Ever since the Senate Committee on Banking, Housing and Hearing Affairs began to investigate credit card practices by the credit card industry, things have began to change for the better. Below are a few examples :

1. Chase does away with the 2-Cycle Average Daily Balance Method

Chase has for the most parts used the 2-cycle average daily balance method to calculate your monthly balances. This method (rather than the normal average daily balance method) confuses consumers because your balance is calculated using 2 months average rather than the current billing cycle. Cardholders who carry irregular balances often get confused about their balances simply because of the calculations. Well, just before the recent Senate Committe hearing, Chase announced that it is doing away with the 2-cycle method and will use the more common average daily balance method.

Citi removes universal default clauses

Citibank has finally stopped practicing and applying the universal default clause. The universal default clause allows credit card companies to increase your interest rates if your credit report shows you have a late payment with another account. Hence, even if you have been paying on time, Citi might still raise your rates. Well, they have stopped practicing this. But the funny thing is that they never had any universal default clause written on their terms and conditions (unlike other credit card issuers)! They just applied this practice anyway!

Capital One is more lenient on their APR increase policy

Capital One used to increase your APR if you were late twice during a six month period. This has now been increased to twelve months. At least it gives cardholders room for “accidentally” failing to pay on time.

Why did we need regulators to step in?

Given that almost everyone has a credit card, you would wonder why credit card companies needed the Senate Banking Committee to have a hearing for these practices to be stopped. In the ultra competitive food and beverage industry, you often see on TV ads comparing one’s own brand versus a rival. I have never seen this happening in the credit card industry. For example, I do not see Citibank saying they only use the average daily balance method whereas Chase or Discover did not! Nor do I see credit card issuers marketing their cards on the fact that they charge no balance transfer fee.

I think the reason is simply because the industry has become an oligopoly. In the past there were more issuers. But bank mergers and consolidation has meant that the industry is dominated by a few key players. MBNA is now part of Bank of America. Bank One is now part of Chase. Orchard Bank is now part of HSBC.

I am all for capitalism and free market forces and generally against excessive regulations. But in the case of the credit card industry, I think I welcome some scrutiny by regulators.

As I was shifting through my junk mails this evening (hey - I look at every credit card junk mails out there), I noticed one from Terminix.

It came in a nice postcard like foldable brochure. On the front page, this was what it said:

IT’S NOT TOO LATE TO PROTECT (MY ADDRESS) FROM TERMITES

It then went on to describe what a great company it was, how they are different from other pest control companies. They even tried to “educate” me on termites. What did I learn?

1. Termites infest 4 million homes in the US each year (can’t really verify)

2. Annually, they cause $5 billion in property damage (again, can’t verify)

3. On average, damage repairs cost $3,000. And home insurance does not cover it.

4. Termites will infest homes made of wood, stucco and even brick (as if we did not kow this)..

Then off course, came the

CALL US FOR A NO-OBLIGATION TERMITE INSPECTION!

And they laid out all their plans and offers, discounts etc. But then came a really annoying and in my opinion deceptive statement. Right on the last page was probably the most deceptive and false statement :

According to our experts, homes in the (my zip code) area are 5 times more likely to suffer a termite infestation that the average home nationwide!

This has to be utter bullshit! I live in the North East and there are other areas with warner weather and moisture. I bet they replace the zip code and address when they mail this out. It is very slick but simply laughable and irritatingly deceptive. I’m not against trying to make a sale, but when a false (and dare I say) fraudulent statement is made, it gets on my nerves.

Has anyone else got a junk mail from Terminix? I would like to hear if “your zip code” is 5 times more susceptible to termites!

In the Rich Dad Poor Dad series, Robert Kiyosaki talks about taking the fast train to financial success rather than taking the “slow train”. If you really sit down and think about this, there are many implications when you are thinking about the career path that you wish to take. Without getting too intellectual about this, an observation about my friends career paths tell a very interesting story.

1. Slow and Steady

I have many friends who belong to this category. They work in corporate america and earn an “average” middle income. They are typically married and have a couple of kids. I guess they are living the american dream. But they cannot stop work now if they wanted to. Most are seeing a financial advisor, setting aside a systematic savings program to save over seven figures by the time they retire.

2. Fast track corporate america

I know another group of friends who work on Wall Street. Though they are ‘employees’, they are certainly highly paid employees. Unlike others working in corporate america, these friends of mine can probably retire in their mid or late thirties. That is assuming that they have saved and invested wisely the bonuses they have made.

