Monthly Archives March 2009

Credit Cards, New Laws, Less Spend Spend Spend

Isn’t it a good thing that credit card companies are finally going to be stopped from increasing their customers credit limits without consent!

It’s like a breath of fresh air after a crazy time of money madness.

I’ve had the letters: ‘we’re happy to say we’ve increased your credit limit’.

My initial thought has always been ‘that’s nice’ and then it’s forgotten and the card stays in the drawer with even more credit available.

The ideal use of a credit card is one of convenience though, not credit.

Use it to buy everything and then clear the balance each month with your earnings. They are designed for 20th century living and make it easy to transact with modern business but they are a trap created by clever people who ultimately want your money.

If everyone who owned a credit card cleared their balance each month, the fat cat corporates would have to radically restructure their business model and find another way to make money. It’s people with outstanding balances who end up paying for the nice cars and big bonuses we’ve heard so much about lately.

The bank of England base rate is 0.5% but credit cards interest rates remain as high as they’ve ever been for many years.

The new laws wont be introduced until the Summer and they were announced by the current PM, Mr. GB with a pending election. So is it all smoke and mirrors? Or it could be the start of a ‘feelgood’ departure from a party who feels they may have already lost the next round. 

Somehow I think this move will get backing regardless of who is at the helm.

Read more about this in the news.

How to Start Share Trading & Is it a Good Idea?

Pondering the news one day I asked a friend, ‘how do people get into organised crime?’

His response was ‘Plan it?’.

And getting started at anything requires a similar approach.

Share trading isn’t quite organised crime although it’s not short of the odd criminal and in the current economic climate it could be argued it isn’t always organised!

But if there is something you want to do, you need to find out as much as you can about it before you do it and something that involves parting with money you could easily lose requires very careful consideration.

This global recession is sparking interest in share trading in a lot of people because right now there is a lot of cheap stock available. Very few companies have escaped the crash and many are currently undervalued which means in theory they should go up in value (eventually).

I thought I’d take a look myself so this is from my experience as a total novice only intending to dabble. (Anyone with a bucket of money that wants to invest a lot should think about speaking to a specialist)

The first thing anyone wanting to get into share trading should do is research.

To find a suitable online trading platform I recommend starting at moneysupermarket.com they compare online share trading providers which will give you a list of options to start researching.

I particularly like Interactive Investor. You can create an account for free, add stock to an imaginary portfolio and watch what happens without spending a penny. (Of course you wont make any money either but you can keep an eye on stock market movements.) Users can set alerts and be notified by email if a particular stock moves up or down in value and then decide to buy or sell.

**Remember, the ‘Bid’ price is the estimated price you’ll get if you sell, the ‘Offer’ price is the price the stock is on offer for and the price you pay can be somewhere in between.**

When you actually buy shares you have to pay for each transaction. The cost of this varies but £10 per trade is a pretty good price. This applies to the purchase and the sale so to buy and then sell the cost will be £20.

So straight away, if you buy £100 worth of shares it will cost £120 before profit which means the stock needs to go up over 20% before you make any money.

The stock market is divided into sectors (such as mining, automotive, financials etc) and I recommend picking a sector you are interested in and sticking with it to begin with. Trying to look at companies across multiple sectors is possible but by sticking with one you can develop a more in-depth knowledge and specialise. There are enough companies in each sector to keep anyone busy!

Once you’ve chosen a sector, do more research! (Do you see a pattern forming?)

Interactive Investor gives live access to the latest news about each company but it also makes sense to set up a folder of ‘favourites’ in your web browser with the websites of all the companies you are looking into. Some even have RSS feeds you can subscribe to so you get the latest news as it happens direct from the horse’s mouth.

Top stock market investors will phone the companies and their competitors to get as much information as possible about a company before investing. This can actually reduce the risk involved in buying shares. If a company sounds shaky, don’t buy!

Subscribe to industry websites or magazines and really get under the skin of a sector. Soon you’ll know which companies are worth investing in and which to avoid like the plague.

So – Is share trading a good idea?

The idea of getting rich quick from share dealing is a glamorous one and even a possibility but don’t part with a penny until you have researched the facts and understand the risk.

Go in with a ‘long haul’ mind-set and you will be more likely to invest in good solid, stable companies.

Go in with a ‘get rich quick’ approach and you are more likely to take risks which could lead to big losses as well as big returns.

In the current volatile market conditions there are some bargains to be had but at the moment there aren’t really any big winners out there.

At the moment the winners are actually the companies who aren’t losing as much as the rest but everyone is feeling the strain of the credit crisis.

With that in mind, I don’t think there is much to speculate on immediately which will give large short-term returns but when we are finally at the bottom of the trough that is the current crisis, there will be a lot of bargains to be had.

Therefore, research now and invest in the future.

 

Body Mass Index and Life Insurance

While promoting a healthy society is a good thing, life insurance companies are making more money from people who don’t fit into ‘ideal’ parameters.

Increasingly they are ‘loading’ customer’s monthly premiums on the basis of ‘Body Mass Index‘.

Body Mass Index is a calculation which determines if a person is either underweight, ideal weight, overweight or obese.

There is science to back this up as an indicator of health because it has been proven that overweight and obese people are more at risk of cardiovascular disease, diabetes and other serious illnesses.

However according to the BBC website and Dr Rob Hicks ‘BMI alone is not a good guide to who is at most risk of obesity and cardiovascular disease. Instead, waist circumference may be a much more accurate measure of future health problems because what matters is where you carry your excess kilos/pounds’.

So why do life insurance companies charge more money when they only ask for a persons height and weight and not their measurements?

It is possible the Body Mass Index calculation is the only method available to them at the moment on which to base their decisions.

It is also possible they have used their financial resources and actuarial boffins to conduct in depth studies into the ratio between a persons BMI reading and the increase risk of health problems.

After all, it’s a heavily regulated business and they wouldn’t want to be seen to not be treating their customers fairly……

If they are all treating their customers fairly then surely they should all treat overweight people the same way.

But they don’t.

Some will offer ‘standard terms’ to people who other insurers will charger more.

It’s all about how much risk the insurance companies are prepared to take. This allows for competition in the market place and it also means it makes sense to shop around.

Online comparison services are good for preliminary research but they will not ask enough specific questions if there are other factors such as health problems or obesity to consider.

Using an independent adviser with access to the whole market who is prepared to research insurers on your behalf and speak directly to the insurance underwriters is the best way to find the right cover for the best price.

And while a good adviser may be able to find the best price, someone who is overweight should prepare themselves to potentially still pay more for insurance than someone who is their ideal weight.