, I’ll double up if there aren’t enough trades to put all my investable funds to work, or if a new trade has an expiration date further in the future.

The remaining trades, 14, 15, and 17 through 25 are all trades that would expire in less than a year, and have “Annualized Percent To Profit” values of more than 50%. It’s entirely possible that these would produce a profit, but if I get this far down the list and still have funds left to invest, then I will normally switch to Long Shot Options.

Long Shot Options

As I said, I also use the Long Shot Options strategy. Again, I’m just fishing for luck here, so I want to spread out my investable funds as much as possible. I never buy more than the minimum 100 share call or put for any given stock.

I also never buy these trades with anything but the interest earned on my core capital because I’m expecting them to expire worthless most of the time. So if I have $100k sitting in a money market at 1.25%, that generates $1250 per year, or $104 per month.

Then each month when I get my account statement, I take the amount earned in interest, $104, and buy Long Shot Option plays until it’s all used up. So in this case that would be 20 $0.05 trades or 4 $0.25 plays, or some combination of that. I try to split the money evenly between the calls and the puts because I never know which way the market is going to go.

When I look at these trades, I take a quick look at the chart to make sure it’s not a buyout situation. Then I pretty much buy right down the line.

For the Calls, I’m looking for the “Percent To Profit Per Day Times Ask” that is the smallest. Basically, I want to pay the least amount for how much a stock has to go up per day to produce a profit.

Trade ID 1 is showing the buyout chart formation, and is indeed the subject of a buyout according to the news. (I usually look at the news stories for the stock on the stock quote page on either Yahoo or BigCharts.) So I would skip Trade ID 1.

Trade ID 2 is a well known stock, so I generally won’t even waste the time to look at the chart for a well known stock as it’s unlikely it will get bought out. As a bonus, Trade ID 2 is also 6 cents per share. I’m highly attracted to the idea of putting down a very small amount and getting back a nice return. Like when I put down 25 cents on a GM put not too long ago and made 400%. It makes a great story.

There’s also the fact that I can buy more 6 cent trades than 25 cent trades, and so expose myself to more positive luck that way. But generally I will just go down the list and buy any of the calls that are not buyouts.

Trade ID 3 is a buyout. So skip that. Trade IDs 4, 5, and 6 are well known, and so I would just buy them. Trade ID 7 is not a buyout, so I would buy it. And so on.

For the Puts, I’m looking for the smallest “Percent To Profit Per Day Times Ask Divided By Max Profit”. Basically, I want to pay the least amount for how much a stock has to go down per day to produce a profit, and moderate that by how far down that stock can go. Since a stock can’t go below $0, there is a maximum amount of profit to be made on these trades.

I’d buy Trade ID 1, 2, 3, 4, and 5. Skip 6 and 7 because they are buyouts. And then buy 8, 9, 10, and so on.

Note that the stock for Trade ID 3 is one that I said I would buy above in calls as well. So I’m saying I would buy both a call and a put on the same stock. Since I don’t know which way the market will go, I don’t try to out guess it and so I’m willing to make trades that go both ways.

Wrap Up

So there’s the selection of trades I would buy from the most recent Investing Strategies data. In future “Saturday Selection” posts, I’ll be much more brief about my choices. I just wanted to give a general overview of my thought process on choosing trades from each of the strategies this time.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 11/20/2009 spreadsheets.

Saturday Selections are what I’m going to call my weekly post about how I would use the Inflatable Dividends , No Lose Stocks , and Long Shot Options services that Dividendium publishes. This will be the second installment with the first installment having been posted last Saturday.

I’d just like to clarify that all of the services publish their data daily. So although I’m only giving tips on how I would use Friday’s data each week, the data from any other day could be used, using the same criteria that I laid out in the initial installment. If I were to try to post my thoughts on every day’s data, it would be too time consuming for me, and the posts would rarely get out early enough for subscribers to find any use in them. By posting on Saturday subscribers then have Sunday to review the post, and can take any actions on Monday’s open.

Review

I won’t do this every time, but I’m going to do a quick review of the trades I suggested last time for the Inflatable Dividends service. The suggestions from last time were 5, 6, 8, and 10 from the 11/13/2009 Inflatable Dividends spreadsheet.

