“2010: The Year in Personal Finance - Inside Fidelity” plus 1 more

2010: The Year in Personal Finance - Inside Fidelity

Posted: 31 Dec 2010 02:32 AM PST

SmartMoney Staff

SMARTMONEY — 1:39 PM ET 12/31/10

The last year caught a lot of people off guard . The financial stories and trends that emerged in 2010 challenged the conventional wisdom about investing, spending and the economy. Whether these patterns represent a "new normal" or a return to historical norms, whether they are long-lasting or short-lived, they will shape our financial lives in the year to come.

SmartMoney took a closer look at six big changes in personal finance that took place over the last year and how they might affect investors and consumers in 2011 and beyond.

Next: The End of the 30-Year Bond Rally

The End of the 30-Year Bond Rally

Over the last two years , more money flowed into bond mutual funds than stock funds, according to the Investment Company Institute, as investors fled to the perceived safety of fixed income. That trend finally started to turn the week ending Nov. 17, when bond funds saw greater outflows than stock funds. And it's about time, because interest rates and inflation are going to rise, market-watchers say. When they do, prices of existing bonds will fall because investors could buy higher-yielding bonds at newly higher market interest rates. "Anyone that has money in bond funds has to be very cautious" of losses in both the short and long term, Jeremy Siegel, a professor of finance at the Wharton School of Business. People buying bonds now are preparing for yesterday's stock market crash and leaving themselves unprepared for tomorrow's inflation, Siegel contends.

Some bondholders are already finding their assets have declined in value. Since October, 10-year Treasury yields have ticked up from 2.4% to 3.3%, effectively devaluing some bonds bought in the fall. Now, the question is, how much higher could interest rates rise and how quickly will they get there? With economic growth still slow, rates are likely to rise only slightly, to perhaps 3.25% or 4% on a 10-year Treasury, within the next year or so, predicts Bret Barker, a portfolio manager specializing in fixed income at TCW... Read the full story

Next: The Value of a Home

The Value of a Home

At its most basic , home ownership has simply gotten less attractive. As a trend, that started even before the market crashed. Home ownership has declined every year since its peak in 2004, according to the U.S. Census' Housing Vacancy Survey. But the market bust and its aftermath, including rising foreclosures, uncertainty about the job market, and the fear of buying a home and ending up underwater, has created a new outlook for many consumers, says Stuart Gabriel, director at UCLA'sZiman Center for Real Estate. A shift is well under way: People are relying less on owning a home to accumulate wealth and are instead returning to more traditional ways to save, he says.

As a result, consumers are likely to save in new and different ways, instead of relying so heavily on their home to appreciate, experts say. That means putting money in stocks and savings accounts, IRAs and 529 plans. Consumers are currently saving about 6% of their disposable income, up from 3.5% two years ago, according to the Bureau of Economic Analysis... Read the full story

Next: The Endless Job Search

The Endless Job Search

As the economy began to recover this year, millions of unemployed Americans waited for hiring to pick up. It did – but not as much or in the way that anyone hoped. The kinds of jobs that became available were different than what we've been used to. There were more contract jobs, more part-time positions, more temporary assignments. Lacking from the recovery? Steady, full-time work with benefits.

So begins the era of the endless job search. In 2010, as the U.S. experienced not only high unemployment, but also record-high long-term unemployment, more people looked for better jobs than ever before, and the hunt took longer. In November, 42% of unemployed Americans had been looking for work for six months or more, according the latest available figures from the Bureau of Labor Statistics. Among those with jobs, the number of people working part-time because they haven't been able to land full-time work rose 15% compared to last year. And this may not simply be part of the business cycle, says Chris Flinn, a professor of economics at New York University: "These trends are likely to continue into the foreseeable future." ... Read the full story

Next: The Return of Easy Credit

The Return of Easy Credit

After more than two years of tight lending, banks have begun originating more mortgages and wooing choice customers with enticing credit card offers--ushering out the worst days of the credit crunch and marking the slow return of easier credit. Why the change of heart after two years of purse-string tightening? With the economy in better shape in 2010, banks feel more confident to lend--and they're looking for more revenue to fuel their balance sheets, something interest rates and fees on loans and credit cards provide.

