The last time the unemployment rate was this high, I was seven years old. I don’t remember much about the 15% mortgage rates or people buying gold coins in mass out of fear of inflation, but I do remember the speeches that I heard about the benefits of working for the government during times of (economic) trouble. You don’t get the stock options or the big Christmas bonus, but you also don’t have to worry about your job being easily outsourced to a cheaper labor force or becoming expendable during the lean years.

But why discuss it when a cool graph is worth a thousand analyses.

Via Chart of the day

Being a glass half empty person, I’m curious why the administration didn’t come out and say that the real unemployment rate was 17.5 percent instead of going with the lower, more easy to tolerate number of 10.2 percent.

Other great reads…

Do We Teach Children Debt? Modern Tightwad brings up a valid point by ask if our parental monetary and budgeting policies are sending the wrong message to our kids. If a child wants a $25 item, but they only have $20, should the parent give them a $5 credit, or make them wait another week until they have the full amount?

Base Salary Isn’t Everything. There is more to a job than just a paycheck. I know a few out of work people that would work a crappy cubical job just to have access to health insurance. The concept of taking the job closer to home for the commute or because they offer more stock options just doesn’t seem to cut it these days.

20 Most Hilarious (Yet Unfortunate) Company Names On Earth. Other than a good name for a porn studio, why would you name your business “Doggy Style Designs“. Maybe it was down the street from the “Fuk Mi Sushi Bar” and was just too good to pass up.

Scientists claim junk food is as addictive as heroin. Scientists have produced additional data to suggest that “pleasure centers in the brains of rats addicted to high-fat, high-calorie diets became less responsive as the binging wore on, making the rats consume more and more food.” In other words, if you want your food to taste better, eat less of it. Also a great explanation of why I now get a sugar rush from a “leaded” Coke or Pepsi after kicking my soda habit around 3 months ago.

Warren Buffett splits the pseudo pricey $3300+ per share Berkshire Hathaway Class B shares 50 to 1. This is a great deal for those savvy buy and hold investors who want to get an actively managed mutual fund for free, not to mention that Buffett can get negotiate business deals that no one else in the world can get (think Goldman Sachs preferred shares at 10% during the crash).

Carnivals I participated in last week:

Money Hackers Carnival hosted by The Financial Blogger.

Festival of Stocks hosted by The Intelligent Speculator.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Best Reads of the Week: Unemployment Above 10% for First Time Since 1980s Edition

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Charles Schwab wants to get into the index fund and ETF business. Badly!

In doing so, Schwab has created a series of funds to undercut the industry leader — Vanguard — by offering the lowest expense ratio ETFs and index funds on the market. With an expense ratio as low as 0.08%, these funds even undercut the ultra cheap Vanguard Admiral Shares (for accounts $100k and over).

Taking it one step further, Schwab will also allow the cost conscious investing crowd (e.g. you and I) to trade their ultra cheap ETFs commission free.

So not only do you get commission free trades (made popular by Zecco Trading), but you also get the lowest cost, broadly diversified ETFs on the market.

You got to love free market competition!

Why should you care?

If you’re a Vanguard investor (like I am), and you’re looking at the ETFs or index funds within your passive investing portfolio that are charging double or triple what Charles Schwab is charging, the cost conscious shopper in you might begin to question why you’re still hanging around.

The only problem is, you can’t start selling everything in your Vanguard account and rush over to Charles Schwab without considering the tax implications, or the pros and cons of investing in ETFs. If you’ve had a Vanguard account for a number of years, you have likely dollar cost averaged into a number of different funds creating a fairly sizable account.

Selling any of these funds would open you up to capital gains taxes and you could lose more in taxes than you would save by moving to a cheaper fund.

Maximizing the Schwab Cash Back VISA

If you’re a Schwab 2% cash rebate credit card holder, this change in ETF pricing and commission free trading might be right up your alley.

As a card holder, your 2% cash back rewards are credited to your Schwab brokerage account every month. If you’re the big spender type or don’t use a rewards debit card, this can add up to decent amount of cash after a few months.

The only problem was, if you earned $100 or $200 in “free money” after a few months of spending, you’re still paying a substantial portion of your cash back rewards on a lousy commission fee just to invest in XYZ stock, ETF or index fund.

No longer!

By allowing brokerage account holders to trade Schwab ETFs for free, Schwab is able to hang on to those customers who were siphoning off their cash back rewards out of their brokerage account and putting it to use somewhere else.

