Andrew Harrer/Bloomberg via Getty ImagesBy Devika Krishna Kumar
Liberty Interactive (QVCA), which owns home shopping network QVC, said it would acquire Zulily (ZU) in a deal valued at $2.4 billion to tap into the online retailer's younger clientele and its strong mobile presence.
Zulily, a website that hosts "flash" sales of clothing primarily for women and children, counts Chinese ecommerce giant Alibaba Group (BABA) as one of its shareholders.
Alibaba held about 9 percent of Zulily's total common stock as of May 15.
The offer of $18.75 a share represents a premium of about 49 percent to Zulily's Friday close. The company's shares rose 49 percent to $18.73 in early trading on Monday.
Zulily sales growth has slowed recently, hurt by increasing competition from other flash sales sites such as Boston-based Rue La La and giants such as Amazon.com (AMZN).
Mike George, chief executive of QVC, said the two companies target similar customers who have above-average income, but had little overlap.
"Only 6 percent of Zulily's active customers made a purchase on QVC," George said on a conference call.
The combined company would have annual revenue of more than $10 billion, QVC, which is about 30 years old in the United States, said.
John Malone, the chairman of Liberty Interactive who also runs Liberty Media (LMCA), is well known for buying and selling cable and media companies.
Liberty Interactive said in 2014 its board had approved splitting into two tracking stocks, one for its cable shopping business QVC Group and the other for its digital commerce, Liberty Digital Commerce.
Liberty Interactive said it would buy Zulily for $18.75 a share, or $9.375 in cash and 0.3098 newly issued share of Liberty Interactive for each Zulily share.
In the second quarter ended June 28, about 56 percent of Zulily's orders were placed from a mobile device, up from about 49 percent a year earlier.
QVC reached about 317 million homes globally in fiscal year 2014. Mobile as a percentage of ecommerce orders, excluding a China joint venture, was about 41 percent for the company.
Once the deal closes, expected in the fourth quarter, Zulily will remain based in Seattle and continue to be run by chief executive Darrell Cavens.
Zulily's shares were up 47.9 percent $18.60 while Liberty Interactive shares fell as much as 4.8 percent to $28.79 on the Nasdaq.
Up to Friday's close, Zulily's stock had fallen about 43 percent since its debut in November 2013.
-Kshitiz Goliya contributed reporting from Bangalore.
Jim Mone/APUnitedHealth Group is said to be interested in buying Aetna. Should that happen, half the country could soon be getting its health coverage from just two mega-health-insurers.
"Generally speaking, further consolidation in the health insurance industry is not a good thing for consumers, employers or medical providers ... It means the potential for future price increases as a result of less competition."
-- Dave Jones, California Insurance Commissioner
And yet, "further consolidation in the health insurance industry" is exactly what we're getting.
Last month, giant consumer health insurance company Anthem (ANTM) -- the insurer formerly known as WellPoint -- confirmed that it is proceeding full speed ahead with its plan to absorb Cigna (CI), a health insurer half its size. Together, the two insurers will employ some 89,000 workers, and take in more than $115 billion in annual revenues.
In a statement on the merger, Anthem noted that "the combined company will cover approximately 53 million medical members" -- nearly 1 in 5 Americans. Data from S&P Capital IQ suggest the concentration could be even bigger than that. Total membership at Anthem is stated at 58.4 million souls. Total membership at Cigna: 27.4 million. That's 85 million members (although there may be some overlap between the two groups).
And that's not all.
It's a Small World, After All
At the same time as Anthem swallows Cigna, rival megainsurer Aetna (AET) is buying Humana (HUM) for $35 billion. Aetna boasts 54.4 million total members; Humana, 21.5 million. Assuming both the Anthem-Cigna and Aetna-Humana deals go through, this will make Anthem and Aetna two of the largest publicly traded health insurers in the nation. UnitedHealth Group (UNH), said to have 41.6 million U.S. members "across commercial, Medicaid and Medicare segments" alone, is the third.
Again, there's likely some overlap among all of these numbers, but just tallying them all up, before accounting for overlap, we get the astonishing sum of 203.3 million Americans getting one form or another of medical insurance from these companies -- more than half the country.
And the World Is Getting Smaller
What's more, UnitedHealth Group itself is said to be interested in buying Aetna. If that happens, half the country could soon be getting its health coverage from just two mega-health-insurers: UnitedHealth and Anthem.
What is going on here? And is it good news or bad news for you?
The Company Line
Joe Swedish, current CEO of Anthem and soon-to-be-CEO of a merged Anthem and Cigna, says his company's absorption of Cigna will help it to "serve the evolving health care market with increased participation by individual consumers and growth in the government business and the need for solutions that advance affordability, choice and quality." And while that's seemingly a self-serving statement, it's not necessarily untrue. Experts note that as insurers grow in size, and have more business to offer to both pharmaceutical companies on one hand and hospitals and other caregivers on the other, they are in a better position to negotiate lower prices for drugs and medical services.
These lower prices can then be passed on to insurance plan members. Additionally, Swedish says that the merger of Anthem with Cigna should permit the company to make significant cost cuts within the companies' own internal bureaucracies, eliminating as much as $2 billion in costs within two years of a merger -- which is even more savings that could be passed along to consumers.
Or not.
(Pricing) Power Corrupts. Absolute (Pricing) Power Corrupts Absolutely
Just because these companies can cut costs for consumers, of course, doesn't mean that they will. After all, the more insurance companies that merge, the fewer insurance companies remain to compete with. Thus, the merging of insurers can work to decrease competition in the market.
Publicly traded insurance companies, beholden to shareholders who like to see profits grow every year, may be tempted to keep any savings from their mergers for themselves (and their shareholders), passing little of the savings on to consumers.
Indeed, a recent analysis of trends by the American Medical Association argues that consolidation to date is already yielding "a serious decline in competition" among insurers -- and consequently, we assume, higher prices. Backing up that analysis, Politico reports that health insurance costs are set to skyrocket in 2016. Especially in states where one insurer owns a dominant market share, Politico is reporting insurance premium rate increase requests as high as 25, 30 and even 50 percent.
Long story short: Anthem's argument that consolidation in the health insurance industry is good for consumers might turn out to be true -- but the evidence is against it.
First five big insurers, then three big insurers, then two? Motley Fool contributor Rich Smith wonders if what we're really doing is taking a roundabout route to "single-payer" health coverage. The Motley Fool recommends Anthem and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
NEW YORK -- U.S. homebuilder sentiment rose in August to its highest level since a matching reading almost a decade ago, the National Association of Home Builders said Monday.
The NAHB/Wells Fargo Housing Market index rose to 61 from 60 in July, the group said in a statement. The latest level was the highest since a matching reading in November 2005. It was in line with economists' expectations, according to a Reuters poll.
Readings above 50 indicate more builders view market conditions as favorable than poor. The index has not been below 50 since June 2014.
"Today's report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015," NAHB Chief Economist David Crowe said in a statement.
"Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year."
The single-family home sales component rose to 66 from 65 to mark its highest level since November 2005. The gauge of single-family sales expectations for the next six months was steady at 70, while prospective buyer traffic rose to 45 from 43 to mark the highest reading since December.
WASHINGTON -- Two units of Citigroup (C) will pay nearly $180 million to settle financial crisis-era charges alleging they defrauded investors in two hedge funds by telling them the funds were safe, low-risk investments, U.S. regulators said Monday.
