Archive for January, 2013

Income Protection Insurance Provides Peace of Mind



Are you the sole bread winner in your family?  Does your family depend on your earnings to survive and get by?  I never gave much thought to these questions when I was younger, and then this past summer I got married.  Now we are thinking about having a family in the near future, and with that comes additional financial responsibilities.  So within a matter of a few years I have gone from thinking about myself to worrying about an entire family.  This is when you need to start asking yourself who will take care of your family should anything happen to you, and how will you financially survive if you become ill, let go, or unable to work for any reason! Australian insurance comparison site Choosi recently launched an advertising campaign that communicates how important precautions such as income insurance can sometimes be overlooked and this should not be the case.

In order to protect your loved ones you should consider income protection insurance.  This insurance will provide a safeguard in case you should ever be left unable to work.  Likewise, if your employer has financial issues and experiences employee cutbacks then having income protection insurance can make sure you are paid regardless.    The benefits are vast and many.  You can choose the length of time you want your coverage to be in effect, which can last for 6 months to several years.  Also, your premiums could be tax deductible.

There aren’t many restrictions to who can apply and receive these types of benefits. I simply went online to compare policies using a site like Chooi to view the best income protection insurance available.  You and your loved ones will be thankful and have the peace of mind knowing that their lifestyles are safe and secure no matter what the future brings. In my opinion it’s always better to be prepared for the worst!

I found that generally speaking, income protection insurance pays out a certain percentage of your annual income when you are unable to work. All insurance policies are different and often you can choose from the following options;

1. The percentage of salary that is paid out. Most policies can offer up to 75% of your regular income and there are different levels of cover to choose from.

2. Waiting time before you are eligible for a payout. This means the minimum period you need to be off work before the policy pays out and can be from 2 weeks to 2 years or sometimeslonger.

3. The benefit period.  This is the amount of time your insurance covers you for and this can vary from 6 months up to 5 years.

Your premiums will depend on the cover you choose. But thegood news is that in most cases the premiums are tax-deductible.To find the best value for money policy, you should look to compare income protection insurance through a comparison site.Depending on your situation, if you are self-employed or contracted, the situation can be different. Insurers don’t usually provide cover to individuals without a consistent income – you should speak to an insurance provider that specialises in income protection to see if cover is available for you. Every situation is different, so I’d definitely recommend doing your own comparisons and research to find out the best options for you!


It’s Time to Stop Kidding Ourselves About Apple

Apple (Symbol: AAPL) might have a dominate market share, but it’s apparently no longer cool to be a successful company. With all of the talk that “Cook isn’t Jobs” and that apple is destine to lose a material portion of it’s market share in 2013 (haven’t heard that before), it’s hard to see whats right in front of us.

As Apple (Symbol: AAPL) currently stands, the stock is underpriced. You can sit here and explain to me all of the reasons why Apple is no longer the golden child of tech, but it’s all hogwash to me.  Apple just needs to keep doing what they are doing, plain and simple. But you know what? They probably will actually grow revenues in 2013 with the help of expanding product lines and more importantly expanding markets.

Expanding markets…. did I say expanding markets? Do I not know there are counterfeit problems in China and other parts of Asia!? Apparently you all forgot what Apple actually is… a brand.

Wasn’t it just a few weeks ago that a woman was being tazered in a mall for trying to buy too many iPhones so that she could ship them to her sister in Asia to resell for four or fives times retail? It’s almost like this new market desires the Apple status symbol.

Wake up wall street or do we need to have a split before people aren’t afraid of the big scary $500 a share Apple?

My message to Tim Cook is this: “Keep it up.”

As Apple (Symbol: AAPL) currently stands, the stock is underpriced.  I absolutely cannot believe the market has allowed this stock to get this low. Countless other tech companies with absolutely terrible fundamentals have fended better (and even appreciated) since the start of the Apple decline in Sept 2012.

The maddness has to stop, if you can’t buy at least somewhat into Apple as it stands now, I think it’s time to call it a year and pack it up for 2013.