So it’s a win-win. Schwab gets your long term business at an 0.08% expense ratio, and you get free trades on free money! (Note: this doesn’t work unless you pay your balance in full every month.)

If interested in signing up for the Schwab Visa Cash Back card, you can read the review and Q&A of a cardholder here. If interested in signing up, you can click here.

Comparison of Expense Ratios

For those interested in making the side by side comparisons, take a look below at the Schwab ETF and index fund expense ratios posted below. Looks like Schwab wins hands down.

Other than DRIPs investing, the Schwab ETFs and commission free trades might be the cheapest way to invest in the market.

- Expense ratios taken on 11/06/2009.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Charles Schwab Might be the Best Choice for Passive Investors

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As a young professional who came of age during the Internet boom, I was among the first wave of consumers to adopt the Internet banking meme. At that time, it was no where near mainstream and was generally considered to be another dot com fad.

Fairly quickly, the Internet banks began gobbling up market share from brick and mortar banks due to the high interest rates they paid for cash deposits. Back then, it was rare (if not impossible) for a medium income consumer to find a 3% to 5% interest rate on your savings account, much less a checking account. Not to mention, you didn’t have to pay the pseudo-punitive “account servicing fee” just to have your bank store your money in the electronic ether (like my Bank of America account at that time).

These days, getting 5% interest on your checking account is nothing but a fond memory.

Most, if not all, of the Internet banking pioneers are currently paying second tier savings rates. I understand that short term interest rates set by Federal Reserve impact the interest rates banks can pay, but still, that doesn’t mean I should roll over and stick with my favorite online banks just because I’ve had an account with them for a decade. I’m loyal, but not loyal settle for second best.

To prove my case, take a look at what some of the more popular Internet banks are currently paying on deposits:

Checking / Savings Account Rates at Popular Online Banks.

E*Trade:  0.5%

ING Direct:  1.3%

Emigrant Bank:  1.3%

Everbank:  1.7%

– listed interest rates as of 11Nov09

Pretty unimpressive, dare I say flaccid, returns in my humble opinion.

Most of these banks are top notch (e.g. ING Direct’s low mortgage default rate) and manage their deposits fairly well, but if you want my business, you have to put the 3% in the 3-6-3 banking rule. Otherwise, demanding customers who aren’t afraid to shop around are going to jump ship.

High Interest Checking Accounts are Still Available

One of my best money hacks of 2008 was signing up for my rewards debit card that I located via CheckingFinder.com. These high interest checking accounts pay double, triple and occasionally more (depending on your bank’s interest rates) than the standard online bank.

Like most things, they come with a catch: you are required to swipe your debit card 10 to 15 times per month (like most people do anyway), and setup a few online transactions in your online account (who doesn’t use online bill pay?).

Considering the ROI you can get on your short term savings or your emergency fund, the small amount of inconvenience you might incur by using your debit card more than your credit card is worth it. If you have a substantial amount of savings, say $10,000, the amount of interest earned per year can be in the hundreds of dollars range.

Photo by Sweet One

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Where have the Pioneers of High Interest Internet Banking Gone?

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Since the recession began, I’ve been struggling with the concept of trading down versus trading down to better value. In other words, should I move to a policy of buying brands/goods that might be cheaper and lower in quality, or stick to brands/goods with a lower price but provide a similarly equivalent value.

After all, most of us find some form of comfort or luxury in sticking with the name brands we know, love and trust.

Unfortunately, when I try to explain what I mean by trading down to better value, it often confuses some people considering the word value can mean so many different things to different people.

Some people think value is simply getting 10 percent off of retail price. Some may have a mix of spending filters where they run XYZ item through a mix of personal choices based upon X, Y, and Z variables. The frugality minded may simply say to hell with it, and buy out of fear of saver’s remorse.

So who’s right? Who knows? Probably a mix of all three. The definition can be as rigid or as flexible as you want it to be.

Me being the pain the butt intellectual, I try to find the justification in any situation (whether I believe in the idea of not). So even if I want something really badly, or think it might be a complete waste of money, I generally make a few mental calculations or rationalizations prior to swiping my debit card.

#1 – The Cost per Use Ratio

One of my worst traits as a young adult was to walk away from any purchase that seemed extravagant. Being a frugal minded person motivated to save for retirement, I always thought ignoring the high cost items was the thing to do. As I’ve grown up a bit, I realize this has probably been a miscalculation.

Case in point: my secondhand $300 treadmill.

