Tuesday, December 30, 2008
Wednesday, December 17, 2008
Search Engine Optimization
The secret for most search engine formulas is closely guarded but the basic idea is this: deliver results relevant to a surfer’s query. Thus, search engine companies will continue to deliver as their most popular search engine results the most helpful, easy to read, information rich websites that are well-visited and linked to by other relevant sites.
- They do not appear visually on your website’s pages – hidden in the HTML code.
- They are descriptive tags that tells the browser program how to present your site to a visitor.
The title of your home page and other key pages should contain the most searched-upon keywords relating to the topic and customers of your site. Users see this information appear along the top line of the browser window and it is the first thing that many search engines check when registering your site.
These words should also be the most searched upon words and phrases for your site’s specialty. In this case, however, you can usually include up to approximately 26 characters and run them all together, separated just by commas with no spaces. This allows you to fit more words and also makes it as easy as possible for the search engine spiders to read them.
The last meta tag often indexed by search engines is an approximately 200-character field that allows you to write several short, keyword rich sentences describing in plain English what your site and products are about. Again, you should make sure these sentences are full of your best keywords so that the search engines will show this description of your site in search results relating to that topic when searched by customers.
- Site Summary
In addition to cataloging a site’s meta tags, many search engines also scan the first few visible lines of paragraphs of a website’s visible text to get a more in-depth understanding of its content. Consequently, you should write tow or three short sentences to put at the top of your home page that summarize your site’s (or that page’s) offerings. Like the Description meta tag, these sentences should also be full of keywords. The “
These first few lines of copy on your home page are so important that some search engines ignore meta tags entirely and borrow the Site Summary wholesale to display as part of their search results.
Although the degree to which search engines rely on these four fields varies widely, they are so easy to complete that you should spend enough time to be certain that you have optimized the words included in each one. The best words are those that your potential customers are most likely to use when searching for services/products like yours. By taking care to research the most appropriate keywords and include them in your new site’s meta tags and home page site summary, you will have greatly improved your site’s chances of receiving accurate and highly ranked search engine results.
Find Your Competitor’s Keywords
- Go to your competition’s website
- Click on “View” in your IE explorer bar
- Click on “Source”
- Now you can see the HTML of the page – at the top you can usually see the meta tags that they use.
If the competitor is successful, you may want to consider using their keywords.
Quality Content is King
In the end, search engines are trying to rank quality content and typically, word of mouth will spread the news of a quality content website and other sites will begin linking to your site which will increase your search rank. Therefore, create quality content and the rest will follow.
Get Your Site Listed – Now!
It can take weeks, and often months for a new site to be indexed and included in the major search engines, you should put up and submit to the search engines an introductory site with the basic information they require for indexing as soon as you can.
Nail down initial versions of your site’s title, meta description, keywords, and some summary introduction copy, then post a simple if minimalist version of your site and submit it. Update it later if necessary.
Get Registered in the DMOZ
Submitting your URL to DMOZ open directory project (ODP) will ensure that you start showing up in searches across all search engines. Go to DMOZ.org to request inclusion.
Skip search engine optimization services for now, they’re a rip-off. You can optimize on your own with the above tips.
Making Internet Money Part Three
An eBusiness Action Plan
1. Decide on a target market
2. Research and price suppliers for products/services in demand by that target market.
3. Decide on the product or service to be offered.
4. Investigate production, fulfillment, or other issues specific to your products.
5. Work out roles, obligations and agreements with partners or staff.
6. Brainstorm company names and URLs.
7. Research and register URLs appropriate to your new company’s activity or products.
8. Set up company e-mail accounts for yourself, plus separate e-mail accounts for customer service and any partners or staff.
9. Create or commission a logo and graphics to use when customizing your website template.
10. Select an entity and follow through on all the rudimentary steps of forming a business - i.e. open a business checking account, get a business license, etc. (see how to start a business on this blog.)
