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The CS Monitor’s Work/Money section is a virtual cornucopia of social investing articles. They have weekly podcasts that are as much ad as advice, but they often feature different social investing strategies and articles. This week’s article focuses on seniors and socially responsible investing.

The article points out (implicitly) that socially responsible investing means different things to different people. The first gentleman focuses on investing in developing nations such as Brazil and Russia as a way to send needed capital to those countries. The second lady invested in a Federal low-income housing partnership that generated tax credits and appreciated assets. Another gentleman invests in the most typical socially responsible screen: no gambling, alcohol, tobacco, weapons, or nuclear power plants.

The article is part cheerleader for socially responsible investing, especially a well placed ad for Calvert in the middle. I think it’s important that people realize these options are out there if you so choose. But as I said, socially responsible investing means different things to different people so if you do invest in a SRI fund make sure their ethics match up with your ethics.

Ah, Dell. Once the glorious child of the PC industry. Now, a slumping share price and negative revenue growth are causing you to flail around in any direction. The latest attempt will be two Dell-branded stores that will open in upscale malls in Dallas and New York. The company has had kiosks in a lot of malls (two local malls that I know of have them) and has been making money on them so they wanted to expand the concept.

The problem is that they are trying to copy a model that’s not really applicable. The real motiviation is the Apple stores around the country, especially after seeing the crazy opening of the 5th Avenue store in New York (open 24/7/365).

There are several problems with copying the Apple concept. First, Dell doesn’t have nearly the err, um, fandom of that Apple has. The Apple-branded stores have definitely benefited from this. Second, the Apple stores have free tech support through the Genius Bar and free wireless internet available. Dell doesn’t appear to be doing this. Third, you walk into an Apple store, play with the products, and then walk out with an iPod or MacBook. Dell won’t have any inventory in the stores. You can’t walk out with a Inspiron.

Oh, and there’s a little thing called the iPod that is driving foot traffic. Dell doesn’t have anything like it to draw in traffic. They do have tvs and other things that Apple doesn’t have, but none of it has the cool factor like the iPod.

I’d expect this will end up like Dell’s foray into Sears stores (remember those? neither did I) and they will have to pull back. Dell is flailing because its direct-to-consumer model is no longer the advantage it used to be. A lot of people like to play with laptops because each one is different and you can’t do that with a Dell. The other computer companies have also copied Dell’s inventory methods that have so long been a source of competitive advantage.

Dell’s stock has been in a free-fall and has fallen nearly 50% in the past year. It’s P/E of 16.5 is well below the traditional average and is half of what HPs is. The stock is probably fairly priced right now, but it doesn’t pay a dividend. I wouldn’t sell the stock now if you’re in but I don’t know that I’d buy here either as I think the stock will keep dropping as Dell gets more and more distracted trying to manufacture growth in the US.

Technorati Tags: Dell, Apple, Genius Bar, iPod, MacBook

Last week, the music industry sued XM over its new portable music devices. The devices allow users to record XM content and play their own MP3s, but do not allow music to be copied to a PC or otherwise transferred. Songs can be marked for purchase via XM + Napster, the joint venture of XM and Napster. XM has marketed it as a TiVo for XM users. The stock dropped nearly 40% on the news of the lawsuit.

The RIAA is contending that the devices require a license because it is a music service, similar to iTunes. Sirius has paid the license for its latest portable music players that have the same functionality and the RIAA is hoping that XM will roll over and pay the licenses as well. The RIAA is seeking damages of $150,000 per song recorded by XM’s customers, an amount that will quickly escalate into the billions as customers purchase the new radios. XM fired back with a message to its subscribers (also posted on their website).

Statement to XM Subscribers - The XM Nation

Everything we’ve done at XM since our first minute on the air is about giving you more choices. We provide more channels and music programming than any other network. We play all the music you want to hear including the artists you want to hear but can’t find on traditional FM radio. And we offer the best radios with the features you want for your cars, homes, and all places in between.

We’ve developed new radios — the Inno, Helix and NeXus — that take innovation to the next level in a totally legal way. Like TiVo, these devices give you the ability to enjoy the sports, talk and music programming whenever you want. And because they are portable, you can enjoy XM wherever you want.

The music industry wants to stop your ability to choose when and where you can listen. Their lawyers have filed a meritless lawsuit to try and stop you from enjoying these radios.

They don’t get it. These devices are clearly legal. Consumers have enjoyed the right to tape off the air for their personal use for decades, from reel-to-reel and the cassette to the VCR and TiVo.

Our new radios complement download services, they don’t replace them. If you want a copy of a song to transfer to other players or burn onto CDs, we make it easy for you to buy them through XM + Napster.

