Questions to Ask before Buying an iPod or MP3 Player

Finding just the right iPod can be a confusing task. Every few months, new technology is being used to improve iPods. You probably want to get one that's not going to be obsolete within a few months, so here are some questions to ask before buying an iPod.

Why am I Buying an iPod?

As with all electronics, you should think about how you're going to use an iPod before making a buying decision. In your personal life, you can download songs onto your iPod to listen to while walking, jogging, traveling, or doing yard work. If you're a photographer, you may use your iPod to store digital photo files. Knowing "why" you need an iPod will help you choose just the right size, color, and type of iPod.

How Many Songs do I Plan to Store on my iPod?

If you plan to store hundreds of songs on your iPod, then you should be sure that the storage space can accommodate your needs. Expect to pay more for more space. Also, consider how file size relates to the quality of the songs you download. Some iPods and MP3 players state that you can download hundreds of songs, but the quality of the sound isn't that great. This is because the sound files are compressed to make them fit the available storage space. If you can't afford a lot of storage space, it's better to sacrifice the number of songs you want than to sacrifice quality.

What Type of iPods are Available?

iPods come in many shapes, sizes, colors, and with different storage capacities. Keep in mind that you are not limited to the "iPod" brand because MP3 players serve the same purpose. There are also many types of MP3 players available that give you a variety of choices. The types of iPods available include iPods specifically designed for Mac or Windows computers, regular iPods with lots of storage space, iPod minis for storing just a few of your favorite songs, and iPods with other functions and capabilities.

What Accessories Will I Need for My iPod?

Accessories for iPods might include an iPod case or sock for protecting the device, a remote control, camera connectors, an iPod dock, in-ear headphones, power adaptors, and software to expand its uses. Determine which accessories you will need and factor them into the price of your iPod.

If you are buying an iPod or MP3 player as a gift, consider purchasing a gift card so your recipient can buy iTunes for his or her iPod.

Where Should I Shop for an iPod?

You can shop locally for iPods or MP3 players or go online to get an even greater selection. At an online shopping mall, you can get an iPod or MP3 player, along with other great electronics such as cell phones, computer supplies, Xbox, PS2, and more. There are a variety of brand name items available online, such as Nokia, Sony, Samsung, and Blackberry, so you can get a great quality PDA and other electronics.

The bottom line is that you should choose an iPod or MP3 player that best suits your needs and your lifestyle. When you do, your favorite tunes will always be close at hand.

Stocks Look Pricey

The first quarter of 2006 is over. Now is a good time to reflect on stock prices and the opportunities they present.

Bargains are scarce. Equities are expensive. In recent weeks, I've heard several fund managers say valuations are still attractive. I don't agree. Generally speaking, valuations are unattractive. Returns on equity are higher than historical levels. A market-wide return on equity of 15% is unsustainable. Price-to-earnings ratios may not fully reflect how expensive stocks are. Price-to-book ratios are more alarming.

There are two additional concerns. Most discussions of the relative attractiveness of equities focus on the S&P 500 and forward earnings. The S&P 500 is not the most representative index. It may not be the best index to consider when looking at market-wide valuations.

Forward earnings are (necessarily) estimates. Where current returns on equity are unsustainable, projected earnings that use similar returns on equity may overstate the earnings power of equities in general. This can occur even where the estimates appear reasonable given current earnings. If you start with unsustainable base earnings, you are likely to overestimate future earnings even if you truly believe you are assuming very modest earnings growth.

Assets in general are pricey. Value investors have few places to turn if they continue to insist upon a true margin of safety.

Bonds are unattractive. Long-term inflation risks make U.S. treasury, corporate, and municipal bonds a fool's bet. There is little to gain and much to lose. The know-nothing investor who buys a top-quality bond today and holds it for decades may very well find his purchasing power diminished.

There may be some select opportunities in foreign equities. But, these are difficult to evaluate. Foreign government obligations are also difficult to evaluate, but that isn't much of a problem for value investors, because most foreign government debt is priced to perfection. You'll have to be willing to take a lot of uncompensated risks if you want to own such bonds.

Of course, there are exceptions to every rule. There may be a few bonds out there that are attractive. There certainly are a few attractive stocks out there. But, even those stocks that look very attractive relative to their peers don't look nearly as attractive when compared to past bargains.

Value investors face a difficult choice. They can assume stock prices will return to historical levels, and hold cash until the correction comes. Or, they can accept the reality they currently face.

There is no logical reason stock prices must necessarily return to historical levels. During the twentieth century, real after-tax returns in diversified groups of common stocks were very high relative to other investment opportunities. There have been various reasons given for why this occurred. Many have said these returns were possible, because of the higher risks involved in holding equities. Over the long-term, risks were somewhat higher than today's investors seem to remember, but they were hardly severe enough to justify the kind of performance spreads that existed during much of the twentieth century

True, if you bought at inopportune times, it was possible to remain in a fairly deep hole for a fairly long time. But, if you gave no real consideration to the timing of your purchases or the prospects of the underlying enterprises, you did better than many bondholders who chose their investments with the utmost care.

This is a disconcerting problem. It may be that most investors are overly sensitive to the risk of an immediate "paper" loss in nominal terms, and therefore overlook the much greater risk of a gradual loss of purchasing power. Issuing fixed dollar obligations may be the best bet for any business or government that seeks to swindle investors.

For the sake of the common stockholders, I hope many of the best businesses continue to issue such obligations when money is cheap. Corporate debt gets a bad name, because it tends to be overused by those who don't need it and shouldn't want it (and, of course, by those businesses that do need it but won't survive even if they get it). The businesses that would benefit the most from the use of debt usually appear to have more cash than they could ever need. But, it's best to think ahead. For truly high quality businesses, the cost of capital will fluctuate far more wildly than the likely returns on capital.

If, during the last hundred years, stocks really were far cheaper than they should have been, is there any reason to believe stock prices will return to past levels? The past is often a pretty good predictor of the future – but, not always. It's difficult to say whether, over the next few decades, valuations will, on average, be higher or lower than they are today. However, it isn't all that difficult to say whether, at some point over the next few decades, valuations will be higher or lower than they are today. The answer to that question is almost certainly yes. They will be higher and they will be lower. Maybe for a few years or a few months. Maybe for a full decade. I don't know.

What I do know is that value investors will have opportunities to make investments with a true margin of safety. But, should they wait?

That's the most difficult question. Today, I am not finding opportunities that look particularly attractive when compared to the best opportunities of past years. But, I am still able to find a few (in fact, a very few) situations where the expected annual rate of return is greater than 15%.

That will be more than enough to beat the market. It will also likely be enough to provide a material increase in after-tax purchasing power. That's not guaranteed, but it hardly seems holding cash would offer the better odds in this regard.

So, is an expected annual rate of return of 15% good enough? Is it reasonable to bet on the good opportunity that is currently available instead of waiting for the great opportunity that may yet become available?