Investing Guide

The traditional piece of advice is to get a 30 year fixed mortgage.  But is it the best way to accumulate wealth?  Instead, pay only the interest and invest the money that would have gone to the principal payment, preferrably in a tax-sheltered account.  The whole mortgage payment is a tax deductible since it is all interest.   

Using the interest only option on a mortgage requires a lot of discipline.  The extra money should not be spent, but invested. An interest only mortgage should not be used to buy a bigger house. 

The next question is what type of interest-only optoin would be a good idea?  I think it depends on the situation.  There are 3, 5, 7, 10 years.  I think the 30/10 fixed interest only mortgage is a decent option.  It gives users the option to pay only the interest for up to 10 years.  

The disadvantage is after the 10 years are up, the monthly mortgage payment jumps up because the loan amortizes over the remaining 20 years.  Interest-only option on a mortgage may increase interest rate on the loan. 

Interest loans should not be used if you plan owning your home for a short amount of time.  ARMs are better to use because of the lower rates. 

This is a good motivational website that I use from time to time. http://greatday.com/, you can also go to the archive http://greatday.com/motivate/previous.html to read over 2000+ motivational messages from before. I read this website when I need some motivation to stay focused on my studies.

I just received my Schweser Secret Sauce book. Although it is quite small, it does a very good job of capturing the most must know topics on the exam. I plan to finish reading this book (only 180 pages small book) over the weekend. I was quite impressed with what I have seen with the flash cards. They are quited detailed in the explanation of the LOS and I think they are an excellent tool for the retention of the CFA material.

I read from the Schweser Secret Sauce book that there will be about 35% of the problems in the exam will be based on calculations. This is a lot lower than I thought, but I think that they are right because CFA wants candidates to understand the underlying concepts of the material and not just regurgitate formulas without knowing what they mean. They said it was important to learn how all the different subjects time together in multiple topics. For example, quant’s regression analysis with portfolio managment. Econ’s growth theory with equity analysis and many many topics that tie together.

I have not done many problems or even gone through the Schweser books yet. I am still working on understanding the big picture, and so far so good. I plan to finish all the text hopefully by mid April and use the last 6 weeks to do at least 6 practice exams, hopefully a lot more. I plan to use all my vacation days to study for the exam. I have 15 vacation days that I will use before the exam. I figure I can study at least 6 - 10 hours each of those 15 days, so I can get a good 100+ hours of studying there. I need to try to keep it realistic and not burn out, but I just need to stay focused.

I am trying to get in at least 3 hours of studying every weekday after work. On the weekend, I hope to get 5+ hours on Saturday and Sunday. I need to make better use of my weekends because they are very valuable in preparing for the CFA exam. Those are my days off where I can commit more than a few hours of study a day.

My studying plan is to use flashcards on the ride to and from work and everywhere I go to use the repetition retain the knowledge I’ve learned so far. I use the audio MP3s before I go to sleep and while I work. Sometimes it’s difficult to focus on what I hear on the MP3s while I work, but every little bit helps. I believe every little thing I do that helps learn will help me for the exam. I’ve stopped watching T.V, except my favorite show (South Park, and The Office). I’ve cut down on the time I waste surfing the internet as well checking on stocks and my portfolio.

76 days left until the exam. 75 X 3 hours a day = 225 hours.

Here’s a good article on why your home is not a good investment.  I think that’s why the general rule of thumb of not spending more than 1/3 of your gross paycheck on your mortgage is a good idea.  If you tie up too much of your income into your property, you lose out on the opportunity to invest in other assets such as stocks and bonds.  You’re also not diversified if most of your wealth is tied up in your home.  If the local real estate market crashes, most of your net worth will evaporate too.

There has been a lot of articles written daily recently on the housing market.  I’ve read about the oversupply of houses on the market.  Some experts say it’ll take 5-7 years before the market price of real estate will recover to the 2005 levels.  I do believe that.  When housing prices were at it’s peak, a lot of people were in denial thinking that housing prices will never go down.  Now they will have to face reality.

What are hard inquiries? They are records of someone checking your credit report that affects your credit score. Credit score normally drops about 5 points per hard inquiry. People get hard inquiries by applying for credit cards and loans. Hard inquiries stay on your credit report for 2 years.

A soft inquiry is when you check your own credit report. It has no effect on your credit report and score. Some people are able to successfully remove hard inquiries of their credit reports. They do this by doing a soft inquiry everyday using a credit monitoring service that allows them to do daily soft inquiry. This can be done once a day, and after awhile(50+ soft inquiries), their hard inquiries on their credit report gets dropped off because there is only a limited amount of storage for inquiries. The three credit reporting bureaus TransUnion, Equifax, and Experian usually hold anywhere from 60 - 100 inquiries per account. Some people report having their hard inquiries drop after 50+ attempts.

Removing hard inquiries only work on TransUnion and Equifax. It does not work on Experian’s report.

This does not always work because the credit bureau may split the credit report into 2 reports instead of dropping off the old inquiry.

Removing hard inquiry from your credit report makes your credit report look a lot better. It also raises your credit score because the hard inquiry is no longer on your report. Having a lot of hard inquiries makes your credit report look bad because creditors may think that you’re desperate to get credit.

There has been discussion about bumping hard inquiries on forums such as Fatwallet and Credit Boards.

I have been doing a soft inquiry everyday on my credit report a few months ago using TrueCredit. Nothing has happened back then until I started doing soft inquiries again last. I now use CreditSecure from American Express. It costs $11.99 a month and gives user the ability to do a soft credit inquiry every day.

I was able to bump 2 hard inquiries off my Transunion credit report within the last week. I started off with 6 inquiries with Experian, 2 with Equifax, and 3 with TransUnion. Now I have 6, 2, and 1 hard inquiry.