Archive for December, 2004
Thursday, December 30th, 2004
Now that I have chosen my Asset Allocation, I want to implement it and be fully invested in the stock and bond market by 1/31. This might be tricky, as I am moving some assets away from E*Trade and according to the paperwork it can take up to 4-6 weeks. But I should be able to do the rest by the end of January.
As a side note, I am vacationing to warmer weather for the next week, and may or may not have internet access. I am bringing along Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John Bogle, as well as some Vanguard prospectuses for the plane ride. Happy New Year!
Posted in Goals | 3 Comments »
Thursday, December 30th, 2004
After some thought and reading, I have decided on the following asset allocation ratio for my current age and position:
70% Stocks / 30% Bonds
Although since I am only 26, some people say I should be more aggressive, I am being realistic in the amount of volatility that I think I can endure and still stick to my plan. Would you really keep your positions if they dropped 35% in one year? That would mean about $20,000 for me, enough to cause some serious heartburn.
However, I am saving for a house as well, and since I’ll need that money in less than 5 years, I think of it as a separate “basket” of money. I am going to handle it much more conservatively. More on that later, but that will allow me to change the rest of my portfolio to:
80% Stock / 20% Bonds, or more specifically:
40% Large Cap / 20% Mid&Small Cap / 20% International / 20% Bonds
This is very similar to my current 401k Asset Allocation. My Monthly Goal due 12/31 is now complete. I thought about putting some in REITs, but I personally think they are a bit inflated right now, and I will get exposure to Real Estate when I buy a house.
Posted in Goals | 4 Comments »
Wednesday, December 29th, 2004
Not quite 2005, but I’m going on vacation on Friday, so here is my monthly snapshot:
My net worth increased by $3006 since last month’s snapshot, which is pretty nice but a little skewed since I get paid bi-weekly and I got 3 paychecks this month. My non-retirement funds now total $25,411, an increase of $2045. Not bad considering since this includes my holiday damage. More analysis on these results later…
Posted in Goals | 2 Comments »
Wednesday, December 29th, 2004
Here are the results from the Deals & Offers I have posted this month. I try to only post the offers that I think are good enough to apply for myself:
Free 10,000 Delta SkyMiles - 10,000 miles received, took a week! Nice and easy, although it only lasted a day.
$100 from Fidelity w/ Deposit - $100 received! Took only two days, only tied up $10k for a about a week including transfer time.
$50 Amazon Credit for Opening 529 - nothing yet, but not worrying.
$50 from MetLife Bank w/ Deposit - nothing yet, but it hasn’t been 90 days yet.
Not quite as good as perhaps stock returns, but remember, this money needs to be kept somewhat safe and liquid for a house purchase in a few years.
Posted in Deals & Offers | No Comments »
Wednesday, December 29th, 2004
Here are the results from the Deals & Offers I have posted this month. I try to only post the offers that I think are good enough to apply for myself:
Free 10,000 Delta SkyMiles - 10,000 miles received, took a week! Nice and easy, although it only lasted a day.
$100 from Fidelity w/ Deposit - $100 received! Took only two days, only tied up $10k for a about a week including transfer time.
$50 Amazon Credit for Opening 529 - nothing yet, but not worrying.
$50 from MetLife Bank w/ Deposit - nothing yet, but it hasn’t been 90 days yet.
Not quite as good as perhaps stock returns, but remember, this money needs to be kept somewhat safe and liquid for a house purchase in a few years.
