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  • Investing is Easier than Ever with Online Trading

    This is a sponsored post; however, all opinions are my own. Read the full CFO disclosure policy here.

    When I was a teenager, my dad gave me a couple of books by Peter Lynch, who was famous for his success as a fund manager at Fidelity. His books were my introduction to investing in stocks, which back then seemed like an almost magical way of making money: Buy the right stock at a low price, sell it at a high price, and make a fortune.

    Of course, it’s not that easy, or at least, it’s not that easy to find “the right stock.” In fact, it’s almost impossible for the average investor. That’s why experts recommend investing in mutual funds, which spread your money out across multiple stocks – they reduce your risk of loss, and increase the likelihood that you’ll actually make money. Mutual funds probably won’t make you a fortune, but they do have their place in every investor’s portfolio.

    Back when I was a teenager, though, mutual funds weren’t touted quite the way they are now. It would have been very tempting to invest in individual stocks, if it hadn’t been so complicated. Back then, you had to open an account with a brokerage by filling out and sending in paper forms (or going in person to the brokerage to fill out the forms), fill out more forms for the actual investment, and send in or deliver checks in person to transfer funds.

    It wasn’t until I was nearly 30 years old that I discovered online trading, and became comfortable transferring money electronically. And it wasn’t until just over five years ago that I purchased my very first individual stock online!

    These days, online trading couldn’t be easier – in fact, in the last year, I’ve set up investment accounts for both of my kids and I regularly invest on their behalf, all online! To get started, all you have to do is sign up with an online brokerage and connect your bank account. Many traditional brokerages also offer online services, so you may be able to trade online with a company you already have an account with. If not, there are many online trading services, like E*trade Online Trading – ask a trusted friend or adviser for a recommendation if you’re not sure where to start.

    One thing to remember: Before you invest in stocks and bonds, you should have an overall financial plan so you know what place your investments have in the big scheme of things. If you’re not sure, consult an expert – your CPA may be able to advise you, or recommend someone to talk to, or if you work for a large company, the human resources department can tell you if there’s an employee assistance program to help you.

    Morning Coffee: It’s Mega Swag Bucks Friday

    Search & WinSwag Bucks is by far my favorite way to earn free money, so I love Fridays, when there’s an increased chance of winning big Swag Bucks. Plus, get a daily Swag Buck by taking the Daily Poll, and another daily Swag Buck for using their toolbar. Disclosure: If you join Swag Bucks using my referral link, I’ll get bonus Swag Bucks, so thank you if you do!

    It’s been a long time since I mentioned ShareBuilder, but three years ago, I bought my first (fraction of an) individual stock through them – a very tiny share of Berkshire Hathaway B, in fact. I haven’t done much with Sharebuilder since, but I’ve been pretty happy with them – their statements are timely and their web site is pretty easy to use. I love that they have different plans to accommodate different types of investors (I went for the pay-per-trade plan that has no other fees), and of course, the very important fact that you can buy partial shares of desirable stocks. Of course, make sure you know what you’re doing before you invest in any stocks! And, although the banner doesn’t say it, when you click through and register via the banner or this link, you’ll get a $25 sign up bonus when you deposit $25. Links via Escalate Media Affiliate Network

    I am totally envious of those of you in Northern California: I got an email that today only (9/24), Rocky JR Whole Body Chicken will be $0.99/lb at all Northern California Whole Foods locations. The best sale price I’ve seen on a whole chicken at Whole Foods is $1.99/lb, and this is half that! Petaluma Poultry’s Rocky was the first USDA approved free range chicken, and is free of antibiotics, contain no added hormones or preservatives, is 100% vegetarian fed, humanely raised, sustainably farmed, dairy free and soy free.

    Get 10 points at Pampers Gifts to Grow with code 1FORMEGTGSEPT23.

    Michaels stores will be hosting an American Girl event on Saturday (9/25), where girls can make all the supplies they need to throw a doll-sized party. (Via Moneywise Moms.)

    The New York Times reports that some Manhattan Walgreens stores are selling fresh produce. I would be in heaven if I could buy at least some of my produce with Register Rewards!

    You can use this printable Facebook coupon to get free Kobari beef at Panda Express on September 29 (next Wednesday).

    I mentioned yesterday that the printable coupon for $2/1 Playtex Gentle Glide has reset, and now Common Sense with Money lists some scenarios to get free or super cheap tampons.

