By Amanda Morrall
Investment experts bang on about the importance of having a well diversified portfolio to guard against risks associated by having too many eggs in one particular asset basket. Well, I believe the same can be said of one's skill set these days given our rapidly changing world and the technological revolution. Ideas guy Seth Godin explains why in his blog on what he's dubbed the "forever recession.''
2) Double Irish with a Dutch Sandwich
Yesterday in my Take Five for Tuesday, I made mention of my year in Dublin where I paid astronomically high rent while I was doing post graduate work. Fortunately, the overall experience made up for all the robbery that was taking place at the time. One of the reasons why this historically very poor country was transformed into a roaring tiger from a feral kitten was because the Government lured the multinationals in with absurdly low tax rates. It's a practise that hasn't disappeared.
Altantic Wire explains in simple terms just how Apple (which now has more than US$117 billion in cash reserves) has taken advantage of the loose tax system there to avoid paying anything resembling a fair taxation rate on its gross profits. Through its two subsidiaries in Ireland - Apple Operations International and Apple Sales International (with some money being channelled through the Netherlands as well), the tech giant pays tax of 12.5 percent compared to the 35 percent corporate rate in the U.S. Damn you Steve Jobs for getting me hooked on the rotten Apple.
HT to my tax troubleshooter Terry Baucher who wrote about why Apple and the like get away with this stuff for spotting this.
3) A closer look at bonds
Robert Brokamp of the Motley Fool, in this guest blog for Get Rich Slowly, takes a closer look at bonds, how they work, how much they pay and the effects of rising and falling interest rates. Some great tables, plain language and a good overview for those keen to learn more about how the market works. As a bonus, you'll get some random animal photos to break up the text. I love that trick. So here's one of my dog to amuse you today.
4) Compounding experience
Tadas Viskanta, editor of Abnormal Returns, in his latest blog discusses why and how Gen Y's should get over their aversion to stocks and how compound experience can be as valuable as compounding interest.
Here's what he means by that:
..A more important, and relevant, concept isn’t compound interest but compound experience. By that I mean compounding experience upon experience. Taking what you learn from one experience and applying it to the next. In this context, piling lesson upon lesson helps generate much greater insights than trying to learn everything all at once and under intense pressure. Blair Livingston writing at his blog about the lessons of college life states:
The best insight into the whole process of compounding: it’s not how you finish, but how you start. How you finish is determined in part by you, but also largely by factors beyond your control – the competition, other people, etc. How you start is 100% within your control. If you start strong, layout good practices, and develop fruitful habits, you can set yourself up for a much easier journey.
These very sentiments apply perfectly to investing and saving. In retirement no one knows what kind of market conditions we will face over time. In part it depends on luck. However if you have established “good practices and fruitful habits” you will be better prepared to deal with the inevitable challenges we all experience as investors. Future retirees and near-retirees facing their first secular bear market will be at a disadvantage to those Gen Yers who embraced investing early on and who compounded not only interest, but experience along the way.
5) Kill your television
Remember those bumper stickers? Well having finally invested in a television that doesn't weigh 500 pounds and doesn't come with rabbit ears, I'm not about to take a sledge hammer to mine however truth be told I do miss the old junker. Not because it was so big it constituted a piece of furniture in and of itself but rather because I could ignore it more easily. Changing channels meant that I had to get off my arse and manually search for a channel, and then fine tune the reception with the ole' bunny ears until I could get a clear image. Neither myself nor my boys could be bothered, so we didn't watch a heck of a lot of telly.
Now because we have this nifty thing called a remote and great reception of 17 free channels, I catch them watching cartoons in the morning when they should be getting ready for school. And last night I found myself glued to the couch watching two hours of drivel because that's the effect that TV has on a person.
U.K. financial blogger Monevator, in his latest post, explains why watching television is bad for you as an investor. Essentially it just adds unnecessary stress to your life if you obsess over the business shows (which he does) as well as drive you to make more impulsive investment decisions. Maybe the flat screen was a poor investment after all?
To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall