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InvestingTips & Tricks

Choosing an Online Broker for investing

by Yoda

Are you ready to start investing? Choosing an online broker is a very important decision before investing. A lot of it depends on your investing style. Some people might be dividend investors, some growth/value investors, some just do index fund investing etc. Based on your requirements, you need to understand what all features various brokers offer and then go about choosing an online broker for yourself.

choosing an online broker

Factors to consider when choosing an online broker

1. Account Offerings

There are different types of investment accounts. Like retirement accounts (401K’s IRA’s), individual investment account, checking account etc. Not all brokers offer all types of accounts. There are certain types of investments you should buy inside specific tax-sheltered accounts to maximize tax free returns. Most retirement accounts also have limits on amounts you can contribute yearly. Depending on your requirements you might need all types of accounts or maybe just one. But usually for a sound retirement strategy people have both retirement and individual investing accounts.

2. Account features

Not every broker offers all type of features. Ability to reinvest dividends(DRIP) is very useful to keep your investing on auto pilot. Automated Customer Account Transfer(ACATS), helps in transfer of securities from one broker to another. Some brokers do not have the ability to transfer in. This could be much needed if another broker of yours decides to shut down abruptly. You might need ACATS-in ability in your second broker to move stocks. Real time quotes, analysis/research on stocks, ability to place different kind of orders like limit, stop etc. and schedule execution are all also very important features. Ease of moving money from and into accounts. Is the broker fast enough to move money? Since many times you will only get a buying opportunity for a day or two and you need the money then to buy stocks.

3. Fees

This includes fee to buy or sell an individual stock. Any fees to start the brokerage account? Annual fee on the account? (this should not even exist). Any minimum balance requirements to maintain? Some brokers have different fees to buy individual stocks and different fee for ETF’s/index funds etc. So, make sure when you make your decision you do know about the fee charges. Also, a reminder free is not always the best route to go. You might be compromising on some other features in exchange of no commissions. More on this later.

4. User Interface

This includes the website UI as well as a mobile application UI. Ability to look at charts, create watch lists, create stock screens is important. Availability of educational resources which you can read through in your time.  Security settings and brokers emphasis on keeping data safe. Ease of access to historic records/statements for tax purposes, to calculate or look at how you are performing is helpful to track your progress over time.

5. Research Reports

Many online brokers offer free access to research reports from popular analysts. It allows you to view their detailed commentary on a stock you are researching. Their star ratings, information on moats, historical data, ratios etc. This information can definitely help you in your research before buying a stock. So do make sure this is also a factor when you are choosing an online broker.

Based on above factors, best online brokers are:

1. Schwab

Key highlights:
  • Now commission FREE (0$ to buy/sell stocks and ETF’s) starting 7th October 2019 
  • $0 – $76 for index & mutual funds only to buy, no fee to sell (this only applies to non-Schwab funds, which makes sense since they want to encourage you to buy more of Schwab owned funds).
  • For non-Schwab ETF’s fees may be $0-$20 depending on the ETF, but the most popular ones you want to buy are free!
  • Schwab ETF’s & index funds both cost 0$ to buy or sell.
  • $0 annual fee on most individual accounts, $0 – 1000$ minimum balance, check more here. I would suggest the standard Schwab one account for individual account and their standard IRA accounts which come with 0$ minimums.
  • Free access to research reports from Morningstar, CFRA, Credit Suisse, Argus & Reuters.
  • Their checking account ATM card doesn’t charge you any fee to use at ATM’s around the world!

This brokerage has been around since 1975. Their customer service is top notch. Not only can you ask questions about your account, you can even get advisors to talk to, ask about transferring your brokerage from other places etc. They are helpful on every doubt you have. Their chat support is phenomenal. I haven’t had to call in at all even once! Other features I mentioned above are also offered by Schwab. Before 1975, trading fees were fixed regardless of the size of your trade. The government abolished this practice in May 1975. Schwab was the pioneer to introduce discounted trades at that time. The company has a history of making decisions and introducing changes in favor of the individual investor. Schwab was one of the best online brokers in 1990’s and continues to be today. Currently they also have a 100$ sign up bonus to sign up for new account. Also a fair warning, Schwab usually does a hard credit pull if you open an account with them for first time ever(without any prior relationship / account). But I think it’s totally worth it.

Good For:
  • People who want a person on other end to ask any questions. Really good customer service.
  • Those who want to do DRIP investing. Set your dividends to DRIP and forget about them.
  • People who like to buy index funds, as Schwab has cheap expense ratio index funds.
  • The checking account comes with a debit card that doesn’t have any fees when used abroad anywhere!
  • People who like to visit a physical branch once every while. Schwab has a big network of physical locations where you can walk in and chat with advisors, make deposits have some snacks, all on the house.
Shortfalls:
  • Although Schwab provides ACH in and out functionality and a checking account, it holds deposits into any account for 2-4 business days. This kind of holds your funds for some time if you want to move it to another account within Schwab or outside.
  • It is still a for profit publicly traded company that has other ways to make money irrespective of fee-free trades it provides.

2. Vanguard 

Key Highlights:
  • $0-$25 to buy or sell stocks/etf’s depending on account size (Not free yet).
  • $0 to buy or sell Vanguard ETF’s and mutual funds plus some third party etf’s.
  • Some Vanguard mutual funds have 1-3K USD minimum requirements to start buying.
  • Incentive aligned with average investor. Not a for profit company.
  • Free analyst reports from Argus and Market Grader.

Before Oct 2019, I used to have Robinhood as my second choice broker. Mostly because of their fee free stock trades. I used to recommend them over other big brokers for most beginners in investing. However starting 2019 October, most big & best online brokers decided to offer fee free trades.  So Robinhood is now out of the picture. In comes Vanguard. This company has also been around since 1975. I mentioned above in shortfalls of Schwab that they are still a for profit, public company and need to generate profits. Vanguard is a company that is held by investors who invest in Vanguard funds. So there is no incentive to generate any profits. You can read more about their structure here.  J L Collins also wrote a very nice article on why he trusts Vanguard with his money. Vanguard’s ownership structure allows it to operate at cost and charge minimum  expense ratios to make sure it covers expenses. This is what separates Vanguard from rest and makes them one of the best online brokers.

Good For:
  • People who want to invest in index and mutual funds only. Vanguard’s funds are the most famous and have some of the least expense ratios.
  • Vanguard is a big proponent of long term investing in index funds. So their platform is really focused on dissuading people from trading in individual stocks. Their fee structure, research, basic guides are all focused on long term investing. In my opinion this is a big positive for us everyday retail investors.
Shortfalls:
  • Not the best online broker if you buy individual stocks.
  • Their mobile app/web application is very basic. No frills, no big features. Good to check balances and place a trade. That’s about it. Don’t expect Vanguard to provide latest features you see elsewhere in other broker mobile apps.
How to go about choosing an online broker to start investing and our suggestions! Click to Tweet

Pitfalls about commission free trading

With most of the best online brokers offering commission free trading, there are things to be aware of. Commission free model encourages trading. It removes a psychological block in your mind and encourages you to be more open to sell/buy stocks based on daily stock prices. A lot of my friends who started with Robinhood app, buy and sell daily because they feel there are no problems since the fee is 0$. They are inadvertently day trading/short term trading. Selling as soon as it goes up a bit. Selling even if it goes into huge loses etc. Not realizing the enormous tax liabilities, they create in process. This is just a warning, you can obviously invest any which way you want.  All I am saying is you need to have an approach and be disciplined when investing.

Another problem for brokers is they still need to make money. They are not in charity business after all. Most brokers like Schwab, Fidelity etc. already have banking divisions. They make money using the interest rate spreads on the cash in your trading account. You get very low interest on the cash you save with them for investing. They lend it to people at higher rate, pocketing the difference. Vanguard is a rare anomaly here as it moves all of the cash in your trading account to a money market fund that gives you market interest rate while it waits to be invested. Brokers also have an incentive to make money on spread between bid and ask prices for any order you place. When you place an order they might direct your order flow to high speed frequency traders and get some commission from them. This might result in you not getting the best price for your order. These might not be a huge concern if you do not trade often and invest for long term. Just be aware that brokers still have to make money and they are probably making you pay one way or another.

In Conclusion

Apart from these 2 picks, there are a few others who always feature in most lists of best online brokers I found during my research. However, I haven’t used them so I cannot write helpful descriptions on them. If you would like you can also look to Fidelity (for best retirement planning/investing) TD Ameritrade (for good data and options platform). Another pro-tip is a lot of big brokers allow for fee free ACATS-IN transfer of securities (they will even reimburse fees charged by your existing broker to ACATS-in to their service). Some also give you a fixed number or duration during which you can trade for commission free. They might even give you bonus money to move your account. You can always ask check with your broker if they offer any commission free trades if your account balance is above certain limits.

choose brokers both

At the end of the day, choosing an online broker comes to your requirements, investment style & philosophy etc. If you like the customer service and more options available to you, go with either Schwab/Vanguard. Schwab has more features and research if you would like to venture into individual stock investing. Vanguard is the best solution to keep everything on auto pilot and investing in index funds without applying much brains. You can even have both accounts. No harm in that. I do! My aim was to just elucidate some factors on which you can base your decisions.

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historical stock data
Tips & Tricks

3 Ways to Get free Historical Stock Data for analysis

by Yoda

Importance of looking at historical stock data in your stock analysis cannot be overstated. There are countless websites where you can find real time stock quotes, pe ratio, dividend yield etc. for a stock you are interested in. However, trying to get 10-15 year historical stock data on the same stock is difficult. Sometimes you must pay, some free data is not reliable. Some data doesn’t include splits etc. Read on to find how you can get free historical stock data for your analysis.

Importance of Historical Stock Data

Before we look at ways to access historical stock data, lets look at some benefits:

  • It helps you judge value of your investment. Whether the stock is trading at a high value compared to past or relative to normal value according to historical averages.
  • There is a very popular reversion to mean theory which suggests that most asset prices revert back to their long-term historical averages. Meaning a stock can be considered overvalued if it’s at a higher pe ratio than historical stock data would suggest. And undervalued inversely. Obviously, this doesn’t apply to all stocks. But, gist is that you can use historical stock data to try and buy undervalued stocks for your portfolio.
  • Sometimes, you might develop a strategy to invest and historical stock data can help you back test this strategy.
  • You can even use historical stock data to understand trends in company of your interest. Are sales increasing over 10-15 years? Maybe the company is cyclical and a better time to buy would be when they hit a downturn. Do increase in sales show a big increase in expenses also? Is the dividend increasing over time?

You can get insight into questions like these using historical stock data.

