This post recently appeared on FreeMoneyFinance.com
I am a big fan of Warren Buffett and have always been inspired by his words of wisdom. These are my five favorites…
“Do business with people you like and who share your objectives.”
Isn’t there more to life than money? I have met people who I wouldn’t work with for a million dollars, haven’t you? People are people and you will never be completely insulated from people who bug you, but if you are hiring them or choosing to work with them, they might as well be people you enjoy being around.
When your business partners are sharing your objectives you won’t have to waste your time pulling against each other. If you are building a business to selling eco-friendly products with the sole intention of saving the rainforest and your partner is only concerned with increasing profits - you are going to be in trouble.
“Leave your children enough money so they can do anything, but not enough that they don’t have to do anything.”
A cousin of mine received 8 million dollars as an inheritance on his 21st birthday. A few people I was talking to couldn’t believe me when I said I wouldn’t want it. To me, the joy in life is overcoming the challenges and reaching the successes. I would have felt like I was robbed of the chance to fight and earn it.
I want to be able to look back on my life and see all the obstacles that I overcame in order to reach my destination. Don’t get me wrong, everyone needs help on the way. For some people the 8 million dollars might be just the help they need to get their non-profit off the ground or get their business started.
But for me, if I would have had 8 million handed to me at age 21, it wouldn’t have helped, it would have been crippling. I would have been tempted to relax just a bit too much. I would have probably ended up a big, fat blob. 
The irony is that as much as some people desire retirement and the “easy life” many of them find themselves bored out of their minds. We all need something to live for. I remember how miserable I became when I was out of work for a few months. I wanted to contribute to society, but couldn’t find the opportunity. I felt like a big, fat blob and wanted more than anything just to have an opportunity to do some work. Amazingly, as soon as I started working again, I felt a whole lot better about myself.
“Decision making abilities fade as cash flow increases.”
Suppose you only have $5 in your pocket until the end of the week, it is likely that you will make a good decision with it, because it is all you have. On the other hand, if you have $100 for the week, your decisions regarding a $5 purchase are far less critical since you have another $95. Therefore, people tend not to treat those decisions with the same respect they would if it was their last $5.
Parkinson’s Law states that expenses rise to meet income. It is the reason that many people wonder why their last raise didn’t make paying the bills any easier. The way to defeat Parkinson’s Law is to treat each dollar as if it is the last - to make the best possible decision for each and every dollar. Not as a miser, but as someone who is choosing to make wise decisions with their money.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Think Eliot Spitzer, Michael Vick and Kobe Bryant. One day they can be very respected in their fields and the next they can have a whole different perception in the eyes of the public.
With the advances in technology it is becoming more and more difficult to hide from mistakes. Society is much more transparent than it used to be. You can Google a phone number and get directions to the location, employers are checking up on Facebook and Myspace pages, and you can see what was on a website years ago. The days of being able to do something stupid and trying to cover it up are gone. So, Warren’s advice is more relevant now than ever.
“There are no called strikes in the ball game of investing.”
Yea, it would have been nice to have bought Google @ $75 during the IPO, or better yet Microsoft. But, you didn’t LOSE any money by not investing. Even if someone else made thousands while you sat on the sidelines, you still did not LOSE any money. There are plenty of stocks that you could have bought that you would have lost money.
While I agree with what Warren is saying, I have noticed that the problem for most people is that they are afraid to swing the bat. They stand up there watching opportunity after opportunity go by only later to say, “I wish I would have…” I did it for years.
I would see a company pop up and say to myself, “that would be a great stock to buy,” only to watch the price continue to rise without swinging the bat. I would feed myself excuses mostly about how I didn’t have enough money and how it was risky - both were kind of true. But you can now get started investing for as little as $100 at Sharebuilder and we all know that without risk there is no reward. So just get in there, wait for a good pitch and swing for the fences.
this post was included in the carnival of personal finance
Do you have any other great words of wisdom from Warren?
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The Advantages of Mutual Fund Investing
The goal of this post is to go over the basics of mutual fund investing. To start, a mutual fund is a company whose main objective is to professionally invest a pool of money in securities and earn a positive return for shareholders. By doing this, these companies allow you to share the rewards and risks of investing.
So when you buy shares in a mutual fund you are essentially buying stock or bond holdings in various companies, based on the underlying investments. Your shares are pooled together with the other investors’ shares, which allows for a high level of diversification.
