Financial Independence Compilation

Welcome to the September 19, 2010 edition of financial independence.

Bruce presents Government Mortgage Assistance with Payments | Government Mortgage Help posted at Government Mortgage Help, saying, "Mortgage Help from the Government to assist you in keeping your home from mortgage foreclosure during this recession"

No Trust Fund presents How Much House Can You Afford? Part 1: Can of Worms posted at Where's My Trust Fund?.

Wenchypoo presents Cheapest Groceries This Side of a Dumpster posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "More frugal living tips."

Silicon Valley Blogger presents Transferring Your Brokerage Account? Switch Brokers With Ease posted at The Digerati Life, saying, "Thanks!"

BackTaxesHelp.com presents Basic Guide For Taxes on Vacation Homes posted at Back Taxes Help.

money and finance

Hussein Sumar presents How to Better Understand Roth IRA Conversions posted at Roth IRA, saying, "Roth IRAs and their sister retirement plans Roth 403b and Roth 401k offer oustanding retirement investing choices for American workers & savers. While most people have heard of these plans, they do not exactly know how to take advantage of them, or yet better understand them. This becomes even more difficult when an employee transitions from one job to another company while leaving behind his retirement plan with the old company, not knowing of the choices available."

Sun presents Credit Card Rewards: Gainers and Losers posted at The Sun’s Financial Diary.

Moneyedup presents How To Protect Your Savings From The Nursing Home posted at MoneyedUP, saying, "Nursing home costs are on the rise. Learn how to protect your savings in retirement."

Alexander presents How to Enroll in a DRIP Program posted at Dividend Stocks, saying, "DRIP programs reinvest your dividend back into the stock. Learn how to enroll."

Tim Chen presents Rewards Showdown - Chase Sapphire vs Capital One Venture posted at NerdWallet Blog - Credit Card Watch, saying, "The Chase Sapphire and the Capital One Venture Rewards cards are both high-profile travel rewards cards for people with excellent credit. At first glance they seem pretty similar, and even their signup bonuses and rewards programs overlap. But when you really look at the numbers, some glaring differences appear."

Charles Chua C K presents 10 Ways to Reduce Your Expenses and still Maintain Your Standard of Living posted at All About Living with Life.

FIRE Getters presents 12 Tips To Lower Your Heating Bill posted at FIRE Finance, saying, "The cost of energy is rising everyday. Whether it be electricity, gas, water or sewage, our utility bills are becoming higher with each passing month. Consequently most of us are looking for ways to trim our energy expenses and boost our savings. As winter sets in, the cost of heating our houses will be a major concern ..."

David de Souza presents UK Income Tax Blunder – How It Happened posted at UK Tax Blog, saying, "Over 2 million people are affected by a tax blunder in the UK. We look at how it happened"

Matt T. Henterly presents How to Live Without Credit Cards posted at The SimpleChecking Blog, saying, "How to live without those cursed plastic anchors - from one who's done without them for over seven years."

share presents Why use options? posted at Options Education for Beginners, saying, "A recently started blog with daily new posts about basic options trading education"

nissim ziv presents Best Careers for Women per Skill Sets & Advantages posted at Job Interview Guide, saying, "List of best careers for women where they can better utilize their skills and advantages - women have advantages over men on particular areas and thereby some careers fit them better"

Neal Frankle presents IRA FAQ ? All the Answers You Need In Plain English posted at Wealth Pilgrim: Money Management Advice, Financial Stess Management, Addiction Recovery Plan & Resources, saying, "You need to know IRA FAQ PDQ (Pretty Darn Quick). I say this because we have to take responsibility for our own financial future. Nobody else is going to do it for us."

Mike Piper presents The Best Places to Retire posted at The Oblivious Investor, saying, "For those considering retiring abroad, what countries should be at the top of the list for consideration?"

Brian Cull presents How-to graphical budgeting posted at Living at the Top of the Bell-Shaped Curve, saying, "Simple, easy-to-use way to control your finances by graphing your budget"

Arjun Rudra presents Be Mindful Of The Risk Of Inflation Says Norman Raschkowan, North American Strategist For Mackenzie Investments posted at Investing Thesis, saying, "This past summer has taken investors on a roller coaster of a ride with capital markets rising and falling so much, it’s no wonder investors are feeling queasy. Mixed economic data may be stoking fears of a “double dip” recession, but one North American strategist, says that while there will be an extended period of moderate economic growth, the chances are slim we’ll see another actual recession hit."