3. Business Owners

I also happen to know a lot of business owners. I know restaurant owners, manufacturers and many others. Most are relatively successful in their business but work very hard as well.

4. Wildly successful entrepreneurs

Yes, I do know a few of these people. What sets these friends apart from others is that they have this uncanny ability to see an exisiting problem that is not addressed by the marketplace and build a business around it. These friends of mine are extremely successful and wealthy. They have a very different mentality of most people. They are always looking for new ideas, have lots of energy and are generally very optimistic people.

Putting it all together

When I reflect back on all the people I know, the most successful people working in corporations are extremely hardworking and most of them come from very good schools and had very good academic grades. They are had a very good personality which enabled them to land starting jobs in great companies and in high paying industries like Wall Street firms, hedge funds, private equity, prestigious law firms etc. My friends who have risen to the top are wealthy beyond their wildest dreams. Those who hit a ceiling aren’t too shabby as well.

The successful entrepreneurs I have met are also different. Most are not from top schools. But they all have uniques ideas and more importantly, they take action and make their vision come through.

For those who are looking to start a career out of school and changing a career, I think it is important to take a hard look at yourself and ask what do you want to achieve. If you want to achive massive wealth in a short period of time (the fast track), then you cannot think and act like most people do. Perhaps a corporate america job will not be suitable unless you get a job on Wall Street or perhaps Google!

But just starting your own business isn’t going to generate massive wealth for you. To be successful, you have to have a very unique value proposition in the market space that you are addressing. Just opening a pizza place ‘because you love pizza’ isn’t going to cut it. You need to ask yourself if you have to mentality to think and act like an entrepreneur to pursue this path.

Whatever path you choose, I think it is important to have a financial objective. Like I said early, if you wish to generate lots of wealth fast and achieve financial freedom at a relatively young age, you have to be different and do things differently.

Yes, Mrs Credit Card and myself have just celebrated our 10th Wedding Anniversary last week. Looking back, I just want to share some financial lessons I have learnt during the last 10 years.

1. Save the bulk of your year end bonus

We have always saved the bulk of our year end bonuses we get from our jobs. This has allowed us to set aside a sizable chuck of savings. This has come in very handy many times during the last 10 years (when we needed to dip into some savings).

2. Buy things that last (not just cheap stuff)

When we just got married, we often had to watch what we spent. Afterall, we had just started our carriers. But there were several times that we probably spent more on goods that we should have, but those lasted a long time. For example, I spent a few hundred dollars on some nice shoes that lasted about 8 years. I bought a couple of designer suits that I still wear today! (and they still look very good). Mrs Credit Card still has business dresses that she bought 10 years ago. I believe they are still in this condition because they are of good quality and they do last (though they cost more).

3. Second Hand Cars really saves you a lot of money

We have had a few cars. All were second hand except one. And we wished we had not bought that new car (because of depreciation). All the second hand cars we bought never gave us any serious problems. We still own a second hand car today.

4. Never assume your kids would like what you bought

Mrs Credit Card toyed about buying a nice big doll house for our daughter. She assumed that she would fall in love with it and spend a lot of time with it. When we finally got it last Christmas, our daughter hardly looked at it! She spends more time drawing with her brothers, playing legos or Thomas the Tank Engine! Just goes to show you should never assume your kids would like what you bought for them.

5. Never assume your kid will like what you want them to do

Mrs Credit Card got my first son to learn to play the voilin when he was four. He was actually pretty good at it and we were all happy about it. Then, due to us moving, relocating, we stopped his voilin lessons and he has since refused to continue learning voilin. My son now likes soccer, baseball and playing chess. He says he does not like football or basketball. Come to think of it, we spent quite a bit of money on his voilin lessons (including buying the voilin and replacing the strings a couple of times). Not to mention the stress of asking him to practice daily! Don’t force something on your kids. They may not only be unhappy, but you end up wasting both time and money!

6. Teach your kids about Money

One thing I have learnt is that you have to teach your kids the value of money. Most people do not learn money management skills from their parents and hence, most are poor at that. I talked to many enterpreneurs and they all teach their kids about business and money and I have started that with our kids. I think we still have a great deal of room to improve, but at least we think about it.

7. Hire a financial advisor early

When you are young and educated, you think you know it all. I started investing myself in both stocks and mutual funds very early on. I really thought I knew it all. Most of you do (especially pf bloggers). But do you know your risk tolerance. Well, I thought I did until the daily volatility of my yahoo, amazon.com and ebay stocks was more than my annual salary!. I’ve made out ok over the years but when I looked back, I could have made much more by truly having a diversified portfolio.

