R2I – Choosing Converters for your Electricals and Electronics

Electric power in India is different from that in the US in terms of both Voltage & Frequency. In US it is 120V/60Hz while India has 230V/50Hz. The plugs used for connecting are also dissimilar with US standardized on A and B types and India on C and D types. This essentially boils down to the majority of the electrical and electronics goods from US requiring a converter for use in India. Some electronic equipment, especially laptops and associated computer paraphernalia, has dual support capability. Usually the back panel or the AC adapter piece will indicate whether a particular equipment will work across the board sans a converter by saying input voltage to be something like “100-240V, … , 50-60Hz”.

With voltage converters for household use, the variables to note are its power rating and whether the converter is designed for continuous use. Converters (sometimes incorrectly referred to as travel adapters) that appear as large and heavy plugs are the popular variety. These are usually rated for around 50W and can function for short periods of time – the plug heats up, if attempted to use it for longer periods running the risk of fire. In general, converters designed for continuous use are bulkier/heavier (the size and weight increases as the power rating goes up), pricier, and carry safety mechanisms as fuses. On the other hand, converters designed for short duration are smaller, usually rated for just 50w or so and goes for a few dollars. Exception to this is the voltage converter that seems like a travel converter but rated as high as 2000W and is in the vicinity of $10 – these are designed for heat generating appliances such as a pressing irons and hair dryers. Instead of employing an actual transformer for conversion, this device cuts off the incoming voltage at the 120V required by the appliance – though the output is not a sine wave heat generating appliances function.

In addition to the usual bunch of electronics and small electricals most households tend to acquire, we also had large home appliances as well, since we owned a home. Fully aware of the bulky converters required for large home appliances (refrigerator, washing machine, etc), we were only too glad to give them away with the house. However, as our buyers chose not to be saddled with existing appliances, our neighbor graciously accepted our newer refrigerator and the real-estate agent donated the washing machine/dryer.

With respect to the rest of our electronics and small electricals, we formed a list to work out the type of converters and the quantity. This also helped us get rid of unwanted items. Below is our list:


For the most part, the converters have held up really well – we lost a couple of fuses by accidentally plugging incompatible items – the built-in fuses with the continuous converters are a godsend. Extension chords are something we completely forgot to take with us – our adapter and the travel extension chord stepped up during our initial months.


R2I Finances - Options to Protect Credit

Those with a few years of residence in the US understand the value of building credit and having a stellar credit report. A good credit score makes it easier to attain credit, mortgages, loans, etc., and that too at better rates. For R2Iers, there are a couple of choices to protect the credit built up:

  1. Fraud Alerts: This allows placing an electronic red flag in the credit report – lenders are required to take steps to verify the identity of the person applying for credit in your name although the exact steps required are not spelled out. The good things about fraud alerts are that it only requires a phone call and the service is free of cost. However its ability to protect credit against identity thieves is questionable – since the identity verification steps are not spelled out, lenders can choose to ignore the alert completely thereby compromising the purpose of alert.
  2. Credit Freeze: This allows blocking credit reports – this prevents identity thefts by not allowing thieves to open a new credit account or secure a loan under your name. When a freeze is in place, opening an account in your name is not allowed. Since the credit file is locked, it translates to background checks not allowed. The owner is blocked as well unless the freeze is lifted using a pin. A confusing aspect for many is that freezing credit does not restrict one from using the credit already allotted. Further, credit freeze does not affect existing lenders access to the credit report. In short, credit freezes are the most effective way to prevent identity theft. The fee is $10 per agency and a pin and advance notice is required to be able to lift the freeze (15 minutes to 10 days depending on the state). Fee waivers apply in certain states, for a senior citizen or for a victim of identity theft. To temporarily lift and reinstate a freeze the fee is between $10 and $12.

We opted for Credit Freeze, as our intention was not to apply for credit in the US for a while. Below is our experience in doing this with the three major credit agencies:
  1. Equifax (Equifax Security Freeze, P.O. Box 105788, Atlanta, GA 30348. PH: 1-800-685-1111): Equifax online process is by far the easiest. The interface can be accessed online at https://www.freeze.equifax.com/. The three steps involved are:  personal info (name, DOB, ss#, address, old address), type of freeze, and payment ($10 - credit card options). Once the steps were completed, the interface returned with a pdf document confirming the freeze - Painless! The pdf doc contained the PIN required to temporarily or permanently lift the freeze
  2. Trans Union (Trans Union Security Freeze, P. O. Box 6790, Fullerton, CA 92834-6790. PH: 1-888-909-8872): Trans Union’s interface was a combination of the free annual credit report interface and the account freeze interface and thus less intuitive. Nevertheless it worked. The interface at https://annualcreditreport.transunion.com/fa/securityFreeze/landing? – transfers to an account login for the free annual credit report. There is also the need to accept two template agreements. It then came back with a payment screen ($10 - credit card and address), and finished with a ‘Create Security Pin’ screen – the security pin needs to be memorized for use when lifting the freeze at a later time.
  3. Experian (Experian Security Freeze, P. O. Box 9554, Allen, TX 75013. PH: 1-888-397-3742): Experian’s online interface did not function for us. The interface at http://www.experian.com/freeze/ took us to a set of links from which the freeze link can be chosen. Entered the personal info section (name, address, DOB, ss#), the payment screen (credit card), and the identity verification segment with 5 questions. It returned with a screen that said ‘could not charge to credit card’. On the second attempt it said system error and to try again later. At last effort a different credit card was used - it went through but came back with a blank screen. We pursued the more involved process mail-in option. It required submitting supporting documents – government photo ID, utility bill, along with personal info (name, address, old address, ss#, DOB) and the $10 check. Received an acknowledgment after two to three weeks with a PIN/confirmation number. That number is needed to lift the freeze.