11. Diagram the website for the business on paper.
12. Apply for a credit card merchant account, if appropriate.
13. Write the copy for each page of your new site; prepare your copy using Microsoft Word so it will be ready for easy cutting and pasting into the website template.
14. Build out your website using a design template.
15. Create a privacy policy.
16. Build out an online store to showcase products/services for sale.
17. Develop an inexpensive plan to test your new business online.
18. Set up an account with an e-mail marketing list-management service.
19. Create banner ads for use on Microsoft’s Banner Network or elsewhere.
20. Have friends review and test your website online store.
21. “Soft launch” the site to the public to do free testing and receive feedback.
22. Start marketing.
The Five Basic Pages of a Web Site
- Home Page
- Products or Services Page
- Store or Online Shopping Pages
- “About the company” Pages
- Contact or customer service Pages
The Footer should contain copyright, ownership contact and legal information. E.g. – MySite.com – All Rights Reserved, Click Here to Contact Us
Email Marketing
Collect e-mail addresses early and often. Offer up incentives and prizes to your customers in return for an e-mail address. You can use companies such as Constant Contact to manage, create and send your e-mail marketing campaigns for a low price. They will give you the code as well to put an e-mail capture on your website, a “sign-up for our newsletter textbox.” This is a very cost-effective way to stay in touch with your customers and market to them.
Most e-mail list companies charge by the size of your list not on how many e-mails you send so, you can compare companies based on this rate. Constant Contact is one such company.
Example of a Successful Campaign
Two types of newsletters: a monthly information letter designed to educate your audience and not push your products and two, a weekly sales edition that pushes the products.
Choosing a third party solution such as Constant Contact will provide you with more information through their reporting tools and will reduce your bounce back rate since it your mail is coming from a trusted source versus going it alone through a solution such as Microsoft Outlook.
Pay Per Click Keyword Advertising
You can use a service such as Google Ad words to create a small ad that will appear in search results based on keywords you select. For example, if you have a page based on dividend stocks, you can take out an add referencing key words such as dividends and stocks. When an individual searches on dividends, your add could “potentially” pop up next to an organic search, thus a qualified lead. Now, you only have to pay if they click through your ad and if you use Ad words, you set your budget. So, your hope would be that they click through and purchase something since you are paying for the click.
Associate Programs
Check out Amazon. Join their associate program and you can load your site down with widgets chock full items for sale at Amazon. You get paid a commission of course if someone clicks through your Amazon link and purchases an item.
Some Worthwhile Sites
CafePress.com
CommissionJunction.com
ConstantContact.com
CraigsList.org
DrudgeReport.com
eBay.com
Fark.com
GoDaddy.com
Google.com
InternetMillionaireSecrets.com
Payloadz.com
ScoobyMods.com
SweaterBabe.com
Making Internet Money Part Two
Steps to Starting an e-Business
1) Domain name selection
2) Choosing a website hosting company
3) Website design and construction
4) Copywriting
5) Optimizing
6) Marketing
7) Operations
Domain Name Rules:
1) Match your business name as closely as possible
2) Make it short, easy to remember and easy to remember
3) Avoid hyphens and underscores in the name if possible
4) If you have to, use .net or .org and if you can, go ahead and register these as well. Example, your URL is bigblimp.com, go ahead and register bigblimp.net and bigblimp.org.
GoDaddy.com
This is the place to go for domain name searches, registration, domain name administration tools, domain forwarding, e-mail accounts and locking. Domain name registration costs about $10 a pop nowadays
Hosting
Basic website hosting costs about $3.95 a month or less. The host is the spot that “hosts” your web page files and serves them up.
e-Commerce Shopping Carts
Shopping Carts
“A website “shopping cart” is a piece of software that mimics the use of a shopping cart in the real world. In other words, it is software that allows the online shopper to choose and hold items for purchase until she is ready to check out and complete the purchase process by making payment.” - Fox, Internet Riches
The best e-commerce shopping carts:
1) Are easy for the shopper to use
2) Are easy for you to install on your website
3) Offer easy visibility of the cart’s contents
4) Make it easy for the customer to add/subtract goods
5) Display the current total cost of the items in the cart (ideally including sales tax and shipping costs, if any)
Payment Processors
This is the middle man between the customer’s credit card company and your merchant account. It checks to see if a customer’s credit card is legit before allowing a purchase to continue.