The trick: Free Public Library Card

In the US, many cities have multiple public libraries. These libraries are funded via public tax dollars. Whatever area you live in, you can go to public library and get free membership by presenting a valid address proof. Many such city library systems offer books, internet access to resources, training programs etc. free of charge! Most times, this includes free online access to Morningstar, Value Line and Factiva. Just go to your local area library website and search for virtual library or research and databases access. You can alternatively just directly search for Morningstar or Value Line.

austin linbrary morningstar access

austin library morningstar access

austin library value line access

austin library value line access

nyc library morningstar access

nyc library morningstar access

In my research, I see most US local city public libraries offer these databases access with free membership. In case, your local library doesn’t, there are some city libraries that give non-residents a membership at some amount of annual fee every year. Do call to make sure Morningstar/Value Line access is included in such a non-resident subscription if you have to go for it.

1. Exploring Morningstar Access

When you click on “access now” from your library site. It takes you to a special URL where you can enter your library card number and password to log in to Morningstar:

austin library login for morningstar

After you login, you can explore Morningstar as a paid subscriber! You can search for any company under the companies tab and look at its star rating. Morningstar rating is just a measure of how undervalued the stock is according to their fair value. For some stocks they provide a full analyst report which you can look at by clicking the “Read Full Analysis”. The analysis is pretty detailed with comments on current business challenges, management, fair value etc.

morningstar sample

courtesy Morningstar Inc.

For historical stock data, lets first look at Financials tab. This gives you past 10 years of income statement, balance sheet and cash flow statements data. You can look at revenue, net income, free cash flow trends over last 10 years. You can even export this historical stock data into excel if you want to do more analysis on it.

morningstar historical stock data financials

Coming to Operating Performance tab, here you can look at 10-year gross margins, operating margins, return on assets, ROIC etc. trends. Similarly, the Valuation tab shows the 10-year price/earnings, price to cash flow, price to book value historical stock data.

operating perf historical stock data

Coming to Ownership tab, here you can see what funds or institutions hold the stock. Have they been buying or selling over the last 8 quarters? This is great if you have certain institutions you know or who you follow. Maybe there is a fund that is famous for long term investing in good dividend companies. If you spot them in this tab, it’s good to know if they are buying or selling the stock you are looking at.

Your free Morningstar access from the library also allows you to look at funds and ETF’s like individual stocks. You can look at expert reviews of specific funds/ETF’s.

ownership historical stock data

Free Morningstar newsletters!

If the above was not enough to convince you to get your free library membership, you also get access to Morningstar newsletters. You get access to past 12 issues of their newsletters related to dividends, funds, ETF’s and individual stocks. You can open any issue, look at their portfolios across all 4 newsletters and get some expert commentary on a few ideas for that month. Isn’t this simply awesome? So many ideas for you to research and look at and all for free. Morningstar charges about 200$ a year for premium access to all these features and I just showed you how you can get this for free!

morningstar newsletter

2. Value Line Historical Stock Data

Morningstar works great for looking at historical stock data. However, you must click on different tabs to get to the information you want to see. PE ratio is at a different place, Dividend trends are somewhere else etc. I like Value Line because it displays all this data in one pdf! They even update these pdf’s once a quarter. Their pdf research reports on individual stock includes up to past 15 years of historical stock data. This includes things like pe ratio, dividend yields, cash flow, net income, return on equity, revenue etc.

Once you access Value Line through your library website, you see the following home page. Here you can enter any stock ticker and select it to know more about it:

value line login

On the next page, you can see the timeliness, safety and financial strength rating from Value Line analysts. Do research on how they get to these ratings. Under the pdf reports button, you can open the latest pdf.

valu line mmm dashboard

Now, here is the magic! The pdf shows historical stock data for MMM since 2004! You can see average annual pe ratios, revenue, eps, dividends etc. You also get a 1-2 paragraph description of the business. Plus, some commentary on the most recent quarter.

mmm historical stock data

Get free Morningstar & Value Line access via your public library! Click to Tweet

3. Free Historical Stock Data using Macrotrends

If you cannot get a free library membership or your library does not have access to Morningstar or Value Line, then there is Marcotrends. Here, you can just search for the stock symbol and  it will show you things like revenue, gross profit, cash trends over 10 plus years. Lets try to look at the dividend yield trends for MMM. I can see, macrotrends has a 31 year historical stock data available:

macrotrends historical stock data

You can see if dividend is rising or when it fell etc. Similar graphs are available for other historical stock data metrics as well.

Conclusion

A good understanding of the historical stock data like average pe ratios, average dividend yield of a stock is an important step in investment process. You could have bought MMM at 220$ when its PE was 31, dividend yield was 2.07% thinking it was a good buy. But both of those ratios were way above average for MMM across its history and a year later you were getting it at 140’s at pe of 15-17 and near all-time high yields of 3.90%+. More information about any stock before buying helps you make a more informed decision. This is not the only information you should focus on but one of the many things to look at before making an informed decision.

If you liked this post on free access to Morningstar and Value Line, check out my other post on getting free access to barron’s and wsj subscriptions. Please also support us by sharing this content with your social media audience in case you would like to see more such articles.

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Investing

REIT Investing: What, How and Why

by Yoda

As you all know from my previous articles, dividend investing is my favorite style of investing. Although along with that, I also like to make sure my portfolio has different type of assets.  One way to do this is via real estate. However not all of us have the money to pay every month for mortgage. Here is where Real Estate investment Trusts (REIT) come in.