Mike Ross presents 5 Life Insurance Myths That Can Cost You a Pretty Penny posted at The Budget Life Blog, saying, "There are a number of myths circulating about life insurance, and you don’t want to fall victim of a myth that could cost you – and your family – down the road. Here are 5 life insurance myths you shouldn’t believe."

BWL presents Should You Buy Disability Insurance? posted at Christian Personal Finance, saying, "This article looks at some of the reasons one might want to consider buying disability insurance."

Ryan @ MFN presents Roth IRA Rules posted at The Military Wallet, saying, "Rules for Roth IRAs, including who can contribute, contribution limits, withdrawal rules, and more."

MoneyNing presents Five Reasons You Should Give Your Kids a Monthly Allowance posted at Money Ning, saying, "Giving your kids an allowance will teach them to be more responsible."

Praveen presents Bought General Dynamics (GD) Today posted at My Simple Trading System.

Roshawn Watson presents Is Extreme Frugality For You? posted at Watson Inc, saying, "So many of us do a job we hate to pay for a consumption-focused lifestyle that we can barely afford. However, is cutting down to beans and rice really for you?"

Madeleine Begun Kane presents Tax Cut Tomfoolery posted at Mad Kane's Political Madness.

Wenchypoo presents The 50% Solution posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "How to hang onto your money--while you make it, or afterwards."

Dan presents The 7 Deadly Sins of ETF Investing – Are You Guilty? posted at ETF Base, saying, "ETFs are better than mutual funds and stocks in many aspects, but there are several risks and downsides many investors are unaware of ranging from futures roll to how leveraged ETFs work. Learn about the 7 Deadly Sins of ETFs."

One Family presents A Peek Into Our Roadmap to Financial Independence posted at One Family's Blog.

PT presents Mystery Shopper Jobs: Deciphering the Mystery posted at Prime Time Money, saying, "The truth about mystery shopper jobs, a potential way to bring in extra income."

Wenchypoo presents What's It Like Living on Food Stamps? Take the SNAP Hunger Challenge and Live on $4.50/Day For the Next Week posted at Wisdom From Wenchypoo's Mental Wastebasket, saying, "If you can meet this challenge, then make it a part of your everyday life, then you will free up tons of money for investing, emergency funds, etc. that will lead to financial independence. Later on, you will wonder the same thing I do now: if current food stamp recipients have to meet this challenge every day, why aren't THEY financially independent yet?"

That concludes this edition. Submit your blog article to the next edition of financial independence using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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Share market indices - measuring the market

An understanding of the language of the sharemarket is essential if you wish to properly communicate with your adviser and/or benefit from the market information available to you. For example you may have heard on the news such as the following:

"After a slow start, turnover on the sharemarket was strong today, with the All Ords finishing up 23 points to 5,300. On overseas markets, the Dow Jones rose slightly to 11,340."

What does that really mean? Listeners are being given an indication as to the general trend of the sharemarket both in Australia and in the USA. The "All Ords" and "Dow Jones" are an index.

An index is simply a measure of performance over time. A sharemarket index is a measure in the change in price of a basket of shares. The number of shares in the basket will determine how closely the index represents the entire market.

The concept of an index is not only used in the sharemarket. A widely followed index is inflation. Inflation is the change in price of a basket of goods. This is measured by the Consumer Price Index – CPI.


The All Ords

The All Ordinaries or All Ords is a measure of the overall performance of the Australian sharemarket at any given point in time. It is made up of the share prices for 500 of the largest companies.

The companies are weighted according to their size in terms of market capitalisation (total number of shares on issue multiplied by the share price). For example, Telstra and National Australia Bank have very large market capitalisations and represent a large component of the All Ords. Movements in their share price have a marked effect on the level of the All Ords index.

The All Ords does not include the value of any dividends paid to shareholders and therefore does not reflect the total returns made from sharemarket investments during that period. An index that takes into account both price movements and dividends is called an accumulation index.


Standard&Poor’s Index Services

Standard & Poor’s (S&P) Index Services provides the index calculation services for the Australian sharemarket.

