Yearly Archives: 2012

New Year And A New Direction Blogging?

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I’ve been thinking in ways that I’ve never thought before, life has changed for me and lately I’m in a constant state of flux.

Last year, I wanted to accomplish certain goals and change my lifestyle all around.  I was only partially successful!

I was successfully in accomplishing measurable goals like weight loss and financial goals.

I was unsuccessful in change my lifestyle in a meaningful, productive or challenging way.

I’ve discovered that when I establish a plan, historically something always blocks me in my progress.  This year I was full steam ahead and making great progress when BAM, I got vertigo like symptoms that I’m still fighting to a certain extent.  I’m bending around the health problem, but it’s still taking a toll on my plans!

Another way that I’ve changed is that I no longer see just one or two ways, but instead I see an issue from multiple directions and angles.  I believe I’ve always seen a few multiple viewpoints, but now I see even more and from different sociology-economical viewpoints.  I’m not sure if I like it, but I also have come to believe that no one answer is right, but also that there are solutions that are statistically prone to a higher probability of success.

On the investing plain, I’ve discovered that often times, I won’t be able to predict what is a hit or miss.  Take texting for example, when it first came out I thought that it didn’t make sense, but now I find myself even using the medium.  How that for a kick in the pants!

Another thing is Facebook.  While I understood the appeal, I thought some things were better left in the past, but to my surprise others don’t seem to think the same as I.  I do think that it’s funny that a lot of people get arrested because they post their pictures or videos of crimes they committed on their Facebook account.  While I have a personal account, I don’t use it much because I value my privacy.  It’s a choice, no right or wrong way about it.

While I like writing about financial tips and tricks I’ve discovered and about my journey to financial independence, lately I thoughts are all over the place and it’s making it hard for me to concentrate on the niche that I enjoy so much.  Hopefully in 2013, my mind will settle and my health will return!

If I remain healthy, I’m hope to be able to bring more value to online environment by creating useful online applications (we’ll see).

Congratulations everybody for surviving 12/21/2012, in some ways it was the end of the “old” world.  Here is to the new world!  Make you mark!

Best,

Don

Year End Investment Portfolio Analysis

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So after writing the article called “Mutual Funds versus Stocks Why I Choose Stocks“, I wondered if my personal “regular account” gains from the past would trump my 401k gains.  I was especially curious about as long of a record period as I could calculate.  So ironically (or is it because I’m focused on this right now), I click on reports in my brokerage account, and low and behold, they have a calculation for the past 4 years.  So since they have such an excellent feature, I decided to perform a quick and dirty Year End Investment Portfolio Analysis!

So let’s start with my regular brokerage accounts first!  I have over 5 accounts (2 of which are my kids) and unfortunately I couldn’t eliminate my kid’s accounts.  They almost certainly pulled my average down a bit since I haven’t done quite as well in their accounts as mine (I have no idea why, but most likely because I set them in stocks and ignore their account a lot of the time).  Their accounts didn’t do horrible, but I’m sure it did pull my account average down a few percentage points.

It’s noteworthy to mention that if I was to include my ESPP money hack, I believe that my actually percentage would be up another 1/2 to 1 percent.

So here is my number for the past 4 years, 19.04% (annualized).  Not bad huh, especially since I believe the number would actually be closer to 20%

Brokerage Account Return for the Past 4 Years

Last 4 years

In my 401k, my return for this period was 11.6%, not horrible but less than the S&P 500’s return which was around 16% per year (or close to this number).

So I was pleased with my 19% (really more like 20%) number (and if you take out my kids account from the equation, the return would have been higher)…  I think my Year End Investment Portfolio Analysis verifies that I’m doing okay investing in stocks versus mutual funds!

If I were to just let the account balances ride out with no new contributions to the principal to either my 401k or regular brokerage accounts, it would take a bit more than 10 years for my regular brokerage account balances to pass my 401k balance.  So I was a little too optimistic on my regular brokerage account passing my 401k balance, but it’s still fun to have the my stocks (regular accounts) compete against my mutual funds (my 401k balance).

Here’s to a great new year!

Don

 

 

 

End of World Financial Plan Sort Of

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Well, according to some, tomorrow will be a big day from a world destruction standpoint.  I figure what better way to start the kickoff than to write an “End of the World” Financial Plan.

First let me say I’m not buying water!  Instead I’m buying Kool Aid!  Yep, why not get some caloric value out of the substance that I’m drinking.  Besides, I’d be a hero to my kids.

Kool Aid Bottles

Next, instead of buying nutritional food, I’m buying crates of ramen noodles!  You see ramen noodles are the frugal doom-dayer’s choice.  I mean does it really matter what the food you eat as long as it works, why not go doomdayer frugal?  Of course, I’ll buy some cheap vitamins too, erh actually I already have them so scratch that.  Perhaps kool aid flavored ramen noodles might taste a bit odd, but we’ll make do.  Oh, in case your curious, I have a camping burner that I’m going to use as the heating source to cook the ramen noodles.  We’ll sure miss our microwave.

