Archives for March 2012

Poor Charlie’s Almanack: Wisdom of Charlie Munger – Book Review, Part 1

March 12, 2012 By Jonathan Ping 8 Comments

Charlie Munger is best known as the long-time friend and business partner of Warren Buffett, and officially as the Vice-Chairman of Berkshire Hathaway. Even though he is Buffett’s partner in investing, Munger is different in that he does not enjoy the spotlight as much and is rather more blunt and cranky. For some reason that just makes me like him more. 🙂

Ever since I read more about him in the Buffett biography The Snowball, I have wanted to learn more about him via the book Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger, which is mostly a collection of his speeches but also includes some of his own personal notes and reflections from his peers and family. From the website:

For the first time ever, the wit and wisdom of Charlie Munger is available in a single volume: all his talks, lectures and public commentary. And, it has been written and compiled with both Charlie Munger and Warren Buffett’s encouragement and cooperation. So pull up your favorite reading chair and enjoy the unique humor, wit and insight that Charlie Munger brings to the world of business, investing and life itself.

The first thing you should know about this book is that it is not meant to be an investing How-To book. Yes, there is a lot of investing advice in it, but the book is more about how to live a successful and fulfilling life more than the accumulation of money. Munger puts more emphasis on integrity and how to think correctly than how to calculate a company’s return on capital.

Financial Independence
One of the reasons that Buffett and Munger appeal to me is that their primary motivation for doing what they do is not simply to be rich, it is to to be independent. Here’s a quote from Buffett on why he wanted to make money: [Read more…]

Filed Under: Book Reviews, Career, Entrepreneurial, Investing

Last updated: March 12, 2012

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Buffett on Charlie Munger: Work For Yourself An Hour Each Day

March 12, 2012 By Jonathan Ping 30 Comments

I’ve gotten to the part in The Snowball that involves Charlie Munger. A very interesting person, although perhaps not someone I’d like to have a beer with (I’d feel stupid), he is probably best known as Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway.

Even before meeting Warren Buffett, Munger was wealthy according to most standards from real estate investing. Here is a quote from a Buffett interview in the book:

Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’ And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.

Now, I’m sure just being a successful lawyer would be plenty for many people. But if you aren’t satisfied with your current situation, why not work for yourself an hour each day? Instead of just idle dreaming, set aside specific time for action. Perhaps the key is small chunks of time, but at regular intervals.

Example. If you’re an administrative assistant making $10 an hour and you don’t want to be, don’t just sign up to work another hour for $10. Working longer is not necessarily the best idea. Instead, give up the $10 (or $8 after taxes), and improve yourself in some way or create something so you’ll be making a lot more. There is no one solution, look into yourself. Nursing school? Investment books? Finding a mentor?

Finally, another quote from Charlie Munger about the desire for independence:

I had a considerable passion to get rich. Not because I wanted Ferraris – I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don’t where I got that notion from, but I had it.

I think I’ll be buying a copy of Poor Charlie’s Almanack the next time I run low on things to read, even though it costs fifty bucks.

Update: I bought a copy of Poor Charlie’s Almanack and will be reviewing it shortly. I still think this idea of working for yourself for an hour each day is great advice and timeless.

Filed Under: Entrepreneurial

Last updated: May 19, 2012

Look Inside the Target Date Retirement Funds in Your 401(k)

March 7, 2012 By Jonathan Ping 6 Comments

If you have a 401(k) plan or similar, then you most likely have a target-date mutual fund (TDF) as the default option. This is a direct result of the Pension Protection Act of 2006 (PPA). These funds contain some mix of stocks and bonds, and the asset allocation changes according to a “glide path” as you reach your “target date” of retirement, and were designed as a stupid-proof, low-maintenance option for investors. But did this turn out to be a good thing or a bad thing?

The Freakonomics blog notes a new academic paper Heterogeneity in Target-Date Funds and the Pension Protection Act of 2006 [pdf] by Balduzzi and Reuter. Heterogeneity is just a fancy word for they tend to be very different from each other even though the yearly dating system can make them seem similar. For example, the WashingtonRock 2020 Fund could be completely different than the LincolnStone 2020 Fund. Why? Their theory is that because every 401(k) now would have a target date fund inside, then every fund provider would have to create a target date fund. However, you wouldn’t want your TDF to be the same as the other guys’ TDF, so you’d make yours slightly different, right?