Merchant Accounts
This is the middle man between your payment processor and you collecting payment from the customer’s credit card company. In a lot of cases the payment processor and merchant account are one and the same and indistinguishable. But, process-wise, the merchant account receives the okay from the payment processor and then reaches out to collect payment from the customer’s credit card company. This is your merchant account.
Paypal
This is a payment processor and probably the biggest. These guys allow the ability to accept credit card transactions without a traditional merchant account. Initially they started as a way for customers to send and receive money to one another directly from their bank accounts, eliminating the need for credit card transaction-processing capabilities. They have grown to include credit card processing as well. Of course, there is a small fee but by using this service, you can accept online payments by directly debiting the consumer’s PayPal account, checking account or credit card.
Your Shopping Cart:
Paypal offers a simple shopping cart that works very well with its own payment system. It is easily installed to your website with some HTML.
Yahoo also offers a shopping cart product.
Why Ship When You Can e-Mail
Do you have a book or a song that you want to sell? Don’t ship it, send it as a digital download. This will save you all of the hassle and the overhead that comes along with traditional snail mail shipping.
There is a company …
That specializes in digital downloads from Word files to PDFs to MP3s - Payloadz. You can upload your files, and install the basic shopping cart buttons to your website and away you go. You can offer your digital goods for sale securely without having to manually send each customer file purchased and manually process the transaction. Payloadz integrates all of these functions into one helpful service that offers free trials and then starts at $15 a month.
eBay
You know the story … they offer auctions, fixed price auctions, multiple item auctions and stores. ‘Nuff said.
Craig’s List
Need some extra income? Go to the gigs section on Craig’s List to find tons of online gigs such as Writing Gigs, Creative Gigs and Labor Gigs.
Saturday, December 6, 2008
Making Internet Money, Part One
The chief thing about money on the web is to leverage as much of the passive sources that you can. You can set up a site nowadays in a matter of hours - the real question, income-wise becomes, "how can I passively profit off of this site."
If you set up a blog on blogger.com, you already have some ready-made options available to you. You can add google adsense to your blog and get paid on a per click basis. For more info, go to http://www.google.com/intl/en/ads/http://www.google.com/intl/en/ads/. You can also sign up for Amazon's associate program and bog down your site or blog with their numerous widgets.
One gentleman, "livingoffdividends.blogspot.com", uses Adsense, Linkworth and Amazon among a list of other passive income web providers.
This is his break-down of revenue generated for a recent month:
Adsense: $339.28
Linkworth: $456.70
TLA: $103.61
Kontera: $62.07
Direct Ads: $330
Prosper Referrals: $175
Amazon: $117.82
Domain Embarking: $60.82
Total Online Income: $1645.30
The key thing, once you get a decent infrastructure set-up, is to spend some money on ads to drive traffic to your site or blog, so I highly recommend checking out Google's AdWords at to get started. Of course, it is always a learning experience so it is best to just jump right in.
Case Study - TrafficMatt.com
What they do: Discuss products they like and provides product information.
Why so special: they carry no inventory but simply focuses on providing helpful information on complex products such as credit card accounts, auto vehicle reports, etc.
Each product's advertiser offers an affiliate program and pay a commision on each product sold through the site.
The great thing about affiliate programs is that the affiliate doesn't have to invest in inventory. Amazon.com offers such a program they call their associate program. The creator of the site generates over $100,000 a year by writing reviews of the products he chooses to focus on, offering online links to purchase them through affiliate ads from Commission Junction and promoting his link-filled sites primarily through pay-per-click advertising.