Before going through this process of freezing credit, it is vital to check the existing credit reports to ensure there are no errors. This can be done very easily online and free of cost at the government website AnnualCreditReport.com while in accessing the website from within US. Otherwise only mail-in option is possible (details at www.ftc.gov). Hence, it is best to get this process done while still in the US.


Related Posts:
Last Updated: 04/2012. 

Quality Systems Inc (QSII) – Stock Analysis

Introduction:

Quality Systems Inc. (QSII) is a software company focused in the development and marketing of practice management for medical and dental group practices and hospitals throughout the US. The company founded in 1974, initially provided information systems to dental group practices and later expanded its focus to include medical practices in the mid 90’s through acquisition of two companies. This formed the basis for their highly successful NextGen product suites, which handle Medical Practice Management (MPM), Electronic Health Records (EHR), Health Information Exchange (HIE), Revenue Cycle Management (RCM), Electronic Data Interchange (EDI), and the associated connectivity services. Along with the hardware, the company provides software, connectivity, training, and other services to medical and dental group practitioners. The software creates electronic medical records, helps with appointments, billing, referrals, and insurance claims. The RCM aspect of the software helps doctors manage cash flow and collections. The HIE allows to exchange electronic medical records with other healthcare providers.

QSI has three distinct businesses:

1. Medical: The NextGen Healthcare suite serves from mid to large size group practices and the small rural hospital industry. The product provides EHR, HIE, and financial solutions for hospitals, health systems, physician practices, and other healthcare organizations. Practices can opt to run the in-house ambulatory product suite (NextGen ambulatory EHR and NextGen practice management) or select the data hosting option with low upfront costs and predictable annualized expenses. NextGen also has product suites for inpatient as well as Community Connect areas (NextGen HIE, NextGen patient portal, and NextGen health quality measures).

2. Dental: The QSI Dental suite provides solutions to both small and large dental group practices and dental practice management organizations. It consists of
  • Dental Practice Management (DPM) solutions – insurance processing and appointment scheduling, patient portal for online services, billing/accounts receivable management, centralized data management.
  • Clinical Product Suite (CPS)
  • Electronic Dental Record (EDR) services – graphical tooth charting, treatment planning, digital radiography, x-ray and imaging, and voice activated periodontal charting.
  • NextDDS Services (online software-as-a-service) – patient and multi-specialty doctor management, centralized data management, clinical management, appointment scheduling, and insurance management.
3. Practice Solutions – The RCM and EDI solutions allow medical practices to outsource their billing and collection.

The company’s growth opportunity stems from the demands of the EHR marketplace, QSI’s P3 Connectivity Suite (Provider-Patient-Payor), and practice management solutons.

Business Issues:

QSI’s NextGen Division accounted for 93.5% of total revenue in 2009, a 2% increase from 2008. That division showed strong revenue growth of almost 35% last year. As though in sync, the QSI Dental Division’s revenue decreased around 2% as a percentage of total revenue. After its acquisition of Healthcare Strategic Initiatives (HIS) and Practice Management Partners (PMP) in 2008, QSI switched to reporting performance based on its three operating segments. It also made two other acquisitions in the recent past as solutions to strengthen its NextGen offerings:
  1. Sphere – Spirit Enterprise Hospital Information System, and
  2. Opus – clinical information systems provider to the small hospital inpatient market.
NextGen division is still by far the largest unit. Following is the revenue split-up, yoy growth figures, and gross margin numbers from their Feb 2011 10Q:




The numbers demonstrate very strong growth and profit records for the NextGen unit, above average figures for the QSI Dental Division, and average numbers for the Practice Solutions Division. The profit margin numbers for Practice Solutions Division need to be tracked vigilantly as that could potentially force overall numbers down should the negative yoy trend continue.

The company has its roots in MPM but has successfully diversified their offerings to include clinical, dental, DPM, EDI, EHR, and RCM solutions. This should help the company sustain growth longer, for the new areas are low penetration high growth sectors per the following graph (QSI’s industry presentation):


Software adoption rates are still very low with small medical practices. Significant opportunity lurks in larger practices and hospitals as demonstrated by the following adoption rates:


The adoption rates are expected to accelerate in the 2011-2015 timeframe as a result of government incentives for Healthcare Information Technology (HIT) in the order of $60B. The government approach is considered “carrot and stick” – the upfront incentives serve good only if “meaningful use” is established by 2015 or else penalties kick in. QSI is expected to directly profit as medical practices scramble to fall in line with this incentive.