    Banner via Escalate Media Affiliate Network

    Free Money from Lending Club

    I haven’t mentioned peer to peer lending in a while, mainly because I haven’t been thinking much about investing. As a refresher, peer to peer lending sites allow people like you and me to lend money to other people like you and me. The borrowers sometimes can’t get loans through traditional means (like from banks), or sometimes they’re just looking for a better rate. Lenders can pick and choose who they want to lend to, taking on the risk that they’re comfortable with.

    I mentioned Lending Club a while back, when they gave me some money to play with as a lender. I invested conservatively, in borrowers with the highest grades and therefore the lowest risk. So far, they’ve all paid consistently and my rate of return is over 8% – pretty awesome in this economy.

    Now, Lending Club wants to give everyone money. Right now, when you sign up to be a lender, Lending Club will deposit $64.62 into your account for you to invest (because bank profits were $6.462 billion last quarter). Last time I checked, you only needed a minimum of $25 to invest in a loan (investments are pooled until they total the amount requested by the borrower), so you could invest in two loans with the bonus money and find out what peer to peer lending is like for yourself. Some restrictions apply (for instance, residents of certain states cannot become lenders). Offer expires 12/31.

    Disclosure: The email I received from Lending Club instructs me to tell you to use this referral link so you can get the bonus, but as far as I can tell, I don’t benefit from it.

    The lesson everyone should learn from Bernie Madoff: Diversify

    The one thing I haven’t been able to understand about all the losses caused by Bernie Madoff is why so many people had everything invested with him. A few months ago, I read an LA Times article about Nancy Silverton, a well-known pastry chef, in which Silverton admitted that she knew she ought to diversify, but the returns with Madoff were so good that she kept putting it off. Maybe that’s all it was – greed.

    The need for diversification came back when I read that a mortgage broker in Hawaii ran a Ponzi scheme that lost $30 million, and his victims appeared in court to say they’d lost everything. Again, it sounds like the investors were simply lured by the prospect of easy money.

    For me, between the Ponzi schemes and the current recession, I’ve learned that I don’t want to trust one entity with all of my money. I already felt that way anyway, but the feeling has been reinforced. Our cash holdings are spread between three banks, and our retirement funds are with three separate institutions. It’s not that I think anything will happen to any of these financial entities, but I’ve always been cautious and now I’m extra cautious when it comes to trusting anyone with my money.

    Certainly, for all of the Ponzi scheme investors, losing even half of their life savings would have been devastating. But at least there’d be something left if they’d diversified.

    Lending Club Part One: Getting started

    I first mentioned my interest in peer-to-peer lending back in November 2007, when I branched out of my comfort zone and bought an individual stock. (A tiny portion of a Berkshire Hathaway B stock share.) Back then, I was thinking about continuing to expand beyond my comfort zone of investing by venturing into P2P lending, and have mentioned it periodically since, but it’s always been on the backburner.

    Until now. I received a special bonus for joining, and I’m not one to turn down a chance to learn for free, so I signed up. Others have written extensively about Lending Club, Prosper, and P2P lending in general. (Try The Dough Roller, Mapgirl’s Fiscal Challenge, Lazy Man and Money, and Moolanomy, just for starters.) So I won’t write about the basics of P2P lending because I just don’t have the inclination or time, and I probably wouldn’t do it as well as DR or Pinyo. Instead, I’ll just share my personal experiences and impressions along the way.

    I was a little apprehensive about signing up, just because I am always cautious about disclosing my personal information. However, I knew I’d have to disclose some information and didn’t feel Lending Club was overly intrusive. I didn’t want to link a bank account, and I didn’t have to – apparently linking a PayPal account is enough, although I didn’t even have to do that since I wasn’t adding any funds to my account.

    Once I’d signed up, picking loans to invest in was fairly straightforward. Mapgirl’s frank posts about loans that aren’t performing well convinced me that I didn’t want to take a lot of risk. Even the lowest risk loans at Lending Club earn close to 8% interest, so it’s still a fairly decent return. I had the option of letting Lending Club automatically choose my loans for me based on the risk I was willing to take, but instead I chose four $25 loans manually.

    I selected borrowers who all had a solid credit history and credit score, seemed to have a good reason for wanting to borrow money, and a low debt to income ratio. I also chose one loan that seemed like it might not fund to see what that’s like. And if that loan does fund, I’ll still consider it my greatest risk, because despite the good credit history, credit score, debt to income ratio and decent income, I’m a little disturbed by the revolving credit balance of nearly $42,000 and projected monthly payment of over $500 (the borrower’s gross income is over $5000 per month, but one spouse is currently unemployed). If I wasn’t willing to take a little extra risk because this is a learning experience, I wouldn’t have selected this loan.

    So that’s where I stand now. All of the loans I selected have yet to be fully funded and processed, but I should have an update in about a month!