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Getting and reading the quarterly 401k account statements used to be quite a joyful event. The numbers keep going up, the row that says Market Value Change is always positive and my grin always get bigger.

This year however, it’s a little different.

With the downturn of the stock market, the value of my 401k account really tanked. In fact, my statement says that I lost $-5,112.08 year to date, which is roughly 12% of my entire account! I already tried to pick the funds with the least amount of fees, but my funds in the 401k will still take an average of 1.2% of my money this year. Normally, I try not to pay attention to this since I don’t have much of a choice with my limited 401k selection but it is particularly frustrating when it seems like I’m paying someone to lose my money. (One note to self: When I gain control of the money in my 401k, remember to pick funds with low expense ratios)

Currently, my allocation is:
BlackRock S&P 500 Index Fund - 40%
Blackock Large Cap Growth Fund - 25%
Goldman Sachs Mid Cap Value Fund - 10%
Thornburg International Value Fund - 25%

The performance hasn’t been good but I don’t plan to adjust it now that it’s down so much. I plan to keep investing through thick or thin which is key to wealth building because the stock market can turn positive all of a sudden.

When that day comes, we will all welcome the 401k statement in the mail again.

With the housing market in one of the biggest slump in decades, I’m contemplating the possibility of buying an investment property.  Those who know me will probably think that I’m nuts because I don’t even own a primary residence but let me explain the reasons why I haven’t bought a house in more detail.

Current Living Environment
I just got married in February and moved into a gorgeous apartment.  There are lots of free amenities and activities for residences that we truly enjoy.  The rent is not cheap but at least it is still affordable and we decided when we moved that it was worth the extra cost.  In fact, the apartment turned out better than we originally thought.  After we moved here, we were both happier and found ourselves enjoying life much more.

It is impossible for Emma and me to afford buying a house with all these amenities in our current financial situation, so if we buy a property, we will in effect downgrade our quality of life.

The Unused Space
We currently live in a one-bedroom apartment and although you can argue that we can use a second bedroom, the space we have is plenty for the two of us.  If we buy a place, we will at least get a 2-bedroom, if not a 3-bedroom condo/house because we don’t plan to move when we have kids.

This means that we will just be paying extra property tax for the unused space until we can grow into the house.

Renting Part of the House
Many homeowners in California rent out unused rooms to help pay the monthly mortgage.  I thought about buying a home and doing this too but since I work on my blog so many hours of the day, I don’t want to run the risk of my tenants causing distractions when they are in the house.

Why an Investment Property Seems to Make Sense

Since I convinced myself that buying a house might not suit my circumstances, I thought about buying a smaller piece of property and renting it out.  The reasons below seem to make this a sound choice.

We are in a Housing Slump
Most people are much happier buying a house when the market is going up but all we end up doing is overpaying for the properties.  I remember hearing stories of bidding wars in California where people were putting in bids of 15-20% over asking price in hopes that they will get the property.

The story is completely different these days.  Realtors are begging potential home buyers to look at houses and buyers who are interested are putting in bids as low as 40% below asking price.  It is in these markets where a first time home buyer like me can take my time and pick a good location.

Practice Makes Perfect
This investment property will be a smaller and less expensive place than my primary residence down the road.  If I can use this time to learn what I like and dislike about houses and sharpen my skills in the home buying process, it will only benefit me down the road.

Long Term Investments
Unlike my primary home where the emphasis will be on livability, the emphasis of an investment property is return on investment.  As long as the rent is generating a positive cash flow after expenses, I can ride the highs and lows of the market and still come out ahead.

Alternative Investments

There are so many other options out there for my money like stocks, bonds, CDs, and even investing in businesses.  Why am I thinking about real estate?

Real Estate versus Stocks
I currently own some stocks, but it is almost a part time job keeping up with them.  I want to get into a more passive approach and something that will generate an income for me.  If I buy any individual stock, I run the risk of it never recovering.  If I buy the index fund, I don’t get the income.

Another major benefit is that I won’t check my property performance like I would my stocks.  This will keep me from being emotional when the market tanks so I can focus on my other day-to-day operations (like writing on my blog).

