Archives for October 2016

LendingClub United Miles Promotion (Both New and Existing Investors)

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LendingClub (LC) is a marketplace lender that offers unsecured personal loans and then sells investment notes backed by those loans. After defaults and fees, they advertise historical returns between 5% and 8%. As an incentive, LC recently started offering up to 100,000 United MileagePlus award miles to investors that bring in at least $2,500 in new money. Here I offer a quick analysis of the investor offer and point out that it is actually available to both new and existing investors, even though that may not be obvious from the website.

Highlights.

  • Offer only valid for taxable Lending Club accounts. (IRAs are not eligible.)
  • Only deposited and invested dollars are eligible for award miles.
  • Lending Club Investor must have UA MileagePlus account activated before investing to qualify. New investors can link online. Existing investors must call or e-mail to manually link your accounts (see below).
  • For existing investors to receive miles, an investor must transfer at least $2,500 of New Funds into an active eligible taxable account and invest the New Funds through the Lending Club platform within 90 days of the commencement of the then-current offer (each, an “Existing Investor Offer Period”).
  • Offer is valid from October 1, 2016 to December 31, 2016 and Mileage Plus miles will only be awarded on new funds transferred and invested through Lending Club during this time period.

Selected quoted text from the landing page:

We’re excited to announce our partnership with United Airlines! Investing on Lending Club just got more rewarding. Right now, receive one United MileagePlus® award mile for every two dollars you invest through Lending Club up to 100,000 miles!

[…] Upon the transfer and investment of the first $2,500 of New Funds, a new investor will qualify to receive 1,250 miles. For every dollar of New Funds transferred and invested in excess of $2,500, a new investor will qualify to receive .5 miles, up to a maximum aggregate bonus of 100,000 miles per calendar year.

The maths. A minimum deposit of $2,500 earns 1,250 United miles. Every dollar above that $2,500 will earn 0.5 miles up to the 100,000 mile limit. If you value United miles at range of 1 cent to 2 cents a mile, 1,250 miles is worth $12.50 to $25. Thus, the bonus value ranges from a 0.5% to 1% bonus on top of the interest you’d already receive.

Existing investors participation details. I confirmed with two different LendingClub representatives that this offer is also available to previous/existing investors. You must first link your United MileagePlus account number with your account. You can them via e-mail at [email protected] or phone at 888-596-3159 (7:00am–5:00pm PST, M–F). Provide them with your LC account ID and your UA MileagepPlus Number.

Bottom line. The bonus itself is not big enough to encourage you to invest if you weren’t otherwise interested. However, if you have already decided to invest with LendingClub, definitely don’t miss out on these free miles to boost your overall return. The value is roughly 0.5% to 1% to your investment amount, assuming you bring in at least $2,500 of new money. Link your accounts first before moving over the new money.

As an existing investor myself, I’ve written my share of opinions on LendingClub. I’ll just say two things: Have realistic expectations and diversify. Their advertised historical returns of between 5% and 8% are more realistic than you may have seen elsewhere. As they also note, 99.8% of investors who invest in 100+ Notes of relatively equal size have seen positive returns. It is not coincidence that 100 notes x $25 each = $2,500.

Sell Your Halloween Candy to Dentists, Who Donate Them to Troops Abroad

ccDo you let your kids create the memories of Trick-or-Treating but not the subsequent cavities from actually eating all that candy? A nationwide network of over 2,500 dentists will buy back your Halloween candy (usually for $1 per pound, up to 5 pounds) at HalloweenCandyBuyBack.com. Find a local dentist by zip code; I found the locator a bit buggy but there does seem to be at least a few dentists in most metro areas. You can also skip the $5 and donate via mail or drop off at these Operation Gratitude locations.

The candy is shipped to our troops overseas as part of care packages by Soldier’s Angels or Operation Gratitude. The children may also write letters of support and gratitude to the troops. The soldiers often use the candy to build relationships with the local children. Ideally, your children will (1) avoid tooth decay, (2) earn a few bucks (money lesson opportunity), and (3) help brighten the day of a service-member overseas! Here’s an ABC new segment about the site:

Consumer Report Car Brand Reliability Rankings 2016

cr_car2016_coverThe December 2016 issue of Consumer Reports magazine includes the results from their 2016 Car Reliability Survey with over a half million data points. In this public-viewable article, CR shares the full 2017 reliability rankings by brand and the relative change from 2016. There were some significant moves up and down. Highlights:

  • Most reliable: Lexus and Toyota.
  • Most spots improved: Infiniti and Acura.
  • Biggest ranking drop: Volkswagen, Volvo, and Subaru.

