How You All Budget Tuesday, March 21st, 2006
My ‘How Do You Budget?‘ post was a nice success, and the giveaway winner has been notified. Here is a breakdown of the replies:
Archive for March, 2006
Google Finance Beta Launched Tuesday, March 21st, 2006
Apparently this is the big news today. Check out Google Finance for yourself. More evolutionary than revolutionary, but as always competition is good, and will lead to more improvements for all finance sites. Yay AJAX.
Received My $50 HSBC Checking Bonus Tuesday, March 21st, 2006
I got my $50 bonus from HSBC for opening up a Smart Package Checking with them yesterday:
Portfolio Option #3: Just One Fund Monday, March 20th, 2006
Ah, mutual fund companies love your money, and fully realize many people are lazy, busy, or just don’t want to deal with money. So they created the All-in-One fund. The one I like the best for our purposes is the Vanguard Target Retirement 2045 Fund (VTIVX). I don’t really care about the dates on the funds, as each company does things a bit differently. Let’s look under the hood. Currently, VTIVX has the following underlying funds:
Vanguard Total Stock Market Index Fund (VTSMX) - 70.4%
Vanguard Total Bond Market Index Fund (VBFMX) - 12.1%
Vanguard European Stock Index Fund (VEURX) - 11.8%
Vanguard Pacific Stock Index Fund (VPACX) - 5.7%
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Where Am I On The Efficient Frontier? Monday, March 20th, 2006
When I talk about maximizing your return (reward) for a given amount of risk, that is called being on the Efficient Frontier. For a very neat illustration of this, check out this Interactive Risk/Reward Chart from IFA, which lists 15 index portfolios as well as 20 of their suggested portfolios.
The individual index portfolios illustrate that individual asset classes like 1-Yr Bonds, Emerging Markets, or Micro Cap each have their own risk/reward characteristics. But, if you combine a bit of each, you can make a nice happy combination to optimize your risk/reward ratio. Why take any extra risk without more reward? That nice sloping line is the Efficient Frontier. My portfolio options are somewhat similar to the #80 dot, but with some tweaks to minimize expenses and complexity.
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Portfolio Option #2: Keep It Simple Sunday, March 19th, 2006
Now, let’s see if we can take the slice and dice portfolio option and make it a bit simpler, and hopefully avoid all extra fees.
Theoretical Allocation
20% S&P 500 (VFINX or VTGIX)
20% Large Cap Value Index (VIVAX)
20% Small Cap Value Index (VISVX)
10% REIT (VGSIX)
20% Total International Index (VGTSX)
10% Intermediate-Term Bond (VFICX)
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Portfolio Option #1: Slice And Dice Saturday, March 18th, 2006
Man, figuring out a good set of funds to work into your asset allocation plan is hard! There are so many different funds to choose from. So I’ve decided to break it down into three possible scenarios that I can then choose from, varying from complex to super-simple. The first scenario is to pick a variety of funds that each focus on a specific asset category. This will result in more complexity and possibly higher fees, but in theory may result in better long-term returns.
First, I’ll list the funds that I would use in theory, and then I’ll list how they would actually fit in reality into our two Roth IRAs, one Traditional IRA, and taxable accounts. The goal is to put the most tax-inefficient funds into the most tax-deferred accounts.
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Gee, Thanks Cingular Saturday, March 18th, 2006
After I got my education discount from Cingular, I ended up with two account numbers and some confusion ensued. In the end, I guess I had a bit of a balance left over, so they generously sent me this check:
Asset Allocation: How Much Risk Would You Like? Friday, March 17th, 2006
As mentioned before, our goal when investing is to maximize the potential return for the amount of risk we decide to take. But how do you find that out? It seems the traditional way to decide this is through what financial planners call a Risk Questionnaire. You answer a series of multiple choice questions, and in the end it suggests an approximate asset allocation, usually telling you how much to put into stocks and how much in bonds.
Having more stocks give you higher overall returns, but higher volatility. Having more bonds does the opposite - it gives you lower returns, but decrease the up and down swings of your overall portfolio. Let’s try out some online risk surveys and see what comes out…
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No Double-Dipping For Me Thursday, March 16th, 2006
If you love getting a good deal and have a partner that shares your passion, then you probably already know that you can double your pleasure by both using the same coupon (one per person, right?) or signing up for bonuses separately, and then getting double the money!
Alas, I, who truly loves wringing money out of companies, has a wife who hates this stuff. She works hard and controls her spending well, but is the type of person who chooses which credit card to carry based on how cute it looks. The words ‘S&P 500′ mean nothing to her. There could be a $1,000 bank bonus and she wouldn’t care. I can’t even sign her up for offers myself anymore, since she really hates having to deal with customer service reps if something goes wrong. The last thing she signed up for was the $100 gift card from Citi, and only after I did it first (and convinced her she could spend it on cute stuff). But I still love her =) So - does your better half care about money as much as you?
SNL Skit - Don’t Buy Stuff You Can’t Afford Thursday, March 16th, 2006
This video has been floating around for a while now, but since it’s great Friday material, check out it if you haven’t already - Saturday Night Live - Don’t Buy Stuff You Can’t Afford. “It’s funny ’cause it’s true.”
Book Review: The Intelligent Asset Allocator Wednesday, March 15th, 2006
The Intelligent Asset Allocator (IAA) by William Bernstein does exactly what it says on the cover, it teaches you ‘how to build your portfolio to maximize returns and minimize risk’. However, I would recommend that 95% of readers not buy it. Huh? Instead, I would recommend the later book by the same author, The Four Pillars of Investing (review). Even though Bernstein himself refers to it as for the ‘liberal arts’ audience, I have an engineering background and I still like Four Pillars much, much more. It just feels more refined and easier to follow.
Both books seem to cover the same general topics, with IAA giving you a clearer mathematical basis for his conclusions. To me, here are the main ideas within the book:
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Emigrant Direct Raises Rate to 4.50% APY Wednesday, March 15th, 2006
Don’t you love how they still claim to have America’s Highest Rate*? My Online Bank Comparison Chart would disagree. Of course, the fine print says “*Highest Nationally Advertised Annual Percentage Yield for unrestricted day of deposit to day of withdrawal savings accounts.” What the #$*% does that even mean?
New accounts can get a $10-$20 Emigrant Direct referral bonus, and my Rate-Chaser Calculator may be useful as well.
Need To Improve My Organizational Skills
Tuesday, March 14th, 2006
DFA Funds: The Porsche of Index Funds Tuesday, March 14th, 2006
While continuing my reading, it seems like Dimensional Fund Advisors (DFA) mutual funds are the Porsche of index funds. They are sexy in that they index everything under the sun (including stuff Vanguard does not) such as having a SmallCap Emerging Markets fund. They are well-engineered, being based on the best academic research available and having famous professors Fama & French on their boards. DFA tries to take indexing to the next level. Finally, they are exclusive as their funds are only available through approved financial advisors. Of course, this also means you’ll also have to have at least $100,000 to play with and pay annual advisor fees. I believe this is to avoid the performance hit on their funds from any active trading by untrained investors.
I don’t know if the fees are worth it, but, just like a Porsche, I still have this mysterious instinctual urge to own some!
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