Black Friday has come and gone. Cyber Monday is history. Yet, online shopping continues in full force. Various reports suggest that online shopping has increased dramatically this year, likely due to the increasing usage of broadband connections in the home, and the draw of huge savings secretly located on the Internet if you can just find the right combination of coupon codes, discount websites, and wholesalers online. However, as always, when it comes to personal finance what you don’t know can hurt you. Make sure you understand all of the details regarding online shopping for bargains. Otherwise, you may get burned.

Amazon Makes Online Shopping OK

Not long ago, online shopping was the exclusive providence of very specific people, typically techies, and ultra-bargain shoppers who linked together in electronic discount finding groups reminiscent of the old coupon clubs. A few appearances on Oprah by folks like "Coupon Mom" helped drive online shopping and deal finding to the forefront of the American consciousness. But, what finally pushed online shopping over the edge from the wary, angst filled, activity it used to be to a common shopping method used by teenagers, little old ladies, and the technological inept alike was the legitimizing factor of Amazon.com.

When Amazon burst onto the scene a decade ago, it was a revolutionary idea. Selling books online meant that not only could Amazon offer deep discounts on books, but it could also stock many more titles than local booksellers could on their shelves. Even the big national chains like Barnes & Noble and Borders couldn’t compete with how many books Amazon sold. The offer to order a book for you began to pale by comparison. Instead of waiting for the bookstore’s regular shipment of books to include the book title you were looking for, you could order the same book from Amazon and have it delivered directly to your house right away.

For a while, books, were one of the things that was OK to purchase online. There were many things that made them safe. First, any book Amazon.com sells is exactly the same as the books on the shelves at Barnes and Noble. In other words, there is no concern about quality or some sort of bait and switch scam. Secondly, shipping costs were relatively low. The savings offered on the price of the book was larger than the cost of sending it in the mail, which meant a good deal, was still a good deal even with shipping. This was no small factor as online pet supply websites found out when it turned out no one was interested in buy 50 lb. bags of dog food online due to the ridiculous shipping costs. Finally, Amazon had good customer service. Products could be returned, and exchanged, and over time, the company became a household name, erasing the fear of giving out your credit card number online.

Once Amazon started selling products beyond books, the barriers were officially broken, and online shopping was a common thing among all groups of people.

Not All Shopping Websites Are Like Amazon

Unfortunately, this familiarization with online shopping via a retailer like Amazon has made many Americans let their guard down when it comes to buying online. It is important to remember that not all merchants are Amazon.com. In fact, precious few are. That means that you need to find out all the facts about who you are buying from FIRST before placing an order, no matter how great of deal it is.

Top Things To Know About Online Shopping Websites

1. Return Policy – Not just that they accept returns, but the details as well. Who pays for shipping? How long is the return period? If it is also a brick and mortar store, can you return items to the store? Is there a restocking fee? Most importantly, under what conditions can something be returned? Many sites allow returns, but only for defective items. That means if you don’t like it, or it isn’t what you thought it would be, then that is just too bad.
2. Shipping and Handling Charges – Even on Amazon.com you have to be careful of this one. Amazon lets anyone sell on their website. Unfortunately, it sorts prices based on the cost without shipping. That means that the vendor who sells for $9.99 plus $8.95 shipping is listed as cheaper than the vendor who sells for $12.99 plus $2.99 shipping.
3. Is It Really Amazon – Speaking of Amazon. The website doesn’t always make it easy to tell if you are buying a product from Amazon, or from some third-party using Amazon as a store front. It matters because they have very different return policies and shipping time frames.
4. Who Is It?  – Amazon isn’t the only website that makes it harder to see who you are actually doing business with. Don’t check out the main website to see if they are legitimate, check out the actual seller. There is a big difference between how legitimate eBay.com is and how legitimate one of its storefront sellers is.
5. Privacy Policy – Will your name and address be sold on lists as a sucker who buys stuff online from unknown websites? You can never know for sure, but make sure you check the privacy policy to ensure that the vendor at least cares enough about their customers to make it look like they care.

Lastly, never forget that identity theft and credit card numbers are tasty targets for scammers. Protect them as much as you can by not signing up or registering for websites with your real name and address until you are actually ready to make a purchase. Whenever possible, use a temporary credit card number for all online transactions to avoid nasty surprises later.

For years, the FDIC has insured bank accounts up to $100,000.

In light of the recent banking crisis and consumer fears, the FDIC insured banks up to $250,000 per account. The move was aimed at increasing American confidence in the banking system. It appears to have worked. However, the higher FDIC coverage limits were temporary.

