The Wall Street Journal had a nice article on Opening Your First Investment Account.

• Don’t just open your account with anyone offering you a free IPOD.
  Although free IPOD’s are great, its not necessarily in your best interest.
• Figure out how much hand-holding you require.
  Do you need to go full-service[full commission] or discount brokerage?
• Will you be buying securities or mutual funds?
  Most brokerages charge different amounts for these and some are cheaper for one while being more expensive for the other.
• Are there account minimums or extras for opening an account?
  Basically look for junk fees.

Here are some related posts:

• Why your stock broker will always be richer than you.
• Bank of America Investment Accounts
• Discount brokerage offering $100

The Wall Street Journal today reported that Vonage has denied all rumors that its going to let its customers off the hook if they no longer want their lousy shares!

This is quite a change from its now alleged stance a couple of days ago. This will just serve to alienate its customers even more. Wonder how this rumor even got started? Let me paraphrase the good ol WSJ

But CNBC yesterday reported Vonage issued the network a statement on Sunday stating that it wanted to avoid “alienating” its customers. If “certain” customers who refused to buy the shares didn’t pay, Vonage expects “to repurchase shares from the underwriters if necessary,” CNBC reported.

So I guess CNBC started it.

Today’s WSJ has a good piece on selecting a Financial Advisor. Since its a subscription site, here are the highlights.

Looking for an adviser? You’ve got to keep these five pointers in mind.

• Many advisers earn their keep by collecting commissions on the investments they sell. That means they have an incentive to get clients to trade and to buy the highest-commission products.

Your best bet: Use fee-only advisers, such as those who charge an hourly fee, a percentage of your portfolio’s value or a fixed annual retainer.

• Most advisers have had little formal financial education. For instance, maybe 5% of brokers, financial planners and insurance agents have bothered to become a certified financial planner, or CFP, which has become the basic credential for any half-decent adviser.

To ensure your adviser is knowledgeable, stick with CFPs or, alternatively, folks who have qualified to be chartered financial consultants, chartered financial analysts or certified public accountants-personal financial specialists.

• Advisers don’t necessarily act in their clients’ best interest. This issue has been brought into sharp relief by the heated debate over the Securities and Exchange Commission’s so-called Merrill Lynch rule. Under the rule, fee-based advisers at brokerage firms often aren’t considered fiduciaries, meaning they are supposed to recommend products that are best for their clients.

Instead, they are held to a lower “suitability” standard, which means they are only required to recommend products that are a reasonable choice for their customers. To protect yourself, avoid advisers who won’t commit to acting as a fiduciary.

• Many advisers offer investment advice — and that’s it. But there is much more to managing money than picking stocks and mutual funds.

You might also want help with your mortgage, college costs, insurance, taxes and estate planning. If so, before you sign on with an adviser, make sure the adviser is committed to assisting you with these other areas.

• Most advisers charge too much, especially when you consider the limited advice they offer. Whether you’re paying fees or commissions, your adviser’s services might be costing you 1% of your portfolio’s value each year. Tack on the fees charged by the mutual funds and other investment products you end up buying, and your total annual tab might be 2% or even 3%.

Result: If your adviser recommends a balanced portfolio of stocks and bonds that returns 7% a year before costs, you could pocket less than 5% after all fees are paid.

That doesn’t mean a good adviser couldn’t garner you a better rate of return, while also helping you with the full array of financial-planning issues. But is your adviser truly helping your finances? Not sure? Remember, you can always buy Treasurys bonds instead. These days, that will also earn you around 5% — with a whole lot less hassle.

Here’s the original link

In a previous post updating my oil investing, I mentioned I was going to see an attorney.

One of my partners [with whom I’ve deal a couple of smaller real estate deals] and I met for just over half an hour with an attorney. We’ve used this attorney before and he’s really sharp [not to mention expensive].

He said it would be easier to file under SEC regulation 504, which provides exemption from regulation requirements. In that only accredited investors are usually allowed into such investments. It is possible to have non-accredited investors but you then need to disclose so much bad stuff that they’d probably shy away anyway, plus you’re limited to only 35 of them, which doesn’t make the preparation costs of all the disclosures even worth it. [Unless you want to do full-blown offering which we definitely don’t want to becuase of the cost involved.]

If we have only accredited investors and we’re raising under $1 million, we only need a subscription agreement and questionaire[stating that the investor is accredited] and a brief offering circular. [We don’t even need to mention all the risks. After all, the government expects accredited investors to know everything about investing. How else could a person even become accredited, what with the government trying to tax the accreditedness out of them!]. We may not even need a Private Placement Memorandum which is a thick book full of disclosures.[disclosures are nothing but worst case suggestions about how you’re going to lose your money.]

I asked my attorney what happens if a non-accredited investor claim’s to be accredited investor just to get in. He said if we know that a person is non-accredited then we cannot accept their money at all. [Although they face no penalties for lying other than they can’t go crying to the SEC saying we didn’t disclose all of the risks!]

We’re not supposed to publicize this to people we don’t know, so if you don’t already know who I am, don’t even ask me for more info! I’m only posting this for information purposes and to give other investors an idea of whats involved. Incidentally, Kiyosaki’s book, Retire Rich, Retire Young where I first read about accredited investor status and SEC regulations regarding the disclosures of certain investments. Didn’t think I’d ever need that knowledge! That was the book the gave me the impetus to stop reading books on real estate investing and finally take the plunge. Like all of Kiyosaki’s books, its low on strategy and high on motivation [although less so than the others].

