This post is just to let everyone know I’ve added a new page to this site…

Over the past month and a half I’ve been researching online savings accounts from 10 different banks. With the information I obtained from each of these I have written 10 reviews. You may compare these savings accounts side-by-side to make a more educated decision on which one is best for you. Click here for the review page or click on the link in the top menu of this site.

What are high yield savings accounts?

A high yield savings account is almost the same as any other savings account that banks offer. The difference is, instead of you earning a very small, let’s say, 0.25% APY (annual percentage yield) you are given a much heftier percentage, for example 2.00% APY. That means if your account balance were $1,000.00, after a year you will have earned about $20.00 in compounded interest. Whereas with the lower APY you will have earned only $2.50 in a year.

Why should you have a high yield savings?

A high yield savings account is a good place to keep your money while you’re waiting for something to invest in or if you’re just saving up to buy a big-ticket item. Another good reason to have one of these accounts is to have money set aside for emergencies, such as daughter’s wedding, emergency plane ticket or loss of job. Financial advisors will say to have an emergency fund that will support you for a period of three to six months, should lack of a job become an issue. In times of bad economy, when the unemployment rate is so high, this is a must!

These are the names of the banks whose savings accounts I have reviewed:

Emigrant Direct
ING Direct
HSBC Direct
FNBO Direct
Citibank
E*Trade
Dollar Savings Direct
Capital One
WT Direct
Bank of Internet

Read the Reviews here.

Ah, tax season… For some this time of year is a dreaded part of life, while for others it’s something to look forward to. Getting that tax refund in the mail, knowing that you have some extra money on hand to do whatever you want with– it’s so exciting! But before you get your refund it would be a good idea to have a plan for what you’re going to do with that money. Whether you want to invest it, save it, use it to pay down debt or spend it and buy a new big screen TV, it’s wise to know what you want to do with it before it comes. Otherwise that money may just sit in your bank account to be eaten away with ice creams and coffee.

Here are some ideas to help you decide what to do with your 2009 Federal Income Tax refund:

Start an Emergency Fund

Financial advisers will tell you to create a fund with enough money to sustain you for a period of three to six months. This is especially wise in times like these, when it’s uncertain whether many of us will still have a job in the coming months.

Where you put this fund is up to you, though it would be better to have it in a place where it’s hard to “borrow” from. My wife and I have an online savings account with ING DIRECT. It’s a very practical account that links right to our bank account, but the best part is the interest payouts. There are other online banks that offer high interest as well. Here are a few to compare:

Bank of Internet – With the High Yield Savings account earn 2.06% APY (annual percentage yield). There is a minimum deposit of $100.00 to open this account but after that there are no account minimums or fees. *

HSBC Direct – Open an Online Savings Account with as little as $1.00 and earn 1.55% APY. There are no regular monthly or transaction fees with this account, though other charges may apply, such as non-sufficient funds, stop payment order, and return item fees. *

ING DIRECT – The Orange Savings Account offers 1.50% APY with no fees and no minimums. *

* Annual Percentage Yield (APY) is variable and subject to change without notice. Information from www.bankofinternet.com, www.hsbcdirect.com, and www.ingdirect.com is accurate as of 06/20/09.

Pay Down Debt

Another good way to use your refund is to pay down debt. If you have credit cards, a car payment, or a home loan, pay extra toward the one with the highest interest rate.

College Savings

If you would like to attend college in the future or if you have kids and want them to have the option of going to college, consider opening a 529 college investment plan. CollegeSavings.org is a site where you can find and compare plans that best fit your goals.

Retirement Savings

Use your tax refund to start or add to an Individual Retirement Account (IRA). A Roth IRA is of particular interest, as the earnings accumulate tax-free and remain tax-free even after distribution (when you withdraw funds).

Large Refunds Aren’t As Cool As They Seem

As fun as it is to get a huge lump sum from the government each year, just remember that they’re actually just paying you back for the interest-free loan you gave them throughout the previous year. Every paycheck the government takes out a little bit more then you owe them, then in the spring they pay it back without interest. If you’re receiving a large tax refund you should ask your employer for a new W-4 form so you can adjust the withholding allowance to receive that money in each paycheck. However, be careful not to allow too much money to be taken out of your paycheck– you do want a little bit of a tax refund; otherwise you’ll have to pay some at the end of the year plus fees.

