Investing

Young Professional Mark Stanislav writes in with some great advice on buying your first home. He just graduated from college a year ago, started his career in systems administration, and realized sticking around at Mom & Dad's for a little longer would prove very valuable. I'm going to remember to re-read this article myself when I'm in the market for my first home!

As more young professionals establish themselves in their careers, the idea of purchasing a first home will certainly come to the forefront of major investment options. Certainly home-buying is not for everyone, financially or per their lifestyle, but it's obviously one popular avenue that people think about when they start becoming more financially sound. This past July I started my career after finishing up with my undergraduate work and immediately tried to make a decision so that I could minimize the length of time it would take to reach my goal. I very much started down the "rent, save, buy" route that a lot of people (sensibly so) do after finding a career. In the end though, I decided to utilize the best money-saving option ever; Mom & Dad's house. While not the 'cool' option, I highly suggest it if you can stomach your pride for a few months and have enough ability to save to make the time count.

I want to detail some major areas of home-buying, from the financial side to the actualization of the purchase. This is not an exhaustive overview, but hopefully it will relay enough information for the prospective 20-something to have a better insight from one of their own on the matter.

Read on for Mark's 5 tips...

Everyone wants to get rich quick. At least, it seems that way sometimes. Are you trying to steadily build wealth , or just trying to strike it rich?

There's a difference between trading and investing-- namely trading involves lots of buying and selling and investing involves less. Every time you perform a trade, you're paying a broker to do it which eats away at the overall returns on your money. The less money you buy and sell with, the higher percentage you pay for the pleasure of that trade. It's important to identify how you want to buy and sell investments to achieve your financial goals instead of relying on last minute, short-sighted decision making.

I like to compare getting rich with driving through crowded traffic. If you keep changing lanes too quickly at the wrong times you could end up less farther than you would have just committing to and staying in the same lane the whole time. Of course, if you're lucky at timing it right (like some people are-- and it's more likely for people to talk about their successes than their failures using this method) you can end-up way ahead of the other guys.

Recently, Vanguard has restructured their account fees allowing investments in their mutual funds to be virtually fee free!

Vanguard's restructured fees have simplified to "$20 per year for each Vanguard fund in which you have a balance under $10,000 in an account."

However, the mutual fund account fee is waived:

• "with more than $100,000 invested in Vanguard mutual fund assets"
• or more importantly if you just sign-up for electronic delivery of account statements and information with their e-Service Package

This means I can purchase funds like the Vanguard S&P 500 Index Fund (VFINX) without a transaction fee compared to paying Firstrades' new $15 No-Load Mutual Fund fee every 2 weeks I make a purchase. I'm still investigating, but I think I'm going to move all my VFINX shares from Firstrade to Vanguard (and probably sell some of it to buy more Berkshire Class B [BRK.B]).

There's a new stock broker service offering up to 10 free trades per day (or 40/month): Zecco.

I haven't tried this service out yet, but it looks interesting. It has start-up financing from one of the main backers of Skype, and plans to make it's money via advertising.

Prosper is an online person-to-person loan site that looks interesting, but risky...

Looks like it's the week of young professional friend articles. My friend Luke Duncan has written up an article about Prosper I thought was a good introduction to the service. He makes mention to Kiva (see my earlier article) and explains a little about both services:

"Kiva is interesting for people looking for innovative charities, but what about people who want to turn a profit? With Kiva you have good odds of getting your money back, assuming the person you lent to doesn't default. But what if you wanted to get in on the action your local banks are already apart of. Have you ever wanted to become a bank? That's where the money is right?"

"There's a newer market out there to help you achieve just this, and its called microlending. Like the charity based microlending operations you can choose who you are going to lend to. In addition you bid on an interest rate you are willing to charge. Assuming you are the winning bidder (match the acceptable criteria of the borrower) you are now unofficially a bank! Imagine ebay, but for lenders. The only site like this I know of is Prosper, but I know there are many out there."

Read more of "Prosper"

I summed-up my thoughts about Prosper on a comment to Luke's blog:

Yeah, Prosper looks interesting. I took a look at this a few months ago, but I was surprised at some of the loan requests-- very high, and some very risky. For example, I saw one for a girl who wanted it to pay off her credit card debt. She couldn't pay back her credit card company, so why would she pay me back? I took another look this morning and see others looking to do the same thing. I guess there could be some good to this. I mean, 9.5% interest for a loan provided by me instead of 20% for a loan from the credit card company could be a win-win situation. Some of these are very risky, though.

All that said, I agree, both Kiva and Prosper are filling different niches and I think there could be a place for them both!