A partial excerpt with the top rankings are below:

cr_car2016b

Consumer Reports also shared some commentary and tips:

  • Toyota and Lexus are on top again, which CR credits to their careful, gradual approach to vehicle feature changes to avoid any sudden drops in reliability.
  • Wait a year or two before buying a newly resigned model from most brands. It takes a while to work out the kinks.
  • Speaking of kinks, a common source of issues in new cars are their new infotainment screens and complex transmissions (CVT, 8/9-speed, dual-clutch, etc).
  • Despite providing these brand rankings, Consumer Reports recommends that you shop by vehicle and not just by brand. Some brands like Toyota and Lexus are reliable across the brand, but others like Ford have a wide range of rankings by model. Of course, you’ll need full print or digital access to get those numbers.

If you don’t see your brand listed, it is probably due to a lack of data points.

My thoughts. In terms of trends as compared to last year’s 2015 survey, I was disappointed to see Honda slip a bit again in the reliability rankings. They dropped 4 spots last year and another 2 spots this year. On an absolute basis, Honda now has the same reliability score as BMW, whose cars have more fancy features and a history of average reliability. On the flip side, both Hyundai and Kia moved up another 1-2 spots this year after both moving up 4 spots last year, earning a solid spot together in the Top 8 “More Reliable” brands.

List of Cheap Basic Cell Phone Plans on Every Network – From $1.25 a Month

phones7Updated. Cellular phone bills remain an area where many people can trim their budgets. If you haven’t shopped around lately, there are many new options available. All the major networks sell wholesale minutes to MVNOs (Mobile Network Virtual Operators), which they in turn sell at a significant discount to individuals. I would also observe that smartphone improvements are slowing, such that using your current phone for another year can also save you hundreds per year.

This post is restricted to talk & text only plans for both light and unlimited usage – no data (although some plans include some anyway). After looking at over 100 MVNOs and multiple comparison engines, and these are the cheapest I could find for each of the major carriers – Verizon, AT&T, Sprint, or T-Mobile. I organized in this way so that you can simply Bring Your Own Device (BYOD) and avoid the hassle of selling your used phone. You can now either go minimalist starting at $15 for an entire year ($1.25 a month), or you can fully replace your landline with an unlimited talk and text plan starting at $15 a month.

mvno_tT-Mobile Network

  • Light Usage – LycaMobile. Their barebones prepaid plan requires a minimum top-up of $10. You must have some sort of activity every 90 days to keep your service (make a phone call, send a text). The rate is a flat 5 cents a minute for talk, and 4 cents per text. If you only used 100 minutes a year, that would be $15 a year for the first year and then $5 a year afterward ($10 minimum recharge).
  • Unlimited Talk & Text – Republic Wireless. You can now buy a SIM and bring over your own device on their eligible list (no iPhones) and get unlimited talk and text for $15 a month. They have a somewhat unique service, see my Republic Wireless review for details. Also worthy of mention is Mint, which goes as low as $21 a month for unlimited talk, text, and 2 GB of data per month. However, you’ll have to pay for an entire year upfront to get that price.

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Sprint Network

  • Light Usage – RingPlus. Their plans change constantly, but as of this writing you can get 250 minutes, 250 texts, and 250 MB of data per month with a $10 initial top-up and a $0 monthly fee. In other words, your total cost could be $10 a year. I still don’t understand their business model, so be ready to port out your number in case the fun stops. See my Ring review for details.
  • Unlimited Talk & Text – Tello. Unlimited talk, text, and no data for $18 a month. I will mention that Republic Wireless has $15 a month plan for unlimited talk and text on the Sprint Network, but you can’t bring any used Sprint device over – you must buy a special RW-modified phone in order to use the Sprint Network (see above for their T-Mobile BYOD option).

