Money Minute: Apple Profit Falls Despite iPhone Sales; UPS' Plan to Save Gas

One company's new navigation system could slash gas consumption. That and more top money stories you need to know today.

UPS (UPS) has developed its own navigation system for its drivers. It says the new technology could save the company $50 million a year by reducing each drivers route by just one mile each day. UPS says the technology will save it about 1½ million gallons of gas a year.

And this will help all drivers, not just those from UPS. AAA says the national average price for a gallon of regular is $3.28, the lowest its been this year. And that's not all. AAA says it expects prices to continue to fall.

Apple's Latest iPhone Models Go On Sale Across U.S.
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Apple's quarterly profit fell by 9 percent from a year ago, despite robust iPhone sales. The company sold 33.8 million iPhones over the three-month period, up 26 percent. The less expensive iPhone 5C model disappointed though, as did sales of the iPad. The company also registered $4.4 billion in iTunes downloads. Apple (AAPL) stock is up 18 percent over the past three months, but still down from a year ago.

The Dow Jones industrial average (^DJI) lost a single point Monday, and the Nasdaq composite index (^IXIC). But the Standard & Poor's 500 index (^GPSC) edged up 2 points to set another record.

The controversial nutrition supplement maker Herbalife (HLF) posted a big jump in earnings, easily topping Wall Street expectations for the 19th straight quarter. Herbalife is at the center of a battle between Wall Street titans, some of whom claim its run like a Ponzi scheme, and others who say its a great growth company. Shares of Herbalife have more than doubled this year.

And policy makers at the Federal Reserve kick off a two-day meeting, and the outcome is likely to be more of the same. The Fed is widely expected to continue its $85 billion a month bond buyback program, but could indicate that it will begin to cut back on those purchases early next year. Analysts say the Fed is waiting for more data on the economy before taking action.

-Produced by Drew Trachtenberg.

If You Only Know 5 Things About Investing, Make It These
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Money Minute: Apple Profit Falls Despite iPhone Sales; UPS' Plan to Save Gas

Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.

Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.

Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.

The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.

Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?

If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.

Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."

Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.

Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.

Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"

Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.

Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.

Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.

The vast majority of financial products are sold by people whose only interest in your wealth is the amount of fees they can sucker you out of.

You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.

This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.

"Everything else is cream cheese."
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