Satellite radio subscribers like you are law-abiding music consumers; a portion of your subscriber fee pays royalties directly to artists. Instead of going after pirates who don’t pay a cent, the record labels are attacking the radios used for the enjoyment of music by consumers like you. It’s misguided and wrong.

We will vigorously defend these radios and your right to enjoy them in court and before Congress, and we expect to win.

Thank you for your support.

I have and love XM. We travel a lot on weekends (which is why I don’t have a whole lot of weekend posts) and not having to constantly find new stations is a Godsend. Plus, I get to listen to any White Sox game that I want to (I no longer live in Chicago). The new radios would be perfect if they had more storage, but are a wonderful “first leap”. Their newest products should help win customers that are beyond their current market of auto customers. However, I wouldn’t invest in the stock. The losses have widened, even though they have more customers and better technology than Sirius. Now, the RIAA (which has never backed down from a fight, no matter how asinine) is suing the company. It will likely end up with a Research In Motion type settlement, but may be a long fight.

I put XM in the column of “products I love, but stocks I hate” along with Apple and Google.I love their products, but find somewhere else to invest unless you are playing with other people’s money.

Technorati Tags: XM, MP3, Napster, TiVo, RIAA, iTunes, Sirius, White Sox, Apple, Google

Easily my favorite business publication is The Economist. There is simply no comparison, but at $125/year it’s a lot more pricey than simpler fare like BusinessWeek (not to knock BusinessWeek which I read cover to cover every week, but it’s no Economist). This week’s profile of Google is another top notch and in depth study of a company.

Anyone that has invested in Google should read the article with interest. It’s of interest to anyone that uses one of Google’s products (of which I use many) or is just interested in the company that finally “got” the internet. A lot of the information is already out there, but it’s a great summary of the company and its history.

One of my initial posts was wondering if the high-flying stock of Apple was a bit too high. At that time, Apple was trading at about 80, or at about a P/E of 54. Since then, Apple came down about 20% to trade below 60 (per charts at Yahoo! Finance).

Last night, Apple reported profits that beat analyst estimates, sending the stock up nearly 3.5% (as of 12:30 EDT). Apple now trades at a more reasonable P/E of 36. More reasonable being relative for a company that’s growing as fast as Apple is currently.

My problem is still the same as three months ago. I don’t believe Apple will stay on top of the world forever. The switch to Intel chips (and the resulting success in installing Windows) has been plugged as the savior for the Mac line, but I don’t agree. Pundits have been saying that education and business will flock to the Mac now that people can boot into Windows or OS X. Imagine being at your workstation and having to reboot the computer to use a Windows-specific application (and most business applications are). I wouldn’t want to be in tech support for the first month of a Mac rollout.

The iPod just keeps selling! TV shows and movies are showing up in iTunes! Big deal. Apple loses money on everything that is purchased at iTunes, its a loss leader for the iPod. The iPod is currently the leader in the market, but at some point it will go the way of the Walkman. Remember when Sony was the dominant consumer electronics company?

Now, I’m not just bashing Apple to bash them. Had I won the argument, I’d have an iBook in our house right now (and Parallels gives me the way to win next time). I will likely be getting an iPod rather than one of the competitors when I do pony for an MP3 player. I use iTunes as my primary library organizer on my computer. I use and love Apple products, but I’d never buy the stock.

This week’s article on the CS Monitor Work/Money section says that “even those of modest means can afford a financial planner”. However, the article spends the vast majority of its real estate describing why people of modest means can’t get an advisor.

Financial planners help people build wealth and guide them toward financial milestones such as retirement, vacation homes, or funding children’s educations. But they don’t work free of charge. Some, like the one who worked with Rohall, charge an hourly rate for their advice. Many more charge a commission on the products they sell, so they want clients with assets to invest in order to generate fees.

As I’ve discussed before, I am a big believer in avoiding the people represented by the bolded part at the bottom. There are clear conflicts of interest between the advisor and the client. Don’t think it happens? Free Money Finance has a post today on an advisor advising a client to cash out all the equity in his home and putting it into some sort of variable life insurance policy three years from retirement so he could generate commissions. Amazing.

Back on topic, it is difficult, but not impossible, to find a decent financial planner even if you are of modest means. Fee-only advisors generally take on those with fewer assets because they are not paid based upon commissions. The CS Monitor article basically says you either have to find a planner with a charitable streak or have family connections. Maybe if you were, say, a newly minted doctor you could find one, but otherwise you are SOL. I disagree. If you want someone to review a budget or get your 401(k) on track, you should be able to find someone easily. If you are looking to have someone manage your money for you, you probably will be out of luck without a large kitty. But that doesn’t mean you can’t afford a financial advisor of any sort.