mvno_aAT&T Network

  • Light Usage – Pix Wireless. Their GSM Blue service is on AT&T, and runs as low at $75 a year which includes 1,875 minutes, 3,750 text, and 938 MB of LTE data for 365 days. Overages are 4¢/Minute, 2¢/Text, and 8¢/ MB 4G LTE. Alternatively, H20 Wireless has a minimum top-up of $10 every 90 days, for a total minimum annual cost of $40 per year. At the flat rate of 5¢/Minute, 5¢/Text, that $40 would buy you 400 minutes and 400 texts over those 360 days.
  • Unlimited Talk & Text – Airvoice. Unlimited talk, text, and 100 MB of data for $20 a month (technically 30 days).

mvno_vVerizon Network

  • Light Usage – Selectel. $75 a year for a bucket of 2000 minutes and 2000 texts for the entire year (no data included, 3G phones only). The same plan costs $100 a year for 4G phones. Their website is very vague; call them directly at 877-218-5744. You can also try Page Plus Cellular for $80 for 2,000 minutes that last a year, but they only take 3G phones.
  • Unlimited Talk & Text – Boom Mobile. Unlimited talk, text, and 250 MB data for $20 a month. (Both 3G and 4G phones will work, but there is a separate plan for each.)

Let me know in the comments if you find a better deal.

List of Free Movie Streaming Sites Online

streamfree2If you are a cord-cutter but are still looking for some free movie content to stream, here is a collection of (legal) links. Shortly after I had kids, I dropped Netflix as I had no time to “binge” on anything. However, I still like to watch bits of movies now and then to relax and take my mind off of things.

Vudu Movies on Us. This Wal-Mart-owned service just announced that they will allow “thousands” of movies to stream freely online with ads. The catalog isn’t great, but sample titles include Margin Call, Mad Max, True Grit, Abduction, and School Of Rock. Streams at 1080p with Dolby Digital sound.

Yahoo View (formerly Hulu Free). This is where a lot of the free content that used to be on Hulu now resides. TV shows include Blindspot, Brooklyn Nine-Nine, Chicago Med, and Empire. Limited movie selection as well.

Crackle.com. This one has been around for a while, and they even have a few original series of their own. Some Seinfeld. I always watch the newest episode of Comedians in Cars Getting Coffee.

Popcornflix. An interesting collection of movies that you might not see elsewhere from independent distributor Screen Media Ventures, LLC. Lots of big stars in their movie flops. Several cheap Disney knock-offs. Also… Inspector Gadget!

Free Documentaries (various). Unfortunately, many of these free documentary sites have lots of sneaky pop-up ads while mostly just embedding YouTube and Vimeo videos. The least annoying ones for me were Documentary Heaven and WatchDocumentary.org.

PBS.org. PBS shows many independent films and documentaries in their Indie Film section. You can also find the classics here like PBS Newshour, Frontline, Masterpiece Theater, This Old House, and Antiques Roadshow.

Most of these are also available via their own smartphone apps (iOS, Android) and streaming box apps (Roku, Apple TV, Amazon Fire, Xbox 360). Please let me know if I missed anything good.

Grit, Early Retirement, and Financial Freedom

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I joined the bandwagon and finished reading Grit: The Power of Passion and Perseverance by Angela Duckworth. (It’s not like I could just give up in the middle…) You’ve probably heard of this NYT bestseller. Either the book, the MacArthur fellow author, or the research discussed has been profiled in nearly every major media outlet. This makes sense due to its broad appeal, from dating/marriage to professional/career to parenting.

Instead of a traditional book review, I’ll try to relate the major conclusions from the book to the pursuit of financial indepedence and retiring early (FIRE).

Grit is both perseverance and passion. Perseverance is the act of trying or continuing to do something, even if it is difficult. Passion is a strong interest that aligns with your values, beliefs, and self-identity. This second part is sometimes overlooked or dismissed. You need both determination and direction. Sometimes it takes time to develop a passion, but nobody works doggedly on something they don’t love.

One test for passion is to ask yourself – Are you excited about the minutiae? I’m not sure how many people find themselves lost in though about withdrawal rate statistics, IRS publications on tax strategies, or optimal asset allocation. 🙂

Grit predicts success more reliably than talent. Research has also shown that talent is not correlated with grit. Talent is certainly still important. However, grit is just as, if not more important, than talent when it comes to success. While grit alone won’t make you an Olympic athlete, talent alone certainly won’t get you there either. When people idolize the idea of natural talent, it lets them off the hook in terms of achievement. “I couldn’t do that because I wasn’t innately talented enough, so it’s not my fault.”