If this poor contraption could speak, it would probably have said “Uncle” long ago. I’ve owned the treadmill around 18 months, and I routinely used it 4 to 5 days per week. Like anyone, I’ve had my lazy weeks where I’ll putz around and not use it, but since summer 2009, I’ve averaged somewhere between 10 to 14 miles per week.

Here is where the cost per use ratio becomes an effective metric: the more I use it, the lower the cost per mile ratio metric will become.

At 100 miles, cost per mile = $3.00 / mile.

At 300 miles: cost per mile = $1.00 / mile.

At 900 miles: cost per mile = $0.33 / mile.

I generally keep track of my workouts in my Seinfeld calendar, and I can conservatively estimate that between myself, my girlfriend, and a few friends that borrow it on rainy days, it has logged around 900 miles over the last 18 months. And the ratio will only get lower as more time and miles continue to tick away.

#2 – The Low Cost, High Return on Investment

If only the world was such a Utopian environment where we could invest minimal time or money, and have it pay huge dividends each and every time. Unfortunately, that is rarely the case but there are certain situations where creativity and cleverness can pay off big.

Take for example, The Good Human’s recent experience with solar heaters. These solar heating boxes aren’t that expensive to construct, they crank out some serious heat, and best of all, they can make a serious dent in your monthly heating bill. Just think of what the potential ROI on this investment would be if you could hit the off switch on your heating unit every other day during the cold winter months. When you multiply the savings over 5 or 10 years, the savings really begin to add up.

It’s a pretty ingenious solution that apparently requires a minimal monetary investment and probably a days work for an experienced DIY’er. Just one more excellent example that green living and frugal living are one in the same.

#3 – The Vulture Investor

Call me strange, but vultures are probably of my favorite creatures in the animal kingdom. They’ve devised a niche where they exert minimal energy, but somehow, still manage to eek out a pretty decent living on Mother Nature’s scraps.

The same goes with being a vulture investor. They have the option of swooping in when a good value becomes available, making an investment at a minimal price compared to what it may have been years ago, and manage to turn a profit where others could not or acquire a much desired asset at a serious bargain by exercising some patience.

Some of the best examples were the real estate vulture investors who bought condos at 50% to 75% discount from peak bubble prices, and now renting them out or turning them into vacation homes.

#4 – The Hours Worked to Buy XYZ item

One of the more effective ways to shut down a spendthrift in mid-purchase is to remind them they worked 40 hours for XYZ purchase.

If you can dissociate the cost of the item away from dollars, and re-associate the purchase in hours they’ve worked, it might give them a moment of pause. So if you might want that HDTV, don’t think of it costing you just $1000, but it will cost you 40 hours of actual time at work.

When I was working in working my first college job (my Dirty Job in the mosquito lab), you can bet your ass I used this method before buying a keg of Sam Adams versus a keg of Natty Light.

#5 – Avoiding the Value Trap

Like most people, I’m a sucker for a good deal. But just because an item is selling for 20% off, it doesn’t mean that it’s a solid value. Who’s to say the price will stabilize at the 20% off level? What if the price continues to fall? Maybe it will cost half as much the following year if you exercise a little patience?

I see this all the time being that I’m somewhat of a buy on the dips or value investor. I’m constantly fearful of of buying a stock that just fell 20% in value, and then the stock dropping another 20% after I buy. The lesson learned is that just because I think it’s cheap, it doesn’t mean everyone else thinks similarly. Thus, your perceived value acts like something like a Venus Fly trap (e.g. value trap) by baiting you into thinking you’ve got a good deal, but end up getting trapped in the end.

Similarly, the concept of a value trap applies to everyday consumer life. If you were lured into buying that HD plasma screen for Christmas 2008, you will likely be pretty PO’d when you see the same (if not better) HDTVs selling at half the price for Christmas 2009. If you really wanted the TV, then no big deal, I’m sure you’re enjoying it but if you suffer from buyers remorse, you might be gritting your teeth a bit walking through Best Buy this year.

So what about you?

Got any tips or unique ways that you assign or calculate value before making a big purchase? If so, be sure to mention them below.

Photo by SashaW

This was an original post from Steadfast Finances. For more, follow me on Twitter.

How I Find Value Where Others Do Not

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Most SF followers know by now that something of a foodie and a wannabe chef. I’m no where near chef level, but I do occasionally put together something that can draw a crowd.

I also suffer from a slight frugality complex and do what I can to keep my food budget as low as possible. So that means I spend a fairly significant amount of time cruising the foodie blogs so I can xerox another cook’s (or chef’s) recipe, and modifying it so I can make it on the cheap without compromising taste or quality. Being that there are so many foodie and cooking blogs these days, this is pretty easy to do.