Superglue, yep superglue is on my list!  It’s amazing what that stuff can bond together.  Besides, I read on the internet that zombies hate the smell of superglue!  And of course duct tape!  I actually seen a show were someone made a sailboat from duct tape.  And it worked and keep them afloat for at least 1 day!

Okay, enough negativity, what happens if the world doesn’t end?

Well, first I’m going to act as if it did from a spending perspective (except for future vacations).

So instead of drinking lattes and the cursed McDonalds Egg Nog milk shakes (yeah, I’ve been drinking way to many of those), I’m going to drink water or flavored water as I have in the past (um, not Kool Aid though, hopefully)!  Based on previous experience, I should be able to drink a glass at a cost of around 5 cents per glass versus the over $2.60 price for a small.

Next I’m going to try and increase my side income by 50% next year, and hopefully my overall income by an equal 50%.  I’m going to do this by working harder at the side income of things, and as for the employed income, I’m planning on picking up some side “employed” work!

Everything depends on my health.  It’s been a bit off since summer this year, but hopefully next year it will be a thing of the past!

Okay, I’m leaving now, but I just want to say that I really have no fear of the end of the world tomorrow.  If it were to happen, being afraid of it will do me no good.  Oh, and there is no way I’m drinking Kool Aid… that was totally a joke!

Bests,

Don

 

Mutual Funds Versus Stocks – Why I Choose Stocks

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Here is a shocking truth…  I don’t own any mutual funds in my regular brokerage accounts or Roth IRA anymore.  In fact, I wouldn’t own any mutual funds if it were for the fact that my employer’s 401k only has mutual funds as investment options.

Now you might think that I’m crazy, but surprisingly I’m not.  You see, mutual funds are too expensive of an option for me to own.  You don’t think so, then let me point out the ways in which mutual funds are expensive.

Let’s say that you have 10 thousand dollars and you want to invest it all in the financial markets, here’s how mutual funds versus stocks compare:

It’s free to put the money in a mutual fund, but each year the mutual fund charges operating expenses of 1% on the balance held within the mutual fund.  So if I bought 1 stock with the 10k, the transaction cost me around $10 and nothing at the end of the year.  With a mutual fund it initially cost me $0, but $100 at the end of the year.  Every year after the initial purchase my stock purchase cost me nil, but the mutual fund will cost me $100 each and every year that I own it!  TELL ME THAT’S NOT EXPENSIVE!  In some ways, buying individual stocks is a very frugal approach to investing.

Now let’s jump forward 10 years after investing 10k each and every year.  Not considering stock appreciation, your balance would be 100k.  At 100k, if you do nothing with the stock purchase it still cost you nothing per year, but the mutual fund is now charging you 1 thousand dollars a year!

Another financially hurtful thing with mutual funds is when the balance of the mutual fund is down, and year-end comes rolling around, the mutual fund company still takes their operating fees out of the balance.  To me this is like rubbing salt into an open wound, or kicking a guy when he’s already down.  The fund manager lost me money AND is still charging my for that loss.  nice…

I remember in the past a few bloggers that were college professors reprimanded me in the comment sections for not investing in mutual funds, but quite frankly, I’ve done much better in my regular brokerage account than my 401k.  So while I contribute less money to my regular brokerage account than my 401k, it has dramatically been rising in value and threatens to catchup to my 401k balance in 10 years or less.  Obviously, I’m happy with my non-401k balances catching up to my 401k balance, but I have to wonder about how great of an investment mutual funds and 401k that only invest in mutual funds really are?  One could advanced the idea (or is it really a fact) that the big winners with mutual funds and 401ks are the financial institution that provide such financial instruments.

As I was mentioned above that I was (gently) reprimanded, but perhaps people without experience shouldn’t do so without experimenting first?  Just because you repeat things that other people write about in a book, in front of college class, doesn’t mean that you know it all!  Or maybe I’m the exception to the rule and perhaps their route is best for the masses?  After all, I did pay off my house in about 10 years, and that kind of make me an odd duck.  Did I mention that by paying off my house early I was able to “not” pay 100k in interest to the banks.  What was I thinking… lol.

Perhaps if you are already rich it doesn’t matter.  Unfortunately I’m not so I have to go the frugal route and purchase my own individual stocks, etc.

So in conclusion, if you do the homework, stocks are a much more frugal and possible financially rewarding approach to investing.  If you are new to the game, and don’t feel comfortable doing it yourself, then don’t.  I personally have read tons of investment books and have an innate understanding of the stock market behavior and I understand the financial aspects that make a company “undervalued” so good, investment.

Bests,

Don