The Securities and Exchange Commission said that Citigroup Global Markets and Citigroup Alternative Investments are settling without admitting or denying the charges, and that the funds will bear all of the costs for distributing the money to harmed investors.
We are pleased to have resolved this matter.
"We are pleased to have resolved this matter," a Citigroup spokeswoman said in a statement.
The SEC said that the bank's two units made "false and misleading" statements to investors in both the ASTA/MAT fund and the Falcon fund, which collectively raised nearly $3 billion in capital from about 4,00 investors before the funds collapsed.
The ASTA/MAT fund was a municipal arbitrage fund that bought municipal bonds and hedged risks with Treasury or LIBOR swaps, while the Falcon fund invested in a number of products, including complex instruments like collateralized debt obligations.
The SEC said that even as the funds were collapsing, the units still accepted $110 million in additional investments and investors weren't informed about the "dire" financial conditions.
The regulator added that at times some of Citigroup's employees gave clients misleading information that ran counter to disclosures in marketing documents and other materials.
Both funds were highly leveraged and sold to advisory clients of either Citigroup Private Bank or Smith Barney.
"Advisers at these Citigroup affiliates were supposed to be looking out for investors' best interests, but falsely assured them they were making safe investments even when the funds were on the brink of disaster," SEC Enforcement Director Andrew Ceresney said.
LOS ANGELES -- McDonald's (MCD), which is expected to offer all-day breakfasts starting this fall to turn around slumping U.S. sales, is the top choice for "Breakfastarians," who crave breakfast food at any hour, according to a new survey obtained by Reuters.
Forty-one percent of consumers who eat breakfast twice a day consider McDonald's for their next meal, according to the survey from YouGov BrandIndex, a brand perception research service.
Sandwich chain Subway was diners' second choice for anytime breakfast with 34 percent, followed by DineEquity's (DIN) IHOP at 32 percent, Burger King (QSR) with 27 percent and Starbucks (SBUX) at 26 percent.
Denny's (DENN) and Dunkin' Donuts (DNKN) were tied with 25 percent each and Wendy's (WEN) got 23 percent, while KFC and Chick-fil-A rounded out the top 10 with 22 percent apiece.
McDonald's long has dominated the breakfast category, which already accounts for roughly 25 percent of McDonald's sales and about 40 percent of profit in the United States.
Breakfast is the only U.S. restaurant meal time seeing an uptick in customer visits. Breakfast traffic was up 4 percent for the year ended May 2015, largely because of gains at fast-food chains, while lunch and dinner visits were flat, according to research firm NPD Group.
The category is increasingly competitive as growth-hungry chains dive in or double down with new breakfast menu items.
McDonald's added espresso drinks to its morning lineup of McMuffins and inexpensive drip coffee. Starbucks and Dunkin' Donuts struck back with new and upgraded breakfast sandwiches and pastries. And, Taco Bell (YUM) last year jumped in with waffle tacos and other twists on the morning meal.
While McDonald's holds the lead in the survey, its results suggest that the industry's breakfast brawls are far from over. Chick-fil-A, IHOP and Taco Bell made the greatest purchase consideration gains in the last six months.
Breakfastarians "appear willing to consider a broad range of options," YouGov BrandIndex chief executive Ted Marzilli.
The online survey, which took place over a 12-month period, included 1,000 adults over the age of 18 who eat breakfast twice a day.
NEW YORK -- U.S. stocks rose Monday after strong economic data boosted the housing sector and as investors bought recently battered shares in biotech and media.
The housing data was pretty good. It certainly didn't hurt the bullish tone to everything housing-related.
The data more than offset earlier concern over a surprise fall in manufacturing activity in New York state in August.
"The housing data was pretty good," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "It certainly didn't hurt the bullish tone to everything housing-related."
An index of housing sector stocks gained 1.2 percent to hit its highest in 8½ years.
Consumer stocks were among the day's gainers led by media companies including Disney, which announced over the weekend plans for two theme park expansions that will bring the celebrated Star Wars movie franchise to life.
Disney (DIS) shares gained 1.8 percent to $109.05 and Time Warner Cable (TWC) and Charter Communications (CHTR) also rose sharply. A reading of the sector's stocks rose 1.3 percent after closing Friday with its largest two-week drop in almost four years on investor concern over the future of media consumption.
"The Star Wars news has lent a bid to Disney and that has spilled over into the rest of media space today," James said.
The Dow Jones industrial average (^DJI) rose 67.78 points, or 0.4 percent, to 17,545.18, the Standard & Poor's 500 index (^GSPC) gained 10.9 points, or 0.5 percent, to 2,102.44 and the Nasdaq composite (^IXIC) added 43.46 points, or 0.9 percent, to 5,091.70.
Biotech Boost
Among the best performing stocks on the S&P 500 and largest boost to the Nasdaq were those in biotech. The Nasdaq Biotech Index rose 2.1 percent after falling 4.8 percent over the previous two weeks.
With 92 percent of the S&P 500 companies having reported results so far, second-quarter earnings are expected to have edged up 1.2 percent, while revenue is expected to have fallen 3.5 percent, according to Thomson Reuters (TRI) data.
Tesla Motors (TSLA) rose 4.9 percent to $254.99 after Morgan Stanley (MS) raised its price target on the stock to $465 from $280 and said Tesla was its top pick among U.S. automakers.
Zulily (ZU) soared 49.1 percent to $18.74 after Liberty Interactive said it would buy the online retailer for $2.4 billion. Liberty (QVCA) fell 1.5 percent at $29.80.
Estee Lauder (EL) fell 6.8 percent to $82.80 after the cosmetics maker reported lower-than-expected quarterly sales.
The S&P 500 posted 29 new 52-week highs and 12 new lows; the Nasdaq composite recorded 92 new highs and 83 new lows. About 5.4 billion shares changed hands on U.S. exchanges, below the 6.84 billion daily average for the month to date, according to BATS Global Markets data.
What to watch Tuesday:
The Commerce Department releases housing starts for July at 8:30 a.m. Eastern time.
Earnings Season
These selected companies are scheduled to release quarterly financial results:
European vacation? Kids' college tuition? Emergency fund for a natural disaster, disease or job layoff? Or maybe you're dreaming of the perfect retirement.
Sometimes we do better at saving our money; other times it's tough. Collectively in June, the latest month for which figures are available, we socked away $646.3 billion, or 4.8 percent of our disposable income, according to the U.S. Bureau of Economic Analysis. That rate was up slightly from May, but was less than half of its 25 year peak of 11 percent in December 2012.
How much did you put away? Not so much?
"If you have trouble putting money aside in a savings account, maybe the solution is to stop struggling and put things on autopilot," says Money Talks News financial expert Stacy Johnson.
Here are seven tips from Stacy and others to get you going, whatever you're saving for.
1. Pay yourself first. Payroll deduction is the single best idea and one of the oldest. Have money automatically taken out of your paycheck and transferred to a savings or retirement account. See if your employer allows you to directly deposit your paycheck to multiple accounts.
If you can pay your bills on your current income, send any additional income from raises, bonuses, cash awards or other windfalls straight to savings, too. If your air conditioner conks out or it's time to take that cruise, you'll have a nice sum of money waiting for you in the bank.