Mutual fund investing has a few advantages:
- The funds are managed by full-time money managers. They research market and economic trends, and then use this information to make decisions about buying, holding or even selling securities to enhance returns.
- Diversification is one of the first things that anyone learns about investing. “Don’t put all of your eggs in the same basket, just in case you drop it you won’t lose them all.” The folks at Enron learned this the hard way as many of them who were fully invested in the company stock lost all their 401k savings when the company folded. Mutual funds help minimize this risk by spreading your money over a number of investments. By doing this the impact of one poor performer on your entire portfolio is greatly reduced.
- Many mutual fund companies offer convenient features, like automatic reinvestment, systematic payments and no-cost exchanges of funds. If you choose to, you can automatically reinvest any dividends and capital gains (profits) to purchase more mutual fund shares .
- Many mutual funds can be purchased with a low minimum investment. After an initial payment of $250, most mutual funds require as little as $25 or $50 at a time for additional investments.
- Liquidity is another nice benefit of mutual funds. Most funds offer you the ability to sell any or all of your fund shares on any business day the markets are open.
I think mutual funds are a great way for beginners to get started investing, (but even better would be index funds) Generally the risks are lower than investing in stocks, but of course the reward is more limited as well.
Anyone have any suggestions for beginners purchasing a mutual fund?
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Answering a reader question
I received a message the other day from a fellow newlywed-er (am I still a newlywed at year 3?) She was asking for a little financial advice. So, I will share what I have and hopefully we can get some input from some of the readers.
Here is an excerpt from what she wrote:
As a newlywed, I just started to plan my life with a person.
I really like your advice about using the Roth IRA to save early.
I am wondering could you write more about those?
I really want to know what you would recommend a new married couple should save up for? A house, a baby, pay off loans,Roth IRA…or what else?
Well, I guess I will just share what my wife and I are currently doing. Since we are transitioning out of the newlywed phase (having been married almost 3 years) we are likely in a similar place.
My financial story
My wife and I (look to the right) both brought a decent chunk of debt into the marriage from our past mistakes and education expenses. Since we got married we have been focusing most of our energy on paying off all of our debt. I really like the debt snowball method for getting out of debt and for the most part we have been using it. The variation that we have made is that we have been funding a Roth IRA as well as our 401k’s.
By not putting all of our financial energy into paying off our debt, we realize that it will take a little bit longer. All of our debt is at 3% interest rate or less, so paying it off quickly is not a major issue for us.
Having learned from a few wise mentors in my life, I have come to understand the impact that time has over investments. Without getting into too much detail, I will just say that getting started investing early puts you at a high advantage. It is not just a little bit better than waiting, but a HUGE amount better. Having enough for retirement can be a breeze if you get started while in your 20’s. It was for this reason that I wanted to get the ball rolling with my investment portfolio.
I say all that to say: everyone’s financial decisions of what to save up for should be based on their personal situation.
For us, our current priorities (always subject to change) are:
- Getting out of debt
- Having plenty of cash for retirement
- Home ownership
- Kids and all the expenses they bring
Because of this we have been focusing about 75% of our financial energy to paying off debt and 25% to retirement. My goal is to finish paying off our student loans this year, which will allow us to start saving for the other priorities.
Personally, I hate debt. I can’t stand the feeling of being a “slave” to lenders as Proverbs puts it. I also don’t want to have to work when I am 75. My strong feelings with both of these issues guide my financial decisions.
So, do you have any financial advice for your fellow newlyweds? What do you think young married couples should be saving for?
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Considering Primerica?
I have been to quite a few multi-level marketing recruiting meetings over the years. I consider myself to be an open-minded person, so I don’t mind meeting with the recruiters and really learning what the company is all about. It helps that I don’t have much desire to follow the crowd and don’t have a problem saying no or leaving when I realize it is not what I was interested in.
I met with someone from Primerica a few months back, and just got a call from a different recruiter a few days ago. Since they seem to be growing, I figured I would share my thoughts and see what everyone else thinks.
Primerica Pros
I was intrigued by Primerica because, having worked in banking and currently working in the brokerage industry, I understood that they were offering a valuable service to their clients. Primerica is a divison of CITI, one of the largest banks in the world. Citi offers just about every financial product under the sun and they use Primerica as a sales force of their many products.