Another success story: Fark.com posts links to humorous sites and gets paid for advertising. They also charge a $5 a month subscription to for people who want access to the links early.
CafePress.com - want to make your own t-shirt? Go to Cafe Press. Here you can personalize or "logo-ize" your own item from t-shirts to coffee mugs, etc. They offer free online storefronts and completely outsourced manufacturing, fulfillment and cusomter service of logo-branded apparel and promotional items for your business.
Use CafePress to:
1) Launch your own line of clothing or other merchandise.
2) Test out your product line or e-business to see if demand is there.
3) Start a side business that can add additional revenue to your existing website business
or current job.
4) Launch a promotinal clothing or merchandise line to promote an existing real-world business, too!
Niche, online communities also offer up lucrative oportunities. An on-line, niche community is a gathering of members around a particular interest or subject. For example MySpace Music.
How to Profit from an Online Community
1) Id a target group with shared offline interests.
2) Provide them a place to meet and interact online.
3) Offer logo-branded merchandise that they can purchase and wear to show their affiliation.
4) Develop enough exclusive content that you can charge a monthly subscription fee for access to the community.
The Icicle Business Model
Your Interests and Ideas, Customers in the Target Market, In Demand Products, Services or Information, Competitive Advantage, Leverage, = Your Business Model.
Example
If you have an interest in Computers you could narrow it down to a Target Market of Computer Programmers and further narrow that market to Web Developers in C#. Your competitive advantage could be your passion and interest in computer programming. You could then leverage the internet by using online research to quickly find information useful to your target market. You could have a website to detail the information. You could publish a blog to promote the site and generate ad revenue from the site.
Thus, the business model would be Publishing of C# Web Development information to a world-wide audience, paid for by advertising and referral links to vendors.
Google offers free information about the most popular current searches on their site called 'Zeitgeist."
Google AdWords - create your own google search engine ads, select your budget and your keywords that folks would search on and see your ad. You don't pay unless you get clicked and you set your own budget so you will not go over what you want to spend.
Friday, November 28, 2008
Financial Independence an Overview
The purpose of Financial Independence is not about money. It's about having options.
First, some pictures.
The Income Statement and the Balance Sheet
And a definition ...
Passive income: persistent cash flow from assets.
Examples:
- Stock dividend income
- Rental income
- Capital Gains from Buffett-style stock investments
- Interest income from savings
- Royalty income
- Covered Calls
1.) The Definition of Financial Independence
An individual reaches financial independence once their passive income is equal to or greater than their expenses. For example, someone with monthly expenses of $2,000 and $2,000 of monthly passive cash flow is financially independent. This person can sustain their current lifestyle without working.
2.) The Interaction Between the Income Statement and Balance Sheet for the Different Societal Classes
A) For a Broke Person
In this model, income heads out the door before it can be invested.
B) For a Middle Class Person
The liability column is loaded down and feeds the expense row with income draining expenses. Income heads straight out the door due to liabilities in this example.
C) For the Financially Independent
The asset column feeds the income column with passive cash flow and provides financial independence once cash flow is equal to or greater than expenses.
3.) Q: How Do I Know What My Expenses Are? A: A Monthly Budget
One of the cornerstones of financial independence lies in developing a budget which helps define and manage monthly expenses.
Sample budget:
Income $4,000.00
Extra Income $100.00Gross Income $4,100.00
Fixed ExpensesElectric $100.00
Cable $80.00
Trash Pickup $30.00
Water $18.00
Phone $70.00
Groceries $500.00
Gym $50.00
NetFlix $9.59Total Fixed $857.59
Variable ExpensesMy Food $110.00
Gas $120.00
My Misc. $130.00
Entert. $65.00
Dogs $10.00
Misc -
Christmas $500.00
Total Variable $935.00
Total Exp $1,792.59
Net Income $2,307.41
The next step involves paying off any unnecessary debt. You have probably heard the terms "good debt" and "bad debt" before. For our purposes, good debt would be any debt that generates positive cashflow into our income statement. For example, a $100,000 loan on an apartment building that puts $200 a month of cash flow into the income column is considered good debt in our paradigm.