2. Round up your savings. Some banks, including Bank of America, have programs that automatically round up debit-card purchases and then transfers that amount to your savings account. For example, say your tall, half-caf, non-fat vanilla latte costs $3.50, your bill would be rounded up to $4; the extra 50 cents would be deposited into your savings account. So essentially you get a treat now and "keep the change" yourself to save toward another treat later. That act alone daily would build to a painless $182.50 over the course of one year.
3. We all could use a little change. The low-tech version of the round-up program is stashing your spare change at the end of each day. Keep it in a jar, mug, glass or piggy bank. When your container is full, or on a set schedule, you can turn that change into a bank deposit. Stacy says he turbo-charges this plan by stashing singles as well as coins.
Coinstar will exchange your coins free if you accept your money loaded onto an egift card from sponsoring partners such as AMC Theaters, The Gap, Sephora or Toys R Us. That won't raise your savings account balance, but it will give you the opportunity to save your spare change for a special item.
4. Pay with cash. You'll have more cash to stash, too, if you pay with real dollar bills, 5s, 10s and 20s when you shop. Using cash automatically makes you spend less compared to plastic. An oft-quoted Dunn & Bradstreet study says people spend 12 to 18 percent more when using credit cards instead of cash. McDonald's says a credit card user's average ticket is $7, but cash customers usually spend only $4.50.
Why? If you're worried about schlepping back to the ATM to reload your wallet, you will be less tempted to spend more cash than you planned. You'll be more inclined to pass on a higher-end model of a product you already intended to buy; also, you'll stick to your shopping list and resist in-store temptations to buy more items than you intended.
5. Make charging rewarding. If you must use a charge card, use one that offers cash back or rewards. Then you're earning cash or equivalents without effort.
6. Bank your discounts. What do you do with all the money you save buying bargains? Check your receipts. Most now conveniently tell you how much you saved on a sale item vs. its regular price, or how much you saved by redeeming coupons. Add them up. Did you buy a cheaper generic and save a bundle over a name brand? Track the difference.
Make it a habit to reward yourself by placing all the money saved from those bargains in your savings account.
7. Automate your transfers. Check with your bank or credit union about how to set up automatic transfers from your checking account to your savings account. This is another way of making sure you pay yourself first. You can even set up subaccounts and label them for special goals, like college or new car fund.
Now that your savings are on automatic, relax and watch your balance grow.
Maryalene LaPonsie contributed to this report.
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You may have never heard of my nephew's metal band, but it got a lot easier earlier this month to check it out. Miami-based Naked Vengeance -- the rock band in which my nephew David Ulloa shreds as its lead guitarist -- put out three singles on iTunes, Spotify and other leading digital music services.
The band didn't sign a major label recording contract. You don't need that these days, though it obviously doesn't hurt. If you have original music, it's just a matter of registering with TuneCore, CD Baby, SongCast or any of the other platforms that help get your tunes into the growing number of digital storefronts.
It's not free. TuneCore charges artists $30 to distribute an entire digital album for the first year. Renewals are $50 after that. Singles will set a composer back $10. SongCast has a different pricing structure: It charges a one-time fee of $20 for every album and $10 for every single. It then charges a monthly maintenance fee of $6 a month or $59.90 a year. CD Baby charges a flat fee of $49 an album and it also specializes in CD distribution.
Artists may never make that money back in subsequent royalties, but it's a small price to pay to have your demo available -- one click away -- all around the world.
Pumping Up the Volume
I had to do it the old-fashioned way a generation ago. I was in a band -- Paris By Air -- that had to shop our demo around to get noticed. We finally got the attention of producer Lewis Martinee, and under his leadership got signed to Columbia Records.
We put out a couple of singles that charted on Billboard's club play chart. We traveled the country in support. Columbia Records eventually cut us loose. However, we had dozens of unreleased tracks. Most of the songs went unheard outside of friends and family, but then the Internet offered up sites including the original MP3.com, IUMA and SoundClick that made digital delivery a means to discovery. That paved the way for Apple's (AAPL) iTunes, Pandora (P) and Spotify as the leading royalty-generating platforms of today.
Paris By Air was played on the radio and in dance clubs around the world while we were signed to Columbia Records, but we have probably reached more listeners in the era of digital self-distribution.
Come as You Are
The digital distribution marketplaces don't discriminate. It doesn't matter if your garage band never got out of the garage or if your singing is off-key. Outside of Pandora -- which does screen submissions that are sent directly to the music discovery site -- the sites embrace submissions with open eardrums. The marketplace will decide what it likes, and it can add up over time. TuneCore claims to have collected more than $541 million in revenue for its artists through 15.2 billion cumulative streams and downloads since the site launched in 2006.
In the end, it certainly helps if you're good -- like my nephew's band Naked Vengeance. It also helps if you're savvy in terms of promotions and social media. After all, having your music online is just half the battle. Getting folks to listen to it is the ultimate goal, and that will take more work than just uploading a few songs to a digital distribution site. If you want to get heard, make it happen.
NEW YORK -- The retail industry is always evolving, particularly in today's digital age, but with all of the various technologies being tested -- both online and in stores -- everything ties back to one simple goal. How can retailers make it easier and faster for consumers to purchase?
Especially online, one of the biggest challenges for retailers is "cart abandonment," meaning that a customer will browse around, add a few items to a cart, but then ultimately decide against following through with the purchase.
Perhaps the consumer went to another retailer or just decided against the purchase altogether. Either way, the retailer's goal is to avoid that scenario as often as possible. "The key is, for this to succeed, it has to be a frictionless experience for the customer," said Mike Rowland, director in West Monroe Partners' Customer Experience practice.
From social media buy buttons to physical buttons, here are the many new ways in which retailers are attempting to do just that.
Buy Buttons
The most recent trend in the retail world is to imbue social media platforms with commerce capabilities.
Along the journey of customer experience, when you look at the ideas of social commerce, there's an expectation out there regarding how easy it will be to do business.
Twitter (TWTR) , Facebook (FB), Pinterest and Instagram have all jumped on the bandwagon here. They are each testing buy buttons that let their users make a purchase directly through an ad on their site without leaving the platform. The idea being that there are already so many eyes on those ads, why not try to convert them then and there and make it as easy as possible for the purchase to happen?
"Along the journey of customer experience, when you look at the ideas of social commerce, there's an expectation out there regarding how easy it will be to do business," Rowland said.
Google (GOOG), too, is rolling out a buy button on its mobile search ads on the same theory of making it easier for consumers to make a purchase.
These buy buttons are still in the early phases and only a select number of retailers have access to them, but assuming the trials pan out successfully, it is easy to conceive that this will be a key strategy for retailers moving forward.
At-home Hardware
While social media platforms are testing out digital buy buttons, Amazon (AMZN) is experimenting with actual physical buttons. In March, Amazon launched the Dash button, which is a small branded button that a consumer can press to reorder a product like detergent, toilet paper and coffee pods. After initially sending these free to select Prime customers, Amazon is now selling the buttons for $4.99 each.
Amazon is hoping a customer, for instance, will buy a Tide Dash button and hang it up in his laundry room so that the next time he's running low on detergent he'll just press the button and an order of Tide will be on its way.
Amazon also lets consumers order via its Echo device, which is Amazon's personal assistant service, similar to Apple's (AAPL) Siri.
With both the Echo and the Dash button, the capability extends only to Prime members who are ordering a product that they have already ordered previously. Nonetheless, it promises to close the gap between intent and purchase. The minute you remember you need detergent, you can automatically place the order, instead of having to remember to order it next time you open your laptop.