Effort counts twice. Instead of the theory that talent produces achievement, Duckworth presents this alternative model.

Talent x Effort = Skill

Skill x Effort = Achievement

Talent is how quickly we can improve our skill. But you still need to apply effort to build that skill. Think of skills like cooking, throwing a football, writing, coding, or mathematical analysis. Next, effort makes that skill productive. You need effort again to become a successful chef with multiple restaurants, a quarterback with a record number of touchdown passes, an author of several books, or an engineer that designed important products. Effort counts twice.

Now, in terms of financial freedom, I would say the closest analogue to skill is income. To increase your net worth, you need to first make money. Your talents may or may not naturally align to making money. Applying effort with your talent creates income. Next, it’s not what you make, it’s what you keep. That takes saving, which is a different kind of effort. Thus, we can rewrite the equations as follows:

Talent x Effort (Working) = Income

Income x Effort (Saving) = Financial Freedom

Researcher Catharine Cox analyzed high-achieving historical figures and came to the conclusion that “high but not the highest intelligence, combined with the greatest degree of persistence will achieve greater eminence than the highest degree of intelligence with somewhat less persistence.” Perhaps we could also extend this to say a high (above-average) income but not the highest income combined with more grit is better than the highest income and less grit.

Enthusiasm is common. Endurance is rare. Nearly everyone thinks the idea of financial independence is great. Who wouldn’t want that? Only a fraction of people actually follow through with it. I really liked this quote from the book… “A high level of achievement is often an accretion of mundane acts.”

Goal hierarchies. Set a top level goal first, which lets you develop sub-goals, which leads to specific actions. Don’t spend your limited time on other unrelated and/or conflicting sub-goals. If a related sub-goal is not working, replace it with something different. Here’s a figure taken from a US Army whitepaper on Grit ]:

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Now, financial freedom may not be your top-level goal. But it might be related if you aren’t able to work on your top-level goal because you’re working 40 hours a week to pay the mortgage.

In any case, I think this diagram does a good job illustrating the concept that there are many ways to get closer to FIRE. You could advance in your career and grow your salary. You could build up a collection of rental units. You could move into a smaller house with a shorter commute. You could buy index funds. You could max out your 401(k). You could buy dividend stocks or REITs. You could create websites that create semi-passive income. If one way doesn’t work, you can try another.

You can improve your grittiness. Your grit isn’t fixed. Here are some ways you can get better:

  • Explore different interests. A passion doesn’t just appear instantly. Read some different perspectives. See which one fits you. Some people focus on entrepreneurship and starting a successful business (make more money). Some focus on frugality and controlling household expenses (spend less money). Some focus on investing (make the difference grow faster).
  • Deliberate practice. You should force yourself outside your comfort zone. It should be at least a little hard! Focus on your weaknesses, try to improve, get feedback, try to improve some more. Acquire a habit of discipline.
  • Focus on a higher purpose. Cultivate meaning. To reach FIRE, you need a good job that you find worth doing. You need purpose. If you don’t like your job, try to reflect on your existing work can help society. Are you a bricklayer, or someone building a school to teach children or a church to serve God? Alternatively, change or alter your work to match your own interests and values.
  • Find a good role model or mentor. Someone you can talk to and get constant feedback from is best, but sometimes you have to settle for books or blog authors. Ideally, they should also inspire hope.
  • Use group conformity and the power of culture to your benefit. Merge your goals with your self-identity. Join local groups or online forums with people with similar interests. Each has a different culture, be it Early Retirement Forums or Mr. Money Mustache Forums or Bogleheads.

Bottom line: When people think of early retirement, they often think of the 20-year-old Silicon Valley entrepreneur, a big inheritance, or the lottery ticket winner. This focuses on luck and talent – things you can’t control – and thus thinking you’ll never be able to do it yourself. In most cases, achieving financial freedom requires a lot of mundane acts over many years. Over time, you develop working skills that create an above-average income. Then you develop saving skills that create a large net worth. Luck and talent still matter, but you really need grit – the combination of perseverance and passion. The good news is that grit is something you can control and improve.

For more on this topic, take her Grit Scale test and also watch her TED Talk.

What Cards Are In My Wallet? 2006 vs. 2016 Flashback Edition

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What’s in my wallet? Besides trying to land at least $500 on new sign-ups, which cards do I end up using on a regular basis? Apparently, the last time I answered this question was in 2006, more than a decade ago?! Let’s see if I have made any improvements since then. These are the cards that work best for my spending patterns and redemption preferences.