Real Estate versus Bonds or CDs
Since this is a long term investment, I need something that gives me a higher rate of return.  Bonds and CDs are great for safety but the return on investment when my time horizon is taken into account is unsatisfactory.

Real Estate versus Investing in Businesses
This is an interesting alternative but I will definitely want to be involved with the business if I ever invest in one.  This is the total opposite of passive!

Real Estate versus All
It is a nice feeling to own a piece of real estate since it is an asset that you can actually see.  Furthermore, there are amazing tax incentives in the United States for owning real estate.  I believe the specific rule is tax free capital gain for the first $500,000 as long as you have been living in it for 2 out of the last 5 years.  So if we are lucky enough to pocket some gains on this property, all we have to do is move there for 2 years and then sell it.

What Do You Think?

Even though in theory this all make sense, it does not mean that it’s necessarily practical.  Does anyone agree with what I’ve said or can anyone think of something that I’m not seeing?  As a next step, I will start looking at the closing and renting prices of various properties to see if I can generate a positive cash flow.  I will keep you updated and I look forward to hearing your thoughts!

I’ve always heard of Trade King but never tried it. As I look for alternatives in an effort to diversify and minimize my risk of holding my ETrade stock and assets under my ETrade stock account, I’ve decided to take a look at this discount brokerage.

From what I can see so far, it’s a strong contender for my investment assets! Trade King’s commission on each trade is only $4.95 and option contracts are only $0.65, much cheaper than others.

Opening My Trade King Account
Opening the account was pretty easy to do. After I filled out a few forms, and within minutes, I was in the main page.

Trade King’s Interface
Seems pretty easy to use. Definitely looks good enough for me to look into it further. What I like is actually its simple design because it just makes everything load faster which helps the responsiveness of the site.

Protection
Each Trade King account is protected up to $25 million, check.

Conclusion
So far so good. If you are looking for a brokerage to get started with, I encourage you to check out Trade King.

With the stock market performance being as sluggish as it has been, it’s easy for us to think about not investing at all and keeping all our money in cash. I remember a year ago this time, personal finance bloggers all over the world were blogging about their success in the stock market, encouraging everyone to keep investing and talking about the out performance of the S&P 500 to any other asset class over any 20-year period. These days however, no one really shares their stories anymore.

So what now? The Dow Jones Industrial Average is down roughly 15% this year so do we just stop investing? What about our automatic contributions like 401ks and IRAs?

Since there are only three possible ways to handle this, let’s talk about all of them here:
Staying Steady
These are probably the set it and forget it types. Some of these people might not care too much about their investments, only to find out at a later point in their lives that the majority of their net worth is made up of the investments that they forgot about. They keep investing through the good and bad times, which is exactly what we recommend here at Money Ning. By the way, I kept my 401k contribution rate at 15% this year.

Decreasing the Contribution Rate
Many people fall into this category. They do it because gas has gone up, they do it because their homes have decreased in value, they do it because they want that new car. In reality, they did it because they are emotional and saw the great big fall in the stock market. They saw their investments tank and couldn’t bear anymore pain. Some people usually learn one day that this is not the way to invest, but most will never learn and end up missing the opportunity to create real wealth through investing.

Increasing the Contribution Rate
These are opportunists, and probably someone who don’t need the money in the short term. They like the stock market, and will try to adjust their contributions to take advantage of market declines. Some people that increased the contribution rate might be just doing it because they got a raise. Either way, they have increased their contribution and eventually, they will be better off because they contributed more money than they otherwise would have.

So which approach did you take with this market decline? Which one would you take if you were given the choice again? If the answer to the two questions were different, is there a reason why?

What Did You Do to the Contribution of Your Investments This Year

• Kept It The Same
• Decreased It
• Increased It
• Don't Have Investments

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It’s impossible to be perfect all the time. From money management to life decisions, we’ve all made many mistakes in our lives. Sometimes, we are able to learn from it; other times, the lesson isn’t so obvious. In those cases where we couldn’t figure out what went wrong, it is very important to just move on.

Perhaps one day, the lesson will come to us but learning from our mistakes is never as important as picking ourselves up from our mistakes and getting on with our lives.

It’s easy to understand the importance of living on when we realize that we are only a small part of this world and that the world revolves with or without us. If we are down when we make a big mistake, the only person that suffers is ourselves and maybe a few other people that really care about us. In the meantime, there might be other things in our lives that needed to be taken care of at the time which we didn’t bother to attend to.