Bad debt is debt that does not deliver cash flow into the income column and typically serves to drain it through expenses. Examples of this include cars, retail debt, rent-a-furniture and negative cash flowing real estate. Again, this is the picture of the middle class.
Additionally, Warren Buffett and Berkshire Hathaway weigh-in on the subject of debt via their investment philosophy: Buffett invests in companies that typically have the ability to retire long-term debt in one to three years from earnings. Thus, on the subject of leverage, it is best to remain conservative with little to no debt; I have 80 billion examples to back up this argument.
Returning to our picture of Financial Independence, it is best to augment cash flow while diminishing expenses in order to expedite the process. A person with $1,000 a month in cash flow and $1,500 a month in expenses could simply reduce their expenses by $500 a month and reach financial independence.
Here is the personal financial plan as prescribed by Dave Ramsey that assist in managing and lowering expenses:
1) Save up $1000 in an emergency fund
2) Pay off all debts smallest to largest
3) Maximize an emergency fund at 3 to 6 months of expenses
4) Start investing in retirement plans and mutual funds
5) Pay off the house
6) Advanced investing
The retirement of bad debt frees up much needed income necessary to build the asset column to a critical mass of financial independence.
4.) Buying Assets
I've posted many blogs that go into detail on buying Assets. Check out these subject blogs on this site:
- Real Estate
- DIFCOO
- Dividends
- Buffett Stock Investing
- Why You Should Turn Your Hobby Into a Small Business
Some great books that serve as the corner stones for the framework of financial independence:
- Mary Buffett, Buffettology
- Robert Kiyosaki's Rich Dad Poor Dad
- Adam Brownlee, Building a Small Business That Warren Buffett Would Love
- Thomas Stanley The Millionaire Next Door
- Dave Ramsey, Total Money Makeover or Financial Peace
5.) Financial Independence
Again, an individual with passive income equal to or greater than expenses, has reached financial independence.
Sunday, November 23, 2008
Dividends Part Three (Stein and DeMuth)
The Stein Demuth Dividend Stock Short List1) At least match the yield of DVY, iShares Dow Jones Select Dividend Index
2) Diversify across different sectors.
3) Perform fundamental analysis.
4) Invest in companies that pay dividends regularly and consistently never cutting or omitting them. You want steady payers.
How to make individual stock selections
1) Morningstar.com – lookup the trailing 12 month dividend yield of iShares Dow Jones, DVY.
2) This gives you the yield to beat – enter symbols.
3) Under Morningstar snapshot, check management grades for profitability, financial health, ignore growth.
4) Go to Charts and Returns page – Dividend history for past few years – has it benn cut for any reason? If so, cross it off the list.
5) Diversify if utitilites, e.g.
6) Consumer business and
DVY – let DVY do the heavy lifting.
· It’s an ETF which means low expense
· list of top dividend paying stocks
· excludes REITs (15%)
· positive 5 year dividend growth rate.
First dividends are “double-taxed.” Taxed once as income at corporate level and they’re taxed again as ordinary income when they’re distributed to shareholders.
- The Dow Jones Select Dividend Index
| | Ticker | Yield | Expense |
| iShares Dow Jones Select Dividend Index | DVY | 3.3% | .40% |
- List of the top dividend-paying stocks from the Dow Jones Total Stock Market Index.
- REITs are excluded so taxable at the 15% rate.
- Make sure each of the stocks has a 5 year positive dividend growth rate, so companies whose stock prices are plummeting (creating an artificially high temporary dividend yield) aren’t included. Weak players on the list are quietly replaced if their dividend yields fall and someone else’s becomes more attractive.