All four stocks gapped up at the open on Monday and didn’t come back down to their Friday’s close at any point during Monday. If I can’t buy a position the day after the spreadsheet is published then I don’t buy it. If the same trade is in the next day’s spreadsheet, then I consider it like I would any other trade in that day’s spreadsheet. So I would not have actually purchased any of these trades.

Inflatable Dividends

There’s only one trade in Friday’s spreadsheet this week. This is probably due to the fact that option expiration just happened on Friday.

After looking at the chart for Trade ID 1, I would pass on this one. Option expiration is a month out, so I look back about 2 months to see how the stock has been acting. It’s recently fallen from a long run up. That may mean that it’s just taking a breather and will go higher from here, or it may mean that it’s on it’s way down. Either way it doesn’t appear to be in a nice stable price range, which is what I would be looking for.

So for 11/20/2009 Inflatable Dividends spreadsheet, there are no recommended Trade IDs.

No Lose Stocks

Skip Trade IDs 1 and 2 since the stock is a buyout target. Then I would skip 3, 4, 8, 9, 10, 15, and 18 because they are all over my self-imposed limit of 3% max annualized loss. I would buy the call options for 5, 6, and 7 since that’s cheaper than buying the stock and put in those cases. And since the rest require an annualized percent to profit of more than 50% I would move on to Long Shot Options.

So for 11/20/2009 No Lose Stocks spreadsheet, I would buy the call options for 5, 6, and 7.

Long Shot Options

Skip Trade IDs 1 and 2 since they are buyout targets. But otherwise I would just buy as I moved down the list until I used up the interest I earned on my funds last month.

So for 11/20/2009 Long Shot Options spreadsheet, I would skip 1 and 2 and buy until I ran out of earned interest.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 11/27/2009 spreadsheets.

Inflatable Dividends

You’ll notice that the size of the spreadsheet has expanded again back to it’s original size. One of the subscribers said that he liked to have all the extra data to be able to consider some of the more exotic covered call dividend capture plays that Inflatable Dividends finds. So the top section of data is what Inflatable Dividends thinks are the best trades to make, with ex-dividend dates that are confirmed, and option expiration dates within the next month.

There’s a disclaimer on the second section that says:

“DISCLAIMER: Trades listed below here do NOT follow the normal Inflatable Dividends criteria. These trades require in depth analysis before deciding to invest. The data below here contain many guesses made by Dividendium and should be highly scrutinized if used at all.”

So I will not be considering any trades for Saturday Selections that come from the second section of data in the spreadsheet.

Jumping in to the picks for this week. If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 2, 4, 6, 7, 8, 9, 10, 11, 12, 14, 16, 17, 19, 20, 21, 23, 24, 25, 26, 27, 29, 30, 31, 32, 33, 34

That leaves the following trades as ones I would pick: Trade IDs 1, 3, 5, 13, 15, 18, 22, 28, 35, 36.

I stopped looking after I found 10 trades that I would do, which means I stopped looking after Trade ID 36. So there may be others in the list that I would consider good as well.

No Lose Stocks

Skip Trade IDs 1 and 2 for buyouts. I’d buy the call options for Trade IDs 3 and 4 with interest on the money I would have used to buy the stock and put for those trades. I’d skip the other trades in favor of Long Shot Options as all the rest seem to be long shots anyway.

Long Shot Options

In previous posts, I have skipped options that were part of a buy out. That still seems practical for a call option, but a reader pointed out that buying the puts on buy out stocks might not be a bad idea. If the buy out falls through, then the put may pay off just from the people rushing out of the stock. And it might turn out that there was a good (or really bad) reason that the buy out did not go through and so the stock might fall even further.

So for the calls, Trade ID 1 is a buyout, so I’d skip that one, but then I’d just buy down the line.

For the puts, since I don’t care about buyouts, I’d just buy right down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 12/4/2009 spreadsheets.

Inflatable Dividends

If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 2, 3, 4, 5, 6, 7, 8, 9, 11, 13, 14, 15, 18, 19, 20, 21.