So I thought I would change it up a bit from the standard personal finance stuff, and show off a few restaurant style dinners that nearly anyone can make at home for half (if not more than half) the cost.

Enjoy!

Chicken Parmesan

Who can possibly say no to a double serving of home cooked Chicken Parm? Seriously? I love this stuff, and probably make a half dozen different versions of this classic recipe with a side of pasta and marinara sauce.

I chose this video from Chef John because it covers a very effective method of prepping and breading the chicken whereas others will suggest you slather and dip. Breading makes the difference between average Chicken Parmesan and the really good Chicken Parmesan!

Sweet Potato Salad

This isn’t your grandma’s potato salad recipe!

This recipe incorporates one of my favorite foods — sweet potatoes — and gives a clever twist to the boring old mayonnaise coated boiled potatoes. The beans add a significant amount of protein for the vegetarian crowd, and the combination of fresh herbs and lime/olive oil dressing adds a ton of flavor.

I use this as a stand alone meal when I’m feeling fairly lazy considering it’s such an easy, but very healthy, dish to make. If you want to boost the visual appeal, go easy on the cilantro and double the amount of tomatoes. My only tweak is to add in a few sliced cucumbers to round out the color palette and give it a little more crunch.

Roasted Pork Tenderloin, Garlic Mashed Potatoes and Grilled Peaches

Instead of your standard fried pork chop and a mashed potato dish that calls for a whole stick of butter, this series of videos takes a classic Tuesday night staple (at least when I was growing up) and dresses it up a bit.

You can still get that “comfort food” feeling with the pork and potatoes, but you get to experience a few restaurant like flavors that you might not make at home for yourself or for the family.

Plus, the peaches serve as an excellent dessert!

My only tweak is that I would use skim milk in the garlic mashed potatoes and usually mix in some fresh chives from my container garden.

Make this one for your friends/family enough times, and they will begin to whine if you suggest calling out for pizza.

Authentic, Southern Louisiana style Jambalaya

I’ve eaten jambalaya in different areas of the deep south, and even though it’s one of those dishes that tends to vary from region to region, this video produces one best jambalaya dishes I’ve ever had. If you’re a fan of N’awlins cuisine, you really can’t go wrong one with this one.

I generally like my jambalaya in the medium spicy range with some type of pork (either sausage or ham) as well as a generous amount of shrimp. Not to mention, how can you go wrong with a jambalaya recipe from a guy nicknamed Scooter!

Definitely worth a try if you like Cajun or southern food and have a houseful of guests coming over for an informal get together.

Turkey Bolognese Sauce

I included this video because it reminds me of my first apartment: crappy cookware, dull knives, and zero spices other than black pepper and Italian seasoning.

While a recipe like is probably a staple in most dual income households, I think it’s more suited for the bachelor or bachelorette who might want to impress a certain someone but doesn’t have the hardware or know-how to pull off a more complicated dinner.

I should know since I’ve made this dish countless times when I wanted to impress a certain young lady. Opening doors and being a gentleman gets your foot in the door, but nothing makes a girl think you’re commitment material like making her nice dinner for two.

Plus, it’s the only thing that I know, aside from 6 shots of tequila, that’s going to work better than The Naked Man (2 out of 3 times)!

If you want to go all out, sprinkle some fresh Parmesan cheese and basil on top of the pasta once you’ve got it plated. You can also make some quick and easy garlic bread by taking some freshly sliced French bread, brushing with a melted butter and garlic powder mixture and throwing it under the broiler.

It’s easy, quick, and sure to impress that certain someone. If it doesn’t, at least you have plenty of leftovers.

~ ~ ~

If you plan on making any of these dishes and have questions/comments, be sure to leave them below. Or if you stumbled across this post in the middle of day and want to curse me for making you hungry… that works too.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Restaurant Meals You Can Make at Home For Half the Price

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SF will be undergoing maintenance on October 29th during the evening hours. New theme changes, reorganization, etc.

Pardon the mess and confusion.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

SF Undergoing Site Maintenance

• Steadfast Finances was Hacked, Now Restored. (Thanks HostGator!)
• CNBC Originals "House of Cards" Now Available Online
• Best Reads of the Week: 2009 PF Blogger Fantasy Baseball League Edition
• Dollar Cost Averaging: Would You Prefer 1 Dart or 12 Darts to Hit the Bullseye?