Overall business is divided into system sales, maintenance, EDI, RCM, and other services. Systems sales category includes software license fees, third party hardware and software, implementation, and training services related to the original purchase of software. Maintenance revenue consists of follow-up training and implementation services, annual third party license fees, hosting services, and other services revenue. The table below summarizes the revenue streams from different categories:


The revenue growth in maintenance is remarkable, yet it is a line item to track keenly going forward – as the software gets simpler, certain services such as follow on training and implementation will have less impact leaving other services like hosting to pick up the slack in order to keep the overall growth steady.

The software industry is moving to a subscription-based delivery and pricing model. QSI adopted a subscription based software-as-a-service (SaaS) delivery model with monthly subscription pricing in April 2009. The plan is to apply this model as a seeding strategy in small practices – in the absence of upfront cost they pose little risk. Although a majority of their current paying customers buys licenses to their software and subscribes for maintenance, in time a greater part of these customers will reach for the new subscription model. Also new customers, irrespective of size, will prefer the subscription model once the adoption of that variety accelerates across corporate America. This will have an initial dampening on the company’s revenue, as revenue per customer would decrease substantially. On the other hand, the maintenance and number of customers should pick up pace as customers realize the benefits of this new model – very low hardware and training costs. Nevertheless, this is something to keep tab on, going forward.


Finances:

Below is a table that summarizes Quality System’s financial position:


Year200820092010
Revenue186.5M245.5M291.8M
Net Earnings40.07M46.12M48.38M
Shares Outstanding27.77M28.40M28.80M
Earnings per Share (Normalized – one-time items removed)1.441.621.68
YOY Earnings Growth19.01%12.50%3.70%
YOY Revenue Growth18.67%31.64%18.86%
Net Profit Margin21.49%18.79%16.59%


Despite the recessionary environment, the company managed an almost 19% revenue growth. While this is far below the revenue growth level achieved in 2009, considering the business environment, it is laudable. The net profit margin presented a downward trend while earnings growth showed a big drop-off last year. This needs to be monitored for if this trend continues, it could be an indication of QSI’s difficulty in keeping prices up for its products and/or keeping costs down.

Quantitative Rating:

The spreadsheet below displays our quantitative rating summary of Quality Systems (QSI). (click for an understanding of the ratings on this spreadsheet):



QSII scores 7.5/10 on its ability to beat inflation: Return on Equity, Net Profit Margin, Free Cash Flow are all almost perfect. PEG ratio, a measure of valuation is however very rich at 1.86.

Corporate Abuse rating is 10/10 as their executive compensation is commendable: The CEO makes around $550K, around 20 times the average worker – considering the rampant abuse regarding executive compensation in corporate America, this is a very fine number – Mr. Pat Cline, President of the company’s NexGen division makes around 50% more than the CEO which is rare.

Income generation and liquidity measure is above average at 7.3/10: QSI pays a decent 1.9% dividend. The stock is also optionable but liquidity is slightly low with the average daily volume just below 250K.

Volatility ranking is perfect at 10/10: the company has no debt, Beta is average, and grew earnings steadily in the last 5 years.

Capacity to increase dividends scored 7.7/10, which is above average: Quality System’s payout ratio is above average at 67 – company has limited ability to grow dividends unless earnings growth is sustained. The company has average 5-year average dividend growth at an annualized rate of 6.52%. Earnings however showed a very good growth rate of 14.6% in the last 5 years.

The overall quantitative rating or the ‘OFB Factor’ came in at 8.5/10, which is well above average.


Summary:

Quality Systems has an enterprise value of $2.38B and a forward PE of 31.18. Its revenue growth slowed last year but is still very healthy in the high teens range. Going forward, the company is expected to grow revenue in the high 20% range for the next two years and earnings per share is expected to keep pace. While the growth rate projections are already impressive, the real kicker is the fact QSI may have underestimated the effect of massive government incentives to its bottom line.

Quality Systems has a PEG ratio of 2.21, which indicates that the valuation is high. Our quantitative analysis showed the company as having a ‘Very Good’ rating. Although most of our other checks showed green lights, the valuation is high. We recommend adding Quality Systems to the watch list and consider purchase when the share price gets cheaper.


Stock Portfolio and Watch List Updates for April 2011


Following are the activity from the previous month:
  1. Wrote cash covered puts on Diebold (DBD) shares (Nov 2011 35 at $3.40 on 4//18/2011) with less than 2% of our portfolio value.
  2. Wrote covered calls on all our NYSE Euronext (NYX) shares (Jan 2012 40 at $1.93 on 4/18/2011).
The cash coverage requirements on the puts account for about 56.6% of our cash position. The cash position in our portfolio is high at around 38%. We will continue to use cash-covered puts along with direct purchases spread-out over a period of time to build the portfolio.