"One button shopping is very much like impulse buying at the cash register," said Vishal Gaur, associate dean for MBA programs and professor of operations management at Cornell University. "When the customer has an impulse to buy, you want to capture that impulse right away rather than letting the opportunity go and having the customer shop at a competitor."
Augmented Reality
Another technology that retailers have been using for some time now is so-called "augmented reality," which blends print with online. Augmented reality takes an advertisement in a magazine and connects it to a digital experience, which brings the consumer closer to a purchase.
For example, Target (TGT) is running an ad in Vogue's September issue that ties in an augmented reality component. When a consumer opens up the Shazam app on her phone and hovers it over the ad, she will be able to buy any of the products from the ads immediately.
Traditionally, a magazine reader who is interested in a dress she sees would have to remember to go find that product later on online. The chances of her forgetting or deciding against the purchase are high. Using Shazam, Target can combat that problem.
In-store Apps
On top of innovating in e-commerce, retailers are realizing that technology should also be brought into physical stores as well. One of the ways in which they're doing that is offering in-store modes in their mobile apps to add different functionalities for shoppers.
Target, for example, has an app called Cartwheel that lets shoppers scan items in store to get discounts.
Other retailers like Walmart (WMT) also offer in-store apps that offer different features such as store maps, shopping lists and deals. Some use video technology to create heat maps of where consumers are in the store. Others use technologies like beacons to track an individual consumer and send them personalized deals right as they pass a certain product in the store.
"Two years back [these location-based apps] were somewhat clunky but they're getting better," Gaur said. "That's one place where brick-and-mortar retailers are becoming savvy now compared to where they were just a few years back."
Mobile Wallets
As the mobile payments industry heats up, retailers are trying to tap into those technologies to make it easier for consumers to make purchases.
Retailers like Starbucks (SBUX) are creating their own branded mobile wallets. This not only lets consumers leave their wallet in the office when they run down to get a coffee, but it is also integrated with their loyalty program and gamifies the whole purchase. Consumers end up buying more to get more Starbucks stars.
Other retailers are just deciding to accept mobile wallets like Apple Pay and Android Pay. Some retailers have partnered up under the Merchant Customer Exchange to work on their own mobile payment solution called CurrenC, but those efforts have yet to come to fruition, with the consortium having yet to launch an actual product.
Whether or not consumers think these mobile solutions are easier than credit cards or not, retailers want to leave the door open and let consumers choose.
Luke Sharrett/Bloomberg via Getty ImagesProperly cared for, iron skillets provide an excellent nonstick surface and can be passed on from one generation to the next.By Louis DeNicola
Savvy renters and homeowners look beyond aesthetics when shopping for home goods. The right purchases can make a home safer, save money and come in handy for years. Equip your home with these 15 items for no more than $50 each.
LED Light Bulbs. Although they can cost $4 to $10 each, LED light bulbs are money savers that can pay for themselves in just over a year, in addition to being good for the environment. Each bulb lasts up to 25 times longer than a traditional incandescent bulb and uses up to 80 percent less energy. Manufacturers have answered early complaints about LED light bulbs: Now there are "soft white" versions (which mimic incandescent light) and bulbs for dimmers.
Cast-Iron Skillets. They require a little extra care, but cast-iron skillets that are properly seasoned and maintained provide an excellent nonstick surface and can be passed on from one generation to the next. Shoppers can find starter sets of three skillets by Lodge, a well-known brand, for about $25.
Silicone Spatulas. To go along with the new skillets, buy silicone spatulas that can withstand up to 600 degrees Fahrenheit. They're not especially expensive -- Oxo sells one for about $10. Unlike plastic spatulas, they won't melt at the edges when flipping eggs or pancakes. Unlike metal spatulas, they won't damage nonstick surfaces.
Coffee Maker. Making coffee at home can save time and money, especially for those who need it daily, and there are plenty of inexpensive methods to choose from. A French press, pour-over dripper, Chemex, percolator, AeroPress or classic Mr. Coffee can all be found for less than $50.
Toaster Oven. This one small appliance takes care of multiple tasks. Whether making toast for breakfast or reheating last night's dinner, a toaster oven can save time and energy over a conventional oven. The Black & Decker and Proctor Silex brands start at about $30.
Fabric Napkins and Cleaning Cloths. Paper towels and napkins can be convenient, but they're a drain on a household budget and the earth's resources. Instead, buy a set of matching napkins that can be thrown into the wash. Microfiber cleaning cloths are durable, absorbent and suitable for all types of surfaces, from windows to countertops to the bathtub. (Use different colored cloths for the bathroom so they don't get mixed up.) They also clean with just water -- no need to buy chemical cleaners.
Water Filtration. A pitcher with a water filter can replace bottled water, keep water cold in the fridge during the summer and serve dinner guests. While Brita (starting at $17) is a household name, the more stylish Soma pitcher is available for $40.
Wine Preserver. A bottle of wine that's recorked and stored for the next day quickly loses its original flavor and aroma. A wine stopper can create an airtight seal and prevent oxidation. The Air Cork Wine Preserver ($25) performed well in testing by The Sweethome but was bested by an even cheaper option: Private Preserve ($9.50), a mix of gases that are sprayed into the bottle to form a protective layer above the wine, which can then be recorked. Either way, don't let good wine go to waste.
Fire Extinguisher. This is one item too many people don't consider until it's too late. For $20 to $50, depending on size, a fire extinguisher can literally be a home saver. And keeping an extinguisher in the home often earns a discount on renters or homeowners insurance.
Bidet. Not common in many U.S. households, bidets are starting to become popular in luxury homes. (Google's headquarters is equipped with high-end models with air dryers, a step toward a paper-free office.) A Luxe Bidet can be fitted easily to a toilet, and some models cost just $35 to $40. (Bump up to $50 or $60 and a hot-water connection becomes an option.)
Blackout Curtains. Curtains may be harder to clean than blinds, but blackout curtains can provide a better night's sleep (one study has even linked excessive light at night to obesity). Blackout curtains also help keep rooms cool in the summer, reducing energy bills. Prices vary by size and fabric, but curtain panels can start as cheap as $10.
Programmable Thermostat. High-end "smart" thermostats can go for more than $200, but the best cheap programmable thermostats cost less than $50. The government's Energy Star program estimates that a family can save about $180 a year by using a programmable thermostat to automatically turn down the heat or air conditioning when they're sleeping or out for the day.
Painting Supplies. Refreshing a room can be as easy as pulling out a few paintbrushes and rollers and painting a dramatic accent wall. An eight-piece set with a tray is available for $10 at Home Depot, and a gallon of paint starts at about $15 or $20.
Key Lock Box. Forgetting the house key is a pain, and just about everyone knows to look under the mat. Store a spare safely with a wall- or shackle-mounted combination lock box (the type real estate professionals often use). MasterLock models cost less than $25 online.
Rechargeable Batteries. Batteries never seem to be handy when they're needed. Make sure there's always an extra set and avoid buying them over and over by opting for rechargeable batteries and a charger. A set of eight AmazonBasics-brand high-capacity AAs, a dozen AAAs and an EBL eight-slot charger that holds both sizes can all be purchased for just under $50.