- 50 companies.
Open Versus Closed-End Mutual Funds
- Open End: management sells and redeems shares of the fund themselves at the day’s closing net-asset value. Investors buy and sell their shares in the fund directly from the management company. (Vanguard, fidelity) which in turn buys and sells the underlying securities that the fund holds to keep pace with this supply and demand.
- This equals most, standard mutual funds.
- A closed end fund issues shares only once at the initial public offering.
After that, their shares trade like ordinary stocks on the stock exchange where they’re listed. This protects the fund from massive inflows and outflows of dollars, which can confuse performance by flooding management with money or by compelling sales and allows management to concentrate on the primary job of managing the portfolio.
Since no new monies are added to the fund from new investors, the fund mgt. company may open several near-identical closed end funds to capture more assets, since (as with open end funds) fess are based on total assets under mgt.
This means that within the closed-end fund sponsors company, many funds tend to be run by the same mgrs with the same investment objectives, holding the same securities and performing similarly.
Closed end funds usually trade on the open market at a premium or a discount to the actual net asset value of the securities they hold.
Usually sinks below the NAV a few months after the initial offering.
ETFs
Technically, all closed-end funds are exchange traded funds, since they’re traded on stock exchanges, but ETFs usually refer to a subset of closed-end funds that are really like a hybrid of open and closed end funds.
Instead of issuing a fixed # of shares (like CEF) the mgt. co’s of these ETFs create and redeem shares to keep pace with mkt demand (like OEF).
Because of this flexibility, the price of ETFs usually tracks that of the underlying securities quite closely, which means they sell at a tiny premium or discount amount.
Mgt. expenses for these funds are also generally much lower than for funds that are actively managed. ETFs were designed to be used as building blocks, allowing investors to create portfolios with precise and stable characteristics.
This winning combination of low expenses and preicise asset – class targeting means that you should take a special interest in ETFs whenever they meet your needs.
Closed end funds (and ETFs) trade like stocks, which means you have to pay commissions when you buy and sell them. This also means that you can buy or sell them any time the market is open, while with open-end funds you have to wait until the days closing. Closed funds normally pay out their dividends and gains rather than reinvesting them = good for current income.
Difficult to get info on, but go to www.etfconnection.com and cefa.com.
Leveraged Closed End Dividend Funds
All closed end, preferred stock funds are leveraged.
The lower the s/t rates, the better the performance = attached to rate.
Payout will vary.
Examples:
| | Yield | Expense |
| DNP | 9.8% | 1.9 |
| HPS | 9.3% | 1.1 |
| PSY | 8.9% | 1.1 |
Invest in stocks that issue dividends as well as ordinary income interest = tax consequences.
But if the leveraged fund pays all its dividends from trusts rather than true preferred stock, the after-tax advantage shrinks to less than .5 a % for those in 35% bracket.
List of closed-end leveraged funds that invest in preferred as well as ordinary dividend stocks. Their yield is taxable entirely at the lower dividend rate.
Leveraged Tax-Friendly Dividend Funds
| Fund | Yield | Expense |
| John Hancock Patriot DIV | 7.8% | 1.9 |
| John Hancock Patriot DIV2 | 7.1% | 1.9 |
| John Hancock Patriot SELECT | 7.7% | 1.7 |
| John Hancock Patriot GLOBAL | 7.3% | 1.9 |
| John Hancock Patriot PREFERED | 8.2% | 1.9 |
Day to day can be expected to fluctuate more so than an unleveraged – but can still get a steady dividend in light of this just attached to s/t rates.
Should the yield curve invert and the fund managers fail to get out of the way you could receive less interest from the fund than simply from owning an unleveraged bundle of preferred stocks.
In that event, the discount at which the fund sells would increase sharply and you would risk a loss if you sold.
REITS
Real Estate Investment Trusts
An equity REIT owns physical property – skyscrapers, malls, hospitals, hotels, shopping centers, nursing homes and the like.