Below is our updated portfolio – the overall portfolio is up 8.96% compared to our cost basis:



StockBuy DateBuy PriceCurrent PriceCurrent % Of PortfolioUnrealized % ReturnYield as % of Portfolio Value
Altria (MO)Various19.1926.061.8935.790.16
Philip Morris International (PM)1/4/200532.1967.611.96110.020.12
Kraft Foods (KFT)Various26.3333.381.9326.790.09
Pfizer (PFE)Various22.1319.792.01(10.57)0.09
ICICI Bank (IBN)5/18/2006 and 08/01/200825.2849.912.17110.010.11
Central Europe & Russia Fund (CEE)Various39.2346.822.3719.380.01
Itron Inc. (ITRI)11/07/200785.0154.630.79(35.81)None
iRobot (IRBT)12/18/200718.6536.372.1196.69None
LDK Solar (LDK)01/22/200830.4910.940.95(33.46)None
Aegon N.V. (AEG)04/28/200815.997.560.88(22.91)0.00
Frontline Limited (FRO)10/06/200836.95 21.870.95(33.46)0.08
DryShips Incorporated (DRYS)02/09/20096.96 4.68 0.47(32.80)0.00
Plum Creek Timber (PCL)07/23/200930.50 42.962.4940.850.14
CPFL Energia S.A. (CPL)07/28/200950.45 91.062.6480.500.18
BP plc (BP)08/05/200951.49 46.031.33(10.60)0.09
AT&T (T)08/27/200926.38 30.681.7816.280.12
Sysco Corporation (SYY)Various25.92 292.1011.870.10
Exelon (EXC)12/30/200949.38 40.651.77(17.68)0.16
Telefonica SA (TEF) 02/09/201022.93 25.882.2512.870.24
Vonage Holdings (VG) 04/06/20101.51 5.151.49240.080
Archer Daniels Midland (ADM)04/23/201028.27 36.052.0927.500.09
Intel Corporation (INTC)Various21.9121.462.49(2.06)0.12
Google Inc. (GOOG)05/03/2010528.36 525.101.52(0.62)0
Cardinal Health (CAH) 05/06/201034.42 42.961.8724.810.06
Pearson PLC (PSO) 05/06/201014.32 18.591.8929.790.16
Nokia (NOK) 05/14/201010.358.631.25(16.62)0.16
Harris (HRS) 06/07/201045.65 52.222.2717.630.08
Beckton Dickson (BDX) 06/23/201070.20 842.4319.660.10
NYSE EuroNext (NYX) 10/22/201030.38 39.032.2628.470.15
Owens & Minor Inc. (OMI) 10/22/201028.11 33.591.9519.500.08
Encana (ECA) 11/8/201029.2232.561.8911.530.10
Nucor Steel (NUE) 1/21/201144.9646.152.012.640.12
K12 Inc (LRN) 2/15/201132.2138.321.6718.960.00
Procter and Gamble (PG) 3/7/201161.8063.271.832.380.09
Cash


38.27

Total Portfolio



8.962.71


Below is a summary of transactions during the year:



StockBuy DateBuy PriceSell DateSell Price% Gain (Loss)% Portfolio Return*
GSK Jan 2011 35 Put 1/22/2011NA 3/26/2010 NA NA0.14
NUE Jan 2011 40 Put 1/22/2011NA 3/26/2010 NA NA0.17
ADP Jan 2011 40 Put 1/22/2011NA 6/21/2010 NA NA0.10
COST Jan 2011 55 Put 1/22/2011NA 8/16/2010 NA NA0.10
QSII June 2011 60 Put 2/15/2011NA 10/29/2010 NA NA0.15
AMTD Feb 2011 15 Put 2/19/2011NA 7/13/2010 NA NA0.15
ITRI May 2011 60 Put 3/8/2011NA 10/7/2010 NA NA(0.00)
NE June 2011 33 Put 3/8/2011NA 11/4/2010 NA NA0.14
Realized Gain/(Loss) YTD-----0.93

  • % Gain/Loss Relative to Portfolio Value at Beginning of Year + Deposits
  • The table assumes realization of profits associated with selling options only after the option is exercised or expiry.

We have covered calls written against one-third of our ICICI Bank (IBN) shares (Jan 2012 55), all of our Cardinal Health (CAH) shares (Sep 2011 43 at $2.55), and all of our NYSE Euronext (NYX) shares (NYX Jan 2012 40 at $1.93). We also have cash covered puts on Cisco (CSCO) shares (Jan 2012 20 at $2.64), Berkshire Hataway (BRK.B) shares (Jan 2012 75 at $7.15), Abbott Labs (ABT) shares (Jan 2012 45 at $4.40), Johnson & Johnson (JNJ) shares (July 2011 60 at $2.47), H&R Block (HRB) shares (Jan 2012 10 at $1.60 and 12.5 at $2.30), Alcoa (AA) shares (Jan 2012 15 at $1.70), Nutrisystem (NTRI) shares (June 2011 17 at $1.30), Gol Linhas (July 2011 12.5 at $0.85), McDonalds (MCD) shares (Sep 2011 75 at $3.50), Cameco (CCJ) shares (Jan 2012 22.5 at $1.60), Glaxo (GSK) shares (Jan 2012 35 at $2.70), and Diebold (DB) shares (Nov 2011 35 at $3.40) with a cash coverage requirement of about 56.58% of our cash position.

We added Amgen (AMGN) to our watch list. Our updated watch list follow – Almost Family (AFAM), Applied Materials (AMAT), Amgen (AMGN), Ameron International Corporation (AMN), Air Products & Chemicals (APD), American Express (AXP), Brown-Foreman (BF-B), Canon (CAJ), Disney (DIS), Darden’s Restaurants (DRI), Home Depot (HD), Coca Cola (KO), 3M Company (MMM), China Nepstar (NPD), Pitney Bowes (PBI), Rovi Corporation (ROVI), UPS Corporation (UPS), VF Corporation (VFC), Waste Management (WM), and Walmart (WMT).