Posted in Deals & Offers | No Comments »
Tuesday, December 28th, 2004
In addition to the many good books out there, you can get a pretty decent grasp of the investing world just by surfing around a bit. Many big sites have in-depth mini-universities. There is a lot of overlap and the some of the advice is pretty generic, but I still use them as resources whenever a question pops up. Here are a few:
CNN Money 101
Kiplinger.com Basics: Tutorials
SmartMoney University (My overall favorite)
MSN Money Decision Center
Posted in Tools & Calculators | No Comments »
Monday, December 27th, 2004
Wasn’t Die Hard a great movie? It’s even got a Christmas theme =). I can’t remember a single thing about the sequels though… Anyways! Diehards.org is a forum for people to discuss mutual funds, more specifically Vanguard mutual funds but not exclusively. The forum is a bit tedious to wade through, with tons of posts and little organization. However, the people there are very nice (even to newbies) and each have their own interesting spin on mutual funds and asset allocation strategies. Supposedly Mr. Bogle himself stops by occassionally. Here are some of the more interesting threads that I came across:
“The Intelligent Asset Allocator by Wm. Bernst” by 3515duck
“My Asset Allocation Plan” by Robin
“Newbie portfolio comments appreciated” by ramesh
“Single Target Retirement Fund in an IRA” by Arenal
Yippie Ky Yay…
Posted in Tools & Calculators | 1 Comment »
Sunday, December 26th, 2004
While A Random Walk Down Wall Street was more of a primer on investing in general, The Four Pillars of Investing by William Bernstein focuses on forming your portfolio. The four pillars are investment theory, history, psychology, and finally investment business.
The book uses statistics and research to support it’s conclusions, which are (briefly and in my opinion) that:
1) Markets go up and down, but timing it is hard if not impossible, and any success one may have is basically luck.
2) As risk increases, so does the return. (Ex. Small-cap stocks vs. Large-cap stocks.)
3) Yes, many actively-managed mutuals fund beat the market every year, but there is no way that you could pick them ahead of time. This year’s winners are just as likely to be next year’s losers. Stick with index funds with the risk-return profile that you desire.
4) The stockbroker makes most of his money on commissions and spreads. Mutual fund companies are similar.
5) Proper diversification in low-expense ratio products can bring you the best chance to keep your money and make it grow.
The book is pretty easy to read, with minimal math. I also briefly browsed Bernstein’s previous book, The Intelligent Asset Allocator, which has a similar focus but is very heavy in the math department. I’d read this book first and see if you thirst for the mathematical underpinnings. I didn’t. I’m forming my asset allocation now and will post it soon.
Overall Rating: 
(ratings explained)
Posted in Book Reviews | 9 Comments »
Saturday, December 25th, 2004
ModestNeeds.org is a non-profit 501(c) charity, operating predominanlty online, with a goal of helping people who live paycheck to paycheck survive past life’s unexpected speed-bumps and perhaps save them from a slippery slope to financial ruin or even homelessness. Most of their “grants” are less than $300 and go for things like unexpected medical bills. Much of it is based on the honor system, and all the money flow is very transparent and shown online. The neat thing is that it started (and continues) with a teacher giving 10% of his salary to others in need.
Instead of the $5 suggested monthly pledge, I only gave a one-time $20, but I thought I’d spread the word a bit as well. Happy Holidays!
Posted in Giving Back | 2 Comments »
Friday, December 24th, 2004
As the holiday blitz starts coming to an end, my family and I watched an interesting PBS program called Affluenza (there is also a book of the same name). As stated on the site, it talks about the high social and environmental costs of materialism and overconsumption. Did you know that 2/3rds of all newspapers is just ads? Or than the average house in the 1950s was just 900 square feet? Even more surprising, 70% of people visit the mall every week. On average, Americans shop six hours a week and spend only 40 minutes playing with their children.
I don’t have kids yet, and I hate going to the mall with a passion, but I definitely feel overwhelmed by the amount of ads out there. I’m somewhat comforted by the fact that with my TiVo, I now watch virtually no TV ads. It’s kind of nice not knowing what is trendy or what’s on sale. I also use an internet pop-up blocker to nix as many ads as I can. As for materialism, I can’t say I don’t get distracted by plasma HDTV’s and the latest gadgetry. I love my laptop and home wireless network. But this show helps put things into perspective a bit. Is it a bit ironic that I checked it out for free at the local public library?
Posted in Frugal Living | 2 Comments »
Thursday, December 23rd, 2004
I just got back from a trip to Costco to use up the rest of our Healthcare FSA for the year. If you put money into it, you only have a week left to buy things to “use it or lose it”.
Some suggestions that qualify:
Contact Lense Solution
Extra Contacts or Eyeglasses (at Costco you pay when you order.)
Headache or Flu/Cold medicine (I didn’t get a flu shot this year, like many.)