All-around cash back rewards card.

  • 2006: MBNA/Fidelity Investments 529 College Rewards Card. I still have this card, although it is in sock drawer mode now. This Fidelity-branded card went from being issued by MBNA, to FIA Cardservices (subsidiary of Bank of America), now to Elan Financial services. The 2% rewards did help me rack up over $8,000 in tax-deferred college savings (including appreciation from investments).
  • 2016: BankAmericard Travel Rewards Card. After moving over $100,000 of existing index funds from Vanguard and qualifying for their Platinum Honors tier, this enabled me to earn 2.625% cash back on all my purchases – redeemed as a statement credit offsetting any travel purchase. That’s a 31% improvement on 2% rewards. If you don’t have $100k in assets to move over, 2% is still double the 1% many cards give on all purchases – I have the Citi Double Cash card as backup.

Category-specific rewards credit card.

  • 2006: Citi Dividend Platinum Select Mastercard. This card is no longer available to new applicants, which is probably why the 5% categories got rather stale. I’m a bit embarrassed to admit that I stopped using it so long that Citi closed it due to inactivity. Whoops! It was one of my older cards, but not a big loss as I have so many other cards to contribute to my “average age of accounts” stat.
  • 2016: Chase Freedom Visa and Discover It Card. This quarter, the Chase Freedom is giving 5% cash back at Costco, Sam’s Club, Walgreens, and CVS ($1,500 total). The Discover It card is giving me 5% cash back at Amazon.com. Overall, I think recent competition has made the 5% categories more useful. Note that Chase Freedem technically earns Ultimate Rewards points, which can provide even higher value when redeemed for points/miles (see below).

Points or miles rewards card.

  • 2006: Starwood Preferred Guest American Express Card. Still a good card overall (we’ll see how the merger changes things). If you redeem in 20,000 point increments, it will provide 1.25 miles per dollar spent for a variety of airline programs. However, I don’t travel as much as I used to, and even at a 2 cents per mile valuation, that’s only 2.5% back on value (more than 2%, but less than the 2.625% above). SPG does not transfer 1:1 to United. I don’t travel for business much these days so I can’t rack up SPG points for hotel stays as quickly anymore, and I also don’t need this card to keep my stash of SPG points active and useful.
  • 2016: Chase Sapphire Preferred card. This card gives 2 Ultimate Rewards points per dollar spent on travel and dining out. Ultimate Rewards points transfer 1:1 to both United and Hyatt, for some solid redemption value. If you value at 2 cents per UR points, that’s 4% back value. I also need this card to keep all of my Ultimate Rewards stash active and available to transfer to the various airline and hotel partners. (I also earn UR points elsewhere from Chase Freedom, Ink business card, and their shopping portal.) If you haven’t had 5 new credit cards in the last 24 months, you should check out the Chase Sapphire Reserve card as well.

ATM Debit card.

  • 2006: Bank of America ATM card. I still have this account, but got tired of how BofA pays no interest and charges you money to initiate a transfer out. If I have to use a online bank as a transfer hub all the time, I’m just going to make that hub my primary account.
  • 2016: Ally Bank ATM card. These days, it’s a lot easier to do all of your banking at an online bank with no branches. Mobile deposit with smartphone camera is much easier than scanner. ATM rebates allow me to use any ATM, and up to $10 per statement cycle in rebates is enough for me (Allpoint ATM network is free and doesn’t count towards limit). 1% APY on savings account, which serves as free overdraft source for checking. Their app is solid, I can easily imitate interbank funds transfers (and I can login with just my thumbprint).

So the overall theme of what goes in my wallet has stayed the same, but the players have around changed a bit.

Which Asset Classes Offer True Diversification in Bear Markets?

The financial gurus are always looking for a new “alternative” asset class that both reduces the risk in your portfolio and increases returns. Longboard Funds looked at data from the past 15 years and examined what happened when you added 20% of various asset classes to a traditional 60/40 stock/bond portfolio. Below is a chart of the results based on two factors:

  • Did the asset class have a lower or higher correlation in declining markets? This reduces maximum drawdown.
  • Did the asset class improve overall historical return?