Disclosure: I currently am Long on a call spread of Apple. is basically the Chinese Google and things have been (for the most part) good for Baidu. In fact China has even allowed Baidu to effectively become a legal monopoly by keeping international competitors out of the country. Massive growth and strong margins make this a really tempting buy, but is it a falling dagger?

I’m personally considering a LEAP option on Baidu, but ultimately I know it’s a highly volatile stock. Even if revenues continue to grow, it might not be to the levels that investors desire. With a P/E of 22.5x it might seem like a logical buy, but in my experience I’ve seen that when investing in foreign equities, it’s common that a lower P/E is desired by investors.

There are of course concerns by a lot of analysts and bloggers. They argue competition is growing within China and that Baidu is not as good as Google technology wise, and it’s hard to argue against those points, but it just has so much upward potential. If this company effectively does become the Chinese Google long-term, this stock is a complete steal.

It’s kind of funny that Baidu is currently trading at almost the exact P/E that Google is currently trading (22.5 vs 23.2), but I find it unlikely that Google has the upward revenue potential (proportionally) that Baidu has.

So what’s the play? For about $26.40 you can buy the nearest in the money option with a Jan 2015 expiration. This of course would result in a “hail mary” type investment, but it could pay off. If growth continues, this stock is likely to see $200 or possibly higher by Jan 2015 (in my opinion). If growth stops or slows down to a crawl, this stock is likely to tank below $100 a share.

So what’s my actual play?

Hope for a downward move before investing. Although I believe these is a ton of upward potential, I just can’t pull the trigger. I feel there are better gambles, and the option chains are not enticing enough for me. I will however be very interested if this stock gets it’s P/E a little lower (below 20ish). I might also consider a non-LEAP option before earnings, but for a much smaller wager.

Legal Monopoly or not, revenue growth is going to make this stock swing for years.


Young People Should be Risky with Investments

The title says it all, but it’s good to possibly have a reminder of how important it is to invest while you are young. Remember this article is 100% opinion, do as you please.

My girlfriend the other day told me while reading in a magazine that the rule of thumb was 100 minus your age. This represents what should be in stocks and the rest should be in bonds.

That rule of thumb is garbage. First off, if you are 25 years old, do not have 25% in bonds. Furthermore, I don’t think an 80 year old should probably have 20% in risky stocks either (maybe conservative cover calls perhaps).

Even thinking that people might think a 25 year old should have 25% in bonds, makes me furious. When you are young, the question should be “how RISKY am I going to be with my stocks”, and what are your overall ROI goals. I’m currently shooting for 25% a year (which is a highly aggressive rate) for example. So how important is it to be aggressive while you are young?

Let’s say you save $10,000 a year (every year) in your investment account for 25 years and let’s assume 2% is inflation (which will be taken out). The following also assumes taxation of 25% (Seek professional advice on calculating your own rate).

So -25% tax on gains, 2% inflation (taken from beginning balance), yearly additions of $10,000 (after-tax), and a return listed below. The results are:

  • 1.0% (current high yield savings) = effective loss of $36,839 in 25 years
  • 1.8% (current rate of 5-year CDs) = effective loss of $20,066 in 25 years (assuming renewing at 1.8%)
  • 3% = effective gain of $8,289 in 25 years (shown to right)
  • 5% = effective gain of $65,704 in 25 years
  • 7% = effective gain of $139,045 in 25 years
  • 10% = effective gain of $289,659 in 25 years
  • 15% = effective gain of $710,381 in 25 years
  • 25% = effective gain of $3,027,364 in 25 years

Now to be fair, it’s probably insane to count on a 15% or 25% ROI every year for 25 years, but I would personally argue 7-10% is very do-able.

So there it is, if you buy into a 5-year CD and inflation is 2%, you’re getting killed. Furthermore if you are buying into a 5-year CD as a 25 year old, you probably ought to reconsider the CD and consider buying a rifle and water rations (since you think the end is near).

When you are young it is absolutely vital to save and find a viable investment strategy. If I was to actually obtain 25% yearly return for 25 years, every $1 I saved today would be $263.70 or $47.02 after-taxes and inflation in 25 years.

So find your goals and get saving now.

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