Here is a glide path comparison done by State Farm showing the paths of the major providers Fidelity, Vanguard, and T. Rowe Price:

(click to enlarge)

[Read more…]

Filed Under: Investing, Retirement

Last updated: March 14, 2012

Zecco IRA Free Hammock Promotion

March 7, 2012 By Jonathan Ping 1 Comment

zecco hammock

Here’s a creative IRA promotion from my inbox. Zecco Trading will send you a free hammock if you open a new IRA between March 1st and April 17th, 2012 and maintain a $2,000 minimum account balance for 90 days after initial funding. Traditional, Roth, SEP, and even Rollover IRAs are eligible. Open to both new and existing Zecco Trading customers. I wonder if it will really be hot pink…

Filed Under: Deals & Offers

Last updated: October 24, 2012

TurboTax 2011 Review: My Experience and Comparison With TaxACT

March 6, 2012 By Jonathan Ping 25 Comments

I just finished filing my federal and state income tax returns (again) using TurboTax Deluxe Online edition. This is the 2nd part of my series comparing the three major tax preparation websites: TurboTax, TaxACT.

You can see my TaxACT 2011 review here.

Tax Situation
Again, here’s a quick summary of our personal tax situation.

Married filing jointly, subject to state income tax
Both with W-2 income, as well as self-employed income (Schedule C).
Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
Contribute to retirement accounts (401ks and IRAs).
Capital gains and losses from brokerage accounts (Schedule D).
Itemized deductions (Schedule A), including mortgage interest and charitable giving.

Retail Price
Although their website shows a “retail” price of $49.95 for TurboTax Deluxe, anyone who visits the site will at most pay $29.95 for Federal including e-File. TurboTax State is $36.95 including e-file. If you are a Vanguard Flagship Services or Asset Management Services client, you get a TurboTax Online Federal Deluxe + State + efile for free. All other clients get discount of about 25% off; you must log in to get your discount. There is also a free edition available if you have a very simple tax return – no itemized deductions, investment income, but remember that State is $27.95 extra in that case.

TurboTax Premier offers “additional guidance” for investment income from stocks and bonds and also rental income. However, I had the usual stock and bond sales and was able to complete my return without upgrading to Premier. I did not feel I needed any extra guidance, but if you do it will run an extra $20 for a total of $49.95. Finally, TurboTax Home & Business ($74.95) offers “additional guidance” for self-employment income including dealing with business expenses. However, if all you have is a couple of 1099-MISCs to report as I did, you can get by with Deluxe.

User Review

With all these tax sites you can start your return for free, and only pay when you file. Since I had already input all my tax data into TaxACT.com, I simply opened that up in a web browser tab side-by-side and start filing things out. The Q&A interview questions are in roughly the same order, but there are enough differences to make you jump around a bit.

Import from TaxACT & H&R Block at Home
Last year, I used TurboTax for my tax return. Thus, this time around TurboTax had all my old tax info pulled up immediately. Filing status, dependents, address, DOB, SSN, etc. They also had all my old W-2 and 1099 providers to reduce my data entry needs a little bit more. For example, all my Employer Tax IDs and addresses were pre-filled. This did feel rather convenient, and it helped make sure I didn’t forget any 1099s from old bank accounts.

However, as a result I was never asked if I wanted to import a previous year’s return from another provider like TaxACT or H&R Block. Perhaps someone can shed some light on this in the comments?

W-2 and 1099 Direct Import from Providers
One of the strengths of TurboTax is that you can directly import your W-2 and 1099 information from a number of partner providers. However, the W-2 part didn’t really impress me. Our W-2s came from Ceridian and we had to enter some sort of username and password which I’ve never set up before. It was faster to just type in the 10 numbers and get on with it.

1099s were a different story, at least for me. I was able to provide my Vanguard username and password and have my 1099-INT, 1099-DIV, and 1099-B data imported in seconds. Other partners that I was able to use included Betterment, Chase Bank, Capital One 360 (Sharebuilder), and Pentagon Federal Credit Union. USAA, TD Ameritrade, E-Trade, and Wells Fargo were also available. For those with a lot of transactions, this is a great time-saver.

In addition, after comparing with my TaxACT data, I found that I had made a data entry error of $300 with one wrong digit when manually entering all those capital gains and losses from stock sales. The TurboTax import would have help me avoided that mistake, which I don’t think I would have caught otherwise.

Finally, a cool feature is that if all your accounts are linked to the aggregation site Mint.com, you can simply log into your Mint account and have all your available forms imported with one login (Intuit owns both TurboTax and Mint).

The Small Stuff
This time around, I did notice that TurboTax has something called “Flags” that are the same as Bookmarks with TaxACT that allow you to mark confusing questions to come back to. The icon is small and there is no text, so I probably would have missed it again if I wasn’t looking for it. A minor positive I noticed is that TurboTax automatically enters commas when you reach thousands (ie. 3,459 instead of 3459). It helps with data entry, as I have already shown that I am error-prone!

A minor negative is that TurboTax had many more server delays where the page would not load or would be blank and I had to refresh the page. I did not have any such problems with TaxACT, which I was using simultaneously on the same internet connection and computer.