Carnival of Road to Financial Independence #30






Welcome to the April 19, 2011 edition of road to financial independence.



Beating Inflation



Nathan Richardson presents Best CD Rates in 2011 posted at Deals & Tips, saying, "Increase your investment income by investing in CDs with an online bank. We've complied the top yielding rates in April 2011."



Darwin presents My Salary Will Never Increase Again In Real Dollars – Will Yours? posted at Darwin's Money, saying, "You may be shocked to learn that in terms of real dollars, your salary will never increase again. Think about it. Here's why."


Frugal Living



Mrs. FIRE presents Torn Dollar Bills Reimbursement posted at FIRE Finance, saying, "Many a time we have received torn dollar bills when we paid in cash. Sometimes when we were unwilling to accept torn bills we were told that if we take them to a bank, we'd get brand new ones in exchange. Friends have said that banks do replace torn dollar bills with fresh ones. We have not yet tested this theory in person but are curious to know the reality behind reimbursement of torn dollar bills ..."



Paula Pant presents Everything I Know About Money, I Learned from Homer Simpson posted at Financial Uproar, saying, "Lessons about frugal living, side income, and valuing your family, from TV's most famous cartoon dad."



Khaleef @ KNS Financial presents Back To Basics: Learn How To Save posted at Faithful With A Few, saying, "How to save money is something that just about everyone wants to discover. However, we often bypass the simple in search of the complicated. Let’s get back to basics"



Jason Price presents Ten Tips to Help Survive and Save Money in a Bad Economy posted at One Money Design, saying, "The first step to financial independence is managing your money wisely each month. These 10 tips help you keep spending under control during bad economic times."



Tarik presents Be wealthy today - by cutting your paycheck in half.. posted at Success starts today, saying, "To be wealthy every day of your life, you need to have some savings aside. It is simply not easy to go day to day without any money saved. Even $100 is enough to start with. Don’t have even that? Start with $1. You don’t have to be financially free to feel wealthy, you need to have a sound financial system in place to be wealthy. Learn to save money, invest it, and reinvest it starting this month."


Passive Income



Alexander presents Dollar Cost Averaging and Dividend Stocks posted at Dividend Stocks, saying, "One of the best ways to build up a dividend portfolio is to make use of dollar cost averaging. This technique allows you to build up your income portfolio slowly, and it is something that almost anyone can participate in."



Zoe presents How To Monetize Your Blog posted at MindofZ, saying, "This is a guide on how to generate passive income by blogging. Teaches over 12 ways to make money from your blog. Great for beginners, especially those who want time freedom."


Reducing Expenses



Charles Chua C K presents Are you prepared to be in debt? posted at All About Living with Life.



James presents At what age does car insurance go down? posted at Car Insurance Comparison, saying, "At what age does your car insurance rates finally start to decrease? What can you expect? Is this approach a smart way to approach the pricing of car insurance risk?"



Tim Chen presents The Chase AAA Credit Card is Possibly The Best Gas Rewards Card There Is posted at NerdWallet Blog - Credit Card Watch, saying, "For those of us in California, Utah and Nevada, AAA and Chase offer one of the best gas rewards cards out there: the AAA Rewards Membership Visa."



Kyle Berks presents Home Mortgage Interest Deduction: How It Works posted at Integrated Loans, saying, "Home mortgage interest is actually an expense that is tax-deductible. This mortgage interest is reported through the Form 1040, Schedule A."



James Nara presents 5 Rules to Help You Manage Your Money Savings : JamesNara.com posted at The Secret to Be Happy and Feel Fulfilled, saying, "Why save money ? Money is very important to help you feel more comfortable, to help you feel more secure and hopeful about the future.

With this article I will help you deal with your first savings in a very systematic way by providing you with 5 rules that you can follow without changing too much of your life style."



Jeff Cambron presents Do You Still Need Full-Coverage Auto Insurance? posted at Free Shipping Blog, saying, "Don’t let fear overwhelm your better judgment. In real life, the penalty for ignorance hits you in the wallet. Insurance is a product. You can shop frugally for it just like anything else."


Jeff Weber presents April 2011 Balance Transfer Credit Card Report posted at Smart Balance Transfers, saying, "In April, credit card companies offered average 0% introductory rates on balance transfers lasting more than 12 months, marking the first time this average has eclipsed the one year mark since inception and a good oportunity for consumers to save money."



The Amateur Financier presents Testing a Cash Only Life posted at The Amateur Financier, saying, "I'm attempting to figure out ways to cut down on my spending, and cutting down my credit card spending seems like a good way to get started on that goal."

Stock Investments



Hussein Sumar presents S&P 500 Dividend Aristocrats of 2011 posted at Best Dividend Stocks, saying, "The S&P 500 Dividend Aristocrats Index is the most honorable list of dividend paying stocks as measured by the S&P 500 Index that have consistently increased their dividends for the past 25 years, without missing a single dividend payment."



