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Stock Index Funds: Weekly Round-Up

Index funds are notable in the sense that it doesn’t require its managers to continually pick and choose stocks for investments. Rather, it contains a large sample of stocks in a chosen index. For example, S&P 500 Index Fund will contain all stocks from the index. In essence, investors will own a tiny part of all companies included in the index fund. This feature provides this type of fund certain advantages. For example, there are no trading costs such as commissions because the net asset of the fund is calculated each day.

If you are interested in know more about index funds and how to invest in it, the list below provides more information.

Mike @ Gather Little by Little wrote an interesting post titled “Investing Strategies with $10,000 or Less” The benefits of index funds are basically described in this blog entry. It requires very little costs with high profit potential. Investors who are looking for a relatively safe medium should consider this option. Meanwhile, Mike also talked about management fees and other considerations in this post.

JD @ Get Rich Slowly nailed the topic about index funds in the article “Index Funds: Why Choose Anything Else.” The post was quite helpful in helping individuals decide where to put their money. Among the advantages he outlined include lower risks, lower costs, and added bonus. In essence, index funds let you know exactly where your money is at unlike other forms of investments where only the manager has complete information.

Roger @ The Amateur Financer uploaded an article about index funds titled “Great Debates: ETFs vs. Index Funds.” The information provided in the article is quite extensive. The blogger delved into many related issues including its flexibility, tax efficiency, and lower tax ratios.

Threat to Your Home Value: The Neighbor’s Mortgage

Traditionally, homes will have good value if it has a good location, near offices or within proximity of renowned schools. It also helps that homes like these are usually situation in well-maintained neighborhoods with friendly communities. However, the above-mentioned factors no longer provide homeowners with the assurance that their homes will hold its value. Why? The neighbor’s mortgage.

It is estimated that around a third of all mortgage holders are holding a loan balance that is higher compared to the market value of their property right now. They are known as “underwater” borrowers and they are unlikely to many of them are unwilling to pay more for a home that actually costs less.

The finding released by the Congressional Oversight Panel on the Troubled Asset Relief Program points out that when troubled homeowners experience further financial distress, they are likely to lose their homes due to little or no incentive to keep their properly. The resulting empty properties, especially when concentrated in certain communities, will have a dramatic adverse effect on the home prices at that area.

Home Abuse: It is Not Wanted

New developments typically look fresh and finishing touches like landscaping are usually still being added. But John Sullivan of the National Associated of Exclusive Buyer Agents report that new subdivisions are experiencing home abuse. Lawns look straggly, the paint appears dirty, and the windows are dark from dirt. These are all signs that the previous owners experienced mortgage problems.

When the mortgage debt declines 20 percent below the property value, there is a high likelihood that it will be foreclosed. Evan Feldman from ZipRealty tries to inform potential home owners about this threat. Buying a home is the single biggest investment you will make. By getting all the information about the neighborhood and the community, shock and financial losses can be avoided later on.

Labor Market – Finally Some Good News?

After almost a year of painful job cuts, employees finally have a breather. Wall Street is rejoicing as well. There are indications that the labor market might be on the road to recovery. Stock gauges are at their highest in over a year even though economic data reports only modest gains. Highlights include the improvement on consumer sentiment, increase in retail sales, and reports on the trade gap.

For the month of November, employers laid-off 11,000. While still significant, it is the smallest job cut since December 2007. The unemployment rate is now at 10 percent from the 10.2 percent high in October. Phil Orlando from Federated Investors observed that it’s going to be years before the labor market goes back to where it was in 2007 although he acknowledged that it was already improving.

Yet, for the positive signs, there are also disturbing factors under the statistics. The drop in real unemployment rate may be because millions of Americans who had lost their jobs almost two years ago may have given up looking for work. Thus, the figure was not included in the data.

On the investor front, the stocks are expected to remain at a certain range. According to Jamie Cox of the Harris Financial Group, “The broad averages are probably going to go sideways and for a while…it’s not going to be as hard or as easy as it’s been in the last 24 months”. At many stages, the market rose dramatically and then fell, and then the trend continues.

The next few months are going to be different. Analysts predict that investors will focus more on stocks, rather than the market as a whole. As a whole, many are betting that the recession is about to end. Combined with the fiscal stimulus, the stocks are currently at their 9 month high.

Middleclass America: Going, Going, Gone

For decades, middleclass America has been the bastion of economic growth and activity. Today, the United States might be witnessing the fall of this segment as their debts shoot through the roof. The financial crisis has definitely hit ordinary Americans the hardest. But before you blame everything on the bankers, it should also be noted that over 100,000 middle-class families filed for bankruptcy every month since 2007.

Statistics shows that one in five Americans today is either unemployed or underemployed. One in eight is in foreclosure or default. And one in nine can’t pay the minimum repayment required on their credit cards. People who are about to retire are also facing incredible challenges because the crisis has just wiped out more than $5 trillion on their wealth (savings and pensions). The list of blogs below highlights other developments that might signal the end of middleclass Americans.

The Rebel News, in the post “US Middle Class Hit Hard by Current Economic Vows”, summarizes key findings that show the vulnerability of ordinary Americans. It also stated that classic lifesavers such as real estate ownership and higher education have lost its powers in the current condition. It has, in fact, become liabilities to the financial system.

Ronni @ Time Goes By wrote a post titled “Imagining Life without a Middle Class”. He gives readers the big picture and the small picture. In the latter, he recounted that most people are spending most of their income on necessities. If this trend goes on, there will not be enough disposable income for any other activity.

Elizabeth Warren @ Huffington Posts compiled research statistics in the post “America without a Middle Class” that demonstrate the fall of the United State’s middle market. Among the key figures that were showed include the comparison between productivity & compensation, income growth during boom times, and the median income of households.

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