Foreign Tax Credit
After everything was entered, there was a difference of less than $50 in my total calculated refund between TurboTax and TaxACT. After some research, I found that it was due to my treatment of my foreign taxes paid as a deduction vs. credit. TaxACT appeared to be more aggressive and just allowed me to take it as a credit, while TurboTax seemed to require more information and otherwise steered me towards taking it as a deduction. This was partially my own fault, but the two questionnaires definitely had a different approach. In the end, I got everything to match up between them. (Take the credit if you can.)

Upselling and Price Tricks?
There are some upsell attempts during the tax return to upgrade to Premier or Home & Business, however it was only a couple times and didn’t feel overly pushy. At the end, the price total was as expected with no bogus charges. There was a final pitch for a product call Audit Defense for $39.95, which provides you “professional representation in the event of an audit” and covers both federal and state returns. As before, I am not convinced of the quality of such representation.

Recap
Turbotax showed why it remains the best-known and popular tax software. That is, it covers all of the tax aspects about as equally as well as the others, perhaps with a bit more thoroughness (anality?). However, where it separates itself is the importing of data from financial institutions. It is indeed more expensive – for most people TurboTax will cost $30+ more than TaxACT but if it saves you both time and effort in data entry (and potentially prevents errors), then I can definitely see how people would be willing to pay a premium.

There is also the familiarity factor. I definitely kept feeling the benefit of using it last year and again this year. It compared all my 2010 and 2011 numbers side-by-side, which was nice for us financial geeks. It also remembered little things like my old IRA basis, so I wouldn’t have to look it up again. On the other hand, if my return was simple and would not benefit much from automatic importing, I would probably rather stick with TaxACT.

Filed Under: Reviews, Taxes

Last updated: February 18, 2015

LendingClub 1099 Forms and Tax Reporting Questions

March 6, 2012 By Jonathan Ping 3 Comments

If you’re a newer investor in Lending Club P2P notes, you may be wondering how to handle your investments at tax time. Will I get a 1099? Even if you do get a 1099, it might not cover all your loans. Unfortunately, the documentation provided by LC is often inadequate on its own. Here is what their website says you will receive in terms of tax documents;
[Read more…]

Filed Under: Investing, Taxes

Last updated: August 2, 2017

Vanguard Emerging Markets Fund (VEIEX) Drops Purchase Fee

March 5, 2012 By Jonathan Ping 4 Comments

Vanguard has announced that the Vanguard Emerging Markets Stock Index mutual fund (VEIEX) will no longer have a purchase and redemption fee of 0.25%, effectively immediately. Although not huge, this fee was rather annoying and a major reason for many investors (including me) to buy the ETF version VWO instead. It’s good to see that Vanguard is continuing to pass on lower expenses when possible. There is still a 2% short-term redemption fee to discourage frequent trading.

We’re eliminating the 0.25% fee on all purchases and redemptions of Vanguard Emerging Markets Stock Index Fund. The fees had been in place to offset the higher trading costs associated with foreign and illiquid markets. As the fund has matured, and with cash flow in and out of the fund offsetting much of these costs, we no longer need to assess these fees.

The fund is adopting the short-term trading fee that applies to most of our other international funds. To deter costly short-term trading activity, Vanguard assesses a 2% fee on shares redeemed within two months of purchase. Because the fee is paid directly to the fund, it’s not a load.

The Investor shares of the fund ($3,000 minimum) have an expense ratio of 0.33%, but the ETF and Admiral shares ($10,000 minimum) both have expense ratios of 0.20%. If you have enough fund to qualify for Admiral shares, my slight personal preference is the mutual fund as I have no desire to trade intra-day and I like the ease of dollar-based transactions. If I want to by $500 of the fund, I can buy exactly $500 of the fund without worrying about partial shares, limit orders, or bid/ask spreads.

Now, what to do with my existing shares of VWO? You can’t convert ETF shares into mutual fund shares, unfortunately. My initial action will probably be to stop future purchases of VWO while keeping the old shares, and use new incoming cashflow to buy VEIEX. Once I reach $10,000, I will convert automatically (and seamlessly) to the Admiral shares (VEMAX) and stick with that. In the future, if I have to sell some Emerging Markets when rebalancing asset allocations, perhaps I’ll sell the VWO. Or I’ll sell the VWO if there is another market drop and can reduce any capital gains hit.

You can buy and sell all Vanguard mutual funds and ETFs without a commission with an account directly at Vanguard. 32 Vanguard ETFs, including the Emerging Markets ETF VWO, are available commission-free at TD Ameritrade.

Filed Under: Investing

Last updated: August 9, 2018

CollegeAdvantage $50 Tax Refund Bonus Offer (Existing Customers)

March 5, 2012 By Jonathan Ping 4 Comments

The Ohio CollegeAdvantage 529 Plan has a new promotion for existing account holders linked to tax refund season. If you make a new one-time contribution of $3,000 or more by April 30th, they will give you a $50 bonus. The $50 bonus will be applied on or before June 15, 2012. Account must be opened prior to March 1, 2012.