While the All Ordinaries has been a popular index for many years, the main index used in the Australian market is the S&P/ASX 200 index. It is recognised as the investable benchmark for the Australian equity market. It addresses the needs of investment managers to benchmark against a portfolio characterised by sufficient size and liquidity. The S&P/ASX 200 is comprised of the S&P/ASX 100 plus an additional 100 stocks. It forms the basis for the SPI 200 and the ASX mini200 futures contract, and the SPDR S&P/ASX 200 exchange-traded fund.


International indices

Indices are used to benchmark sharemarkets all around the world, with the most well known being the Dow Jones Index, a share price index that measures the market prices of the top companies listed on the New York Stock Exchange.

In London, the Financial Times Stock Exchange Index, better known as the FTSE 100 or 'the Footsie', lists the 100 largest public companies traded on the London Stock Exchange.

The Hang Seng is the principal Hong Kong share price index. The main market barometer in Japan is the Nikkei Dow Index which covers the top 225 shares listed on the Tokyo Stock Exchange.

The German Stock Exchange Dax 30 (covering 30 blue chip stocks) is unusual in that it is an Accumulation Index, whereas all the others are price indices, meaning they do not include dividends.

Share Types

Types of shares

Depending on their capital requirements, many companies issue different types of shares in addition to ordinary shares. Each type of share and separate classes within each type may have different rights attached.

Your stockbroker can help you to understand the advantages and disadvantages of various types of shares before you invest in them.


Ordinary shares


• Represent the bulk of a company's basic ownership money or equity capital.

• Shareholders benefit from any distributions of dividends and can vote at company meetings. The more ordinary shares they own, the greater their control over the company.

• Rank last behind other types of shares if the company is wound up


Preference shares


• Are entitled to a preferred dividend paid before the ordinary dividend is announced. The dividend is often paid at a fixed rate.

• Have priority over ordinary shareholders for repayment of capital if the company is wound up.

Trust units


• In the form of property trusts and equity trusts.

• From an investor's point of view, units in listed trusts are similar to ordinary shares except that a full distribution of profit is made to unit holders instead of a dividend.

Contributing shares


• A company may issue new shares without requiring full payment immediately. In such a case, it may issue the shares on a contributing or partly-paid basis.

• Shareholders make further payments on certain dates or in some cases, may forfeit their shares.

• Have equal voting rights with ordinary shares and dividends are usually paid on a pro-rata basis.

Rights and bonus issues


Companies can make special issues of rights or bonus shares to shareholders. As a shareholder, it is important for you to understand what each issue entails and the important dates involved. If you have any doubt about such issues you should contact your client adviser/stockbroker.

Bonus issues


Bonus issues are shares issued free of charge to shareholders. The size of the issue reflects the improved value of the company's assets.

Bonus issues are made on a predetermined pro-rata basis, for example, one for ten.

This means you will receive one new share for every ten you currently own. For example if a company in which you hold 1,000 shares announces a 1-for-10 bonus issue, you are entitled to 100 more shares at no cost, which would bring your total holding to 1,100 shares.

Once a bonus is issued, the price of the shares is likely to drop as the value of the company's assets is now spread over a larger number of shares. Bonus shares dilute the market price of the shares in direct proportion to the increase in the total number of shares on issue.

This price adjustment occurs on the ex-bonus (XB) date. An investor who buys the existing shares on or after the XB date is not entitled to the bonus shares - they belong to the previous owner of the shares.

Rights issues

A rights issue entitles existing shareholders to take up additional shares in the company at a below-market price and without having to pay brokerage. Rights issues enable the company to raise additional funds from shareholders, perhaps for expansion or to repay debt. For example, Company X may have a rights issue to raise $300 million to fund its takeover of Company Y.

The process for a rights issue is similar to a float, in so far as a prospectus is prepared and an underwriter is often appointed. Shares are offered on a predetermined pro-rata basis, for example, 1 for 4. This means that for every four shares you own, you can purchase one additional share at the discounted price.

A rights issue may be renounceable or non-renounceable. Renounceable means shareholders are entitled to sell their rights to other investors on the sharemarket if they do not wish to take up the additional shares themselves. Non-renounceable means only existing shareholders can participate and you must either take up the shares or forfeit the rights.

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Financial Independence Compilation

Welcome to the August 4, 2010 edition of financial independence.