Let me give you an example related to my stock account. Last year, I bought many shares of E*Trade Financial (ETFC) and it seriously tanked. If I keep complaining about it never just admit defeat and move on, I would’ve never had the chance to go from a -99.79% loss to a +9.99% gain.

Clever Dude made a few mistakes while he was young, but he didn’t let himself get consumed by those wrong choices. After years of hard work, he’s turned out to be a successful blogger whose actively eliminating his debt.

While it is always important to avoid repeating the mistakes that we have made, the number one priority for us is to get out of our misery when mistake happens and live our lives. No one cares about ourselves but us, and the only way to do that is to move on.

All of us have many stories to tell but when do we ever spend time to read or listen to other people’s stories?  Well, here’s your chance with the 64th edition of Carnival of Money Stories!  As always, there are many great stories for us to learn from as long as we are willing to do so!

Editor Choice

• Terry Dean presents From a Sale to An Experience. What are you doing to turn a sale into an experience?
• Dorian Wales presents The Personal Financier: Actively Manage Your Career to Stay On Top of Your Game. Always move forward! Staying in the same spot is just another way of moving backwards!

Career and Business

• vh presents Amazing Grace! Annual Review Miracle. Some creativity and you could get a raise too!
• Michel Fortin presents Apply The Law of Contrast to Build Desire. Selling is a skill everyone should have and Michel is teaching a great technique over there!
• Silicon Valley Blogger presents Want Some Extra Income? Try Odd Jobs!. Work more jobs is the most direct way to earn more money!
• Jose DeJesus MD presents Creating Incentives and Recognizing Excellence in Your Employees. Very important!
• NtJS presents Some Advice To a Friend. Never put yourself at too much risk!
• praveen presents How Menards Builds Demand for Its Products.

Buying and Selling

• Realm of Prosperity presents Turned Hobby Into A Method To Make Money. What a great investment idea!
• John Crickett presents Is Now The Time To Buy A House?. That’s what everyone wants to know (including me) so check it out!

Save More Money, Spend Less Cash

• FMF presents Another Example of Saving by Asking for a Discount. Title says it all!
• Money presents Debt drains cash flow. We all know this but how many can keep ourselves from overspending?
• Weight Ladder / Rich Leverage presents What You Need to Know Before Going Into Debt.
• Jamy presents The art of creative home budgeting.
• The Happy Rock presents Buying Tires From Costco - Great Price + Good Service.
• Faron Benoit presents 15 Cheap Romantic Date Ideas. Always great to see these lists!

Personal

• GBlogger presents Looking Back — 10 Years And More Than $1,000,000 Ago. A story about.. hmm.. himself!
• Heather Allen presents Sucking Lemons. Opportunities are everywhere, even in bad times!
• Todd presents Insurance Audit At Work.
• Chief Family Officer presents Car insurance that works the way it’s supposed to
• Brooke presents Maid-Tipping. Tip everyone who deserves it!
• BeThisWay presents Fine Literature at a Great Price

Investments, Savings

• Vera Lang presents Little-known retirement income strategy creates guaranteed lifetime income while increasing long-term liquidity. I need to look into this!
• Fred presents High Interest Savings Accounts for Kids
• Raymond presents Dealing With A Car Breakdown and Paying Rip Off Repair Shop Prices.
• RC presents My Personal Finance Tipping Point or When I Decided to Change My Financial Future.
• Shana presents The Value of Being Friendly and Chatty! Even works with the dentist!

Others

• Nina presents Ten Money Questions for Annie Libby.
• Ellesse presents Free Career, Business & Trade Magazines for Your Career & Economic Goals.
• The Shark Investor presents The Five Essential Elements Of Automated Income Generators.
• SingleGuyMoney presents Sign of the Financial Times. A story that what not to do!
• Madison presents Create Your Own Dollar Plan: Step 6.
• Joe Manausa presents Loan Limits - Contact Your Senator Today!

One of the readers recently asked:

I see that you do quite a bit of trading via E*trade and I think it would be pretty cool to have a post about how you went about making your first stock purchase.