A lot of people prefer to have a larger refund rather than getting that money in their paychecks where it would probably get spent on something or used for bills. If this is an issue, consider having that money direct-deposited from your bank account into the investment fund or high yield savings account of your choice. That way, after every payday, the money is gone from your account before you get your hands on it.

Stocks

Whenever non-investors think of “investing”, their first thought is usually stocks. Which then is followed by thoughts of uncertainty, risk, and in most recent times during this economic crisis, people would fear buying stocks that are near rock bottom. Bad economy, falling stock prices, what is a young investor to do? Well, let’s see, falling stock prices… Hmmm… Cheap stocks? I know! Buy stock when the market is at the floor! Sure the economy is poor right now, but wounds heal, and given time the economy will regain strength. A general rule of investing is to buy low and sell high. So, to invest in stock now would be a good observation of that rule.

But what about the fact that so many companies are on the verge of bankruptcy and also the many that have already gone out of business? Of course you don’t want to buy shares of a company that’s going bankrupt. That would be dumb. But what you could look for is a company whose business is absolutely needed in this culture. Maybe not many people are buying new cars right now, so the auto industry might not be the best choice. But people still have their old cars and they’ve still got to pump them with gasoline. So perhaps the oil industry would be a good idea. Do some research by looking at companies like Chevron-Texaco (CVX) or Exxon (XOM) on NASDAQ.com. Also, I don’t think people are going to stop using their phones anytime soon, so try looking at different telephone companies, like AT&T (ATT) or Sprint (S).

Just remember, if the company offers a product or service that’s vital to this culture, our way of life, then there might be a better chance for that company to remain in business, even during a recession. I hope this makes sense. For myself this is mostly conjecture, as I am not that familiar with trading in the stock market. Though one more tip I can offer is, do lots of research before investing. Know what you’re doing when you do it and know why a stock might be good to buy before you buy it.

Precious Metals

Metals such as silver and gold are another example of a safe investment during bad economic times. Very often when the US dollar loses value, the prices for gold and silver go up. There are also other things that influence the value of precious metals, for example, the government’s economical decisions. Keep in mind that depending on the circumstances the relationship between the value of metals and the value of the dollar may look different.

It’s important to buy gold or silver when the markets are at a low. They don’t have to be at an all time low, just low enough so you can make a profit when the markets go back up.

For more detailed information on how to purchase an trade gold see Investing in Gold. You may also be interested in reading my articles on Paper Trading Gold where I post weekly updates on the status of gold on the market.

1) Open A Practice Account

If you’ve never traded forex before, it is a good suggestion to open a practice or demo account with websites like AVAFX.com, Forex.com, or FXCM.com first, before you open a live account. This will give you some time to play around with pretend money while you get the hang of how the market moves, before you involve your real cash.

2) Separate Your Emotions From Your Knowledge

Never let your emotions become an influential factor in your decisions to buy and sell. You’ll find that when you have a practice account it’s a lot easier to make buying and selling decisions, because you know that whether you win or lose you still won’t really lose your real money. That changes, though, when you start trading with real money. You start worrying over a trade you just made, thinking, “what if the market goes the opposite direction and I lose!” So if the market does turn against you a little bit, you panic and liquidate your open positions.

Or if you’re wanting to make a trade and you see a currency pair rising incredibly fast, you may think, “I better hurry up and buy it before I miss my chance!” Then right after you buy it, the market goes back down and you lose. It’s very important to create a dividing line between your emotions and the knowledge and experience you have in trading currencies. You don’t have to worry about missing your chance! There will always be another chance. It’s better to wait for another opportunity to come along, taking time to study it and knowing for sure whether you think it would be a good idea to trade it or not.

When you trade forex you must detach yourself from the money you invest. The moment you transfer that money to your trading account, consider it gone. That way, if you gain money, it will be a nice surprise, but if you lose you won’t be terribly disappointed.

3) Watch For “Spikes” On The Charts

One useful method that I found for reading charts is watching for “spikes”. As the candlestick chart in fig. 1 shows, when the market goes up or down very rapidly it will appear as a spike on the chart. When the chart spikes like this, more often than not, the market will turn and go in the opposite direction from the spike. It doesn’t happen this way all the time, but it is quite frequent.