JupiterimagesSeparate checking accounts provide autonomy, but joint accounts may lead to fewer money squabbles.By Maryalene LaPonsie
If wedding bells were ringing for you this summer, you may be in the thick of trying to figure out how to blend your beloved's financial life with your own. One of the most fundamental decisions a couple faces is whether to treat money as a joint asset or something to be managed separately.
Traditionally, married couples have been expected to keep their money in a joint checking account, and many finance professionals tout the merits of this arrangement. However, as couples are increasingly marrying at an older age, they may be more likely to bring substantial assets, income and even debt to a union. In those cases, separate checking accounts could be appealing.
Here's why you may want to have a joint checking account with your spouse ... or not.
Joint checking accounts promote trust. When asked why a couple might want to have a joint checking account, financial planners respond with words such as "communication," "openness" and "trust."
"I think it's important to have both names on every account," says Keith Klein, a certified financial planner and owner of Turning Pointe Wealth Management in Phoenix. "It eliminates some trust issues."
Planners like Klein say joint accounts help prevent money secrets between spouses and encourage couples to communicate about financial goals.
Separate checking accounts promote autonomy. While joint accounts may keep couples talking about their money, separate accounts allow each partner to retain their financial independence. That autonomy may be particularly important to those who marry later in life and are used to managing their own money.
Emily Sanders, managing director of United Capital in Norcross, Georgia, says separate accounts can mean each spouse maintains the skills needed to take care of their money should something happen to their partner. "I find time and time again women abdicate their control of finances," she says. "With separate accounts, both spouses remain financially literate in case of death or divorce."
Joint checking accounts offer a clear financial picture. Another benefit of joint checking accounts is that they make it easy to gauge the overall finances in a family. "I believe all money should come into one account and all bills should be paid from it because it provides a clear picture of finances," says Kelsa Dickey, a financial coach and owner of Fiscal Fitness Phoenix. Too many bank accounts can muddy the waters and make it difficult to properly track spending and pinpoint areas where a family's budget could be improved.
Separate checking accounts offer less ammunition for money battles. On the other hand, separate checking accounts may lead to more harmony in a marriage if each spouse doesn't feel as if he or she has to justify spending habits.
"[Separate accounts] allow people to spend according to their personality," Dickey says. "Some people may spend every day, while others hoard it for big purchases."
Joint checking accounts mean money is never out of reach. Couples may want to keep joint accounts because they ensure both spouses can access money at any time. If only one person's name is on an account and that spouse becomes injured or ill, their partner may be unable to pull out money needed for medical expenses or other bills.
However, spouses share ownership of assets in joint accounts, which means either partner can take over management of the household money whenever needed.
Separate checking accounts mean money may not be touched by others. Sometimes, couples may not want their money to be so freely accessed by their spouse.
"There are reasons to keep inheritance money individually, especially if there are guidelines from the grantor on how that money is used," Klein says. In addition, putting an inheritance in a joint account means an ex-spouse could walk away with half its value in the event of a divorce.
Putting money in separate accounts can also be useful if one spouse has considerable debt. Money from a joint account could be garnished, but the spouse without debt can keep their money out of creditors' hands by leaving it in their name alone.
The best arrangement may combine joint and separate accounts. While there are benefits to both joint and separate accounts, the best way to manage your money in marriage could be a combination of both.
"Put all money into a joint account to pay the bills," Dickey says. "Then, you can have individual spending accounts." This arrangement requires couples to work together to pay household bills while giving them an agreed-upon amount each spouse can spend as he or she wants. Even though these accounts are meant to be used individually, Dickey recommends putting both spouses' names on the account in case one person becomes incapacitated or passes away.
At the end of the day, couples need to make a decision that works best for their marriage. "For the right people, [separate accounts] can be a route to happiness," Sanders says. "The happiest couple I know just celebrated their 70th wedding anniversary, and they've had separate accounts all their life."
CHICAGO -- Walmart Stores (WMT) reported weaker quarterly earnings and lowered its annual forecast Tuesday, as it copes with higher labor costs, a squeeze on pharmacy margins and sliding sales at its British supermarket chain.
Shares of the world's largest retailer fell 3 percent to $69.75 after trading at its lowest in 2½ years.
The results showed how a move to lift wages and other costs have kept Walmart from taking full advantage of a strengthening U.S. economy, although there was a bright spot in its report: a fourth straight quarter of same-store sales growth.
Net profit attributable to Walmart fell to $3.48 billion, or $1.08 a share, in the second quarter ended July 31, from $3.92 billion, or $1.21, a year earlier. Analysts, on average, expected $1.12 a share, according to Thomson Reuters I/B/E/S.
Walmart lowered its forecast for the year ending in January to a range of $4.40 to $4.70 from its outlook of $4.70 to $5.05 in February. The consensus was for $4.77 a share.
The significant cut to the forecast, even as Walmart logged a 1.5 percent increase in comparable sales at U.S. stores open at least a year, highlighted a growing problem with controlling costs, said Edward Jones analyst Brian Yarbrough.
"It was a big drop," said Yarbrough, referring to its revised forecast, which included 24 cents a share to pay for higher wages, training and additional worker hours. "I question whether they will even be able to grow earnings next year."
In February Walmart had flagged it would spend $1 billion on higher pay and for training, which will weigh on earnings this year. It also warned of higher spending to boost its e-commerce infrastructure as it seeks to close the online gap with Amazon.com (AMZN), which recently surpassed the Arkansas-based retailer in market value.
But Walmart said Tuesday costs to increase worker hours beyond the February plan -- as it tries to improve customer service with faster checkouts and better-stocked shelves -- were denting earnings more than anticipated.
It also said reduced reimbursement rates from pharmacy benefit managers were hurting margins in its U.S. pharmacy business and that wider healthcare insurance coverage generally had led to fewer higher-margin cash transactions on drugs.
Increasing 'Shrink'
Another problem is increasing "shrink," a retail industry term for losses tied to various issues including theft.
A stronger dollar took a toll on its international business, which suffered a 14 percent fall in operating income in the quarter. Same-store sales at Asda, the U.K. grocery arm, declined 4.7 percent, the worst quarterly performance in the 16 years it has been owned by Walmart.
In one upbeat note, the 1.5 percent increase in same-store U.S. sales beat the consensus for a 1.0 percent rise, according to analysts polled by research firm Consensus Metrix. Sam's Club, its wholesale club store division that competes with Costco Wholesale (COST), achieved same-store sales growth of 1.3 percent, excluding the impact of fuel.
Chief Financial Officer Charles Holley told an earnings conference call that while lower gasoline prices helped drive sales, the bulk of the gains were due to increased investments in its stores as well as in wages and training.
The retailer lowered its forecast for opening smaller-format stores, and now plans to open 160 to 170 Neighborhood Markets locations for the full year, down from 180 to 200. It said it was still on track to open 60 to 70 Supercenters this year.
WASHINGTON -- Housing starts rose to a near eight-year high in July as builders ramped up construction of single-family homes, suggesting that the economy was firing on almost all cylinders.
The Commerce Department report Tuesday added to solid payrolls, retail sales and industrial output data in suggesting the economy got off to a strong start in the third quarter. The steady flow of upbeat economic reports has bolstered views that the Federal Reserve will raise interest rates in September.
The Fed is likely to take further reassurance that housing is on an improving trend and this should add to the view that the economy is in more normal territory.