But even here, most people do not understand what a truly diversified portfolio means. Do you know what percentage of the US equity markets consists of large cap, mid cap and small cap stocks? Do you know what percentage of US equities make up the World Equity Indices? What percentage of total Global Capital Markets is fixed income and what percentage is equities? How do you mix in index funds with with superior fund managers? Do you understand what Alpha and Sharpe Ratio is?

Truth is most people (including dare I say pf bloggers, investing bloggers, magazine writers, finance web site writers) do not know that answers to these question. And if you do not know the answers, how can you have a truly diversified portfolio and understand why it is constructed that way.

8. Take your time to buy your first home

Although most financial advisors and the mainstream press would have you believe that you should buy your first home as soon as you can afford a downpayment, I think you should think about this issue very carefully. Firstly, you should have a stable job. If you work in a very unstable industry, you probably have to save more to have a “cushion”. Buy only what you can afford. This sounds common sensical but with the real estate shooting through the roof in the last few years, you can get caught up easily and buy something that you really cannot afford (or one that leaves you no margin for error).

By the way, we bought our first house at a foreclosure auction. This probably saved us close to $50,000. (not bad at all).

9. Time is Money

Sometimes, in a bid to be more frugal, we tend to save money but waste a lot of time. When we were first married, Mrs Credit Card wanted to do the laundry herself (and save the money we would have spent at the laundromat). But this was taking up too much time on Saturdays! And she always accused me of not helping (well, I hate doing laundry). I finally convinced her to send the clothes to the laundry so we do not waste our precious Saturdays arguing over it. She finally agreed and was happy with the decision.

Remember, while you may want to save money, consider how much your time is worth as well.

10. Delayed Gratification

Delayed gratification is one of the most important trait to have for success. We all have our dreams, our dream car, dream house, dream BBQ grill etc. But financially successful people always put off spending on discretionary items until they can easily afford it. Both of us put off buying our house for years until we have really saved enough. We listened to music on my old Dell Laptop for years before buying a Hi-Fi system. We had a 19 inch TV for ages before buying a Home Theater. It is easy to fall into the 0% financing that is so common and is advertized to us everyday. But most people I know got into trouble because they buy stuff before they can afford it.

We are trying to teach our kids about this too. So far, we think we are on the right track. When we go to Toys R Us, our kids know that we will not be buying anything for them (unless it is their birthday or Christmas). They know that they are only there to ‘look at stuff’. We allow them to use their savings and pocket money to buy things. But when they realize that they will be using their own money, they stop thinking about buying stuff!

11. Use Reward or Cash Back Credit Cards to Earn Freebies

Both Mrs Credit Card and myself pay our credit bills in full (most of the time anyway). We use our cards to pay for everything, pay in full, and earn either reward points or cash rebates. Our two main cards are the American Express® Preferred Rewards Gold Card (although I have now upgraded to the Platinum Card) and the Blue Cash® from American Express . We have got lots of free airline tickets and cash rebates over the years.

12. Develop Money Trust Between One Another

Since we first dated, we have never had an argument over money. We never blew our money on stuff we cannot afford, nor have we really questioned each other’s expenses. If Mrs Credit Card saw a nice handbag and wants to buy it, I never question that decision. She has never abused that trust by being a shopperholic and buying a handbag every month! The same goes for me. This makes it so much easier. We had our fights in many other areas, but thankfully, money was never one of them. It’s tough enough to argue about relationships, kids, work etc. The last thing you really need is to argue about money with your partner.

So that’s it - my lessons from 10 years of marriage.

It’s been a year since I signed up for Vonage’s service. And I have to say that I am very happy about it. Before I signed up, I did tons of research on the web and compared them with other services. Back then, I felt that Vonage offered the most value for the money. It was cheaper than Verizon VoiceWing. Comast did not have their phone service yet (it is still more expensive) and a couple of other VOIP services that were much cheaper were not so well known, hence I did not take the risk with them.

The package I got was the standard unlimited calls (including long distance) within the US. The international rates were low and competitive compared to other VOIP players. The monthly fee was and still is $24.95 (without taxes). With taxes, it came up about $27 or so. If I do make lots of oversears call during the month, the bill comes up to about $30.