It also manages them – leases space, screens tenants, collects the rent, renovates, paints, patches carpets and fixes the water heater and air conditioning – doing whatever it takes to keep the properties operational.
Manages a portfolio of real estate, selling existing properties and buying new ones as it deems advantageous.
Pros: Diversification in Real Estate
1) A REIT is a collection of properties that are often located in diverse geographic regions by buying several REITs you can cover the entire states = you can own a stake in a nationally diversified portfolio of commercial real estate properties with as little as $100.
2) Since they trade on stock exchanges, shares can be bought and sold within ten seconds any time the market is open,whereas an individual rental property might take months to unload.
Commission to sell = $10 versus a single million dollar rental at $60k.
3) REITs are leveraged at 50% and you can equalize with a rental leverage at 80% by buying REITs on margin or in a leveraged closed-end mutual fund.
4) The yields on REITs are fairly comparable to those from owning an apartment house.
5) They have a transparency and accountability previously unknown in real estate.
By law, a REIT must distribute 90% of its annual taxable income as dividends to its shareholders.
Depreciation used for tax purposes is returned through dividends – usually about 25 – 30% of the dividend yield from equity REITs constitutes such a return of capital and is ultimately taxed at the lower long-term capital gains rate.
This makes for a better after-tax yield on REITs.
Traditional, Real Property Real Estate Advantages:
1) Leverage
2) Tax Advantages through depreciation
3) Control to improve value of property
4) Not correlated to the stock market
Big, important point here: Although a REIT can give you national or global real estate diversification, and let you avoid tenant and property headaches with an investment that can be leveraged with a tax advantage, you are still correlated to the stock market. Not a strong correlation to small stocks, but a correlation nonetheless. Thus, with a stock market crash while real estate holds, you would still lose value in a REIT versus if you were in real property real estate. In my opinion, this defeats the purpose of true asset diversification – investing across asset classes; paper, real estate and business.
So, the question becomes, or at least, one of the questions becomes, is it still delivering yield? Perhaps you are not as concerned with underlying value if the check is still arriving in the mail. Still, you do not have asset diversification.
How to Buy a REIT
You can invest in a REIT by purchasing a low-expense-index mutual fund that simply tracks the entire sector. One is enough since they all sample form the same master list of 200 or so REITs.
Vanguards and Fidelity’s are open end mutual funds.
The others are ETFs which means you will pay a commission for each investment making it harder to dollar cost average.
| Fund | Ticker | Index | Yield | Expense |
| Vanguard REIT Index | VGSIX | Morgan Stanley REIT Index | 4.8% | .24% |
| Cohen & Steers Realty Majors | ICF | Cohen & Steers Realty Major Index | 4.5% | .35% |
| Dow Jones Realty Index Fund | IYR | Dow Jones Realty Index | 4.8% | .60% |
| Wilshire REIT | RWR | Wilshire REIT Index | 4.2% | .26% |
How REITs are Divided – Equity REITs
| Segment | Market Share |
| Industrial/Office | 31% |
| Shopping Centers | 13% |
| Fashion Malls | 13% |
| Retail Freestanding | 2% |
| Apartments | 18% |
| Manufactured Housing | 1% |
| Diversified | 6% |
| Hotel/Resort | 4% |
| Health Care | 4% |
| Self-Storage | 4% |
| Specialty | 4% |
An index fund will typically own a “chocolate box” of assorted REITs weighted to approximate each segments market share.
Hotel/Resort REITs do bad in a down economy vs. aptmts. And commercial which = 1 year to multi-year leases.
Shopping centers do better, dry cleaners, drug stores, a bank.