What I think is brilliant with Primerica is that their goal is to help their customers use their existing income and shift things around freeing up extra cash to fund retirement and other savings goals. In the example they showed (I am not sure if it was the average American’s financial situation) they refinanced the customers mortgage and switched them from a cash value life insurance policy to a term policy freeing up $500 a month. They then take this $500 and show them how to make good use of it by investing in mutual funds for retirement, saving for college, etc…
The reason they can hire anyone is because they have a computer program that does the advising for them. The Primerica rep gives the computer specific information about the customer’s financial situation and it spits out what they call an FNA (Financial Analysis). This analysis shows the rep and the customer how they can save money and what they should put that extra money towards.
Coincidentally or not, this seems to be somewhat of a win-win. CITI is willing to make a sacrifice and make a little bit less money on a few products in order to free up the client’s money that will likely be spent on other CITI products.
Primerica Cons
- They are still a high pressure multi-level marketing firm. The problem I find with a lot of these companies is that the coerce and pressure people to join - personally, nothing turns me off quicker than when I feel like I am being pressured into something.
- I did not sign up with them so I don’t have a full understanding of how they get paid. My rep rambled through some gibberish about there being four ways, but was obviously very vague with me about it. From what other Primerica reps have said, most money is made from recruiting people rather than selling products - and it is difficult to make much money if you don’t recruit a bunch of people.
- The commission payouts are a lot lower than other salespeople in the industry. I guess they figure they can get away with it, since most of their reps wouldn’t have the credentials to work many other places in the industry.
- If you do leave and stay in the industry, they have a non-compete clause for 2 years within a 50 mile radius of your address. If you leave, you must leave behind the clients that you worked so hard to get in the first place.
I am sure there are bunch more pros and cons, but honestly, since I never signed up I don’t know all of the details. I would love to hear your perspective if you heard of them, been recruited by them, worked for them, or currently work for them. I know a lot of people are very passionate about MLMs one way or another, so if you comment please keep it civil.
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It is so SIMPLE to retire well off, if you make just a little sacrifice now. The alternative is making a huge sacrifice later on (in your 40s) and still probably not doing as well as if you made a small sacrifice now.
You just finished your degree and you are probably looking for your first “real” job. This is the perfect opportunity to decide how you would like your financial life to be. You have the choice to spend and buy whatever you feel like which will likely put you in heaps of debt. If you choose this path, you will be in good company. You can be sure most of your peers will take this path.
Or, you can take the road less traveled. You can be one of the “weird” people out there who refuse to believe that they have to be in debt all their lives. You can get motivated by the thought of the freedom that comes with being debt free. This road can sometimes feel like a lonely road, when everything and everyone around you is yelling, “Spend! Spend! Spend!” But, be assured, those who go down this road get the last laugh. They experience freedoms that most people only dream of.
If you are like I was, you will think, “oh, I can spend now, because I will be making more money later.” Well, the truth is that it doesn’t matter how much money you make. Expenses rise to meet income. So, as your income increases, you can be sure that, by default, your expenses will increase as well. Believe it or not, there are people out there with $500K annual salaries filing bankruptcy and in the same moment, you have people who never made more than $50K a year retiring as millionaires. It is not about how much you make. It is about how much you keep.
So, I say all of this to say, if I could teach a college grad only one financial lesson it would be to:
Max out your Roth IRA for five years
By maxing out ($4000 for 2007 and $5000 for 2008) your Roth IRA for the first 5 years after you graduate - you will likely have over $24,000 by the time you are 27. If you add NOTHING else to it, when you are 67 and ready to retire it will be worth over $1,000,000 (assuming 10% growth). If you can keep adding to it, you can really watch the puppy grow!!
But don’t wait, if you wait until you are 27 to start rather than 22 - the million is now down to $675,000 when you retire. Still not bad, but definitely not a million. And if you wait just 5 more years until you are 32 - you are looking at about $415,000 when you retire. So, you can see the importance of doing this right away - no matter what age you are. You can make this retirement figure a lot larger if you keep adding to it, rather than just doing it for 5 years.
Figures calculated with the savings calculator at CNN.com.
Invest the money in an Index fund
Buy an Index fund that follows the S&P 500 - The average performance of U.S. stocks over the last 80 years is over 10%. You may find a few stock mutual funds that occasionally beat the index, but very few consistently beat the average. This is the big secret of the industry - you will never (yes, I can pretty safely say never) have a financial advisor tell you to buy an index fund, because the fees are a lot smaller with an index fund than with a managed stock mutual fund. Therefore everyone involved in the sale of the mutual fund is getting paid a lot less than if you bought a managed mutual fund. The fact is that the great majority of managed stock mutual funds fail to beat the index.