FDIC Insured Banks $250,000 Coverage Limits Extended

When first implemented, the increased insurance limits on FDIC savings accounts and other FDIC insured accounts at most banks, was set to expire at the end of 2009. However, to avoid a rush of customers restructuring (withdrawing) money from various FDIC insured banks, in order to get back under the $100,000 limit, President Obama signed a law passed by Congress that extends the higher FDIC coverage until December 31, 2013.

However, the law does NOT include most retirement accounts including IRAs. So, those IRA CDs, or IRA Certificates of Deposit are NOT insured to $250,000 like your regular bank savings accounts or checking accounts.

To get higher government insurance amounts on retirement accounts, move them to an investment account, or brokerage account. Even a discount online brokerage account is good.

While investment accounts with brokers are not FDIC insured, they are insured by a similar quasi-governmental entity called SPIC. (What is SPIC? – SPIC Defined) Unlike the FDIC, the SPIC already insured the amount of cash in an SPIC insured brokerage account up to $500,000 per customer. However, there is a catch. Cash, and cash equivalent, claims are limited to $100,000. So, to take advantage of the higher limits, you’ll need to have your IRA invested in something other than money market funds and CDs.

If you are worried about the safety of your IRA principal, but still want the higher SPIC insurance ceiling, look for low-risk investments to use in your brokerage account.

But, before you run out and make any changes, make sure that you understand FDIC Insurance Limit Coverage first.

Recently, people have begun to draw all the wrong conclusions about the stock market for all the wrong reasons.  It is a common phenomenon and it happens every time the stock market moves up or down long enough for the average citizen whose only market investments are in IRAs or 401(k) plans to notice.

The first bad conclusion is that now is the time to pull money out of the market.  While this market has fallen long and fallen fast, it is almost always the case that when the average person looks to get out of their investments, they have already fallen significantly which means that getting out now just means locking in losses, especially because precious few of them have any idea about when or how they will get back in.

The second miscalculation that continuously happens to virtually everyone who is not a seasoned investor is the mistaken notion that the stock market is moving and pricing based on now, as in today.  It isn’t.

The stock market is now, and has always been, priced based on the future.  Investors buy stock not because the stock will be higher today, but because it will be higher in the future (day-traders excluded.)  Thus, when a professional investor looks at GE or IBM in today’s market they aren’t interested in today, they are interested in next quarter, next year, next five years, or whatever.

This all adds up to the stock market being what is known as a leading indicator.

Leading Indicator

A tool or system whose value indicates the direction of movement, usually in regards to the overall economy, prior to the actual change occurring.

The catch to this, of course, is that no one knows precisely how far out the market is leading, nor how far forward the masses who buy and sell stocks each day are looking.  So whether today’s drop in the stock market signifies predicts a drop next quarter or next year is difficult to ascertain.  The best one can hope for is to see clues or signs that things might be changing soon.

One such sign may have popped up today.

Merck announced today that it was offering to rival drug titan Schering-Plough in a $41 billion deal. 

While it is possible that this is an anomaly and that it means nothing, it may also mean that some of the big money out there is starting to think that prices are at the levels where buying makes sense.  A $41 billion deal isn’t the kind of thing you throw together because you are bored on a Sunday afternoon.  Merck must see some value at that price in Shering-Plough.

Obviously, a single data point is meaningless in predicting anything, much less the stock market, especially coming on the heals of the yet un-accepted Roche offer for Genetech. It is possible that this is nothing more than biotech consolidation, which is good for the long term, but hardly bullish.

However, if this marks the beginning of a series of mergers and acquisitions, it will be time to start looking at where you want to put your investment dollars for the beginning of the next bull market.

People are always asking me how safe municipal bonds are.  The answer is: They’re Safe.

Note that we are talking about BONDS here, NOT Notes, which are a whole different deal.  Unless you are an expert or near-expert bond trader, you should stay away from any and all notes of any kind except those from the US Treasury.

But, that can’t be the end of it.  After all, there are some examples of muni bonds going sour, most notably Orange County’s default on some of its muni bond debt. 

And, of course, various municipal bonds which were pegged to specific projects or revenue streams have gone belly up.  Of course, it is pretty easy to spot which ones have that kind of risk.  Bonds fully backed by the state, county, or city are generally as safe as you can get without investing in a US Treasury.  Also pretty safe are bonds back by utilities (water and sewer especially) since people have to pay for those one way or another. 

The ones you have to watch out for are the ones that are for building a specific project and then funded with the revenues from that project.  Common examples are things like an aquarium, stadium, road, business park, mall, and so on. Those can and do default pretty regularly, so you’ll really want to make sure you know all about the project and all about municipal bonds before you dip a toe in there.