Naturally, I agreed to this because I would gladly share my experience with everyone. Let me know if you have any questions by posting a comment below.

As I think back, I’ve always been involved with the stock market unknowingly. As a kid, my parents bought me some mutual funds along with some CDs in an effort to help me understand money. At the time, I didn’t really know what money really was and meant but having the statements come every quarter was pretty exciting because the figure slowly became bigger.

Once I moved to the US a couple of years ago, I was living by myself which meant that I was on my own for many of the things that I took for granted while I was living with my parents. This included everything about money. I had the mutual funds and CDs, and I also have some cash saved up in an ING Direct online savings account.

By then, I’ve heard about online brokerages and stock trading but I was nervous about doing it by myself. However, I realized that most of the mutual funds are really about paying someone else to do what you can do yourself. It also didn’t help reading about the fact that most mutual funds perform worst than the S&P 500. I was thinking to myself “if they could do it, I could”!

With that in mind, I started frequenting financial websites like The Motley Fool and Yahoo Finance and within days, I signed up at ETrade through one of the advertising links there. I didn’t do any research on different brokerages because I told myself that I can always switch if I didn’t like it. Although I believe I was lucky and found that ETrade is one of the best brokerages, I do not recommend signing up for a brokerage account without doing any research. One thing I did though was that I transferred a small portion of my money into the account to limit the chances of me losing lots of money.

I am pretty familiar with how websites work, so signing up was a breeze and I familiarized myself with the account like a little kid with a new toy. I explored so many pages within the website and I was fascinated by all the performance metrics about the account. I didn’t know what most of the terms meant but that was fun because I was determined to learn.

Of course, I was impatient as always so without any research and based only on my personal experience with buying the company’s products, I bought my first stock. 70 shares of Intel (INTC) at $19.81 on March 27, 2006.

Fast forward to today. My brokerage account has become much bigger (as a matter of fact, my brokerage account has more money in it now than my net worth in 2006), my investment knowledge has grown tremendously and I’ve also found something to do that I really enjoy.

If you are thinking about trading stocks for the first time, I urge you to open an account in any of the well known brokerages. Start exploring the brokerage website and also the sites I listed earlier. Learn about how companies make and lose money. Get a feel about why prices go up and down based on supply and demand of that particular stock. DO NOT follow what I did and just blindly buy a stock thinking you would make money because you won’t. I was lucky because I started when the market was generally good but times are different right now.

Have the enthusiasm to start right away, but do enough research and make sure you understand why you are buying a particular stock before you put your money on the line. At the beginning, you will probably lose some money but understand why you lost money and try to adjust. Do that enough times and it could be a very profitable road for you in the future.

Some of you might remember that I bought ETrade stock right before it went drastically lower. It was a great learning experience because I’ve never made such a big (and wrong) bet on a stock before. From roughly $15 a share, it went down to around $11 at the time of the article.

Days later, a Citigroup analyst came out and talked about a possibility of ETrade going bankrupt. This sent shares down to $3.59 which triggered another post on what I have learned and planned to do.

ETrade Stocks
It’s been 6 months since those events and I’m happy to say that I still own ETrade stock! In fact, I have added to my position through the last couple months, doubling the shares that I own. I feel that ETrade still has a very compelling story and eventually the mortgage related issues will be worked out.

ETrade Customer
I still love being a client of ETrade. The website is very intuitive and everything is easily accessible unlike my wife’s TD Ameritrade account. As a client, I couldn’t be happier and thus I continue to put money into my brokerage account. Did I worry about my money when all the media was reporting about the possible bankruptcy? Sure. Do I worry anymore? Not really because ETrade has taken steps like selling their corporate jets and a stake to Citadel Investments to make sure it is well capitalized.

Thoughts of the Future of ETrade
Many people are betting that ETrade can return to profitibility in Q3 of 2008. Although I’m not as optimistic, I believe that ETrade will definitely be profitable once again in the future (I’m thinking 2009). Therefore, I plan to continue buying more shares as time goes on because demand for the stock will eventually pick back up, sending the stock price higher.

I’m long ETrade.

Email subscribers are really getting a good deal on the latest giveaway because today’s winner is another email subscriber! It’s still not too late to join so go to the link above and participate!