The service came with most features which are common in VOIP providers and which you have to pay extra with traditional land lines. Call waiting, voice messages, 3-way conferences, free fax line are included. Once I subsribed to the service, I had to get a new phone which can receive wireless signals. I got the Vtech 5.8GHZ cordless model.

I applied for the service over the phone and had to give my credit card number. With this service, you have to pay by your credit card (which was fine by me). By the way, I charged it to my Blue Cash to earn cash rebates. The service also came with a free Linksys wireless router. You get to keep this if you stay with Vonage for one year.

So how is the service. Well, firstly, the voice quality is very good. That may be a function of the Vtech phone that I bought, but the reception is always clear. One of the things that bothered me in the beginning was that my calls were dropped occasionally (like how it is in the Cingular advertisement). I was very frustrated but still kept the service because I was too lazy to change providers and also because traditional phone lines still cost more. Then one day, a Verizon salesperson came knocking on my door and sold me on their FIOS fiber optic internet connection. I signed up for it and immediately, my dropped call problem stopped. Previously, I was using Comcast as my internet service provider. But I always had problems with it in the sense that if I leave my computer for too long, my internet connection also drops. I suspect that had to do with my dropped calls on Vonage.

After switching to verizon FIOS, my Vonage has been working like a charm. I have not had to make a single customer service call. Every month, my bills comes through my email and my credit card gets billed. I would highly recommed Vonage to anyone who is looking to save money on their phone bills.

Recently, it has come to my attention that another provider SunRocket Internet Phone Service is offering an even better deal than Vonage at $199 a year or about $17 a month with essentially identical features. I do not use this service, but it is something that you should also consider.

We all know how coupon cutting saves you lots of money at supermarkets. Mrs Credit Card cuts up coupons every weekend from the papers and strategically makes our household purchases whenever she could take advantage of the coupons she has amassed.

But when I use coupons for an auto repair shop, the story is a bit different. Just a two minute drive from my place is Monroe’s. Monroe’s is a chain of auto repair shops. Each shop is managed by someone who is actually just an employee. There are always Monroe coupons every week in the papers.

The first time I went to Monroe’s, Mrs Credit Card gave me the coupons. But I forgot to use them and when we told the manager, he said he could not change the system and told us he would give us a discount the next time (which he did).

On the third occasion, I gave him the coupon just before he input the details in the cashier’s machine. “Oh” he said, and he went on keying in the details. The bill came up to an amount that was similar with no discount. “I have to include certain labor cost!” he said.

On the fourth occasion, I had a similar service performed. This time I gave him the coupon right from the start. When I came to pick up the car, I was told I needed to change something (can’t remember cos I’m not a car guy). It was very minor. But there goes my discount!

I have been to this place a few more times because it is close to my place. But I can’t help but think that all these coupons for auto repair shops are worthless. They will always find something wrong with your car or include some other “service cost” if you tell them you are using the coupons! The manager also said that he does not advertise the coupons, but instead it is done by the “corporate marketing department”. Go figure.

Do you really love your job or the money you make? I guess this question applies more to professions that “pay more” than the average job. I did a little survey among random group pf friends. The answers were pretty interesting.

Doctor Friend : His background is that his father was a doctor and he followed his footsteps. Did you really have the burning desire to “save lifes”? Well, he certainly did when he was studying medicine. Did he really enjoy his job because he enjoys it or because the money was “good”. Dr Doctor was honest with me and said that he can’t really answer that because he has “no complaints about his work” and the “money is good”. Jury out on him.

Real Estate Friend : Well, she got into the business because clearly the “money was good”. It may not be as great right now but she has had her good years. Does she really “love your job or career”? Hard to answer honestly. She can obviously do any sales job and if real estate does not pay, she would have never gotten into it in the first place. The jury is out for her as well. One thing is for sure : she will never work for a corporation in the normal sense. She’ll always be a free independent agent.

Ms Advertising : Ms Advertising has just quite her job and going to Business School. She wants to get a job on Wall Street. Being in the advertising business seldom gets you a six figure salary (according to her), while a first year MBA on major Wall Street firms nets at least $120,000! The decision to take her MBA to allow for a “career change” was a no brainer for her. But in my opinion, it will be a no-brainer if she does get her wall street job! Clearly, money is the motivating factor. When I asked her what type of job on wall street would she want (trading, sales, investment banking, stocks, bonds, commodities), she said she was indifferent. Anything will do! Well, at least she was honest about it. Money Talks and Bullshit Walks.