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• How To Create a Killer Landing Page
• Ruptured Peroneus Longus Tendon

A fascinating talk on how 72% of the American Gross Domestic Product — consumers — are changing their spending behavior, relying on old school frugality tips to save more money, and deleveraging (e.g. saying goodbye to credit) to reduce their liability and financial risk. Mr. Gerzema compiles an enormous amount of personal finance data to support his thesis that consumers are shifting their purchasing behavior from mindless consumption to mindful consumption.

Perhaps more intriguing to me is his belief that crisis brings opportunity happens to parallel mine in that we should embrace the recession as a positive influence of change for global business, as well as individual responsibility.

[RSS & email subscribers please click to site for video]

Hat tip to John Gerzema from The Brand Bubble blog for the excellent talk.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

The Great Unwind: Frugality, DeLeveraging, & Ethics Altering the Post-Crisis Consumer

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This week, Amazon.com released a great earnings report that propelled the most well known “internet stock” to a new all time high. As a person who experienced the internet stock bubble firsthand, Amazon’s stock popping 25 points in a single day gave me a little feeling of nostalgia considering that I haven’t seen an (American) internet stock perform that well in many years.

Nevertheless, die hard buy and hold investors must be ecstatic. If you had bought Amazon at the top of the tech stock bubble, it’s taken a long time — a decade in fact — for investors to finally turn a profit.

So in recognition of Amazon’s performance, I thought it would be fun to take a stroll down memory lane with a few high flying tech stocks to see just how well they’ve performed over the last decade. Of course, from an investor standpoint, it’s important to realize just how long it would have taken to actually make your money back by buying at the top of the bubble, as well as the importance of knowing how to spot a bubble once it has formed.

JDS Uniphase

Everyone loved JDSU in the late 90s. From the commentators on CNBC to my cohort of college investor buddies who would always offer to spring for a second round of drinks just because JDSU went up another 30 points from the previous weekend. Then, once the bubble popped, everyone dropped poor ol’ JDSU faster than a … well, you get the idea.

If ever there existed a chart to epitomize just how severe the tech bubble really was, JDSU might take the prize. (I’m sure anyone who thought DrKoop.com was a long term buy and hold would disagree.)

…

Amazon

The aforementioned Amazon.com finally broke through it’s 1999 high to reach a new all time high.

Guess that half cocked idea of selling books (or powertools, or lawn mowers, or darn near anything else) via the internet wasn’t such a bad idea after all. Probably makes Jeff Bezos feel pretty good about himself considering lots of “experts” called him a wacko back in the day.

…

IBM

Big blue is called “Big Blue” for a reason. It’s one of Wall Street’s most well respected companies, which didn’t experience nearly the sell off that most tech companies experienced. It hasn’t quite made it back to its tech bubble all time highs, but it has paid a steady dividend along the way which sets it apart from almost all the other tech companies.

…

Cisco Systems

Even the company that supposedly allows the internet to be the internet hasn’t regained it’s former glory. Even with the post stock market crash rally, Cisco is still down 75% from it’s all time highs.

…

Apple

The Apple that we see in 2009 isn’t the Apple that existed in 1999. Steve Jobs wasn’t in the picture, no one but Napster had made any significant headway on the MP3 front, and Wall Street really didn’t care all that much about Apple because everyone thought that Microsoft would take over the world.

However, I included Apple in this simple case study to show how well a stock can perform — regardless of stock market crashes and investment bubbles — when Wall Street believes a true growth story exists.

…

If you know of another high flying tech stock from the late 1990s that has made a new all time high in the 2009 rally, be sure to leave a quick comment below. Locating one will probably be more difficult than you think!

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Some Tech Bubble Stocks Finally Breaking Even after a 10 Year Wait

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If you’ve never heard of Brooksley Born, you’re not alone. I followed the markets fairly closely in the late 1990s while this political battle over regulating the derivatives market was underway, and I honestly can’t remember hearing anything about it.

Like most people, I was probably too caught up with my JDS Uniphase and CMGI stocks doubling every month (e.g. the tech bubble) to care about something as trivial as credit default swaps and other esoteric derivatives. (Not like they would come back to bite taxpayers in the ass later.)

What intrigues me most about Born’s story is that she saw the danger of that most regulators and politicians didn’t see (or paid not to see), and quickly stripped of any regulatory power that she might have as head of the Commodities Futures Trading Exchange when she tried to defuse the bomb that would explode a decade later.

We’re trying to protect the money of the American public. Which is at risk in these [derivatives] markets.  – Brooksley Born, Congressional testimony.