REIT what if i told you

What are REIT’s?

A REIT is a company that owns, operates and manages real estate assets around the world and collects rent to make money. There can be publicly traded or privately held REIT’s. The good thing about public REIT’s is that they are required by law to pay out at least 90% of their taxable income in form of dividends.  This makes them excellent alternative to just normal dividend stocks. Public REIT’s usually operate in a single industry.  For e.g. Data Center, Telecom towers, industrial, storage, healthcare properties etc. This is not a hard and fast rule though. Some REIT’s do invest in all types of properties. There are also some REIT’s which invest in mortgages and make money using the interest payments on mortgage instead of collecting rents and managing properties.  They are called mREIT’s but we will only be focusing on Publicly traded normal REIT in this article.

Advantages of REIT’s

Juicy Dividend Yields

Since REIT’s are legally mandated to pay at least 90% of their taxable income, they have high dividend yields. Most REIT’s can pay 4-5 or even 7% sustainable dividend yields. As compared to the average 2-3% dividend of rest of the S&P 500, REIT’s dividends are amazing! These yields are also usually very stable since most tenants are in long term leases which have increases priced every year as per inflation at least. However, check out various ways to ensure/safeguard you keep getting dividends at the bottom of the article.

Instant Diversification

Since we know its very important to diversify in various asset classes in your portfolio.  REIT’s help in this regard. REIT’s indirectly make you owner of real estate. They usually have low correlation with stocks so, helps with reducing risk in your portfolio.  Plus, best part is you get to be a real estate owner without doing the hard work in maintaining or collecting rents or paying any mortgage. Agreed they do trade like stocks, but REIT underlying asset that produces income is real estate.

Liquidity

Publicly traded REIT’s can be bought and sold just like stocks. So its easier to re balance your portfolio if needed. There are other private platforms like Fundrise and Real Estate Mogul that allow you to invest in REIT’s. But they are bound by extra rules on when you can sell and how much you need minimum to invest. So, publicly traded REIT’s are what I would suggest buying.

Proven long term performance

REIT’s over the last 25-30 years have returned over 11% annually reinvesting dividends. That is a great rate of return for any asset class given the fact we have had 2 recessions in that time. (courtesy NAREIT)

reit performance

This kind of performance has been almost second to no other group of equities.

Risks/Disadvantages of investing in REIT’s

Sensitivity to Rising rates

In a rising rate environment like today’s, REIT’s compete with other asset classes. For e.g bonds and US treasury rates increase which are usually safer than REIT’s. So a 3% bond would be appealing to people as compared to a 4% REIT with amount of risk involved and REIT usually under-performs. However, having said that if you are a young investor with retirement after a decade or two or more. Then what is there to worry about! Just relax and reinvest the dividends and watch your income from REIT stocks keep growing. Over long term even rising rates usually benefit economy and help in raising rents across most properties and helping REIT’s.

Industry Risks

Most REIT’s operate in a specific industry and are susceptible to business risks weighing down respective industry. For e.g. recent fears over retail apocalypse over slowing sales in 2016-2017 lead to huge decreases in stock prices of most retail-oriented REIT’s. However, if you just focused on fundamentals and bought/invested then, most REIT’s are way more up since then this year.

Tax treatment for you

As we know publicly traded REIT’s are required to pay out at least 90% of their taxable income and they are exempt from paying any income taxes. But then for this reason, you get taxed at full income tax rate on unqualified dividends you receive from REIT. Instead of the favorable tax treatment at lower tax bracket for normal dividend stocks.  So, its important to understand what type of investing account they should go in to minimize taxes/eliminate taxes. Yes! its possible to pay absolutely no taxes on REIT’s and get the high dividend yield they offer.

Different Type of REIT Sectors

As mentioned, REIT’s can operate in different industries and business. Type of industry has a lot of impact on REIT’s ability to earn rents. Here are some examples:

  1. Industrial: These invest in making warehouses, distribution centers, logistics center for housing any kind of equipment’s, process, materials required by customers. Some examples include Prologis Inc, Plymouth Industrial etc.
  2. Telecom: These invest in creating tower sites that which network operators use to provide cell services. Some examples include American Tower, Crown Castle Inc etc.
  3. Data Center: These invest in building huge infrastructure for data centers which big tech companies rent. They are usually fitted with features like extra cooling, 24*7 power supply and extremely secure environment. Some examples include Digital Realty, Cyrus One etc.
  4. Retail: These invest in single standing or mall like shopping centers. Some examples include Realty Income, Store  Capital etc.
  5. Healthcare: Theses invest in creating hospitals, nursing homes, skilled nursing facilities etc. Some examples include Omega Healthcare Inc, Sabra Healthcare etc.

Other sectors include Office, Residential, Timber based REIT’s etc. You can find more about them here. Its important to know that at any given time, its easily possible that one sector of business is booming and REIT’s involved in that sector will also be booming.

In Conclusion

There are a lot of other factors like adjusted funds from operations AFFO, management etc to look at when choosing REIT’s. Factors to ensuring/safeguarding that dividend yield. Correct investment accounts to buy REIT’s in etc. To know more on how to go about choosing best REIT’s please consider subscribing below for free to help support the blog.

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Tips & Tricks

Using Chase Collision Damage Waiver Benefit

by Yoda

The I am sure many of you have heard credit cards provide collision damage waiver coverage when you rent a car. Some of you might have been in unfortunate situation when you had to use it. I am sure applying for a claim is a confusing process. Do you pay the rental company for damages? Get reimbursed by your credit card company later? What if the amount is too much to pay out of pocket?