The CS Monitor had an article in it’s Work/Money section on how cash-strapped investors can break into the stock market. The basics of the article is that unless you have $2,500 to slap into a mutual fund, you’re basically locked out of the market.

The savior listed in the article is Sharebuilder. I’ve used Sharebuilder in the past and it’s far from the savior it pretends itself to be. First, the fees are high. $4 per investment, or $14.95 per trade. If you manage to invest $100 per month, you are still paying a 4% commission and need to make that return just to break even. If you save $50 per month, it’s an 8% commission, which is the average return for an entire year.

My suggestion would be exactly what the Motley Fool editor suggested in the article, save the money in a taxable high-yield savings account until you accumulate the required minimums to get into an IRA from Fidelity, Vanguard, or any of the other major brokerage houses. You’ll get a tax deduction once you accumulate the minimum required, which will more than offset any taxes you’ll pay on the interest earned in the savings account.

Additionally, some companies have automatic investment programs to allow you to build up balances gradually. Fidelity requires $200/month, but T. Rowe Price only requires $50/month to be invested in their plan. It requires an automatic deduction from your paycheck or bank account and there are stiff penalities if you stop the automatic contributions.

I am participating in the Carnival of Investing hosted by A Financial Revolution. Go check out all of the posts (there’s 50 some to choose from).

(Due to the length of this post, I’ve broken it down into two pieces. Read part one here.)

My current allocations as of 3/31 were:

0.49% Cash
48.02% Domestic Value
13.09% Emerging Markets
15.20% International
12.86% Real Estate
10.34% Domestic Growth

I am primarily a value investor and seek out value stocks that pay dividends. One of my largest holdings is a Fidelity fund that specializes in underpriced stocks and is currently closed to new investors (you can figure it out if you really want to). Because of the minimums to avoid fees in this fund, it makes up over 20% of my IRA. When I rebalance I sell enough of the fund to get to the minimum in order to continue to diversify my portfolio. I am probably overly weighted in Domestic Value and need additional weighting in Domestic Growth, but I’m not terribly worried about it. I am overweighted in large-cap stocks, but the aforementioned fund invests primarily in small and medium caps, so I do have some exposure there.

On the international side, I am underweighted overall (only 28%) but overweighted in emerging market stocks. This is primarily due to the outsized returns of emerging market funds over the past year.

Real estate is right on target with 12.86% being smack in the middle of my target allocation of 10-15%.

So, by looking at my current allocations, I am overweighted in domestic stocks and emerging markets and underweighted in international stocks generally. Like I said before, I’m not overly concerned about being underweighted in domestic growth stocks. I want to get my international stocks to allocation before adjusting my domestic allocation (mainly to avoid trading fees).

I will sell off enough of the emerging markets funds to get down to my 10% target allocation. I will use the proceeds from the sale and the dividends that I received this quarter to purchase additional shares of international funds. This will not get me to my targeted allocation in international stocks, but I will continue to use my dividends and sell overweighted funds in order to reach my designated allocation.

So, that’s how I rebalance my portfolio. Your mileage may vary and it’s only one example, but it should be enough to get you started.

(Due to the length of this post, I’ve broken it down into two pieces. Here is part one.)

Professionals and personal finance bloggers often tout the benefit of rebalancing your portfolio every so often in order to maximize gains. The problem is that they never explain how to go about doing this. I try to rebalance my IRA every quarter when I receive the dividends on my investments. To me, this is the most logical because I have to reinvest the dividends anyway on all of my ETFs. If you have mutual funds that automatically reinvest dividends, doing a yearly rebalancing is all that’s really necessary (unless you are obsessive like I am).

The first thing I do is make sure that I’m still on track. I compare my overall gain to the S&P 500 returns for the quarter to see if I was able to beat the “broader market”. The S&P 500 seems to be the benchmark that most funds use, so I go ahead and use that. I use the “Spartan U.S. Equity Index Fund” because it’s the one that’s easily accessible in my 401(k). The YTD return as of 3/31/2006 was 4.19%. I calculated my return as 7.30% for the first quarter of 2006, so once again I managed to beat the market (which makes me happy).

The next step is to compare my current allocations to my targets. Generally my targets break down as:

45-55% Domestic Stocks
35-40% International Stocks
10-15% Real Estate

I break down the International category a little further into 10% Emerging Markets and 25-30% broad-based international. As you can see, my portfolio is all stock, which I feel is appropriate for someone of my age (late 20s). I have 40 years to ride the ups and downs of the stock market, so I am willing to take on more risk for the better returns that stocks have provided over the long term for the past two centuries.

(continue to part two)