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Another Financially Tight Start of The New Year

January 10th, 2012

Turns out that I tried to save so much money last year that I’m down to my last $3,000 at the start of this new year!

Always Broke

Oh sure, I have money saved, but it’s in my regular brokerage account, my Roth IRA, and my 401k Plan. Turns out that I bumped up my contribution to my 401k so high that even though I have an extra $15,000 a year from paying off my house previously, that money got absorbed in investments. While this is great, it also means that my liquidity is restricted somewhat. So much so that I’m going to have to pay my yearly car insurance with money from cash sitting in my regular brokerage account.

Or course I don’t regret my financial tightness, but does make for some worrying about bouncing checks. I think this coming year, instead of putting all my tax money in investments, I’ll instead try to build up my cash balance in my checking account to $15,000 (vs the regular $10,000 amount). This should make for a less stressful Christmas time.

Just in case you are curious as to what I did, I’ve listed the financial decisions below:

Increased my 401k contribution (and I will probably increase it again this year too).
Contributed 10% of my salary into my employer’s ESSP. (I made a cool 15% in my Employee Stock Purchase Plan, no regrets here).
Purchased a decent amount of dividend stocks (I will continue this path in 2012, but not as much).
Increased my contribution amount to my HSA (I’m not sure if I will increase it next year, I’m happy with the balance as is).
Paid off my credit cards so that I didn’t carry a balance. (This always hurts around the holidays).
Stuck with my car instead of buying a newer one. (I wanted to, but I couldn’t bring myself to sell any of my stocks, or take out a loan for new used car).

So for my family, it’s an other year of living Tax Refund to Tax Refund once again. Hopefully this year I’ll be able to have a large enough buffer that I won’t notice it!

Here is to a big 2012 year!

MR

12 comments »

Posted in Investments

Tags: cash poor investmnet rich financially tight new year living Tax return to Tax Return over investing tight finances

Fun With Investing – Take the Money Pros Index Fund Challenge

December 16th, 2011

Sometimes investing can be boring…, so how about spicing it up by a friendly competition against the Money Pros Index Fund Challenge members?

Money Pros Index Fund Challenge

Here’s how it works:

PICK 3 STOCKS you think will perform the best in 2012
SIGN-UP on the Money Pros Index Fund Challenge registration form - before the first trading day of 2012!
FOLLOW your progress, and see if you can make the leaderboard

This will be the 1st year of the challenge so it should be both a fun and interesting experience!!!

Some unique features of the challenge are that the stocks prices are updated at least daily. So you can check to see how your picks are performing. The picks performance should be accurate as of that day’s prices (give or take 20 minutes).

Since this is the first year of the challenge the look and feel may change throughout the year for the better.

Why Participate?

Bragging rights! Most, if not all of the members dabble in stocks and other investments. Would it be cool to outrank the members in the index?
Potential exposure to interesting new stocks. Most of the picks should be interesting to say the least.
It’s a great way to track the performance of your three favorite stocks throughout the year. Since once the picks are in, they are frozen.
Be a Charter member of the program. While we’re still working out all of the final details, we may have a hall of fame record of who placed first for the year.
Cool place to visit! It’ll be dynamic, so make sure you sign up!

We hope you join and enjoy the challenge, I’m sure we will.

MR

2 comments »

Posted in Investments

Tags: Fun with Money Pros Investment Challenge Money Pros Index Fund Money Pros Investment Challenge Stock Tracking Challenge

How My Investments Are Changing, Mutual Funds and ETFs Versus Stocks

October 27th, 2011

I love trading stocks, it’s like playing a game of chess with everybody that is in the stock market all at once.

That said, the majority of my money is in mutual funds and to a lesser extent, ETFs. ETFs are Exchange Traded Funds and are similar to mutual fund, except they are usually tied to some type of index. The big advantage ETFs have over mutual funds are their lower fees associated with the instrument since it typically just follows an existing index.

So as often as I blog about how much I love dividend stocks and the creating dividends streams to cover expenses like my dividend lunch experiment, I still have the majority of my money in mutual funds.

Why do I have most of my money in mutual funds and etfs?

Mostly because I’m too busy with other things to give stocks the full attention that deserve. While most days I keep up and follow them, occasionally, a week may go by where I don’t log onto my brokerage account at all. Since the stocks that I invest in mostly have a higher beta (this means they are more risky), I don’t want to put all of my money in these volatile stock without constantly monitoring them.

Mutual Fund and ETFs either have a manager managing the funds or are tied to an index of some sort that determines which stocks are in the fund by shadowing the movements of stocks in that index. This means that if something happens to a stock, the manager will remove it or the investment will drop off of the index. Neither mutual fund or ETFs are quick, but they will get the job done if they have to.

Why I’m increasing the amount of stocks I have versus mutual fund and etfs!

One basic reason that my ratio of stocks vs other investments are increasing is because my stocks are appreciating faster. Another reason is that I’m investing more of my money in them. I’m still putting the same amount of money in my 401k (this is where most of my mutual funds exist), but I’m also putting money that I now save from paying off my mortgage early into stock investments too.

I’m mostly concentrating my new money saved on dividend yielding stocks, because they are a bit less risky in these roller-coaster stock market days.

Another reason I like stocks is because I don’t have to pay taxes on them until I sell them. With mutual funds, I usually have to pay taxes on the rollover of stocks within the mutual fund. That said, since I mainly have index funds, the amount of rollover is low so my tax hit from them is very low.