"The Fed is likely to take further reassurance that housing is on an improving trend and this should add to the view that the economy is in more normal territory," said John Ryding, an economist at RDQ Economics in New York.
Groundbreaking increased 0.2 percent to a seasonally adjusted annual pace of 1.21 million units, the highest level since October 2007. June and May starts were revised higher, a sign that builders are growing more confident in the economy.
Housing starts have now been above a one million-unit pace for four straight months. Economists had forecast groundbreaking on new homes rising to a 1.19 million-unit pace last month.
The dollar was trading higher against a basket of currencies, while prices for U.S. Treasury debt fell. The S&P homebuilding index jumped 3.09 percent, outperforming the broader market, which was weighed down by weaker-than-expected quarterly results from Walmart Stores (WMT).
D.R. Horton (DRI), the largest U.S. homebuilder, increased 2.69 percent. Lennar (LEN), the nation's second-largest homebuilder, surged 3.26 percent.
Housing is getting a tailwind from a tightening labor market, which is encouraging young adults to move from their parents' basements and set up their own households.
Economists expect that housing will absorb some of the slack from a struggling manufacturing sector and contribute to growth this year. The economy expanded at a 2.3 percent annual pace in the second quarter and forecasts for the July-September period are close to a 3 percent rate.
Most economists expect the Fed to hike interest rates next month for the first time in almost a decade.
Leading Light
"The housing market is a leading light of the economy and it looks like that will be the case for a while. My take is the economy is moving forward solidly," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
A report Monday showed confidence among homebuilders climbed to a near 10-year high in August. The firming housing market is bolstering profits at Home Depot (HD). The world's No.1 home improvement retailer reported better-than-expected quarterly same-store sales and raised its full-year sales and profit forecast Tuesday.
In July, groundbreaking for single-family homes, which accounts for the largest share of the market, surged 12.8 percent to a 782,000 unit pace, the highest level since December 2007. Single-family home building in the South, where most of the home construction takes place, rose to the highest level since January 2008.
Though housing starts in the Northeast tumbled 27.5 percent, that followed several months of strong gains as builders rushed to take advantage of tax incentives for real estate development in New York that expired in mid-June.
Groundbreaking on single-family homes in the Northeast in July rose to the highest level since October 2013. Single-family starts in the West increased to a near eight-year high.
"Construction activity is picking up across the country, which we take as a positive signal about the health of the U.S. consumer and overall economy," said Jesse Hurwitz, an economist at Barclays in New York.
Starts for the volatile multifamily segment fell 17 percent to a 424,000,000 unit rate. The decline, however, is likely to be temporary given a tightening rental vacancy rate.
While building permits fell 16.3 percent in July to a 1.12 million-unit pace, that followed three straight months of hefty increases and the decline was likely related to the expiration of the tax incentives in New York. Building permits in the Northeast plunged 60.2 percent last month.
Single-family building permits slipped 1.9 percent in July. Multifamily building permits tumbled 31.8 percent.
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Target (TGT) said it has reached an agreement with Visa (V) card issuers to reimburse the costs related to a data breach at the retailer in 2013.
The agreement comes three months after a proposed $19 million settlement between Target and Mastercard (MA) fell through as not enough banks accepted the deal.
The deal required the approval of banks that issued at least 90 percent of the MasterCard accounts.
The breach during the holiday shopping season compromised at least 40 million credit cards and may have resulted in the theft of personal information from as many as 110 million people.
Target said the agreement with Visa was based on a condition that a subset of Visa card issuers entered into direct settlements with Target and Visa.
"Visa has worked to help Target reach a resolution for the expenses incurred as result of the 2013 compromise. This agreement attempts to put this event behind us," Visa said.
Target has incurred $162 million in net expenses related to the breach as of Jan. 31.
Buying a new car can be confusing, and with so many options it's hard to know whether you're getting the best deal for your new wheels. Luckily, there are a few easy tips that can help you drive away with more savings.
The first thing to do is go online to asses the car's long-term costs. At Edmunds.com, you can find out what the "true cost to own" will be. Simply put in the make, model and year of your car and you'll get a helpful cost breakdown. The site even gives you a side-by-side comparison with key stats for each vehicle. Using these tools could potentially save you thousands of dollars.
Another important thing to do is check the reviews. On MotorMouths.com, you can look up an average score of your car based on reviews submitted by popular car authorities like Automobile Magazine and CNET. This may seem obvious, but digging deeper can really pay off.
Finally, if you're in the market for a used car, go on your smartphone and check out Vinny. Not only is this app great for looking up a car's history, it's also free! Simply open the app, and scan the VIN barcode on the car to start the process. Vinny has data on over 100 million cars and you'll get instant results on the car's value, which will help you negotiate a better deal.
Before you buy your next car, give these tips a try. You'll find that with a little know-how, you'll get the most mileage for your budget.
Collin Hughes/Courtesy of Google via APPre-orders for Google's $199 Wi-Fi wireless router, called OnHub, can be made starting Tuesday.By MICHAEL LIEDTKE
SAN FRANCISCO -- Google (GOOG) is making a Wi-Fi router as part of its ambition to provide better Internet connections that make it easier for people to access its digital services and see more of its online advertising.
Pre-orders for the $199 wireless router, called OnHub, can be made beginning Tuesday at Google's online store, Amazon.com (AMZN) and Walmart.com (WMT). The device will go on sale in stores in the U.S. and Canada in late August or early September.
Google is touting the cylinder-shaped OnHub as a leap ahead in a neglected part of technology.
The Mountain View, California, company is promising its wireless router will be sleeker, more reliable, more secure and easier to use than other long-established alternatives made by the Arris Group (ARRS), Netgear (NTGR), Apple (AAPL) and other hardware specialists. Google teamed up with networking device maker TP-Link to build OnHub.
OnHub also will adapt to the evolving needs of its owners because its software will be regularly updated to unlock new features, according to Trond Wuellner, a Google product manager. The concept is similar to the automatic software upgrades the company makes to its Chrome browser and personal computers running on its Chrome operating system.
Sandbox Studio/Courtesy of Google via AP
Wuellner expects most people will be able to set up OnHub in three minutes or less. The router is designed to be managed with a mobile app called Google On that will work on Apple's iPhone, as well as devices running on Google's Android software.
Google's expansion into wireless routers may conjure up memories of how the company trespassed on the Wi-Fi networks in homes and businesses around the world for more than two years beginning in 2008.
In 2010, Google acknowledged that company cars taking photos for its digital maps also had been intercepting emails, passwords and other sensitive information sent over unprotected Wi-Fi networks. The intrusion became derisively known as "Wi-Spy" among Google's critics.
Although Google insisted it hadn't broken any laws, it paid $7 million in 2013 to settle allegations of illegal eavesdropping in the U.S. made by 38 states and the District of Columbia.
Google is pledging not to use OnHub to monitor a user's Internet activity. The company will still store personal information sent through an Internet connection tied to OnHub when a user visits Google's search engine or other services, such as YouTube or Gmail, with the privacy controls set to permit the data collection. This is the same data collection Google does when users of its services visit through any router.
The new router represents the latest phase in Google's mission to make it easier for people to be online.
Besides dispatching Internet-beaming balloons and drones to parts of the world without much online access, Google also has been trying to lower the cost and accelerate the speeds of the connections in more advanced countries such as the U.S. The goal has already hatched Google Fiber, an ultra-fast Internet service that is already available in a few U.S. cities and is coming to more than 20 others. Google is also preparing to offer a wireless subscription plan for smartphones running on the company's Android software.