Do not worry, I recently had the unfortunate necessity to file a claim with Chase for collision damage waiver on a rental. Read on to find out the process to make sure you do not end up paying for the damages yourself.

agent handing out keys

On a recent trip to Utah I had a small rock chip come out of nowhere and hit the windshield on my rental car. Thankfully no major harm was done to us. However, the windshield was left with a small hole shown below. Luckily for me, I had rented using my Chase Sapphire Reserve(CSR) card. As they mentioned I had declined my Collision Damage Waiver (CDW) coverage from Enterprise and paid in full using my CSR. So, when this happened I was at least relaxed knowing that CSR would be able to reimburse me for any damages. I called to make sure what the process was. I just wanted to create this guide for anyone who rents using CSR or any of the chase premium cards and ends up needing to file a claim:

car windshield issue

What is Auto Rental Collision Damage Waiver ?

Chase as part of its cardholder benefits provides cdw coverage on rental cars. They cover up to 75000 USD in damages for theft or collision on a rental car. All you have to do is decline the CDW coverage provided by your rental company and pay for the full rental using your chase card.

Chase Sapphire Reserve (CSR) and Chase Sapphire Preferred (CSP) offer primary Collision Damage Waiver. It means you can just go through them to claim for insurance in case you need to. Most other Chase, Discover and Amex cards provide secondary CDW coverage. Meaning, you also need to involve your car insurance provider first and then credit card provider might step in to cover rest of the bill.

Start a claim online as soon as possible

Chase outsources their claims process to a company called eclaimsline. Head over to the following website: https://www.eclaimsline.com/ start the claim:

Hit new claim and enter your card number and the name on card:

collision damage waiver claim1 collision damage waiver claim2

 

We will select Collision Damage Waiver since we are trying to claim for a rental car incident. Enter your address and personal info on next screen:

select collision damage waiver option rental car claim4

 

 

 

 

 

 

 

 

Give details on the incident, rental car and if you made the payment at the counter, then choose yourself as the benefits payee. You can change this later. Upload the required documents in the next screen. You can submit some documents later as well:

rental car claim5 rental car claim6

 

 

 

 

 

 

 

 

Once you hit submit, you should get a confirmation about the claim. You should also get an email from the site with the details.

rental car claim7

 

Decide whether to pay for damages out of your own pocket

Next step is while returning the vehicle decide whether to pay for the damages on your own or not. In my case the damage was small (317$) so I paid it while returning the car. However in case when the damage is huge, it might not be possible to pay out of your pocket. In such cases make sure to let Enterprise/rental company know that you started a claim with eclaimsline. Its possible that you might have to pay a deductible that the car rental has set depending on the type of damage. They might even ask to put a hold on your card for the damages. This depends and varies from rental agency to another agency. But do not worry, take receipts and document anything you pay.

Documentation for Collision Damage Waiver Claim

Get as much documentation as you can. Things like original rental agreement that shows you declined collision damage waiver. Itemized receipt for any payment you paid.  Photos of the damage. Police report if you have any.  Incident report from car rental company. I even have this list in one of the screenshots above. In addition to this, the claim website also asks for a copy of your card statement with any payment charge. Upload all the documents to the claim website against your claim.

documents collision damage waiver

Now waiting begins

Now that you uploaded all documents, the ball is in the claims website court. Usually you get a response after 5-7 days. However this is when I realized that that there are 2 other documents that the eclaimsline website needs to complete the claim. Its the demand letter and itemized bill/estimate of repair. Its according to this estimate that they payout. I learned that the rental car company needs to send this demand letter and estimate. However getting this form the rental company turned out to be easier said than done.

rental car claim9

More waiting

I kept getting reminder emails from eclaimsline website asking me to submit the demand letter and estimate. I had to call Enterprise a few times but they seemed clueless. All they seemed to say was it will take at least 30 days for them to generate the demand. At this point I kind of felt taken for a ride when I paid for the damages myself. And was not getting proper responses for the demand and estimate.

Respite at last

I finally got an email from enterprise stating claim was processed and my case closed. It mentioned no payment was needed from my side since I had already paid for damages. However I actually had to call enterprise again to remind them to send me the demand letter and estimate since I still needed those to get myself reimbursed. I eventually received the demand and estimate form Enterprise via email. To my surprise the demand and estimate were only for 185$ when I had paid 317$ for the damages while returning. On calling enterprise once again, I found that the original cost was indeed a deductible. Eventually they returned me the 117$ via a check and I had to submit the demand and estimate for the rest(185$) to the eclaimsline website as part of collision damage waiver claims process.

Got my money back!

After about a week of submitting the demand letter and estimate, I got an email form eclaimsline asking for my electronic deposit information to reimburse me for the remaining 185$. The process lasted 75 days from the day of incident to getting my money back.

rental car claim10

Pros:

  • The process works as expected. Its simple enough to follow.
  • You have 365 days of to submit all documents from the date of incident. So you do have ample time to make sure you get through the whole process right.