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The 6 asset classes that both lowered max drawdown and increased overall return were:

  • Trend Following (SG Trend Index)
  • U.S. Treasuries (Barclays 1-3 Yr US Treasury TR Index)
  • MLPs (Alerian MLP TR Index)
  • Municipal bonds (Barclays Municipal TR Index)
  • Gold (S&P GSCI Gold Index)
  • TIPS (Barclays Gbl Infl Linked US TIPS TR Index)

I would add that your next consideration should be to research each asset class and determine which ones you have strong faith in over the long term. As diversifiers, these asset classes will have long periods of poor performance during bull markets. You must be able to hold onto these asset classes so that they can eventually help you in a bear market.

Personally, I do not have faith in trend-following, I don’t understand the fundamentals of gold (seems heavily based on speculation), and I don’t like the various complexities of Master Limited Partnerships. You may feel differently. That leaves me with the classic high-quality bonds: US Treasury bonds, Municipal bonds, and TIPS (also backed by US Treasury). Munis seem to be the best relative deal right now depending on tax bracket (and perhaps also I Savings Bonds?). None of these offer a ton of yield, but most importantly I’m okay holding them through these lean times.

American Express 2X Rewards On Purchases at Small Businesses

amex2xAmerican Express has a new promotion that offers you “2X Rewards” on your consumer or small business AmEx when you shop at a small business. Runs through the end of the year, 12/31/2016. You must register here. List of what counts as small businesses on their map here.

This works with most of the various flavors of American Express. Specifically, when you use your enrolled Card at small businesses you can earn*:

  • Membership Rewards cards will earn 1 additional Membership Rewards point per dollar spent.
  • Delta Skymiles cards will earn 1 additional mile per dollar spent.
  • Blue Cash cards will earn an additional 1% back per dollar spent.
  • Blue Sky cards will earn 1 additional Blue Sky point per dollar spent.
  • Hilton Honors cards will earn 3 additional Hilton HHonors points per dollar spent.
  • Starwood Preferred Guest cards will earn 1 additional Starpoint per dollar spent.
  • Plenti cards will earn 1 additional Plenti point per dollar spent.
  • Schwab Investor cards will earn an additional 1.5% cash back per dollar spent.

* Rewards cap applies; 2X Rewards valid on up to $100,000 in purchases per enrolled consumer card and $250,000 in purchases per enrolled business card. Prepaid and Corporate Cards, American Express Cards issued by other financial institutions, The Plum Card®, Clear from American Express®, Blue Cash InStore, Blue Cash Rebate Card, Blue for Students®, American Express® Platinum Cash Rebate Card, Optima, and One from American Express are not eligible.

Definitely worth spending the initial effort to sign up for, although the size of the benefit will vary depending on your spending patterns.

BuffetGo: Reduce Food Waste and Buy a Big Box of Leftovers for $3

bgo0The cheap, hungry student inside me couldn’t help but mention a new site called BuffetGo. In an effort to reduce wasted food, both mom-and-pop and hotel buffet restaurants work with BuffetGo to offer a special deal. You show up at their restaurant within a 15 or 30-minute window before closing, and you can fill a take-out box with whatever is available for $2 to $5.

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The number of participating restaurants is still quite limited, but locations include Chicago, New York, and Southern California. Your first meal is also free (may expire on October 31st):

FIRST MEAL FREE FOR NEW CUSTOMERS
We’re committed to an excellent cause, and we want you to be too. To get you on board we’re offering you your first meal completely free. Just place your order via the website and we’ll refund the full amount of your first meal back onto your payment card within 72 hours – it’s as simple as that. See you at the buffet cart!

This won’t work for most people, but it does seem like a clever win-win for the parties involved and indirectly helps the environment. My cheapskate side would hope that I could grab enough food for two meals in one box.

More: Vice, Business Insider

How To Read Market Commentary and Stay The Course

forecastcloudEvery day, new articles are published telling you to buy this! Sell that! Hedge against this other thing! One of the most underrated skills in investing is the ability to stick to your plan and do nothing.

Some folks argue that that solution is to never listen to any market commentary (or “noise”). Keep your head down, plow your money into index funds and don’t look up until you’re ready to retire. Well, if you can do that, more power to you. However, I’ve been getting more e-mails from people scared to invest due to reports of high stock market valuations and rising interest rates. Here’s an example of how I read market commentary and keep on truckin’ ahead.