Google has a financial incentive to make the Internet more accessible and less frustrating to use because it runs the world's dominant search engine, as well as the highly popular YouTube and Gmail. The company believes people who spend more time online are more likely to interact with a Google service and click on one of the ads that generate most of Google's profits.
Ensuring the reliability of Wi-Fi systems is becoming more important to Google for another reason. Like other tech companies, Google is hoping to sell more home appliances and other equipment that require wireless connections to the Internet. Google's Nest division already sells thermostats, smoke detectors and video cameras that depend on Wi-Fi to work properly.
Google's push into Internet access and other far-flung fields ranging from driverless cars to health care has frustrated investors who believe the company is spending too much on its technological mishmash. To address those concerns, Google later this year is creating a holding company called Alphabet that will break things up into the main search advertising business and various side projects.
It hasn't been decided yet whether OnHub will remain in Google or spun into another part of Alphabet.
NEW YORK -- U.S. stocks fell Tuesday, with the S&P 500 trading in its tightest daily range in nearly a month, weighed down by earnings-related selling in Walmart and a drop in commodity stocks on concern about China's economy.
Walmart Stores (WMT) fell 3.4 percent to close at $69.48, its lowest in nearly 2½ years, after its profit missed estimates and it cut its outlook.
Chinese stocks fell more than 6 percent overnight. Fears that Beijing may be intent on a deeper devaluation of the yuan pushed oil prices and industrial metals, including copper, to near six-year lows.
You would think that a 6-percent China move amid the recent currency adjustments would have netted a more negative result.
The materials sector was the largest decliner among the top ten industry sectors with a 0.7 percent decline. Freeport McMoRan (FCX) fell 3.1 percent to $9.92.
"You would think that a 6-percent China move amid the recent currency adjustments would have netted a more negative result," said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
He said the market hasn't found a reason to break lower or test record highs, so "it's been a rubber-band kind of mentality."
The Dow Jones industrial average (^DJI) fell 33.84 points, or 0.2 percent, to 17,511.34, the Standard & Poor's 500 index (^GSPC) lost 5.52 points, or 0.3 percent, to 2,096.92 and the Nasdaq composite (^IXIC) dropped 32.35 points, or 0.6 percent, to 5,059.35.
Homebuilders continued on a winning streak after data showed housing starts rose to a near eight-year high in July. The PHLX housing sector index rose 1.3 percent for an eighth straight session of gains.
"Housing starts was a very good number, with positive revisions, and I think that caught the market's eye," said Doug Cote, chief market strategist at Voya Investment Management.
Underscoring the strength of the homebuilding sector, Home Depot (HD) rose 2.6 percent to $122.80, a record closing high.
Winners and Losers
TJX Cos. (TJX) jumped 7.2 percent to close at a record high of $76.78 after same-store sales beat estimates.
Dow component Disney (DIS) fell 1.9 percent to $106.94 after Wells Fargo (WFC) cut its rating on the stock and five other media companies, including CBS. CBS (CBS) fell 1.4 percent to $49.35.
Declining issues outnumbered advancing ones on the NYSE by 1,975 to 1,064, for a 1.86-to-1 ratio; on the Nasdaq, 1,906 issues fell and 890 advanced, for a 2.14-to-1 ratio favoring decliners.
The S&P 500 posted 41 new 52-week highs and 9 new lows; the Nasdaq was recording 69 new highs and 85 new lows. About 5.4 billion shares exchanged hands in U.S. exchanges, below the 6.7 billion daily average so far this month, according to BATS Global Markets data.
What to watch Wednesday:
The Labor Department releases Consumer Price Index for July at 8:30 a.m. Eastern time.
The Federal Reserve releases minutes from its July interest-rate meeting at 2 p.m.
Earnings Season
These selected companies are scheduled to report quarterly financial results:
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The mutual fund industry continues to grow. There is more than $15.8 billion invested in nearly 8,000 funds, according to industry tracker Investment Company Institute, making it just as challenging to find the right fund to buy as for stock investors to nail down specific equities.
Mutual funds offer a great way to achieve a diversified portfolio in a single investment. Most funds are open and honest, but there are some practices that investors should watch out for. Let's go over a few potential warning flags.
1. Window-Dressing Is a Drag
One of the more nefarious industry practices -- and thankfully one that doesn't happen often these days -- is window-dressing. Money managers would shake up their portfolios at the end of a reporting period, replacing market losers with some of the biggest winners over the past year.
Window-dressing, therefore, merely makes the "window" look better. It conveys the illusion that a fund manager has invested in all of the right stocks, when in reality it's a matter of just trying to make the list of portfolio holdings at the end of the year look good.
Today's investors are smarter than that. The Internet offers easy access to performance reports and third-party rating agencies and ranked lists. Year-end stock holdings don't hold a lot of weight when a fund can be easily pitted against the competition.
2. Fund Families Bury the Black Sheep
Mutual funds that consistently lose to the market don't stick around. Mutual fund families tend to close investments that aren't performing well, and that usually means merging those assets into a more successful fund.
In theory, investors shouldn't mind. Their underperforming funds are being upgraded. However, the new funds may not have the same objectives as the old fund. More important, someone trying to judge a mutual fund operator based on the performance of its available funds will only be seeing the more successful ones that are still active.
3. Relative Performance Isn't Always Relative
Different categories of funds stack up their performance against different benchmarks. That makes sense: It's not fair to compare a short-term bond fund or an emerging-markets equity fund to the S&P 500.
However, some funds aren't true matches to their benchmarks. Some income funds invest in blue chips, but others may invest in riskier fare. International funds will naturally vary based on their allocations into different countries and types of stocks within those countries.
This may not be a deliberate trick. It's just as easy for a fund to underperform a benchmark than it is to exceed it. However, it certainly makes it easier for a fund to promote itself by marketing the outperformance against a benchmark that isn't an appropriate fit. As a potential fund investor, it's important to assess a fund's actual performance and the risks it took to make it happen, and that's where third-party sources such as Morningstar and annual Kiplinger's rankings can come in handy. Be a smart fund investor from the beginning, and everything else comes easy.
NEW YORK -- So you think a private equity fund can do more for your money than a mutual fund? Give it some more thought.
Paul Jacobs, chief investment officer of Palisades Hudson Financial Group in Atlanta, notes that adding private equity funds to your portfolio can lead to higher returns and lower risk over the long term. However, selecting a private fund requires a lot more homework than picking from your typical mutual fund.
For one thing, private equity funds aren't for everybody. Private equity funds are typically limited partnerships with a lifespan of about 10 years, and some have a minimum investment as low as $100,000 and are available. That makes them available to affluent investors, but keep in mind that's the low-end buy-in. Other funds require specifically more wealth.
"For the right investor, the rewards can be substantial," Jacobs says.
Private fund managers can take a more active role with the companies they acquire and potentially wring out higher returns than mutual fund managers. Their "leverage" (borrowing) can produce higher returns by buying up companies and improving operations and profits.
"Look for managers who generate returns by making significant operational improvements to portfolio companies, rather than those who rely on excessive leverage, which adds risk," Jacobs says. "However, with judicious use of leverage, a skilled manager can deliver excellent results."
