Monday, October 1, 2007

Financial Nuggets

Interesting and useful nuggets of information...

  • A case for finding out your 401(k) account expenses. Account fees include investment, administrative and individual fees. And fees can make a difference - a big difference. The Sunday newspaper article pointed out the difference 1% in fee would make over 35 years. An account value dimished by about 28%. Bottomline - find out how much are you paying and trim the fee as much as possible. Read about the types of fee at 401(K) Fee . Today it's not easy to find what you pay for the 401(K) plan - there is legislation pending to improve reporting and visibility of this fee structure. Till then work with your plan provider to understand what you are paying. Remember every percent counts!

  • Is CISCO too hot? Barrons reported last weekend that CISCO (CSCO) has had a good year with stock price going up by about 40%. Valuations are becoming expensive (PE of 21 versus 18 a year ago) although the combination of good products (TelePresence), smart management (gross margin steady at 64%) and market penetration (rev rose 23% in year ended July 07) is working well for CISCO. Barron's recommends some profit taking as CISCO is starting to feel a little too hot.

  • Caution - Danger Ahead! Housing and credit markets still tend to pose some risk for the US economy. New home sales tumbled to their lowest levels in seven years. Ill effects of housing and credit problems are getting reflected in reduced demand and lower consumer confidence. A cutback in spending (corporate and consumer) will certainly impact the economy. The stock market may be reflecting a buoyant mood but treading cautiously would be a wise move.

  • Another reason to consider Indexing - The Motley Fool reminded us as to why the Dow (and other indexes) are better than individual stocks. The Dow maintains its position by adding and dropping companies as the business environment evolves. The index adapts to the changing fortunes of companies thereby limiting the adverse exposure to retail customer from individual companies/stock.
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