Cons:

  • I wish there was more transparency in the process.
  • Communication on the process is poor. Had to follow up with Enterprise to get the demand letter and estimate. Had to follow up to understand why the demand was for lesser amount than what I paid. There was no communication about a check from Enterprise at all!
  • Need to follow up to make sure things are moving along. I think the usual process takes about 2-3 months. But constant reminders from eclaimsline regarding demand and estimate. Along with poor communication from Enterprise forces you to follow up. Although I do think 2-3 months should be enough for the process to complete. Do keep in mind that if you paid for any part of the damages while returning your vehicle, you will not bee seeing that money for at least 2-3 months.
Check out step by step process to file a claim for collision damage waiver benefit on an auto rental using your chase credit card. Click to Tweet

In Conclusion

As I mention in my other article, Chase Sapphire Reserve is one of my all time fav cards despite the 450$ annual fee. The benefits you get are just too good for the price. Having saved so much money on my trips before by not paying for insurance I have already made it well worth the fee. This time I even used the claim process and was able to get my money back from Chase within 2-3 months of the incident. Here is a summarized list of things you need to do if you get in some incident (Or in general to make sure you are prepared for any situation):

  • Make sure to decline collision coverage on your rental and put all amount on the CSR card. (This is a must condition for Chase to take care of your collision coverage in case of an incident)
  • Take pictures of your car at the shop before picking it up.
  • Do a detailed walk through and report any problems on car if you find any.
  • Make sure you check out the gas tank level before driving off.
  • Make sure to get the Rental agreement hard copy/email before driving off.
  • In case of an incident inform and start a claim as soon as possible.
  • Take pics of damage.
  • Either pay the charges out of pocket/ask rental agency to follow up with claims website with details of claim info.
  • Upload all documents requested by claims website.
  • Call the rental agency if you need the demand/estimate of repairs.
  • Wait for the process to complete and make sure all parties are happy with the outcome.

rental car relax

This is just a generic guide and an account of how my experience was while claiming for car rental damage. I got my collision damage waiver through the Chase Sapphire Reserve card. But I do think the general process for most other primary coverage cards is the same. Little things or steps during the process may differ from person to person and base don incident. But I am sure this account will be helpful for all. Head over to the respective credit card provider website to make sure you understand all the terms to use collision damage waiver coverage.

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PrinciplesTips & Tricks

Net Worth: What, why & how to track it

by Yoda

From my first article on being wealthy, we know Net Worth = Assets – Liabilities. Its a sum total of how much you are worth. It gives an idea about financially how healthy one is.

Why should I track my Net worth?

1. Important piece of data

Unless you do not sit down and find your net worth, you have no way of knowing how much wealth you have. You have no way of making any decisions that might help you grow wealthy. You have no idea if you are in deep trouble or are doing great for your age/situation etc.

2. Keep you on track to Financial Independence

How would you know if you are on your way to becoming financially independent or not? Its easily possible you are losing money every month and not realizing it. Tracking your net worth in fixed intervals allows you to be in check with the reality.

3. Make smart financial decisions

Do you know if you are in a healthy position to take a big loan? What if a big debt you have needs to be paid down faster or not because of high interest rate? Do you know if you need to increase investments in order to get higher return to get where you want to be? All these decisions require information about net worth. How much cash do you have on hand etc. Without knowing this information, its easily possible to make bad decisions and land in sticky situation few years down the line. Maybe you find you are spending way too much money every month. This might lead you to dig deeper to figure out where and how you can reduce that. Maybe that encourages you to start meal prep. Stop eating out daily. Reduce costs etc.

4. Makes you a businessman/woman

I strongly believe a house needs to be run as a business. Every few months family/concerned people need to sit down. Figure out the net worth. See how many accounts increased in value. See what went down in value. This would give so much more information to make decisions and move towards financial independence together. It gives you better understanding if an item is an asset or a liability. For e.g. if you keep tracking your car loan payments and car value using KBB every few months, it would help you realize you keep paying down your car loan amount every month. But the car value also keeps decreasing. You realize that car is taking money out of your pocket and reducing your net worth slowly. Many people keep on leasing a car every few years not realizing they keep paying money to do so. Reducing their net worth slowly and steadily.

5. Give encouragement and motivation to yourself

Once you start tracking your net worth. You start making smarter financial decisions. It just becomes way simpler to decide to take a loan or not, to go on a costly trip or not with that information in mind. You start spending money wisely once you understand your net worth needs to go up for you to become wealthy. When you track it and see that line going in the top right direction. It makes you feel good! Its gratifying! It encourages you to make even better decisions. Also gives you motivation to keep going! It can also give you great motivation to dig yourself out of debt if you have any.

How to track your net worth

There are lot of apps/websites on the market which allow you to sync all your accounts and track net worth. However, the process in each case is the same. You create placeholders/accounts for each type of item. Checking accounts, saving accounts, car loan, house mortgage, house value, car value, investments. Everything can have 1 account each. Then you group them into assets and liabilities. Some of the asset accounts would be checking, saving, investment accounts etc. Liabilities would be car loan, house mortgage etc. If you are having a hard time figuring out what goes under assets and what goes under liabilities. Do not worry. Most apps/websites already group this for you and ask you to just enter the information. After you have your assets and liabilities, you just subtract them to get your net worth. It’s that simple!

Manual or online the lazy way?