That leaves the following trades as ones I would pick: Trade IDs 1, 10, 12, 16, 17.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

Skip Trade ID 9 because Trade ID 5 is the same stock and a better buy.

I’d buy the call options with interest on the money I would have used to buy the stock and put for Trade IDs 2, 3, 5, 6, 7, 8, 10. Trade ID 4 doesn’t have a call option detailed because Yahoo wasn’t reporting one, but BigCharts says the call at the same strike and expiration date has an ask price of $1.18. That figures to an interest rate of .71%, so I’d buy the call on that one too.

Trade ID 11 says the interest rate is -1, which means there is no interest rate at which the call is better than the stock and put, so I would buy the stock and put for Trade ID 11.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade ID 1 and 2 since they are buy outs, and then I’d just buy down the line.

For the puts, just buy down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 12/11/2009 spreadsheets.

Inflatable Dividends

If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 1, 2.

So there are no trades that I would pick from this spreadsheet.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

Skip Trade IDs 9, 12, and 13 because the same stock is used in a better buy.

I’d buy the call options with interest on the money I would have used to buy the stock and put for Trade IDs 2, 3, 4, 5, 6, 7, 8, 10, 11, 14, 16, 17, 18.

Trade ID 15 says the interest rate is -1, which means there is no interest rate at which the call is better than the stock and put, so I would buy the stock and put for Trade ID 15.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade ID 1 since it’s a buy out, and then I’d just buy down the line.

For the puts, just buy down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 12/18/2009 spreadsheets.

Inflatable Dividends

Option expiration happened this past Friday, so there are no trades currently listed for this strategy.

So there are no trades that I would pick from this spreadsheet.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

I’d buy the call options with interest on the money I would have used to buy the stock and put for Trade IDs 2 – 12.

Trade ID 13 says the interest rate is -1, which means there is no interest rate at which the call is better than the stock and put, so I would buy the stock and put for Trade ID 13.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade IDs 1 and 2 since they are buy outs, and then I’d just buy down the line.

For the puts, just buy down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 12/26/2009 spreadsheets.

Inflatable Dividends

If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 1, 2, 3, 4, 5, 6, 8, 9, 12.

That leaves the following trades as ones I would pick: Trade IDs 7, 10, 11, 13, 14.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

I’d buy the call options with interest on the money I would have used to buy the stock and put for: Trade IDs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 23, 26, 27, 28, 30, 32, 34, 35.

The skipped Trade IDs in the range above were for stocks that were covered by better trades already in the list above.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade ID 4 since its a buy out, otherwise I’d just buy down the line.

For the puts, just buy down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 1/1/2010 spreadsheets.

Inflatable Dividends

If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 2, 3, 5, 6, 8, 9, 12, 13, 14, 15, 16.

That leaves the following trades as ones I would pick: Trade IDs 1, 4, 7, 10, 11, 17.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

I’d buy the call options with interest on the money I would have used to buy the stock and put for: Trade IDs 2 – 47.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade IDs 1 and 3 since they are buyouts, otherwise I’d just buy down the line.

For the puts, just buy down the line.

Saturday Selections

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 1/8/2010 spreadsheets.

Inflatable Dividends

If I was using this strategy, I’d skip the following trades because they haven’t been in a good price range for more than twice the time until expiration: Trade IDs 1, 2, 3, 4.

That leaves no trades that I would take this time.

No Lose Stocks

Skip Trade ID 1 since it’s a buyout.

I’d buy the call options with interest on the money I would have used to buy the stock and put for: Trade IDs 2 – 22. Note there are a few repeats in there, and I would only buy the better trade (lower Trade IDs).

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, I’d just buy down the line.

For the puts, I’d just buy down the line.

Saturday Selections

NOTE: I’ve been posting these “Saturday Selections” for a bit now, and I think it’s pretty clear what my criteria are and how I would implement them. So I’m planning to make this my last “Saturday Selections” post. If you would prefer otherwise, please let me know.

See the first installment of Saturday Selections for details on the criteria I’m using to make these picks.

These picks are from the 1/15/2010 spreadsheets.

