Posts for August 2007→

This is an age-old question, and to many of us the answer is a resounding “yes!”. Nobel Laureate economist/psychologist Daniel Kahneman views the question as a no-brainer, but he also thinks more money does not always buy more happiness. I do not understand such non-linear relationships. (I mean, if having money makes me happy, wouldn’t I be happier if I had pots of it?)
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And it is all in our brain. Greed and panic – the two primal human emotions – are regulated by specific regions in our brain, and they in turn control how we as investors react to market unpredictability. In an insightful article today, Jason Zweig discusses the latest advances in neuroeconomics, the branch of science that probes human brain to understand investor behavior.
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In a recent BusinessWeek interview on current market volatility, John Bogle – index fund guru and Vanguard founder – made the following comments:

In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses. And the stock market is nothing but a giant distraction in that quest to acquire returns that business earns.

Without telling anything new, this quote still reminds us of the big picture of investing: a buy-and-hold strategy for the long haul is the only way to escape the ravages of market swings, and to benefit from the slowly (and surely) growing economy. I recommend reading the entire interview.

In a recent post, Stanley Bing of The Bing Blog compared job switching with the shelf life of a perishable good, such as the milk or cheese that we buy in a grocery store. When we move from an old job to a new one, it is like being repackaged with a future “sell by” date and returned to the aisle. This is an interesting comparison, with the only difference being our continued resale value (until we retire), unlike a food item.
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Since July 19 this year, when Dow Jones Index rose to a record 14,000 points, it is down to 12,845 at yesterday’s closing (even falling below 12,600 at one point). That is almost 10% drop in less than a month, nearing the official definition of a market correction. Is this a precursor to a bear market? Here are CNN Money’s 5 ways to know:
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Below is a short sampling of Internet resources that will help you get through the process of buying a new or used car step-by-step:

1. Edmunds: A great site for information on all kinds of new and used cars, excellent reviews and how-to-buy guides.
2. Kelley Blue Book: An excellent place to look up used car prices, and also has lot of other information on both new and used cars.
3. CarBuyingTips: A definitive source for tips for buying new and used cars.
4. Samarins: Another source of car buying tips that is my favorite.
5. CARFAX: The place to visit for used car history.
6. Buying a used car: A Federal Trade Commission site offering facts for consumers.

(This is the last post of the 8-part series An investing-friendly car buying guide.)

You got your car. Congratulations! The car has at least two to three months of dealer warranty to cover for any problem in its early days (unless you bought it from a private seller, in which case you are on your own). Also, depending on the car’s age, it may still carry the remaining balance of the original factory warranty that you should be able to use.
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(This is the 7^th post of the 8-part series An investing-friendly car buying guide. This is also somewhat long, but you get your car at the end!)

You have checked the car inside and out, test drove it, got the green signal from your mechanic, and now back to the seller to “seal the deal”. If you are buying from a private owner, the process is easy. The car usually costs less than it would in a dealership, and depending on the urgency of the owner, may cost even less than Edmunds’ TMV. You may try bargaining down further if the car needs some major repair. Get all maintenance records from the owner (to make sure the car was in good hands). Complete the formalities of title transfer etc. and the car is yours.
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(This is the 6^th post of the 8-part series An investing-friendly car buying guide.)

You have short listed 4-5 used cars in your neighborhood that you are ready to check out and test drive. Give yourself a weekend to complete this process (unlike most of our work places, car dealers are not only open on weekends, these are some of their busiest days).
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(This is the 5^th post of the 8-part series An investing-friendly car buying guide.)

Visit Carfax with your list of cars and their VINs. This is where you look up the entire history of the car, from its birth up to now. Carfax offers a free service too, but it is more than your money’s worth to pay $30 for the detailed history report for unlimited number of cars. The icing is Carfax’s “buyback guarantee”, the offer to buy the car back from you at the price you paid if the report misses any serious violation. Enter each of the VINs on your list, and look them up.
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  I am a scientist working in a US university, and I also study the dynamics of financial markets and their impact on our financial health. More...

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