Ones to look at:
1) Shopping Centers
2) Manufactured Housing
3) Health care
4) Self-storage facilities
| Ticker | Yield | Ticker | Yield |
| UMH | 6.5% | O | 5.4% |
| PSA | 3.6% | NNN | 7.1% |
| KIM | 4.4% | HCN | 6.7% |
| REG | 4.5% | UHT | 6.6% |
| NXL | 6.6% | HR | 6.5% |
| ASN | 5.4% | DRE | 5.6% | CUZ | 4.3% |
| BRE | 5.1% | LRY | 6.1% | LXP | 6.4% |
| HPT | 6.8% | CLI | 5.7% | | |
| BDN | 6.2% | | 5.6% | | |
The Recommended Stein/Demuth REIT - 9/2004
| Company | Ticker | Yield | Sector |
| United Mobile Homes | UMH | 6.5% | Manufactured Housing |
| Kimco Realty | KIM | 4.4% | Shopping Centers |
| Realty Income | O | 5.4% | Freestanding |
| Healthcare Realty Trust | HR | 6.5% | Health Care |
| Arch Stone-Smith Trust | ASN | 5.4% | Apt. |
| Merch-Cals | CLI | 5.7% | Office |
| Hospitality Properties | HPT | 6.8% | Hotel |
| Cousins Properties | CUZ | 4.3% | Diversified |
Leveraged REIT Mutual Funds = a fatter yield and it addresses the leverage issue of being able to leverage real estate and not stocks. Here, you can.
| Fund Ticker | Yield | Expense |
| | 6.8% | 1.4 |
| RRE | 6.6% | 1.0 |
| RLF | 7.2% | 1.0 |
| RPF | 6.7% | 1.1 |
| RQI | 6.8% | 1.1 |
| NRL | 6.3% | 1.8 |
| NRI | 6.4% | 1.4 |
| JRS | 6.8% | 2.1 |
| RIT | 7.0% | 1.1 |
- Any of the above would suffice as far as covering the gamut of REIT sectors.
- Some are closed-end funds.
- Yields will fall as interest rates go up.
- These guys are riskier.
Royalty trust – a financial wrapper for holding a group of assets and their operating companies
They own hard assets such as oil reserves, timber, natural gas or minerals. The cash flows generated by the sale of the trusts’ assets are passed directly through to the shareholder.
· RTs tend to be concerned with energy exploration thus less susceptible to interest-rate risk as inflation represents a large component of that danger and the underlying oil and gas resources the trusts own act as a hedge.
Cons
1) The income will fluctuate with commodity prices up to about 15% yield.
2) The underlying assets are depleting – thus a return of principle.
3) Currency risk – Canadian dollar.
Pro – you receive a tax break
| Ticker | Business | Yield |
| BPT | Oil and Gas | 8.0 |
| DOM | Gas | 8.2 |
| GNI | Iron | 6.4 |
| MSB | Iron | 7.0 |
| PBT | Oil and Gas | 7.1 |
A Good Income Allocation
| Asset Class | Percent Allocation |
| REITs (stocks) | 20% |
| Inflation Indexed Bonds | 30% |
| Dividend Stocks | 20% |
| Bonds | 30% |
Conservative Income Portfolio
| Percent | Asset | Ticker | Yield | Expense |
| REITs 20% | Vanguard REIT Index | VGSIX | 4.8% | .24% |
| Stocks 20% | iShares Dow Jones Selected Dividend | DVY | 3.3% | .40% |
| TIPs 30% | Vanguard Inflation Prof. Securities | VIPSX | 3.5% | .18% |
| Bonds 30% | Vanguard ST Bond Index | VBISX | 2.9% | .20% |
The Aggressive Income Portfolio
| Percent | Asset | Ticker | Yield | Expense |
| REITs 20% | Cohen & Steers Quality Income | RQI | 7.7% | 1.1% |
| Stocks 20% | John Hancock Patriot Premium Dividend | | 6.9% | 1.9% |
| TIPs 30% | iShares TIPs | TIP | 4.9% | .2% |
| Bonds 30% | Pimco Corp. Income Fund | PCN | 8.5% | 1.2% |
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