When it comes to regular municipal bonds though, they tend to be as safe as anything can be without being backed by a federal agency like the FDIC or NCUA.

Here is an example.  Today’s CNNMoney site (among others) reports that California is delaying $3.5 billion in payments.  The list includes taxpayer refunds, contractors, counties that get money from the state, and even social service agencies.  Do you notice what is missing from that list? 

Nowhere in any news story in any paper or on any website do you see even a hint that California is considering for one second not making timely interest payments on California Muni Bonds.  In fact, while Fitch was downgrading California Revenue Anticipation Notes, or RANs, (what did I tell you in the second sentence?) it made no moves to lower its A+ rating (with negative watch, from before this news) for California municipal bonds.  That is a pretty good example of how safe most municipal bonds are.

There is a great scene in the movie The Paper with Michael Keaton in which the characters are sitting in a conference room discussing the next day’s front page.  There has been a big sensational story, and they ponder over how to best deliver a headline.  When they finish, one of the characters says, “With a slammer (exclamation point).”  At which point, one of the characters rolls her eyes and says something about heaven forbid if they ever ran a headline with an exclamation point.

I’ve never worked in a newsroom and I have no idea how accurate the movie is, but I do know that newspapers and magazines work very hard to grab our attention with their headlines, and if they can use a powerful buzz word, then so much the better.

Yeah! It’s a Bear Market…Not.

On Monday, the stock market closed just over 19.5% down from the last high point.  This is significant, because the definition of a Bear Market is when the stock market is down 20% from its previous high.  Yesterday, the markets started the day lower dipping enough to slide below the magic 20% number.  The results were almost instant.  On every major business web site and even on numerous regular news sites, the headlines flew up in large bold characters.  Bear Market were the key words in whatever clever phrasing they came up with.  The press was happy.  Bear Market makes for a great buzzword especially as confidence in the overall economy is slipping.

There was just one problem.  Shortly after dipping into bear market territory, stocks started moving back up.  By noon, they were in positive territory quashing the bear market generated ever so briefly earlier.  I could almost hear the grumbling in the newsrooms.

In fact, GM reported lower than expected losses and the markets finished the day up.  No big bold Bear Market headlines for today’s newspapers.  They would have to go with something less powerful (although, I’m sure, just as gloomy).

Media Outlets and the Markets

It is useful to keep this story in mind.  Various publications whether they be newspapers, web sites, magazines, or T.V. shows figure they have just seconds to grab your attention.  To do that they use flashy buzz filled headlines that they hope will inspire you to give them a chance.  There is nothing wrong with this, but it does mean that thoughtful, well-researched money stories must be sought out by intelligent investors and financial advisors.

Top Ten Best Whatever is hardly a good way to get solid analysis.  Look beyond the flashy headlines and read the details.  Educate yourself by reading the Finance Gourmet and other resources that provide in-depth looks.  Then, make sure you use your brain and think for yourself.  After all, does it really matter if the markets are down 19.5 percent or 20.1 percent?  Does that affect your portfolio or finances in any way?  The answer is it shouldn’t.  Your long term financial plan should not react to these short term events, and your short term financial plan should not involve the stock market.  So, either way, these headlines are nothing more than entertainment for the smart investor.

I laughed so hard I ended up crying. The [tag]SEC[/tag] is concerned that the prospectuses that mutual fund companies send to their clients are too big and full of legal mumbo jumbo to be useful to the general public. How many of you think that mutual fund companies WILLINGLY CHOOSE to spend the money to develop, write, print, and mail a 38-page book to your house, not just once, but every single year you own the fund?

Mutual fund companies are jointly regulated by the SEC and the [tag]NASD[/tag] (now FINRA). Guess who writes and enforces the various rules that REQUIRE the [tag]mutual fund[/tag] companies to have those huge prospectuses? Guess who writes and enforces the rules that REQUIRE specific information to be included in every one of those prospectuses? Guess who is responsible for the the huge incomprehensible [tag]prospectus[/tag]?

This is like Britney Spears shaving her head, partying all night with Paris Hilton, quitting re-hab, and flashing her panties to the whole world, and then announcing that she doesn’t think young women in America have enough of the right kind of role models and she is going to do something about it!

If you can stop yourself from laughing long enough there is a place for you to comment on the matter buried on the SEC.gov web site. I’d link it, but can’t justify wasting the time when a matter like this will end up being written by the lobbyists and the Senators and Congressmen they own. By the time both sides negotiate out anything too controversial, whatever the new thing is will be equally worthless, though maybe shorter.

If you are serious about understanding your mutual funds, then reading the full prospectus is the only way to go. Yes, there is a lot of jargon and legalese in there but if you sat down and actually read it, you could figure it out.