That concludes this edition. Submit your blog article to the next edition of
road to financial independence
using our
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R2I Finances – Setup to maintain accounts in the US

Around 6.5 million Americans live outside the US – more than 2% of the population. Despite this percentage, the industry is not completely geared to serving expatriates. Some businesses accept addresses and phone numbers outside the US while others don’t. As noted, we setup a virtual address primarily to provide a valid US address to businesses that did not accept our outside US address.

For R2Iers (Return to India), some choices exist depending on the immigration status and plans for the future and there are different ways to set things up. Maintaining financial and similar accounts in the US after R2I is a priority for many, especially for US citizens with plans to live in different parts of the world. Our mindset paralleled this and hence we looked to maintain our US accounts while in India. Below is a summary of our experience:
  1. Government Notification: While notifications are not mandatory, it is best to notify the IRS, the state tax body, and the US consulate/embassy of change of address and residency abroad. For IRS notification, we sent in the completed Form 8882 and for the Franchise Tax Board of California, it was Form 3533. Doing so will allow the tax authorities to send forms to the new address and also allow the embassy to easily track one down in case of emergencies. There is no acknowledgment with either of these forms. For US consulate/embassy notification, one can also either approach the nearest consulate with proof of citizenship (US passport) or phone in – if it is in person, passport data will be recorded at the consulate/embassy allowing for easier replacement if it is ever lost.
  2. Banking: Some banks allow online change of address only within the US while some permit online change of address to an international address. Yet other financial institutions do not support online change of address at all. We did our research on this and chose to maintain accounts with two banks – one with the address set to the virtual US address and the other to our new Indian address. Two year since R2I, we still maintain the US bank account with the virtual US address (Bank of America) but has since cancelled the other one (Chase). It is now possible to switch address online to an overseas address with Bank of America.
  3. Credit Cards: Our primary credit cards were a Visa Card and an American Express Card through a retailer. We expected the Amex card account to close automatically within a month after we closed the retailer account. But, in reality that did not happen – the Amex account did not get cancelled until after 9 months. For its address change we had to provide the US virtual address for their address change interface did not allow for country selection. The Visa card address change interface said to call them for an international address change – we ended up using our US virtual address, although in due course this should change. One caveat with using an overseas address is that certain US websites will reject your credit card for payments. For this reason, we have resisted changing our Visa card profile address.
  4. Brokerage Accounts: Our primary brokerage account (TD Ameritrade) allowed online change of address to an international address while our secondary brokerage account (E*Trade) allowed online change of address but did not allow choosing a country. We kept both our accounts – the former with our Indian address and the latter with the virtual US address. Some brokerages allow global trading (needs global trading account) at TSX (Canada), FTSE 100 (UK), CAC40 (French), Dax (German), Hang Seng (Hong Kong), and Nikkei 225 (Japan). This is a very useful option especially for expatriates who wish to diversify their asset base away from a concentration in the US dollar.
  5. Retirement Accounts: For anyone who switched employers more than once, multiple retirement accounts is almost a given. We had our share of multiple accounts. Here again, support for address change to a foreign address is all over the map. Some accounts accepted smoothly the new Indian address via their online interfaces. But, for certain accounts, the interface directed to call the previous employer’s 800 number – that is still in our ‘to do’ list. During our research we realized, IRA conversions with the same provider using online interfaces are also not that perfect – we tried doing this with one account (Schwab), but it returned an empty page, when we clicked on their online new IRA account application!! We have since managed to set it up with the right address changes for the most part - a following post will look into the details...
  6. Others: With most other accounts, it is a question of terminating them gracefully. Although one will be in a time crunch and temptation strong to not bother with such accounts, it is best to bring them all to closure. These include things like smart cards at local toll booths, move-out inspection and arrangements to refund any security deposits, cancel accounts with any wholesale retailers, cancel auto insurance policies, canceling all utilities, and other miscellaneous things such as clearing out safe deposit boxes. While this is drudgery, the good news is that closing many of these accounts will net you a refund check as they refund your deposits or other upfront refundable payments.
With respect to your banking and brokerage accounts, it is also good to setup electronic fund transfer between your accounts using ACH (Automatic Clearing House), which is free in most cases. In essence, as the service levels for expatriates vary widely it is imperative to research the service level before hand with respect to one’s banking, brokerage, retirement, and other accounts and act accordingly.

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Last Updated: 04/2012. 


MCAT Exam Prep Books & Resources – ISBNs and Best Prices

Medical College Admission Test (MCAT) is a standardized test for medical college admission in the US and Canada. The test may be taken up to three times in a calendar year. It is a computerized exam (since 2007) administered as many as 28 times a year by the American Association of Medical Colleges (AAMC). AAMC also administers other services for prospective medical students including the American Medical College Application Service (AMCAS), a centralized application processing service available to applicants for the first-year entering classes at participating medical schools.

The MCAT is very expensive with the basic fees starting at $235. Fees for other optional test related services like change of test center and late registration is another $60. International test sites have an additional $70 fee as well. There is a Fee Assistance Program (FAP) targeted towards those with extreme financial limitations that reduce the basic fee from $235 to $85. Though information is available on the format of the test at their website it provides no free study resources. Some third-party websites offer some sample material as free pdfs.