Digital Thermometers
First Aid Kits, Bandages, Hydrogen Peroxide, etc.
Need more ideas? Drugstore.com even has an “FSA” area that you can browse. I’d be careful to print out the right screen to get an official receipt your FSA administrator will accept.
Posted in Frugal Living | No Comments »
Wednesday, December 22nd, 2004
As I am reading up on mutual funds and investing currently, I can see why so many people let others do the work for them. I mean, there are people trained to do this, so why not, right? Wrong. Especially for people with net worths under a million dollars.
As noted in this CNN Money article and another MSN article, most brokers that service us non-millionaires such as Edward D. Jones or American Express Financial Advisors are simply salespeople who get their money from “revenue sharing”, aka commissions. You can even read about the job here or here. Note that your salary in both places is heavily dependent on commissions.
These kickbacks, er, “revenue sharing”, usually mean mutual funds with loads or various insurance products that sound really good but aren’t. I’ve recently sat down with these people, and they are slick - usually attractive and charismatic. But once you ask them pointedly about the fees and why they don’t recommend no-load mutual funds instead, or about actual returns on the portfolios they manage compared to the overall market, they get a bit nervous. It was a good learning experience though, it reinforces my interest in doing the research myself and buying no-load no-transaction-fee mutual funds using Vanguard, which is actually owned by its shareholders.
Posted in Retirement | 4 Comments »
Tuesday, December 21st, 2004
The details of the offer are pretty much layed out on this website (the initial address looks shady, but the application link is to https://www.metlifebanksecure.com, a legit website). However, if you apply by phone and use the code “CPD19″ and say you saw it in an ad in USA today, the minimum is only $5,000 instead of $10,000. You must keep the money there for 90 days to get the bonus.
You may have noticed, I participate in a lot of these bank offers. The main goal is to increase the earnings of my current large cash deposits. For instance, $50 on $5000 in 90 days is about 4% APR by itself. Add in the current 2.18% APR (2.2% APY) and you are earning 6.18% APR on a $5,000 deposit for those 90 days, not too shabby for an FDIC-insured account. For many people this just isn’t worth the trouble, but it’s almost a hobby for me. In addition, if you have the ability to borrow money at a lower interest rate, there is a real arbitrage opportunity.
Posted in Deals & Offers | 2 Comments »
Monday, December 20th, 2004
Ok, all the gifts are bought and sent. Everyone talks about how Christmas isn’t about buying stuff for people, but I don’t mind exchanging gifts with people (I do hate crowded mall parking and shopping, though). As since this is the first year where both my wife and I have jobs, we went a bit crazy this year. After totalling the receipts:
Total on gifts: $1060
Shipping: $130
———————-
Total: $1190
According to this article at MSN Money:
Depending on which survey you read, during the holidays Americans last year spent an average of about $483 (The Conference Board), $853 (Roper), $1,600 (Consumer Credit and Counseling Service) or $1,656 (American Express).
So I am right at the average of all those data points ($1148). That is definitely the most I’ve ever spent for holiday gifts - of course, my family has grown significantly since getting married. I won’t fret though, as I am going to be paying off all these credit card bills in full as they come in. However, it will definitely put a dent in my mid-term goal progress.
Posted in Frugal Living | 2 Comments »
Sunday, December 19th, 2004
After setting my Short-Term Goal for this month, I am now setting my Mid-Term Goal. As I have mentioned, I plan to buy a house in an area with insane real estate prices for the long term for family reasons. As we are planning to move in mid-2007, that is the target date. $100,000 in non-retirement accounts will be enough for a good-sized downpayment, as well as other incidental costs.
Let’s check on the current status - If I contribute $14,000 to my wife and I’s Roth IRA in January for 2004/2005, my net worth will look like:
Non-retirement: $23,366
Retirement: $32,384
Thus, I am 23% to my goal, with 2.5 years remaining. That means my required savings and earnings pace will have to amount to $2555/month. That’s going to be tough, the stock and bond markets will hopefully help me out. If I assume a certain earnings rate, then my monthly savings amount may be more reasonable. I will have to consult my economics-trained friends! My other option is to put less into retirement.
Posted in Goals | 4 Comments »