The Blackrock Investment Institute recently released their Q4 2016 Global Investment Outlook, which has a lot of carefully-considered statistics, charts, and predictions. The chart below compares the current yields of various asset classes as compared to their pre-crisis averages (2003-2008):

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Blackrock’s analysis:

High valuations versus history point to more muted returns across asset classes in the long run. Yet slowing nominal GDP growth and aging populations argue for lower bond yields than in the past — and sustained demand for high-quality bonds. This structural shift changes the prism of assessing today’s valuations. It makes risk assets such as equities, credit, local EM bonds and selected alternatives look attractive on a relative basis.

I choose to take my risk and upside potential with stocks. While stocks have lower earnings yields (higher P/E) than pre-2008, they are still more attractive than high-quality bonds on a long-term basis. They are certainly more attractive than cash. US, European, Japan, Emerging Markets, nothing looks horrible.

I only invest in high-quality bonds because I want bonds to serve as portfolio ballast and help keep the ship steady. Risky bonds are more correlated with stocks, meaning if stocks go down then they are more likely to go down as well. I simply don’t want to own those types of bonds, even if they yield a bit more. Thus, I ignore any recommendation to buy high-yield corporate bonds, high-yield municipal bonds, and emerging markets bonds.

You can see that the high-quality bond yields are all significantly lower in the current environment. This second chart below looks more closely at the current bond picture. If you are in a high tax bracket, you should consider investment-grade municipal bond funds due to their high effective yields. Otherwise, a broad US Corporate bond fund (Investment Grade) is still a pretty good choice, and a a broad Total US Bond fund (US Aggregate) is in the “okay” zone.

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If you’re doing the sensible index fund thing, perhaps via Vanguard Target Retirement fund, then I see nothing wrong with staying the course. Nobody knows what will happen in the next 1, 3, or 12 months. Stocks could drop. Rates could rise. But stocks could also keep going up. Rates could also stay flat for a decade. Investing for the long-term requires perseverance. Stocks are still compensating investors for taking risk and are more attractive than bonds in the long-term. I would still add some high-quality bonds to smooth out the ride.

Finally, keep on saving. As Jack Bogle says, “If we’re going to have lower returns, well, the worst thing you can do is reach for more yield. You just have to save more.”

Navy Federal Visa Signature Flagship Rewards Credit Card: 30,000 Bonus Points, 0% APR No Balance Transfer Fee Offer

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NavyFed Credit Union has brought back the sign-up bonus on their premium rewards credit card, the Navy Federal Visa Signature Flagship Rewards Credit Card. Taken altogether, the sign-up bonus and the low intro balance transfer rate are quite competitive. The highlights:

  • Earn 30,000 bonus points when you spend $3,000 within the first 90 days of opening a new card. 30,000 points can be redeemed for a $300 statement credit towards the purchase of any flight on any major airline.
  • 0% intro APR on purchases and balance transfers for 12 months with no balance transfer fee. After that, a variable APR between 10.24% and 18% applies.
  • Earn 2 points per net dollar spent.
  • No limit on the points you can earn; points never expire.
  • No foreign transaction fees.
  • No annual fee for the first year, $49 thereafter.

The “catch” is that in order to apply, you must first become a credit union member. Membership eligibility for NavyFed is primarily restricted to those who currently or have ever been affiliated with the Armed Forces, DoD, Coast Guard or National Guard, those with a family member who has those affiliations, or those with a family or household member who is a NFCU member.

This is a solid offer as it has been harder to find a no fee 0% APR balance transfer offer these days even though interest rates are still relatively low. (Other NFCU cards have no balance transfer fee, but only at a much higher APR, not 0% interest.) For example, doing a balance transfer of $10,000 with a 3% balance transfer fee would add up to $300 already. Add in the $300 value sign-up bonus, and you’re already up to $600 total value in the first year. Transfer a higher balance, and the benefit increases further. NavyFed has a reputation for being generous with credit limits, with $50,000 or $80,000 limits not out of the ordinary.

In terms of competition, the Slate Card from Chase is also currently available with a 0% intro APR for 15 months with no balance transfer fee on both balance transfers and purchases and no annual fee. You must initiate your balance transfer within 60 days of opening the account.

Both cards are good opportunities to lower the interest rate on your existing balances and accelerate any debt payoff plans. You can even pay off student loans.

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