[RSS and email readers please click to site for video]

It’s just one more piece of evidence to prove that no matter how great we might believe the United States financial system is compared to the rest of the world, that the Old Boys Club on Wall Street will do whatever is in there best interest to keep the gravy train flowing… and cut out any cancer (or cure) that will make an attempt to ruin their plans.

A well deserved hat tip to PBS Frontline for their excellent work.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

Brooksley Born’s story: Fighting Wall Street, Rubin & Greenspan was a Bad Career Move

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Earlier this week, everyone’s favorite emerging market — Brazil — gave a classic example of why it can be dangerous to invest in emerging markets. Out of the blue, the Brazilian government implemented a 2% tax on any incoming foreign investment to reduce the possibility of a speculative stock market bubble from forming in the Bovespa.

Thus, the emerging market which could do no wrong, has a vast supply of untapped commodities, as well as a stable currency, will require you to pay a 2% fee for just playing along. If only they had decided to take 20% of your profits, they would be the world’s largest hedge fund.

While the news only caused a small 4% drop in the Bovespa and the iShares MSCI Brazilian Index ETF (NYSE: EWZ), the unexpected policy change exemplifies a few basic dangers of investing in emerging markets that most people here in the United States sometimes forget:

1. Their way of doing business might not be our way of doing business.
2. Their government isn’t like the U.S. Government, and can implement a policy change on a whim.
3. They don’t require the “Western World’s” approval.
4. They have their best interests in mind. Not ours. Not yours.
5. They will do whatever they darn well please in their own country. If you don’t like it, [bleep] off!

Granted, most well respected emerging market countries will conduct themselves in a manner to attract foreign investors, but there are a few countries who go out of their way to make things difficult for foreign investors for any number of reasons (e.g. greed, political verification, etc).

Russia

Russia and the U.S. have had their differences, but after the Cold War, the Russian business climate appeared to have warmed to receiving American Dollars and a western economic system. However, that doesn’t mean they don’t want to conduct business according to Russian “rules” where organized crime is rampant and the Russian government has the muscle to strong arm any corporation located on its native soil.

Take the case of Bill Browder, CEO of Hermitage Capital Management, where his firm’s offices were raided, servers and computers seized, all documents and finances confiscated, etc. Basically, the worst possible situation you can have when conducting business on foreign soil.

CNBC has brought up the subject many times over, and it’s not just U.S. investors who are questioning whether doing business with Russia is worth the financial risk.

Venezuela

Hugo Chavez is one of the world’s most infamous heads of state. His thoughts have the potential to be converted into law in a very short time period since he has access to the Venezuelan military.

Not to mention, he is notoriously whimsical and has an unfortunate tendency to nationalize any private property built on Venezuelan soil that he might find is “good for the Venezuelan people”. So if you’re a private corporation thinking about building a factory in Caracas or maybe setting up an offshore oil platform in Venezuelan waters, you might end up losing a cool half billion dollars just because Chavez thinks he’s entitled to it.

Iraq

War torn Iraq could arguably be one of the most hostile and unsafe countries in the world. For that reason alone, it would seem unlikely that Iraq could attract any semblance of foreign investment.

But considering the strong western influence (e.g. a military presence) that will likely be there for many years to come, some would argue that the risk reward ratio has become attractive considering that the peace will be (forcibly) maintained and a business friendly government has been put in place.

The danger is real, but the potential ROI is apparently big enough to entice the big fish (e.g. hedge funds).

Safest Way to Invest in Emerging Markets

If you’re a U.S. based investor, you have a growing number of mutual funds, index funds and ETFs at your fingertips.

Like anything, just because you can quickly find what you need doesn’t mean you should invest in any single emerging market considering the elevated risk. Much less a frontier market in a country like Iraq where even major hedge fund investors are following heightened risk management procedures and only allocating 1% or less in one specific country.

That said, if you’re determined to move forward, the safest way to invest in the emerging markets would likely be a Plane Jane emerging markets index fund or ETF. This way, the risk is spread out over a broad range of countries so taking a hit due to one country’s negative news (e.g. Brazil’s 2% foreign investor tax) won’t result in a substantial loss of capital within a short time frame. Of course, by investing in an index fund or ETF that tracks a foreign market index, you lower your risk by diversifying your investment but also lower your profit potential.

Investment management firms like Vanguard, Charles Schwab and Fidelity would all be suitable to find low cost emerging market investment vehicles.

This was an original post from Steadfast Finances. For more, follow me on Twitter.

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