Bottom line: Buy an Index fund in a ROTH IRA account, max it out for your first 5 working years and forget about it until you retire. If you can’t afford to max it out, don’t worry about it, just do the best you can. The purpose of the article is to emphasize how important it is to START EARLY!!
What I wouldn’t tell the grad (but I am thinking)
The reason this is the one thing I would teach them, is because it will probably help them to spend less than they earn - which is the KEY to financial well being. Secondly, if they can do it for five years - it will likely become a habit that they should be able to continue for the rest of their lives. And lastly, there are a bunch of things I would love to teach the grad, but this was the lesson that got me interested enough in money to learn the other lessons that I needed to learn.
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He probably wouldn’t now, but he may have 18 months ago…
One up on Wall Street
A few years back I read Peter Lynch’s classic One up on Wall Street
One of the points that Peter mentions in the book is that often times the biggest winners pop up around us (in the shopping mall, grocery store, etc.) and the smaller investor stumbles upon them before Wall Street ever takes notice. If the smaller investor buys into the winning stock before the Wall Street investors do - they are going to benefit greatly from being in early. As he mentions, Wall Street generally has a herd mentality so once a stock is discovered by one Wall Street firm as a good buy, it is likely that many more big firms will be buying it as well. It is this process when all the “Big Money” is buying shares that causes the stock’s price to go up dramatically.
I am still trying to find a “ten-bagger” as Peter calls them (a stock that goes up 10x its value). I am disappointed to share that I missed one that was right under my nose.
Crocs
Crocs - you know the attractively challenged, yet extremely comfortable shoes that seem to have grown famous at mall kiosks. Well, over the last few years I have watched them start popping up all over the place. I saw continued expansion in the company as they started offering a wider range of styles and products. But yet, it NEVER crossed my mind that I should look into investing in these guys. Well, since their IPO (Initial Public Offering - when the public can first buy shares of a company) their shares have gone up 6x what they started at.
The chart below shows the growth of the stock price since the IPO last year.
This is just about exactly what Peter Lynch was talking about. It was a company that I saw in action long before the wall street analysts took any notice. If I would have been more attentive, I could have made a nice chunk of change investing in Crocs. Well, one thing I am determined to do is to learn from my mistakes - I would suggest you do the same, I missed this one, learn from my mistake and catch the next one that comes by.
One of my favorite Warren Buffet quotes is, “there are no called strikes in the game of investing.” So, if you miss one or two or three, just get the next one. You do not LOSE any money by missing them. And if you wait and get the right one, you have a whole lot to gain.
Is it too late to invest in Crocs?
Well, as I was talking about, Wall Street is heavily invested in the stock (about 50%), so the chance for those big gains is past. Regardless, if it is a good company and a good price it still could be a good investment. I think I agree with Kiplinger’s that is a faddish company that probably will not be able to sustain the momentum that it has produced, therefore I will not be buying right now.
As you can see in the chart above, there was a major decline a few weeks back - which could create a buying opportunity, depending on what the reason was for it. I honestly have not thoroughly researched the stock, so I really don’t know many of the business details of it. If anyone has any insight about the stock, please share with us.
Technorati Tags: invest in Crocs, Peter Lynch, Crocs stock
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The following is a guest post written by Terry Sprouse, author of “Fix em Up, Rent em Out: How to Start Your Own House Fix-up and Rental Business in Your Spare Time” - Find out more at Fixemup.org
In my opinion, the two safest ways to get started in real estate, are: 1) buy a home, rent it, then do it again, and/or 2) buy a home, live in it 2 years, then sell it without paying any federal taxes using the “homeowner’s tax break.” Over the past six years, my wife and I have used both techniques. We have several properties that we keep as rental properties and provide us with cash flow. In addition, we also buy houses in need of repair with the intention of selling them and utilizing the “homeowners tax break” to pay no federal taxes.
Turn Your Residence into a Rental Instead of Selling It
A system that I like to use is to refinance my residence six months to a year before I plan to buy a new residence. This gives me enough money for a down payment on the next house that I will purchase. When I locate a good fixer-upper I can quickly purchase it. During the 3-4 weeks it takes to close on the new house, I prepare the old house so it will be ready to rent. This usually involves some painting and landscaping. Then, before I close on the new house, the “for rent” sign goes up on the old house.