Also, realize that a private equity fund is going to tie up your money for 10 years or more, so you're going to want to get a good handle on a manager's investment strategy and the risks involved before diving in. How were the manager's previous fund portfolios were structured? How does he or she expect the current fund to be structured and diversified? How many portfolio companies does the manager expect to own, and what is the maximum amount of the portfolio that can be invested in any one company? A more concentrated portfolio will carry the potential for higher returns, but also more risk.
Asking Tough Questions
Don't be afraid to ask the tougher questions, either. Does a fund provide annual audited financial statement? Can the manager tell you where the fund stores its cash balances? Can you visit the manager's office and get a tour? If the answer to any of these questions is no, or if your fund manager wants more than 20 percent of the end profits (carried interest), then don't be so quick to part with your investment or the management fee. Also, it helps if the manager believes in his or her own cooking.
"Active management -- in the right hands -- can build wealth faster and more reliably than an index strategy," says Frank Congemi, an investment adviser in Deerfield Beach, Florida. "And while past results don't guarantee future results, this methodology is the most convincing I've seen... The beauty of high manager ownership is that these people are literally putting their money where their mouth is."
If you like what you see, Jacobs says that managers' fees for private equity funds are incredibly negotiable. However, he advises limiting your exposure to those funds to about 10 to 20 percent of your entire portfolio, given the risk involved.
As we mentioned, however, private equity funds are not for everyone. As Jacobs notes, these funds have higher risk of incurring large losses, or even a complete loss of principal, than do mutual funds. You're putting a lot more at stake when you're doing your homework, so if something doesn't seem quite right about the fund or you don't think you have enough to risk, there are always other options.
'Boring' Funds
Benjamin Sullivan, a certified financial planner with Palisades Hudson's office in Scarsdale, New York, realizes that ETFs and mutual funds can seem boring in contrast to private equity funds or investing in private companies, but investors can get excited about sensible investing if they think about it the right way.
"Investing in an index fund won't give you a rush of adrenaline like seeing your stock going up 10 percent in a day, but, ultimately, it's more exciting to see your portfolio double and triple in value over the years," he says, noting that actively managed mutual funds can provide similar reward if an investment manager has an eye for undervalued companies. "Index equity funds are bedrock investments, but actively managed funds can play a key role too once you have a reasonable amount of money to invest,"
If that mix sounds a bit more comfortable, Sullivan recommends putting about 60 percent of equity investments in index funds in established markets like the United States, Japan and Europe. The other 40 percent should go into actively managed funds that invest in small-cap stocks, emerging markets and specialty areas such as REITS. Just avoid funds with excessive fees.
"With private companies, if you're lucky, you may hit a home run, but far more often, you're going to strike out," Sullivan says. "Hitting singles and doubles consistently with funds is the time-tested way to build long-term wealth."
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
It's one thing to surrender to the occasional impulse buy -- that watch gleaming from behind the display case, or a pair of black shoes that will add the perfect dash of sophistication to your favorite business suit. But when your purchases shift from impulsive to compulsive, it's the first sign that you might be grappling with a more serious condition: a shopping addiction.
Researchers estimate that up to 6 percent of Americans are so-called shopaholics. In our society, the phrase "shop till you drop" translates as frivolous and fun, but when spending presents a real problem, the glamour fades and, frequently, debt mounts.
Psychologists call it Compulsive Buying Disorder, and it is characterized as an impulse-control issue, just like gambling or binge eating, and has the potential to create a whirlwind of emotional and financial distress.
Here are some of the telltale signs someone is becoming a problem shopper and what they can do to curb their spending. For a more complete analysis, also check out the Compulsive Buying Scale, developed by psychologist Gilles Valence and his associates.
1. You have many unopened or tagged items in your closet. We're not talking about the sweater your aunt gave you last holiday season, but about items you selected on your own that sit unopened or with their tags still attached. You've likely forgotten about some of these possessions -- boxes of shoes lining the bottom of your closet or jackets that have never seen the light of day.
2. You often purchase things you don't need or didn't plan to buy. You're easily tempted by items that you can do without. A fifth candle for your bedroom dresser, a new iPod case, even though yours is fine ... you get the idea. You're particularly vulnerable if you've admitted to having an obsession, like shoes or designer handbags. Just because your splurges tend to stick to one category doesn't make them any more rational.
3. An argument or frustration sparks an urge to shop. Compulsive shopping is an attempt to fill an emotional void, like loneliness, lack of control, or lack of self-confidence. Shopaholics also have a tendency to suffer from mood disorders, eating disorders, or substance abuse problems. So if you tend to binge on comfort food after a bad day, studies suggest that you may be more likely to indulge in a shopping spree, too.
4. You experience a rush of excitement when you buy. Shopaholics experience a high or an adrenaline rush, not from owning something, but from the act of purchasing it. Experts say dopamine, a brain chemical associated with pleasure, is often released in waves as shoppers see a desirable item and consider buying it. This burst of excitement can become addictive.
5. Purchases are followed by feelings of remorse. This guilt doesn't have to be limited to big purchases, either; compulsive shoppers are just as often attracted to deals and bargain hunting. Despite any remorse that follows, though, shopaholics are adept at rationalizing just about any purchase if challenged.
6. You try to conceal your shopping habits. If you're hiding shopping bags in your daughter's closet or constantly looking over your shoulder for passing co-workers as you shop online, this is a possible sign that you're spending money at the expense of your family, your loved ones, or even your job.
7. You feel anxious on the days you don't shop. It's one thing to feel anxious if you haven't had your morning cup of joe, but if you're feeling on edge because you haven't swiped your debit card all day, be concerned. Shopaholics have reported feeling out of sorts if they haven't had their shopping fix, and have admitted to shopping online if they couldn't physically pull away from their day's responsibilities.
8. You are shopping beyond your means. You max out credit cards and open new ones in order to keep purchasing things. The mounting debt may also tempt you to lie or steal.
If the characteristics above sound a lot like you or someone you know, don't worry just yet. And if you're on the fence about whether you really have a problem, even figuring out why you're always shopping and how you can change could be a big relief -- for both your well-being and your budget. Fortunately, there are some simple ways to help you kick a shopping habit:
Find a new activity. Jogging, exercising, listening to music, watching more TV, any of these activities could potentially substitute for shopping and would be a much lighter burden on your wallet.
Identify triggers. Take note of what's likely to send you off to the nearest department store, whether it's an argument with your significant other or frustration after a business meeting. When these feelings overcome you, resist shopping at all costs and find a healthier way to work it out.
Remove temptation. It's no secret that you shouldn't walk through your favorite boutique if you're trying to curb your spending. Try to limit your shopping trips and go only when absolutely necessary. If online shopping is your weakness, resist the urge to surf your favorite stores' sites and even consider keeping your laptop out of reach.
Carry only enough cash to buy what you went for. Leave your debit and credit cards at home. Create a shopping list with estimated costs and stick to it when you're at the store.
Ask for help. If you're still struggling with compulsive spending, don't be afraid to ask for help. You can start by asking a friend or family member to help keep you in check or seeking out money management classes. But it might also be wise to enlist professional help. Consider therapy to address underlying issues such as depression or anxiety, and check out recovery programs like Stopping Overshopping, Shopaholics Anonymous and Debtors Anonymous.
Do you have ideas about curbing problem spending? Share with us in comments below or on our Facebook page.
-Kari Huus contributed to this post.
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