A plethora of apps like Mint/Personal Capital etc. give you the ability to simply connect your checking, saving, investment accounts directly to their app. This allows the amounts to be synced automatically. You do not have to do anything. While this sounds easier to do, I have a few issues with this approach:

  • Sometimes banks change their secured login API’s and most of these apps are not quick to change it on their end. What if your app tries to connect 2-3 times and bank ends up locking your account for this reason?
  • Secondly, I do understand that these type of connections for Mint to my bank account are very secure. They provide read only access, no one can make a transaction using that access etc. But, I still do not want to be in a position where some new sophisticated attack manages to take some other useful information using this type of connection. What if the bank refuses to acknowledge any fault if I am in a pickle, citing third party connections?
  • Lastly, I think doing it manually once every quarter forces you to be involved in the process. If you do an automatic sync, you are less likely to focus on it. With automatic sync, you might not even know when your net worth increased or decreased. Doing it manually forces you to take time out of your routine to sit and look up each account and enter the balance in the app/website. The more time you spend doing that, more you would think about it. It’s reinforcing the whole concept of tracking net worth to motivate and encourage yourself. That’s why I like to track my net worth manually every quarter.

How often to track net worth?

According to me one needs to do this manual exercise of going through all accounts once every quarter. It doesn’t need to be daily since that would be an overkill. You got to spend more time on other productive things. You do not want to do it only 1 a year, because by year 2 you would have forgotten about it. Doing it once every few months will force you to be in check with reality of your financial health. You can even start doing it once every month in beginning to get a more detailed idea of finances. After a few months you can switch to quarterly intervals. Again it is very gratifying to see your efforts and decisions take that net worth line to the top right in your chart.

My choice for tracking net worth: Personal Capital

Key highlights
  • It’s a free app/website on available for both Android and iPhone.
  •  Very easy to use interface to enter accounts manually.
  • Excellent charts/graphs to show your progress over time.
  • Connections to do real time sync with many different type of accounts. Although as I mentioned before I usually do not even use this feature.
  • In conjunction with above, it even has inbuilt portfolio, 401K analyzers. However, these again need you to connect your accounts to the service. So I don’t really use them. Since I do manual account setup.
  • The UI to look at charts and arrangement is great! I can easily say there is nothing else on the market with such great UI. Just look at some pictures below.
Shortfalls
  • Fair warning, once you reach a net worth of about 100K, Personal capital calls you to schedule advisor sessions with them. They make money using their advisory services which are totally optional. The app is completely free. I usually just politely decline such calls. But do understand that you will get them.
  • They even have a budgeting tool, which is a new feature and I think it still needs polish. But having said that again, I do not use this feature. I solely use this app to track my net worth. So, for me its not a big negative.

net worth 1

net worth 3

net worth 4

net worth 2

Here is a direct link to sign up for free.

In Conclusion

Some of us have performance reviews at work. We usually track our work done in the last few months and discuss that with our managers. Similarly tracking net worth helps you keep performing better financially. Smallest of financial decisions taken today will help you 10-15 years down the line. When you see your net worth in black or red, you are forced to face the reality.  It helps you keep grounded in your journey to financial independence.

 

Disclaimer: Links in this article are my referral links. I and you will get 20$ Amazon Gift card for signing up to Personal Capital. I have signed up and have found the app pretty useful for my own self and decided to share this with readers.

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PrinciplesTips & Tricks

Car buying: New, Used or None at all!

by Yoda

Never buy a new car PERIOD. Its a completely needless expense you will take which is almost guaranteed to drain money out of your pocket. First up let’s look at a graph of car’s value and car loan payments after its bought new. Let’s try and track it along the course of its lifetime. I am mostly using the cars values from public sources and websites and trying to plot them on a graph:

car used new graph

Let’s say you paid 2k$ down for a new vehicle(total price = 20K). We see that the moment you buy a new one and drive it off the lot. Its value decreases by at least 10%.  What you will find is its already worth 18K if you try and sell it back to the dealer same day. Talk about a liability taking money out of your pocket! If we keep plotting your monthly car payments as expenses, you can see how your expense on the car keeps going up and up and look at the value of the car as it keeps slowly decreasing year by year. Over years 3-5 its already lost about 40-50% of the value of the new car! All these expenses are just monthly loan installments. We have not even included any car repairs or insurance payments at all in the above graph. So, when you take all those expenses into account, I hope you do realize that buying a brand-new car is just draining your hard-earned money down the hole.
Instead you can simply buy a car that’s 3 years old and still get same level of performance and it depreciates a lot slower as compared to a new car. I personally got a 3-year-old Camry from a third party dealer which has worked out really good for me so far! I still use it and have had barely any problems. Any small repairs I do myself like changing aux ports, filters etc. and haven’t really had to spend too much on any major repairs.
When it comes to lease, what you are paying for is that high rate of depreciation on the vehicle. The 160-200$ payments which look pretty good at the start make you only pay for the fast decreasing value of the vehicle. Once at the end of the lease you decide to say buy the car, the manufacturer will ask you for 300$ monthly payments now not your 200$ payments!
With all this in mind, I can only say that we should realize that a car is a liability in the long run whose value is almost always bound to go down to 0. A car is probably the second largest purchase you will make. In order to be wealthy as we know we need to have more assets than liability! So ideally, we should try to reduce as much as possible of this liability and here are some alternatives:

1. Used cars

Instead of getting a brand-new car, 3-4 years old used cars are often reliable. Cost very less and do not have many expenses at all. I personally got a 3 year old used car which has barely given any problems. It has worked real good so far! I do minor repairs like aux port changes, filter changes myself. Then take it for inspection once a year to see if I need any changes.