Fig. 1

When you see a chart spiking, wait till the spike reaches its fullest and starts to recede back to the base of the spike. This is where you want to buy the currency pair. Be careful not to hold on to it for too long though. As you can see in fig. 1, where the first spike with notations is, the market went up after the down spike, but then soon afterwards it continued on its course down. You want to sell while you’re ahead, because after the spike it’s hard to tell whether the market will go up or down. This brings us to tip number 4.

4) Sell While You’re Ahead

One of the most important things to know when trading forex is knowing when to sell. Unless you have tons of money in your trading account, a good tip is to sell while you’re ahead. Don’t wait for your profit to increase “just a little bit more” before you sell, you may end up losing all your profit and more.

Another thing is, you need to always be on your toes and ready to sell at a moments notice. Again, unless you have mass quantities of cash in your account, you should be monitoring your open positions constantly. Don’t buy something then wait hours before checking on its progress. This is very important! It will be different later when you have more money in your account, but for starters if you have, let’s say only $500.00, you really should be watching the market all day.

5) Don’t Go Cheap When Opening An Account

When you start trading foreign exchange, begin with a sizable amount of money in your account. If you want an account with a 200:1 leverage, start with a bare minimum of $500.00. Though you would be way better off with somewhere around $1,000.00. The more money you have in your trading account the better chance of success you’ll have at making a profit. In my opinion, $500.00 is too small of an amount to start with, but it may work for some people.

6) Only Trade With 10% Of Your Margin Balance.

If your leverage is 200:1 your margin will be whatever your account balance is multiplied by 200. So, if you have $500.00 in your account, your margin balance will be $100,000.00. Now, if the lot size is 10k, in order to make one trade, you will need to use $10,000.00 of the margin. So technically you could purchase, at most 9 lots at ounce with a margin of $100,000.00. It’s just that you don’t ever want to do that! Why not? Because, the more open positions you have, the faster you will gain or lose money. Thus, it is wise to only use 10% of your margin balance at a time. Keep your gains small while at the same time minimizing your losses.

So to sum up, if you have $500.00 in your account, your margin will be $100,000.00. Therefore, only purchase 1 lot. If you have $1,000.00 in your account your margin will be $200,000.00. So you may then purchase 2 lots.

After awhile of using this 10% rule, it may start to seem like you’re not making as much profit as you could be. You might be tempted to use more then 10%. A word of caution: Don’t give into this. Although your profits will seem small, you will have much more success while investing in the foreign exchange market if you apply this rule.

7) Practice, Practice, Practice!

Now you’ve opened a practice account and played around a little, but you still don’t feel confident with using real money just yet. Time is running out, and before you know it your practice account expires and the company representatives start pressuring you to open a live account. What do you do? Open another practice account and keep on learning until your ready. Study, read other how-to articles, and become a pro.

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Here are some links to forex sites that offer free practice accounts:

AVAFX.com

Forex.com

FXCM.com

ForexMicroLot.com

Here are some links to forex sites that do not offer practice accounts:

Finexo.com

Easy-Forex.com

Warning: Forex trading is extremely risky. The market is very volatile, which means you may win considerably, but you may also lose considerably.

Beware of Investment Risks!

Thomas Edison said, “I have not failed. I’ve just found 10,000 ways that won’t work.” The same is true for me, though in my case, with trying to make money by investing in toys, I only found one investment method that did not work, at least not yet.

I’ve always been a big fan of Star Trek. Yeah, I know you can laugh. But what I didn’t realize was that not everyone was as big a fan as I was. I thought I could buy all of the toy action figures and sell them for lots of money when they became lost relics of the past. Here’s what really happened– I spent nearly $500.00 and bought over 70 action figures. I left them unopened and put them in storage. That was ten years ago, and to this day I still have them. What dismayed me was that I cannot find anyone who would want to buy them. The market just isn’t there, and because of that the values of the toys are less now than what I paid for them.

I am in no way an expert at collecting toys, this is just my own experience. Some people may do very well with their investments. It’s just hard to tell which toy will be worth hundreds of dollars in the future and which one will be forgotten and worthless.

So back to Thomas Edison’s way of thinking, I don’t think of this as an investment failure on my part but rather a costly lesson in how to invest and what not to invest in, a lesson well worth my time and money.