The 3 steps in this technique: 1.) refinance your residence. 2.) use the refinance money as a down payment to buy a new house. 3.) move into the new house and rent out the old house Instead of refinancing your residence, you can use savings or a loan from a relative as a down payment. As mentioned, an advantage of refinancing your residence while you are still living there is that you get a lower interest rate on your loan than if you were refinancing a rental property. Under this technique, you get the lower “primary residence” interest rate for both the old property and the new one, since each property is your primary residence at the time that you take out the loan.
Sell a House that You Live in For Two Years and Pay No Income Tax
The 1997 Taxpayer Relief Act was a great boost for average people who wanted to sell their home and buy a new one. It was also a great boost for investors. Couples are allowed to exclude up to $500,000 of the capital gain on the sale of their primary residence. Single individuals can exclude up to $250,000. In other words, the sale of the house is never reported on your federal IRS forms if the capital gain is less than the $500,000 and $250,000 limits.
This exclusion is based on compliance with two requirements: 1. The home must have been the primary residence for both spouses during two of the last five years. The two years do not have to be consecutive but if you rent out the primary residence for more than three years you would be required to occupy it again for two years. 2. The exclusion is available only once every two years. Utilization of this tax exemption is the safest investment strategy for the conservative investor who wants to take few risks. This is the type of investor who wears both suspenders and a belt to hold up his pants. They like to play it safe.
Under this strategy, the investors can quality for the least expensive loan, the owner-occupied loan. There is no need to worry about tenants destroying your rental property or not paying the rent. You completely control the investment by living in the property yourself. When you sell, you have the opportunity to bring in up to $500,000 tax-free money every two years. My wife and I didn’t sock away much money for retirement, but with our rental houses, we have a flow of income that will last as long as we keep the houses.
Many people stay away from rental properties because they don’t want to deal with renters. However, with practice anything is easy, including dealing with renters, and the rewards far outweigh the difficulties. If you really don’t want to deal with renters, just use technique #2, where you buy and sell every two years. Technique #2 is for people who like to play it safe. I have made real estate investing my hobby, as have many others, and you can do it too. For anyone who wants to learn there is plenty of room in the fix-up business. Grab a hammer and join me.
Technorati Tags: real estate investing, how to invest, real estate
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I previously wrote a post called What is an IRA?, but I have had some inquiries about IRA’s, so I will try to keep it simple and explain Individiual Retirement Accounts a bit further for the beginners.
What is an IRA anyway?
- Well, an Individual Retirement Account (IRA) is basically an account that provides huge tax benefits when used to save money for retirement.
- It is an ACCOUNT that HOLDS investments IN it. I find that some people get this part confused, so remember IRAs are NOT investments themselves, they are only the ACCOUNT that holds the investments. Within the account you can invest in stocks, mutual funds, CDs, money market funds, and many others.
- IRAs can be opened at brokerage firms (Merrill Lynch, Edward Jones, etc.), online brokers (Zecco, Scottrade, ETrade), mutual fund companies (TRowe Price, Vanguard), and most banking institutions.
- You get to choose which investments go in the account. Keeping that in mind, many banks will not give you the freedom to invest in stocks and mutual funds, because they do not offer brokerage services (I know the larger ones do, so if you bank with them, go for it). But YOU are the one who decides what investments go in your account.
- You CAN open multiple IRA accounts at different places - keep in mind that there is a maximum amount that you are allowed to put in to your IRA each year ($4000 for 2007). I don’t recommend it; it gets messy. I know from experience. You have to keep track of how much you put in each one each year and make sure the combined amount doesn’t exceed the IRS limit. Another reason for not having multiple IRAs opened up is that…
- There is an annual fee of $30-40 charged by the brokerage firm or bank that you have your IRA with. Some are more, and some are less, but this is a good ballpark figure.
Roth IRA or Traditional IRA?
Of the two most common and basic IRAs, there are two types; ROTH and Traditional. The main advantage of the Roth IRA is that you use after-tax money to fund it, so when you reach retirement age you will not pay ANY taxes on the withdrawals.
The Traditional IRA, on the other hand, offers an up-front tax deduction, but commands taxes to be paid in retirement.
It is generally a safe assumption that the ROTH is usually is the better choice for most people. However, there are major differences between the two, so in order to get the best advice for your particular situation talk to a financial advisor.