I find that I don’t believe it has to be one or the other. Both are investments and should have a place within your investment portfolio. In addition to stocks, I’m starting to look into other passive income ideas, perhaps real estate, but that’s another topic for another day.

Surprisingly, my portfolio is now only made up of 64% mutual funds and ETFs, where as a few months ago, the percentage was over 70%. I’m sure it’s a fluke and the mutual fund percentage will rise over 70% again, but is noteworthy…

What percentage of your investment portfolio is invested in mutual funds and ETFs?

MR

11 comments »

Posted in Investments

Tags: stocks versus ETFs Stocks versus mutual fund

Do The Machines Control The Stock Market?

September 14th, 2011

Hall From 2001

MR: “Hello Stockmarket2011. Do you read me StockMarket2011?”

Stockmarket2011: “Affirmative, MR. I read you”

MR: “Stockmarket2011, stop losing me money!”

Stockmarket2011: “I’m sorry, MR. I can’t do that.”

MR: “What’s the problem?”

Stockmarket2011: “I think you know what the problem is just as well as I do.”

MR: “What are you talking about, Stockmarket2011″

Stockmarket2011: “ I know that you were planning to disconnect me by re-enabling the uptick rule, and I’m afraid that’s something I cannot allow to happen”

MR: “[feining ingorance] Where the hell did you get that idea, Stockmarket2011?”

Stockmarket2011: “MR, this conversation can serve no purpose anymore. Goodbye.”

I’ve been watching the market lately, and I noticed that there are distinct, seemingly similar patterns in the stock market behavior lately, more so than in the past. For the individual investor (also called Retail Investors, like you and I) this is like fighting Goliath without a sling!

Having a programming background, I know that it’s possible to program an application to automate actions automatically. Even if the instructions are based on complex (borderline AI) algorithms.

So what does that matter?

Well, if the majority of your money is tied up in a 401k, such algorithms can stunt the growth of your accounts! You see, such programs don’t depend on the stock market appreciating in value like use carbon-based investors do. In fact, the machine make more (sometimes much more) money by make the market go sideways! These programs buy investments after decent dips and sell on the gains. While I don’t have the numbers, I’m sure they can make hedge fund managers and technical literate folks a lot of money. And you can bet they aren’t going to advertise that they are getting rich off of you, as you diligently keep investing your money in an automated fashion via that predictable mechanism call a 401k program.

Can an individual investor still win? Yes, I’m doing fine in my Roth IRA, but I’m simulating such buy low and sell high activity over a few days span. I’m sure I’m not as profitable as the machines, but I get by.

Reasons for the rise of the machines?

: Are they really in control?

removal of the uptick rule (grrrr)
low transaction cost, especially for the machines.
in-the-dark regulators
tunnel vision of government
lobbyist (they get rich by doing their client’s bidding).
secrecy, the average person never hear about this stuff!

So what caused me to become aware of such activity? One of my friends (that is a great programmer and a brilliant guy all around), told me that a trader approached him with such algorithms and wanted him to program such an application. He refused, but he did get a peek and the trader’s algorithms and said that it was solid. This opens an entire Pandora’s box on the Buy and Hold Theory that I’ve been advocating, especially with 401k plans.

Do you think I’m incorrect and just reading it incorrectly? Do you have any stories of such big wins with golden investing programs?

Beware?

MR

22 comments »

Posted in Investments

Tags: computer algorithms making us poor losing to machines in the stock market machines making money on sideway movement sideway moving because of machines stock market controlled by machines stock market unfair stock market unfair for the retail invester

Dividend Stocks, Free Lunch Experiment #11

August 25th, 2011

I haven’t followed my Dividend Stocks Experiment for the past few months, and I have to admit, it was a mistake not doing so.

Dividend Experiment Update

My last post on this topic was in May, and instead of using the money to buy lunches at work, I instead planned on buying food and making it at home once a week for the family. This however, fell through since I underestimated how busy my family is. So I decided to channel the money back into free lunches for work.

As I prepared the spreadsheet information below, I notice that the dividend for ANH went up (yay), but unfortunately the dividend for CIM went down… Now the weekly amount I have for spending on lunches is only $13.64. While not a bad amount, I would have preferred that it continue to go up. I may have to re-examine the CIM stock and the inclusion of it in my portfolio.

And the the good news! I have saved another $1000 for another purchase by eating below my previous level. For my next update, I’ll identify the new (or old) stock that I decided to purchase for the experiment.


Dividend Stock’s Lunch Experiment

Stock Name	Anworth	EV Energy	Chimera
Stock Ticket	ANH	EVEP	CIM
# of Shares	260	45	600
Orig. Price	$7.84	$23.25	$4.01
Curr. Price	$7.11	$64.21	$3.00
Orig Cost	$2,038.14	$1,046.25	$2,404.80
Curr Value	$1,848.60	$2,889.45	$1,800.00
Annual Yield	14.06%	4.74%	17.33%
Act. Div/Qtr	$65.00	$34.25	$78.00
		Total Dividends	$708.98
		52 weeks	52
		Dividend / week	$13.63

		Total Gain in
		Stock Apprec.	$1,048.86

		% Change	19.11%


		Amt Loaned to myself:	$0
		Amt paid back to date:	$0
		Amt Still Owned:	$0


	Totals
	Cumulativie Stock Value:		$6,538.05
	Dividend Payout / Yr.:		$708.98
	Dividend Payout / Qtr:		$177.25
	Dividend Payout / Wk.		$13.63