Your free gift - We are offering you a free gift that we are sure that it will inspire you on your road to success. The book the Science of getting rich has inspired me and started me on my road to financial independence. I encourage you to download the book and join the SOGR network. You have nothing to lose. Click here to download your free book.

 Your Financial Independence Articles

The most important money advice - There is only one rule that should direct your personal finances. If you are able to understand and apply this rule you have mastered all that you need to achieve financial independence.

Investing in shares - learning from the financial press - In this article, we discuss how to read the financial newspapers and look at other areas of the media that can provide you with information on share market investment.

The science of getting rich - acting in a certain way - Do not bother as to whether yesterday’s work was well done or ill done, do today’s work well. Do not try to do tomorrow’s work now, there will be plenty of time to do that when you get to it.

Do not wait for a change of environment, before you act, get a change of environment by action. Cause your environment to change. You can so act upon the environment in which you are now, as to cause yourself to be transferred to a better environment.

Buying and selling shares - The share market can be thought of in terms of its two main functions: The primary market where companies raise money by floating their company and selling shares to investors. Following this Initial Public Offering, the shares are then able to be traded on the share market (the secondary market).

So as an investor there are two distinct points at which you can purchase shares...

Real riches - I am right now on my way to work on a Monday morning. It seems to be a normal Monday morning, however, I have this empty feeling inside of me. This is unusual, as far as I can remember this has never happened to me.


Reader's Sponsored Articles


Charlie Kimball presents 7 Steps To Get Out Of Debt posted at Consumer Credit Guide, saying, "The toughest part is changing your attitude about spending money, using credit cards, and disregarding the future. Nothing is easy, but it is possible to get out. Even small steps make a difference . . . make a plan and attack your debts!"


Ellesse presents Can You Be Financial Independent Before 40? posted at Goal Setting College.


Nissim ziv presents Finding your Dream Career and landing the Job of your Dreams posted at Job Interview Guide, saying, "Here are some tips that you might use:
Make Yourself Competent for your Dream Career, Hone Your Core Competencies"


Mitch Archuleta presents How to Prioritize Multiple Retirement Accounts posted at RothIRA.com's Retirement Planning Blog, saying, "How to decide what order to contribute to retirement investment accounts."


Sam presents Investing in Gold posted at Surfer Sam and Friends, saying, "Thanks for including my article. Here's an excerpt...

When people buy and own gold they consider it as a store of value and a safe haven for wealth in economic crisis. One of gold's important properties is psychological, because it is so closely associated with money. This gives it an immeasurable advantage over other tangible stores of wealth. Most people readily associate gold's distinctive color with wealth, and consider the color of gold beautiful. King Midas of mythology, who could turn everything he touched into gold, had the first fatal case of “gold fever,” the frantic need to seek and hoard gold."


David de Souza presents The Inland Revenue posted at UK Tax Blog, saying, "An interesting article outlining the history of the Inland Revenue and taxation in the UK, dating back to the Roman invasion."


Abbott Efrain presents Fast Cash Loans For The Fastidious! posted at Cheap Payday Loan Blog, saying, "The payday loan industry is popular today this is because it recognizes the need of people.It understands that not everyone wants a big loan or has the time to wait for the advance to get approved."


Daniel M. Wood presents Here is a Method That is Helping People All Over The World to Accomplish Their Goals posted at Looking to Business, saying, "Knowing you goals, knowing where you are going and what you want to achieve makes a huge difference in your life. It gives you lots of motivation, it helps you focus all your efforts towards your goals and moves you towards your goals in a much faster pace."


Rick Todd presents Is retiring abroad actually cheaper? posted at Expat Investing.


Two Becomes One presents Debt Consolidation Company: How To Make The Right Choice « Debt Relief Blog posted at Debt Consolidation Company: How To Make The Right Choice, saying, "Paying off debt is a back breaking exercise. It works like a domino; debt begetting more debt until the entire financial edifice crumbles."


Aileen Black presents Debt Consolidation Company: How To Make The Right Choice « Debt Relief Blog posted at Debt Consolidation Company: How To Make The Right Choice, saying, "Paying off debt is a back breaking exercise. It works like a domino; debt begetting more debt until the entire financial edifice crumbles."


That concludes this edition. Submit your blog article to the next edition of financial independence using our
carnival submission form. Past posts and future hosts can be found on our

blog carnival index page.

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