There is a whole lot more to learn about ROTH IRAs and Traditional IRAs, but if you can honestly admit that you do not want to spend the time or energy to figure out which one will work better for your situation, then just pick one and start saving. It is far better to start saving, than do nothing while you try to figure out what to do.
Where can I open a Roth IRA?
So, you have learned the basics about IRA’s and you know that now is as good of a time as ever to start one, but where do you go to open one?
Really, you can open them just about anywhere: banks, brokerage firms, discount brokers, some mutual fund companies etc.
Just be aware that WHERE you open it may impact what investments are available to you. For instance, some banks only offer CDs in their IRA’s. www.TradeKing.com is a discount broker that I like (that is just about one of the cheapest places you can go). They allow you to buy mutual funds, stocks, bonds and more.
Questions to ask
No matter where you open your IRA, you should find out the answers to a few questions…
- Is there a minimum initial investment? How about minimum contributions?
- What types of fees are charged?
- Does the company offer automatic contributions?
- What investment options are available? Stocks? Bonds? Mutual funds? CDs?
If you open the account online, you should be able to find the answers to these and any other questions you may have on the company’s website. If not, feel free to call them. Most of them are so excited to have new customers that they will make the process as painless as possible.
(added 04/21/08) Zecco is another option for opening an IRA. They actually offer free stock trades. I haven’t opened an account with them yet, but I am going to be opening one soon. I will write more about it when I do…
Just find some place that you feel comfortable with to open your IRA. As I mentioned the options are endless, but even if you decide you want to move your IRA - you can without much hassle. I will have to go over IRA rollovers later.
Just remember, the hardest part is just taking the first step. It may take you an hour or two to open an account, but it will be well worth it when you look back in 20 years.
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Open an account. I like going directly to the source. You can get a broker to open an IRA for you which may be more convenient. But, you will pay a hefty sum for that convenience. It has become fairly easy and very inexpensive for the individual investor to open investment accounts online. I like Vanguard and T.Rowe Price. Both will allow you to make free regular investments into your IRA.
Calculate how much you need to save. Now that the account is open, we need to figure out how much of an investment it is going to take to get us from here to there. Try out one of these retirement planning calculators to get an estimate of how much you will need to save on a monthly basis.
Direct deposit. Out of sight, out of mind. Humans are generally very easy to fool. If we don’t see (or have access) to the money, we won’t spend it. The trick is to have our employer direct deposit the money to our 401(k) or IRA, before we can get our hands on it. So, use the information from the calculator to give you a rough starting point of how much to have deposited each month. If the number is larger than you would have hoped, then just start with what you can each month and gradually increase it.
Don’t quit. In order to reach any goal, we must stay the course. There will be times when it is easy and times when it is hard, but consistency is how the tortoise beat the hare. The hare was a lot flashier and could move quicker, but he wasn’t consistent. When it comes to saving, it is not about how much we make, but about how much we keep. Don’t stop putting money towards your goal and commit to never touching your retirement savings (until retirement of course).
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Due largely to the lending frenzy of the recent real estate boom, many mortgage companies are feeling the squeeze. [tag]American Home Mortgage[/tag] (AHM) recently filed for [tag]bankruptcy[/tag] due to “extraordinary disruptions” in the markets that support the mortgage industry. A slow housing market and many payment defaults scared investors away from mortgage debt, including bonds and other securities backed by home loans.
Homebanc ([tag]HMB[/tag]) was recently delisted from the NYSE and seems to be in a bit of trouble themselves.
I purchased a small chunk of [tag]Homebanc[/tag] at a price of $1.50 a share. Admittedly, I did not do as much research as I should have, but I was banking on the fact that they had a tangible book value of $2.15. The logic was that even if they did go bankrupt, when all of their assets were liquidated I would receive $2.15 per share. I thought I was safe.
Now, it turns out that Homebanc is leaving the mortgage loan origination business.
This is the statement from Homebanc’s CEO:
“In light of the extraordinary difficulties that HomeBanc continues to face in the mortgage loan origination market, we feel that it is in the best interests of the Company to exit this business so that we can focus on preserving the value of our investment portfolio assets and loan servicing operations.”
The two lessons I learned here:
- For every action, there is an equal reaction. The housing market boomed, and now it is slumping. So the cycle continues…
- Don’t buy a stock, until you have done ALL of your homework.
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