Inflatable Dividends

Option expiration happened this past Friday, so there are no trades currently listed for this strategy.

So there are no trades that I would pick from this spreadsheet.

No Lose Stocks

Skip Trade ID 2 since it’s a buyout.

I’d buy the call options with interest on the money I would have used to buy the stock and put for Trade IDs 1, 3 – 28.

The remaining trades all require more than a 50% annualized gain, so I would skip them in favor of Long Shot Options.

Long Shot Options

For the calls, skip Trade ID 1 since it’s a buy out, and then I’d just buy down the line.

For the puts, just buy down the line.

For a while now I have been working on making some improvements to Dividendium. Mainly these improvements are in the backend of the site, but some of them will be obvious from the frontend. Here’s a rundown of the new features…

Login

On all non-blog pages of the site, you’ll see a “Login” text box. This allows subscribers to the Investing Strategies services to access the content they subscribed to. There is no password. It’s just whatever email address you subscribe with. A subscriber can’t change anything from Dividendium, so it would only be an annoyance to make a user remember yet another password for logging into the site.

Dividends Search

The Dividends Search section of the site had lots of changes.

First, all regular Dividend Data and Investing Strategies services now have a web interface.

The web interfaces allow sorting of the data right on the webpage by clicking the headers of the columns. The columns for the Investing Strategies are all sorted by what I think are the most pertinent measures of a trade’s potential.

There are previous and next links at the bottom to move to the next or previous pages.
If you go to the “next” page, you’ll see some parts of the browser URL that are “hackable”.

http://www.dividendium.com/DividendsSearch.aspx?filter=&page=1&max=20

The “page=1” indicates that you are on the second page of the data. The pages range from 0 to however many pages of data there are. If you go too high, it just won’t have any data to show.

The “max=20” is how many stocks you want to show at a time. 20 is the default. If you change it to 200, then it will list 200. It may take a while to load the page if you go too high though. The number will be maintained as you click next and previous.

There’s also a new text box on the non-Investing Strategies pages that says “Get emailed when data is updated”. This allows anyone to get emailed when Dividendium’s dividend data is updated, which happens every weekday after the market closes.

On all the Dividends Search pages there is a link that says “Download CSV Data”. This allows you to download the current data in spreadsheet form (CSV is comma separated values and opens in Excel or pretty much any other spreadsheet program you want to use). So now you can download the daily dividend data and sort, parse, and collate til your heart’s content.

Under that is the “Historical Data” link. This link will take you to a list of the archived spreadsheets for previous days. So if you wanted to do some back testing or just see what the trades were on a particular Investing Strategy in the past, this is where you’d be able to find them.

The spreadsheets are listed by date, and the data in the spreadsheets is sorted the same as the default sort on the webpage. So the trades near the top are more likely (in my opinion) to be the better trades. I’ve also filtered out a lot of the trades that were not as good or that didn’t match the strategies as well. So the more recent spreadsheets are much shorter and smaller in size.

You’ll also notice in the most recent spreadsheets for the Investing Strategies there is a new column called Trade ID. I’ve received lots of requests for guidance or advice on which trades I would choose from the spreadsheets. So I’ll be posting what trades I would do, and probably will do in some cases, on Saturdays. That way subscribers can read over the info on Sunday before the Monday open. In order to avoid giving away the data that the subscribers paid for, I’ll be referencing the trades by their Trade ID.

Investing Strategies

All Investing Strategies (Inflatable Dividends, No Lose Stocks, and Long Shot Options) now have a 6 month free trial. I don’t want anyone to pay for something they don’t find useful.

The email delivery for the Investing Strategies has also changed. Emailing used to be done through Yahoo Groups, which was a royal pain to deal with as far as getting people signed up. It worked for the time being, but I’m very glad to be rid of it now.

The emails are also now personalized. So rather than receiving one email for each subscription, subscribers now receive one email total each day with all of their subscription links in it. The links will take you right to the data and automatically log you in. Or you can download the data right there from the email. And if you decide the subscription is not for you, there’s a cancel link right next to each subscription.