I received this offer by e-mail, but you can see it when you log in. There is no promotion code required. The $50 bonus contribution will be invested in the CollegeAdvantage investment option with the largest balance as of June 15, 2012.

$50 is only 1.7% of $3,000, but if you were going to contribute anyways it’s something – and sadly double what a savings account would pay you in interest on that same $3,000 over an entire year. Also, rollovers from outside 529s do indeed qualify as a contribution. I have money in the Ohio plan and have found it a solid plan with low-cost investment options, so if you’re in a more expensive 529 then this could be good time to move money over. It’s regularly ranked as a top plan by Morningstar.

Filed Under: College & Education, Deals & Offers

Last updated: October 7, 2012

TaxACT 2011 Review: My User Experience With Screenshots

March 2, 2012 By Jonathan Ping 12 Comments

According to my tax software poll, it appears that the vast majority of readers are using one of the “big 3” tax filing software: TurboTax, H&R Block At Home, or TaxACT. This matches industry-wide estimates; Did you know that H&R Block tried to buy TaxAct last year but was blocked by the Justice Department as it would hurt competition and basically create a duopoly?

Here is my hopefully-useful review of TaxACT.com, the first part of a series to try out each of these three products to do my real-life taxes and then compare each of them.

Tax Situation
Here’s a quick summary of our personal tax situation, which I think should cover the most common features of tax software. We don’t have any rental income, however.

Married filing jointly, subject to state income tax
Both with W-2 income, as well as self-employed income (Schedule C).
Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
Contribute to retirement accounts (401ks and IRAs).
Capital gains and losses from brokerage accounts (Schedule D).
Itemized deductions (Schedule A), including mortgage interest and charitable giving.

Retail Price
Of the Big 3, TaxACT regularly has the lowest retail price. I will be using the online version of TaxACT, of which there are two editions:

Federal Free Edition (Basic): Free for Federal return + efile, $14.95 for State return + efile
Deluxe: $9.95 for Federal return + efile, $8.00 for State return + efile

Both versions include all Schedules and all e-fileable IRS Forms. Reasons for upgrading to Deluxe (basically an extra $3 for Fed + State) are the ability to import information from your 2010 TaxACT return, import info electronically from Gainskeeper, help with valuing donation items, as well as free phone support. If you are not subject to state income tax, then you can indeed use TaxACT completely free including efile regardless of income level or complexity of return. Nice! There is also a desktop version available on CD and via download for Windows only.

User Review

[Read more…]

Filed Under: Taxes

Last updated: March 4, 2018

Amazon Promos: Discover Free 1-Day Shipping, Amazon Mom Free 3-Month Trial

March 1, 2012 By Jonathan Ping 4 Comments

Here are a few promotions from Amazon that can save you some time and/or money.

Amazon and Discover Card have teamed up to offer free 1-day shipping on select products (mostly electronics) if you use the promo code DSCVRSHP and buy with a Discover card. Saw a few Roku boxes for streaming Netflix that I’ve been thinking about. Offer valid from February 15th, 2012 through March 31st, 2012 or while promotional funds last.

Amazon has started offering free 3-month trials to Amazon Mom again, which includes the free 2-day shipping feature of Amazon Prime and 20% off diapers and wipes subscriptions. You should be able to turn off auto-renew so it just ends when time is up. (If you have ever received shipping benefits through Amazon Mom, Amazon Student, or have had a paid or free trial Prime membership within the past 13 months, you are not eligible for the Amazon Mom free period. You’ll need to use a new or different account.)

If you’re a student with a .edu e-mail address, sign up for Amazon Student which offers six-months of Amazon Prime for free, and after that you’ll get 50% off Amazon Prime ($39 a year) for up to four years with automatic renewal.

Filed Under: Deals & Offers

Last updated: March 1, 2012

Archives for March 2012

Poor Charlie’s Almanack: Wisdom of Charlie Munger – Book Review, Part 1

Buffett on Charlie Munger: Work For Yourself An Hour Each Day

Look Inside the Target Date Retirement Funds in Your 401(k)

Zecco IRA Free Hammock Promotion

TurboTax 2011 Review: My Experience and Comparison With TaxACT

User Review

LendingClub 1099 Forms and Tax Reporting Questions

Vanguard Emerging Markets Fund (VEIEX) Drops Purchase Fee

CollegeAdvantage $50 Tax Refund Bonus Offer (Existing Customers)

TaxACT 2011 Review: My User Experience With Screenshots

User Review

Amazon Promos: Discover Free 1-Day Shipping, Amazon Mom Free 3-Month Trial

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