What the experts say

Don’t sweat bank stress test

Most of the biggest financial institutions in the country need more cash reserves, said Dave Kansas in The Wall Street Journal. We learned as much from the Federal Reserve’s recent “stress tests.” What does that mean for those who are investors in or customers of those banks? Depositors needn’t worry: The Federal Deposit Insurance Corp. still insures up to $250,000 per account. Likewise, if somehow the bank that serviced your mortgage or credit card failed, there are “plenty of financial institutions that would happily pick up your debt.” (Still, card­holders should be vigilant about scrutinizing statements for rate hikes—a likely step for cash-strapped banks.) For investors, though, things aren’t nearly so rosy. Troubled financial institutions face possible dilution of their equity and restrictions on their actions if the government decides to take a stake. For that reason, “bank stocks remain very risky investments.”

Second-label savings

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Why fork over “big bucks” for a primo brand when you can buy virtually the same product under a different name? said Louis Jones in Kiplinger’s Personal Finance. “Lots of companies offer two versions of their products—a pricey brand-name one and a bargain, second-label twin.” This is true of everything from automobiles to wine labels. Château Léoville’s famous Grand Vin de Léoville Bordeaux runs about $200 a bottle, but its second label, Clos du Marquis, goes for only $50 a bottle. AstraZeneca’s prescription heartburn remedy Nexium costs about $200 for a monthly supply, but its over-the-counter predecessor, Prilosec, has the same active ingredients for just $20 a month. Even mutual-fund investors stand to save if they look for lesser-known labels. Bill Gross’ Harbor Bond fund, for example, is a “near clone” of his PIMCO Total Return fund, only minus the initial sales fee.

Hunting for investment properties

During a yearlong search for an investment property, I encountered wild dogs and houses stripped of everything valuable—including the front door, said Christopher Palmeri in BusinessWeek. My conclusion: “Avoid foreclosure auctions.” Among other things, they don’t allow enough time for a home inspection. Short sales, in which both the current homeowner and the original lender are taking a haircut, also can be more hassle than they’re worth. “I made an offer on a short sale. Nine months later it’s still on the market.” My persistence paid off when I settled on a $125,000 price with the seller of two-bedroom house in Ontario, Calif.— less than half what the home had fetched four years ago. Even then, despite stellar credit, I had to put down 25 percent, and pay points on top of a higher interest rate because it’s an investment property.