The test is four and a half to five hours long and consists of four sections in this order: Physical Sciences (PS), Verbal Reasoning (VR), Writing Sample (WS), and Biological Sciences (BS). All sections except WS is multiple-choice with no penalty for guessing. The WS consists of two short essays. The format of the exam is as follows:



Scoring is unique for the MCAT. It consists of two values appended together and quoted as the score. The first value is a range from 3 to 45 (1 to 15 for each section) for the multiple choice sections while the second value is an alphabetical range from J to T. Examples of quoted scores are 40S and 30.1P.

Below are ISBNs and Best Prices for MCAT study resources:



ResourceISBNBest PriceDescription
Kaplan MCAT Review: Complete 5-Book Series978-1607146544$101Excellent Overall Subject Review. 1500 practice questions. Online fast fact videos.
Examkrackers Mcat Complete Study Package978-1893858497$110Over 1400 MCAT questions in total. 31 30-minute topical questions in MCAT format.
Kaplan MCAT Practice Tests978-1419553578$15Two full-length practice tests with detailed answer explanations. Six chapters of strategies for each major section of the test.
AudioLearn: MCAT (Biology, Chemistry, Organic Chemistry, Physics)978-0970419934$110Complete Audio Study Guide for the Science portion of MCAT.

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Last Updated: 03/2012.



LSAT Exam Prep Books and Resources - ISBNs and Best Prices

Law School Admission Test (LSAT) is standardized test for law school admission used in the United States, Canada, and the Caribbean. The Law School Admission Council (LSAC), a nonprofit corporation formed to standardize the admission process for law schools in the United States and Canada, administers it. All law schools approved by the American Bar Association (ABA) are LSAC members, as are Canadian law schools recognized by their territorial law societies or government agencies. LSAC also provides other valuable services, chief among them being the Credential Assembly Service (CAS) which allows streamlining of law school admission process by allowing students to have all transcripts, recommendations, and evaluations sent only once to the LSAC. They in turn consolidate all this along with the LSAT scores and writing samples (part of the LSAT test that is not scored by LSAC) into a report, which is sent to the prospective law schools the student is applying to. Using CAS has since become a requirement for JD (law school – Juris Doctor or Doctorate of Jurisprudence – equivalent to the LLB Bachelor of Law degree outside the US).

The LSAT test is very expensive with just the basic fees standing at $136 in the US (Canada slightly higher) and $124 for the Credential Assembly Service (CAS), which is required by all US law schools for JD admission. Fees for other optional test related services such as date change, and center change etc starts at $35 and can go upto $68. LSAC offers a fee waiver program for US citizens who can demonstrate the absolute inability to pay (tax records). LSAC also offers a free actual test (June 2007) and certain other sample test materials for free in pdf form in their website.

The test itself is very long and takes half-a-day to complete. It is administered four times each year and there is no score choice – all test scores from the last 5 years get reported – you can cancel scores within 6 days of taking the test, however. It consists of five 35-minute sections of multiple-choice questions, and a 35-minute writing sample. The writing sample and one of the five sections are not scored. The writing sample is sent as part of the CAS report sent for law schools to evaluate. The unscored multiple-choice test is used to pretest new test questions. The multiple-choice question types may be one of the following:
  • Reading comprehension: Measures the ability to read, with understanding and insight, lengthy and complex materials similar to those encountered in law school. The section contains four sets of reading questions, each consisting of a selection of reading material and associated questions.
  • Analytical reasoning (Logic Games): Measure the ability to understand structure of relationships and to draw logical conclusions about that structure. The questions attempt to measure legal problem solving skills, by having students’ reason deductively about relationships among persons, things, or events.
  • Logical reasoning: Measure the ability to analyze, critically evaluate, and complete arguments as they occur in ordinary language. It involves reading a short passage and answering a question about it. The questions attempt to assess legal reasoning skills by having students draw well-supported conclusions, reasoning by analogy, etc.
Below are a list of ISBNs and Best Prices of study materials for the LSAT:


ResourceISBNBest PriceDescription
Kaplan LSAT 2011 Premier with CD-ROM978-1419549939$22Five Full-length Official LSAT Practice Tests. Hundreds of additional practice questions. Practice Online. The CD-ROM has problems loading on Windows 7.
The Next 10 Actual, Official LSAT PrepTests978-0979305054$1910 Official previously administered LSAT Tests, Target Specific Categories for Intensive Review, Strategies, and Sample Comparative Reading Questions and Explanations.
LSAT Logic Games Bible9780980178203$34Best Book for the Logic Games section of LSAT. Uses Actual Logic Games Administered in the LSAT.
LSAT Logical Reasoning Bible: A Comprehensive System for Attacking the Logical Reasoning Section of the LSAT978-0980178258$34Best Book for the Logical Reasoning Section. Detailed methodology on how to attack each problem type.

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Last Updated: 03/2012.

Home Improvement Loans - A Primer

Home Improvement Loans come in many flavors but they are not equally beneficial to all. Some feature lower rates and tax advantages, while others not so much. Below is a summary of the different loans available along with their pros and cons in order to assist a prospective homeowner on a quest of a home improvement loan:

Home Equity Loan (HEL): HEL also known as closed-end loans are lump-sum loans, usually with a fixed interest rate based on prime rate plus a margin. The homeowner uses the equity of their home as collateral. As these loans are secured against the value of the property and are usually a second position lien they are also termed second mortgages.  The loan term can be very short or as long as 30-years although it usually does not exceed the term of the primary mortgage. Except during the bubble years when total loan-to-value levels did not matter, such loans generally require 80% or less.

