Parchayi.com - Personal Finance Simplified

One very often asked question, especially by young and new investors is how to invest small amounts of money in mutual funds. Most mutual funds have an entry point that may not be easily reached of a few thousand dollars. Even if you can invest a few thousand dollars, it is diffcult to diversify because each fund will have a similar investment minimum.

There are several ways to overcome this barrier and start investing:

• ETFs at discount Brokers: Accumulate money for a few months until you reach atleast $1000 (to avoid paying too much in the way of commissions) and open an account at a discount broker like Scottrade to buy ETFs (Exchange Traded Funds)
• Retirement Accounts: It is never to early to invest in your retirement. Many fund companies have lower minimum requirements for retirement accounts. In fact if you are willing to invest a small fixed amount every month, you should definitely look at Fidelity’s Simple Start IRA
• Sharebuilder: You can invest any amount of money for 4$ commissions (trades are made Tuesdays).
• Increase your contributions to your 401K, if you have one

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I just happened to see a Citibank ad on Bankrate.com advertising 4.75% APY and went on to check it out. So I clicked on the link and was taken here. This page states - “Introducing the e-savings account with FREE Citibank EZ Checking”. Yes the FREE is in capitals on the site. Under the 4.75% APY, the Ad states - “No minimum balance required”. It is shameful that Citibank uses such deceptive marketing to sucker people into opening an account. Even the fine print does not state the minimum balance required for the EZ Checking.

So I clicked on ’FAQ’. The FAQ also fails to mention this. I think, maybe citibank has changed the structure of the EZ Checking account and made it totally free.

So I clicked the Open Account button and it says:

You are applying for: Citibank® EZ Checking with
Regular Checking Account
e-Savings

Here if you click on EZ Checking it says:

• Balance. To avoid monthly fees, you need to use Direct Deposit, or make two monthly bill payments, or maintain a $1,500 combined average balance.
• Monthly Fee. Free if you meet the combined balance or if a Direct Deposit is made, or if you make two monthly bill payments. If not, $7.50 in NY, NJ & CT; $9.50 in all other states.
• Checks. Free, if you meet the combined balance or if a Direct Deposit is made, or if you make two monthly bill payments. If not, $.50 per check in CA & NV. In all other states, 1-10 free per statement period; 11+, $1 each
• ATM Use. Free unlimited use of Citibank ATMs. With non-Citibank ATMs: In CA, NV and NY, the fee is $1.50 per use. In all other markets, 1-5 free uses per statement period; 6+, $1.50 each.
• Fee Rebates. Save up to $12 a year just by using Automatic Deductions!
• Free Services. Online bill payment, online bank statements, online check images, e-mail & wireless banking alerts.

After some more investigation, I found that regular checking has a monthly fee!! Nowhere on these pages could I find any mention of that or whether the fee is waived for this package.

I had a Citibank easy checking account and was happy with the extra features like ATM reimbursements and free international access. However I will now avoid Citibank thanks to this deception.

So if you are opening an account at Citibank, always read the fine print everywhere, not just on the main page!

If you are looking for a High Yield Savings, may I recommend HSBCDirect, which is actually No Fees, No Minimums and now 4.65% APY

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Shares of The India Fund Inc. dropped 10% today after the Indian Stock market took another beating. The Indian stock market started up about 600 points, however it quickly dropped over 10% causing the markets to shutdown for an hour. The Finance Minister urged investors to stay invested in the market citing no change in Indias fundamentals and growth prospects and that FII (Foreign Institutional Investors) and Mutual Funds are currently buying.

My Take: Wait for a slight reversal before buying IFN/IIF. If you have some hold on.

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The Indian stock market dropped another 4% falling below 11000, after yesterdays 6% drop. What does this mean for India Fund Inc. holders? Well it probably means another drop today. Yesterday, I said it might be time to get into IFN, well today might be even better than yesterday to get in. I would also expect the premiums to drop from 30% levels, however they should remain attractive enough to make the rights offer worthwhile.

No news from the Fund as far as the Rights Offer yet.

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Have some spare money? Want better rates than savings accounts? Are willing to take on some more risk with it? You need to check out Prosper.com. Here is how it works:

“Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as people who lend bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.”

Fees for the service - “Prosper generates revenue by collecting a one-time 1% fee on funded loans from borrowers, and assessing a 0.5% annual loan servicing fee to lenders.”

Depending on how regular people are with their payments, borrowers are assigned ‘Credit Ratings’. The lower your credit rating, the more interest you end up having to pay to borrow money since lenders would consider you at a greater risk of defaulting.

There is a similar UK service - Zopa which, believe it or not, has lower fees - ”Zopa charges borrowers a fee of 0.5% of their loan amount and lenders a 0.5% annual service fee.”

You can read the Zopa Blog here.

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Here are some stocks and Funds I follow because I own some in real life and some in my mimf contest portfolio:

• IFN - The India Fund Inc.
• PNRA - Panera Bread
• TGT - Target
• INTC - Intel
• WB - Wachovia
• GSK - Glaxo
• GOOG - Google
• AAPL - Apple
• NSANY - Nissan

The other funds I own are index funds so they need no real following. If I find anything worthwhile to report that has already not been beated to death in the news and other blogs/sites, I will post that here.

Today’s report deals with IFN. The indian stock market saw its biggest one day fall ever. The BSE fell 826 points (6.76%) and the NSE fell 246 points (-6.77%). This probably shouldn’t be a surprise considering the ridiculous pace of gains in the market this year. The markets are still up over 20% YTD despite yesterdays fall. As the market gained over the last one year, so did IFN with premiums generally over 20% of NAV. At the begining of the year these were near 30%. So far IFN is up more than 35% YTD inspite of its 15% fall in the last week. I consider IFN a great buy at current prices, though beware if you dislike high volatility, and am looking forward to the announcements of the details of its upcoming rights offering. Since IFN trades at a significant premium, the fund is also worth buying now, just for getting more shares cheaply from the rights offer.

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There are several banks, mostly online ones or online-only services from regular banks that provide consistently high APRs on Savings/Money Market Accounts. Here are some of them:

• Emigrant Direct
• HSBC Direct
• ING Direct

Watch this space for detailed updates on each bank.

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