The return to easier credit began to pick up steam after the Card Act went into effect in August. But that access has mostly been felt by consumers with prime credit scores who even six months ago had trouble lowering their interest rate. With changes to credit card terms in place limiting fees for things like late payments and frequency of interest rate hikes, the subprime borrower issuers once relied on to generate revenue—they carried higher balances and accrued more late fees—were more of a liability than a source of profits. So card issuers have increasingly targeted borrowers with a credit score of at least 720, says John Ulzheimer, president of consumer education for SmartCredit.com, a credit-monitoring web site.

The number of credit card applications mailed to potential customers more than doubled through November, to four billion, according to Mintel Compremedia, which tracks direct marketing data. During the third quarter, 73% of credit-card mail featured low introductory APRs on purchases, up from 43% a year ago, according to Synovate Mail Monitor, which tracks credit-card mail. Card issuers "have reached a point of comfort and they're reaching out to customers and trying to stay competitive," says a spokesman at the American Bankers Association... Read the full story

Next: America Gets Its Groupon

American Gets Its Groupon

In 2009, if you wanted a group discount, you had to convince a large number of friends that, yes, they really wanted to see "Blue Man Group." But that was BG: Before Groupon. The online group-buying phenomenon it exploded nationwide in 2010, bringing massive deals and changing the ways shoppers – and merchants – expect to do business.

Around since 2008 but largely unknown before this year, so-called social- and group-buying sites now number more than 600, says Jack Vonder Heide, the president of Technology Briefing Centers, which tracks the sector. In addition to the general sites like Groupon and Living Social, spa and restaurant groups have formed their own consortia for group-buying, as have local newspapers, TV stations and phone directories -- and any entrepreneur with the technological wherewithal to build a very basic web site. For merchants, it's advertising. For consumers, it's a deep discount, often close to 50%, if enough people want in before the limited-time deal expires.

The deals are so good, the limited-time-only pitch so motivating, that the sites can be almost addictive – and they're subtly turning every consumer into a marketer... Read the full Story

Next: Are IPOs Gone for Good?

Are IPOs Gone for Good?

It wasn't exactly the best year to take a company public: Lending was tight, unemployment was high and the business outlook remained murky at best, leaving investors wary of big bets. In 2010, just 153 companies braved those unfriendly conditions to launch an initial public offering, 43% fewer than in 2007. But the lackluster year for IPO launches might not be an anomaly, but rather part of a long-developing trend of fewer companies going public — and a decline in the number of small, rapidly growing companies average investors can place in their portfolios.

Between 1990 and 2000, there were 4,470 IPOs, but between 2001 and 2010 there were just 1,016. Think the dot-com boom skews the numbers a bit for the 90s? Perhaps a bit – but the most active year of that decade was actually 1996.

Now, even as the economy continues to improve, a robust rebound in IPOs is in doubt. Regulatory hurdles erected before the recession and fading interest from big banks could keep more and more emerging businesses off the table for retail investors... Read the full story

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Mint.com Hits The Books; Offers Personal Finance Curriculum To Students - TechCrunch

Posted: 20 Dec 2010 07:03 AM PST

Intuit-owned Mint.com is heading to schools today with the launch of a free, online program designed to educate middle-school students about personal finance and financial management.

Mint has partnered with educational publisher Scholastic to develop materials that parents and teachers can use to teach children the ins and outs of personal finance management. The materials includes lesson plans as well as an interactive game, to teach children money management, budgeting and goals.

For example, the program teaches children the concept of compound interest with real-life math problems, and encourages children to set goals and budgets with their own current work opportunities (i.e. babysitting).

Mint says the curriculum will be expanded to 30,000 classrooms nationwide early next year. Considering the state of the economy and credit, teaching children financial literacy and sounds personal finance practices at an early edge is an incredibly important initiative. In terms of branding, this is a big win for Mint, which can start building awareness of its tools among students at an early age.

Personal Finance

Friday, December 31, 2010