Ms Artist : Ms Artist is well, an artist and this is something that she honestly loves doing. Is the money great? Well, it can be. But to great great money, Ms Artist says that you need to be a publicist and be great at marketing. The days when Artist just did their stuff and hope for the best are over. Ms Artist feels that many of the very successful modern artist are masters at publicity and that it is a skill she may not necessarily have. But she clearly enjoys what she is doing.

These are just a few examples of friend’s response when I pose the question of whether they really their job or were they in it for the money. The truth is that for some people, it is purely for the money, while for others, they truly love what they are doing. However, I think that for the most of us that have a high paying job (career), we aren’t really too sure about whether we really do love our job or is it because of the money. It could be that we learnt to love our work because the money was good. I suspect that is the case with many of us.

But why is this question so important. It is important because I think that the truly successful people in every profession has a passion for their work (not just loving their work but having true passion). If you really want to excel in something, passion is what keeps you going. The problem arises when we have a good and high paying career but it is something that does not ignite our passion. What do we do then? Look elsewhere, or just continue (as most of us do) because hey, it pays well and pays the bills! Well, it would be interesting to hear what you think.

Should you have a joint or seperate credit card account with your spouse or partner? I’m not too sure if there is a right answer, but for me, both Mrs Credit Card and myself have seperate credit card accounts.

We always had seperate credit card accounts because when we got married, we were both working. I had my card and she had hers. This has worked out well and I think there are a few advantages to having a seperate account.

Firstly, having seperate credit card accounts mean that your credit scores are seperate. If one of us get into any credit problems, there will be no spillover effects.

Secondly, having your own credit cards means you can charge some little luxury purchases to your card if you want to.

Thirdly, if a couple were to seperate, having joint accounts can be a nightmare. Having seperate credit cards makes any seperation much cleaner when to comes to any credit card debt.

However, I can see some advantages in having a joint credit card account. If one partner has a slightly lower credit score and wants a boost, having a joint account will help. You may want to do this if one partner needs to take a credit loan and would get a better rate if the FICO score was higher.

Whether you want a joint account also depends on how you want your finances to be set up. If you decide to open a joint checking and savings account and charge your monthly bills to a credit card to be paid by this joint account, then you may want to get a joint account.

At the end of the day, there probably isn’t a better way - but do what is right for you and your partner.

There have lots of blog posts and articles about 0% balance transfer credit card deals and arbitrage. In the real estate, zero downpayment is a buzzword. Also hot not so recently was the interest only deal financing. The mainstream press has written a lot of negative articles on these teaser financing techniques, especially with regards to the interest only loans. The fact of the matter is that many people have gotten into financial troubles because of these deals. I know people who got carried away with 0% apr credit card deals and ended up with massive credit card debt. I also know people who bought properties in the last 2 years on interest only or adjustable mortgages and are now feeling the pain.

The truth of the matter of all these deals is that they are best taken advantage of if you do not really need them. Below are a few examples of friends of mine (not their real names) who have wisely taken advantage of these deals. Notice how different they are compared to others who have gotten into trouble because of these teaser deals.

Example 1 : Billy - Using 0% credit card deals for his home improvement

Rather than take out a home equity line of credit or a home improvement loan, Billy decided to get a 0% apr balance transfer deal for 12 months. He got a $15,000 credit line, which he used to furnish his basement and some other kitchen works. He could have easily paid by check or cash. But he decided to stretch out his payment over 12 months.

Example 2 : John got 0% financing with a credit card on his plasma purchase

John wanted to get the latest Panasonic Plasma. I went to Best Buy with him and helped him choose a model. But before he decided on the model, John had just got approval for the Discover® Platinum Card, which gave him a 0% apr rate for 12 months on purchases and balance transfer. He got the latest model for about $2700 (thereabouts) and instead of paying up front, he got 0% financing from his Discover card. But unlike most people who use these deals to buy stuff they really shouldn’t be buying, John can easily pay off the Plasma TV in cash. But he simple chose not to do so.

Example 3 : Jack Bought His House with No Money Down

How is this possible? You might ask. Well, Jack did not use any of the shaddy techniques that are thought in real estate courses. Instead, what Jack has a large portfolio (nearly 7 figures) with Salomon Smith Barney. Most major brokerage firms will give you a mortgage with no money down if you pledge your “securities” as a colleteral. The value of the house he bought was way below the value of his portfolio. He could have paid it off in cash if he wanted. But since he did not want to touch his retirement portfolio, he decided to take advantage of the no downpayment deal.