Pros:
  • Taxes: The interest paid on this type of home improvement loan is almost always tax-deductible.
  • Interest Rate: The rates are favorable when compared to credit card or other personal consumer loan rates.
  • Usability: There is no restriction as to how you use the loan amount. Home improvement and debt consolidation are the more common uses although it can be used for anything including paying for a vacation. While debt consolidation is a popular use, the critical downside is that in essence this converts an unsecured debt to a secured debt.
Cons: 
  • Interest Rate: Although interest rates are lower compared to credit card or other personal consumer loans that are sometimes used as home improvement loans, they have a higher interest rate when compared to the primary mortgage - since the collateral is 2nd lien, the loan is considered more risky to the lender.
  • Recourse Risk: Most home equity loans are considered recourse – the lender can hound your assets, should the collateral (2nd lien on the house) fail to realize enough value to payoff the loan amount in a foreclosure situation. This nightmare of a situation can prove genuine when the primary mortgage is non-recourse but the much smaller home improvement loan is recourse essentially jeopardizing all of one’s assets for a small loan amount.
  • Monthly Payments: As the term of the loan is usually less (20 years is the most common) and interest rates are higher compared to a primary mortgage, monthly payments are higher compared to traditional loans.

Home Equity Line of Credit (HELOC): HELOC or open-ended loans are lines of credit from which the borrower can borrow any amount up to the credit limit during the draw period (typically 5 to 20 years). The interest rate on the borrowed amount is variable although it is based on an index such as prime rate plus a margin. The collateral is the borrower’s equity in the homeowner’s house. Repayment terms are also flexible with a minimum monthly payment requirement. HELOC was trendy among homeowners earlier and viewed as a low cost debt with features allowing flexibility comparable to a credit card debt. The popularity has since dampened somewhat following the mortgage crisis and the HELOC freeze action initiated by many lenders since 2008.

Pros:
  • Taxes: The interest paid on this home improvement loan type is almost always tax deductible.
  • Interest Rate: The rates are favorable compared to credit card or other personal consumer loan rates. Further, when weighed against Home Equity Loans (HELs), variable interest rate is a desirable feature in a prolonged low interest rate environment.
  • Usability: This provides the flexibility to obtain up to the max amount any time during the draw period in effect making it ideal as a lower cost emergency line of credit.
Cons:
  • Interest Rate: They usually command a higher interest rate compared to the primary mortgage and carry the risk of rising costs in a rising interest rate environment.
  • Recourse Risk: Most home equity loans are considered recourse – the lender can hound your assets, should the collateral (2nd lien on the house) fail to realize enough value to payoff the loan amount in a foreclosure situation. This nightmare of a situation can prove genuine when the primary mortgage is non-recourse but the much smaller HELOC is recourse essentially risking all of one’s assets for a small loan amount.
  • Freeze Risk: As the lender can freeze their line of credit at any time there does not exist a guaranteed line of credit with a HELOC.  Many homeowners experienced this upleasant surprise in 2008 when HELOCs were frozen en masse by many major lenders at the time as Countrywide, Citigroup, and Washington Mutual.
Cash-out Refinancing: Cash-out refinancing is a type of refinancing where the loan amount is more than that required to pay out existing liens providing the borrower the flexibility to use the balance amount (subject to fees) for any purpose including finance home improvements. Lender requirements on the loan-to-value ratio determine the amount that can be borrowed. Interest rates are higher compared to the straight rate-and-term refinancing but usually lower compared to home equity loans – the lenders risk is higher as loan-to-value ratio increase.

Pros:
  • Taxes: The interest paid on this loan is tax deductible.
  • Convenience: Since this is a replacement for the first mortgage compared to an additional mortgage with other options, there is just one payment due every month.
Cons:
  • Costs: Compared to HEL and HELOC, loan costs are higher for closing costs exists, as it is the primary mortgage.
  • Effect of Resetting: In spite of the number of years that has gone into paying the existing primary mortgage, refinancing will reset the loan term thereby extending the mortgage period compared to the existing loan.
FHA 203K Refinancing: This is a combination of the government insured FHA refinance and a home improvement loan. The main differences between this home improvement loan type and other options listed above are that interest rates are generally lower, and the loan value is based on the improved value of the home.

Pros:
  • Taxes: The interest paid on this loan is tax deductible.
  • Higher Loan to Value Ratio: The maximum loan amount can be 110% of the improved value of the home.
  • Interest Rate: Interest rate is lower compared to all other options.

Cons:
  • Availability: Only a limited number of lenders approved by the government do FHA 203K refinancing loans.
  • Use Restrictions: The homeowner is required to do the home improvements pledged when applying for the loan. Also, only certain types of improvements approved by FHA are allowed. Using a contractor can also be a requirement in some cases.
  • Costs: Costs are slightly higher compared to closing costs of a conventional refinance.
  • Private Mortgage Insurance (PMI) Requirement: PMI is required for a minimum of 5 years, independent of the loan to value ratio. With other options, PMI is required only if the loan to value ratio goes over 80%.
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Last Updated: 03/2012. 


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