Lets see how things work out. One things for certain, whether or not we make any money, our attorney sure will!

Here’s a somewhat related and very interesting topic on Starting Your Own Hedge Fund.

In a bid to avoid trying to lose customers who bought into Vonage’s IPO, Vonage has told its underwriters that it will cover the cost. If customers no longer want the stock that opened at $17, closed at $14 and is now $12.50, then Vonage will agree to purchase those shares.

I think its a good show of faith on Vonage’s part and it makes good business sense too. [Although offering customers a part of the IPO wasn’t.]

Everyone always admires those people who do the right thing no matter what the consequences. Conversely, people despise those who lie, cheat and con their way to wealth. After a certain point in life, it doesn’t even make sense to be dishonest.

There are two articles today about this. Enron’s top execs Skilling and Lay were both incredibly wealthy before the Enron mess. Their personal fortunes, upwards of $50 million each were enough to live a great life without the additional 100’s of millions in Enron stock. Now both are faced with spending their retirement years in prison and having their wealth depleted by legal fees and fines. McAfee’s general counsel Kent Roberts was also fired today for an improper options grant that occurred in 2006.

You spend your whole life building a good rep and it only takes one wrong step to mess that up. And atleast the fear of jail should keep people honest.The ramifications are particularly bad when white-collar employees embezzle money. The jail term is usually greater than that metted out to murders and molesters. Another good reason to keep your hands clean!

The tenant who’s check bounced contacted me today. As I thought, they was out for the long weekend. He said there was enough money in the account and it shouldn’t have bounced. He was quite surprized when I told him that I had personally gone to the bank with his check and they told me he was broke.[well they didn’t say that exactly, but it means the same thing]

Anyway I’m stopping by the bank tomorrow and if they claim he’s short again i’ll have them call the tenants and figure it out there and then. But a tenant who’s pro-active about following up when the landlord calls is a slightly better quality of tenant!

Incidentally, Washington Mutual now looks like a Starbucks. I hadn’t been in one for 2 years and I was amazed at the transformation. I tried looking for a picture of the insides but I found this image at Tee Commerce instead. Much more fun!

So far my investing has been going pretty good. [Apart from the small setback in the stock market crash of 2000.] I bought real estate in San Diego at the right time. I sold it at the peak. I got out of my other California properties right at the top too. I got into Salt Lake City right as it was about to take off. I bought some gold right before it made a 35% jump. So far I’ve been quite accurate at identifying investments trends and profiting from them.[Or maybe I’ve just been lucky!]

I’ve spent the past several months researching oil and gas and have even invested a bit in a small well and am about to invest in another one through my corporation’s pension plan. I also think oil is going to be the next highly touted investment. I bet some washed-out actor like Eric Estrada will appear on late night ads promoting oil investments in the next 2 years.

Everyone knows that oil has jumped to $70 per barrel but most people don’t know how to invest in it. Since I’ve figured out some of the steps and pitfalls, I think its time to capitalize on my knowledge. I’m planning on putting together an LLC with a partner which will pool in money from friends & family. Together we’ll invest in several projects, thus lowering the risk.

Not only will I invest my money along with them, I’ll take a small management fee. I’m thinking it’ll be in the range of 30% of the profits after the investors get 10%. If I can’t provide a 10% return then I really don’t deserve any profit-split, right? Although most financial overseers don’t agree with this philosophy, that was how Warren Buffet had originally set up his partnership. He got a 25% share of the profits after the first 6% was returned to investors.

Well I’m talking to an attorney about it tomorrow. I’ll let you know what I find out.

I got a bounced check in the mail from my bank. The tenants in one of my Salt Lake City homes had their check bounce due to insufficient funds. I went to their bank WAMU on Saturday to see if they had sufficient funds in their account. Unfortunately they did not. Atleast I didn’t redeposit it and waste another 2-3 weeks finding out whether it would bounce again.

I called and left them a message. They’ve probably gone out for the long weekend. On Tuesday, I’ll have to have my guy stick a 5 day eviction notice on their door. Pay up or move out. The good thing about Utah is that its a landlord friendly state. It takes 2 weeks to evict a tenant, and most of the time the tenants don’t even stick around that long. They just move out.

It never pays to be nice to your tenants. They just take advantage of you. Remember your tenants are not your friends. You are not in the welfare business. If they can’t pay their rent, they need to ask Uncle Sam for help.

I had a really nice house being built in St. George, Utah. Now that the house is finished, I need to refinance a construction loan into a regular loan otherwise the interest rate jumps to 18% or higher.

Unfortunately my mortgage broker called me up to tell me that someone else’s name is attached to my social security number and I need a letter from Social Security Office proving that its my number.[and not some random number I just made up since I crossed the border last week?]

Thought it was going to be a big hassle, but it turns out it wasn’t too bad. Got it in an hour and faxed it off. The guy behind the counter said the credit bureaus sometimes make errors typing in stuff. It probably wasn’t a case of identity theft. Besides, with the 20+ mortgages in my name, no one can get a loan to buy anything with my credit!

Hopefully the letter should be enough. I hope the underwriter doesn’t deny the loan. I can’t afford to pay 18% on a 320k loan!