2. Public transportation

If you live in big cities like New York, Chicago or Seattle, you should make use of the public transportation system. I even have a few friends in cities like Houston and Dallas that are not that much known for their transportation. But they have been able to make really good use of public transportation for their day to day routine.

3. Uber/Lyft

These days ride sharing apps are all the buzz. Its possible to use these apps and completely give up your vehicle. If you add  expenses for your vehicle like insurance, monthly payments and fuel costs. Most of the ride sharing apps have monthly ride passes which are very cheap. They also offer very competitive discounts since they are new. You may be surprised to know sometimes using ride sharing apps is a better option then owing a car.

 Let me know in the comments if you have any questions or how your car buying experience went!

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Tips & Tricks

How to take advantage of Credit Cards?

by Yoda

credit cards picI keep hearing from my friends and reading from a lot of articles that we should avoid using credit cards. Most of them suggest that use of credit card essentially means using money which you don’t have. Credit cards incite you and encourage your spending behavior. They make you careless about your lifestyle and finances. Before you realize you will be falling down the credit card debt spiral.

I do agree to most part, however I do have few reasons on why to use credit cards and how to use them. By being more efficient in using them and learning to control your habits, you can bring them on your side. Credit cards can then not only help you get a better credit score but sometimes also help you achieve some financial and personal goals.

Here are some of the reasons you should use credit cards

  1. No liability

    Most of the credit cards today offer zero liability protection. This means if your card details are hacked (which believe me happens way more often than you think). You find unauthorized transactions, you can just call the credit card company and get those charges disputed. You will never end up paying for those fraudulent charges. Some debit cards do offer this protection. But I think it’s easier to get this processed through a credit card company. Debit card provider may take a lot of time and leave you without some cold hard cash in the moment.

  2. Fee free foreign currency Transactions

    When you travel outside US, you need some form of payment. You can withdraw money from local ATM or maybe carry cash to the country by changing it at a bank. That works if you are visiting a country where primary form of payments is cash. But downside is you get hit by bad transfer rates and fees especially at ATM’s. They are notorious for this. Credit cards again come to the rescue by providing fee free transactions in foreign currencies at almost little to no extra cost. Usually banks that provide credit cards add a very-very small commission rate on top of the prevalent exchange rate between your card currency and the foreign currency. You always come ahead as compared to if you withdrew cash at ATM. One thing to remember is to always ask the merchant/cashier when traveling to charge your credit card in local currency.

  3. Rewards!

    Credit card companies earn money on transactions by taking a cut from the vendor when you swipe your card. They then offer you a fixed or variable amount of rewards in form of cashback or points. There is a whole world of information out there that deals with cards to maximize these rewards. I will probably not go into details of that here. But I can tell you using these rewards I have not bought a flight ticket out of my own money in the last 3 years. Just by making use of credit card rewards systems. I have been to many places domestically, internationally without having to pay anything out of my pocket. Shopkeepers usually markup and charge all customers extra in order to compensate for the 2-4 % cut of every transaction that the credit card company charges them. If you are not using a credit card and earning the cash back. You are just using your debit card/cash to pay for someone’s processing fee and not getting any rewards in return!

  4. Purchase protection/Extended warranties

    Many credit cards now come with purchase protection and extended warranties for most of the electronics you buy. These features have helped me get out of pickle many times now. I have bought smartphones from some companies that have just randomly stopped working after 13 months. I found myself out of warranty with the manufacturer (and believe me this was a very big company). They refused to help me since I was out of the standard warranty. Luckily I bought this phone using a credit card which provided extended warranty. All I had to do was just ask the manufacturer for an estimate and send that estimate to the credit card company. They reimbursed me that amount and my phone got fixed. I think this is a very big advantage and I highly suggest readers to use credit cards to purchase electronics. Companies are practicing planned obsolescence to force you into buying more and make profits.

  5. Rental Car Insurance

    A lot of credit cards come with collision coverage for when you rent a vehicle on a trip. You need to make sure that the coverage your credit card offers is primary. This will come into effect without going through your own car insurance. Many cards offer this. I think this is an excellent advantage for people who travel a lot. I will write a detailed article on this later.

  6. Better organize finances!

    When you pay by debit cards or cash, you pay then and there. Money is gone from your account instantly. When you pay using credit cards, you pay the credit card company on or before your payment date. But the transaction may have taken place 20-30 days before you made the payment. How to take advantage of this? You can ask your credit card provider to change your payment dates, so that you pay your credit card bills after you get paid from work. You can then organize your purchases on different cards with different payment dates. If you get paid twice in a month then it becomes even more easier because you can put your next purchase on a card that always has a later payment date!

  7. Building Credit!

    This is probably the most basic features of credit cards. If you are young, starting out on a job and no credit history. Credit cards usually help to build credit history real fast. You must obviously utilize your card very carefully. Always pay of balance in full before due date. Never carry any leftover balance. Try to clear the balance even before it hits your statement to take your utilization lower. Eventually this helps you in getting better interest rates when you go out to shop for cars house and whatever!

In Conclusion

So, with all this in mind, I do highly request readers to use credit cards. Before you go though, I would like to also write up a short note on self-control. I do believe credit cards encourages spending and makes it easier. However, we all must exercise self-control. I can only go as far as to give you tips on why to use credit cards. Maybe even how to become better in managing your money and growing it further. All of these steps require you to exercise control over your temptations which at the end of the day are the exact things keeping you from becoming financially independent and allow you to pursue other goals which bring you more happiness!

 

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