Example 4: Mary has an interest only mortgage

Huh! We all thought interest only mortgage was bad because it induced people who really could afford the house to buy them. Years later, they will have a higher principal outstanding compared to if they had taken a conventional 30 year fixed mortgage. However, Mary isn’t someone who had to stretch to buy her house. Like John, she can pay off her house if she had wanted to. Instead, she is using the money she is saving from the lower interest payment to invest for both herself and her kids college education. She figured she the returns of her investment over 10 years will be more than the cost of her mortgage. If things go sour, she is not in trouble at all.

If You Need Cheap Financing For Your Purchase, then You Probably Should Not Be Getting It

Notice what my four “successful friends” have in common. They could all easily have paid up for their purchases, but instead took advantage of favourable financing when they were available to “stretch their dollars”. They are different from those who actually should not be buying what they buy and only do because these cheap financing were available. I guess the lesson is that if you are wealthy, more cheap financing is available to you and perhaps you should take advantage of it. But if you can only afford these high price items because of cheap financing, then perhaps you should reconsider!.

I have just enrolled in a new 401K plan. One of the important decisions I had to make was the fund to choose. Obviously, asset allocation had a big part to play in my decision. But as I looked through all the mutual funds that was available, I found myself not looking at whether the fund outperformed the index, or the fees that the fund charged. But before I explained how I chose my fund, let’s review what mainstream advice is.

Check Past Performance

Well, this really isn’t a correct headline. Past performance does not indicate future performance. But you certainly want to look at past performance because you do not want to fund to have too many negative years.

Performance Relative to the Index

If 90 something percent to active fund managers failed to beat the index, the theory goes that if you choose an active manager, he or she better outperform the index. Otherwise, just buy the index? Well, for reasons I’ll explain below, this argument has major flaws in it that too few people bother to discuss. This relates to the fact that an index may be “overvalued”.

Fees

Pretty self explanatory. Fees have to be reasonable and not outrages.

Method of choosing investments

I paid close attention this. The reason for this was my experience with most of my funds from 2001 to 2002, when the major market indices as well as most mutual funds suffered massive negative performance for a couple of years.

I tossed out funds that chose “stocks that showed potential for capital appreciation or growth”. I seriously considered on funds that bought “cheap stocks that were perceived to be undervalued by the market”. Reason for this, as I’ll explain later relates to my experience during the last bear market.

How I chose my fund?

Well, let’s get to how I chose my fund. Firstly, this is what I did not bother to check.

1. I did not bother about beating the index. Why? Simply because I want fund managers not to overpay for stocks. I want to buy cheap and safe stocks because only by having a disciplined approach in buying can you minimize your “permanent loss of capital risk”. This is the type of risk that hardly anyone talks about. Most mainstream articles and financial talk about volatility risk. But there are other risk to consider as well.

2. I did not bother about fees. Because I am not bothered about beating the index, but more about making sure the fund manager only buys stocks at an appropriate discount to where he thinks their value should be, I believe in paying a manager to buy only cheap stocks to minimize the risk of a permanent loss of capital.

3. I did look at past performance. But like I said earlier, I did not look at whether the fund outperformed the index. I looked at how the fund did during 2001 and 2002. This was the period when the S&P had negative returns and most funds had negative returns too. It did not matter to me if the funds “outperformed the market”! A negative return is a negative return.

Why Did I place so much emphasize on returns during the last Bear Market?

It is simply because it tells me how the manager chooses his investments and stocks. It tells me that the manager does not “overpay” for stocks even for “good long term holdings”. Bear in mind that fund managers who had postitive returns in 2001 and 2002 probably “underperformed the market” in the previous years of the technology boom. But they had the discipline of not “joining the crowd”.

But I do not care less if they underperformed the market in the 90s as long they had decent positive returns. Even Warren Buffet underperformed the market in the late 90s. There were articles in the press questioning if “he had lost it!”. It was simply the case that he did not join the hype and buy “overvalued stocks”. In my opinion, any fund manager that outperformed the index in the late nineties ought to be fired because they bought expensive stocks and were counting on another “fool paying a higher price”.

So at the end, I ended up choosing Dodge and Cox Balanced Fund. Their worst year in 2000 was down 2%, better than those who were down 25% or so, but still “outperformed the index”!. Another fund that I have been watching is Marty Whitman’s Third Avenue Fund, which is now unfortunately closed to new investors.