My intention was to make it as easy as possible to cancel a subscription. The easier I make it, the better the feedback I’ll get on whether or not people find a service useful.

Lastly, the No Lose Stocks Investing Strategy data is now updated daily.

Suggestions or Complaints

So let me know what you think of the new changes, or if you have suggestions for further changes feel free to send them to me via Contact Us or contact@dividendium.com.

In past articles, I’ve talked about ignoring the news. The current environment seems to be a great time to practice that particular bit of self-preservation. A recent discussion with a good friend reminded me about how easy it is for us to fall into the herd mentality and build on each other’s fears.

My friend was wondering if he should change his financial behavior in response to the ominous things he was reading on the news sites, in particular CNN. My advice was to ignore the news and not to change his behavior. I told him his reasoned financial decisions should be made independent of the state of the economy. Whatever reasoning is used should be sound in any economy. For example, it’s always a good idea to spend less than you make and to have reserves like an emergency fund.

Reject the new

It turns out that the optimal strategy is always to reject the new, which includes new inventions, new medicines, new procedures, and of course news. It’s not that there is nothing of value in the news, but rather that what is of value is buried under lots of stuff that is of no value. Ask yourself when was the last time that a news article actually positively affected your investing? Personally, I can’t remember an instance.

If we take the optimal strategy of always rejecting the new in favor of the old, then we gain the benefit of time as a filter. Something that might seem like a great idea initially may eventually show its flaws. So if we wait until something is “old” we don’t waste time considering those things that didn’t stand the test of time.

Automation as defense

But if we stop reading or watching the news, then where do we get our investing ideas? My suggestion is that the news is so useless as an investing tool that you should ignore it completely. You should craft an investing philosophy that doesn’t require you to be familiar with the news. I would suggest an automated investing strategy.

By automating our investment decisions, we get to think rationally about what a good decision would be before we make the investment. Making that decision before we make the investment is really important because after we make the investment we’re emotionally involved and prone to making decisions without rational reasons.

The classic automated investment strategy is the index fund in a 401k. You put a predetermined percentage of your paycheck in to the index fund every month, and don’t vary regardless of the state of the economy. That’s a nice automated strategy that you don’t have to think about and you don’t need to know the news to execute.

Of course I’ve stated previously that I’m not a particular fan of the index fund. Given my risk averse attitude, my personal choice is to go with one of the strategies that I’ve been working on that are virtually immune to losses like No Lose Stocks or Long Shot Options.

Service updates

I started taking subscribers for Long Shot Options yesterday. I’m offering a 6-month free trial and then $9.95/month after that. The free trial is to let subscribers decide if the service is right for them. As always, I don’t want anyone to pay for anything they don’t find valuable.

I also further automated the No Lose Stocks strategy. I noticed that every time I got an email from the service and downloaded the spreadsheet, I would immediately sort the spreadsheet by “Percent to Profit”. I was looking for the stock that had to rise in price the least to give me a profit. Now however, the service presorts the spreadsheet by “Percent to Profit” and so all I have to do is open the spreadsheet and see if there are any trades to place. That’s one less thing I have to think about when I make my investments.

The Long Shot Options data is also presorted. First the data is sorted by price, then by expiration date, and finally by “Percent to Profit”. The idea is to look for the smallest priced options that have the longest time frame to surprise in and the shortest path to get to that surprise. The data is reported in two separate spreadsheets, one with calls, and one with puts.

Recent observations

At the risk of sounding hypocritical, I’ve noticed some recent (a.k.a. new) changes in the No Lose Stocks and Long Shot Options data. Before a couple months ago, there were maybe 10 to 20 trades that fit my personal criteria for a good No Lose Stocks trade. (I’m looking for stocks that only have to rise in price 10% to 20% to provide a profit.)

Currently there are zero stocks that meet my No Lose Stocks criteria. And when I look at the Long Shot Options data, I notice lots of possible call option trades, but very few put option trades.

It would seem then that the put options are very expensive right now. Or it could mean that the call options are very cheap. Either way, the automated strategies that I’m following are automatically directing me to buy what’s cheapest without my needing to think about it, which is exactly what I want them to do.