Facing My Financial Fears: Estate Planning
November 22, 2006 @ 12:11 pm - Written by Trent
This week, The Simple Dollar is doing a five part series on financial topics that scare me just a bit. Researching and then writing about them will (hopefully) alleviate some of that fear
Other fears include buying a car and Roth IRAs.
Until recently, I’ve not thought about the need to plan for my passing in any real form. With what little I knew, I was pleased with intestacy for determining my assets, which basically meant that my wife gets everything, or in the event of simultaneous passing, my son gets everything, or in the case of a family disaster… well, I really didn’t care - the intestate law in my state was perfectly fine by me.
The first step I made in the direction of estate planning is that I simply drew up a list of specific items that I wanted specific friends and family to have upon my passing. Again, this is no real problem; I trust my wife to distribute these items.
But then I began to wonder what would happen if we both passed, and a whole nightmarish can of worms opened for me.
At first, I was just fine with intestacy, meaning that all of the cash would simply become the property of our son, but then I tried to imagine what would happen if our infant son was left with our full insurance amounts and in the hands of his guardians (the only aspect of our will is the definition of guardians for our son; we make no mention of any assets so intestacy will apply and probate can be avoided) and, as much as I trust them, I wondered what potentially might happen with that money.
I realized that I needed to set up a living trust so that my desires for my assets are clearly followed in the event of my death, but I’ve avoided the process because of the apparent complexities of such an instrument. Successor? Grantor? Trustee? Signing my assets over to the trust? It all made little sense to me and the documentation I’ve found in extensive internet searching isn’t entirely clear, either.
Every time I look at my son, though, it gnaws at me a little more. I’m failing him because of my own ignorance and avoidance of a situation I don’t understand, I keep telling myself. I know that the process is relatively simple and I know that I need to do it, but there’s one thing holding me back.
Fear.
Writing this has made me step up to the plate. I have set up a brief meeting with our family’s attorney, who will answer my questions for me for a very agreeable fee. I hope to enter the process of setting up a living trust as soon as my questions are answered.
http://www.thesimpledollar.com/2006/11/22/facing-my-financial-fears-estate-planning/
Wednesday, 1 July 2009
Facing My Financial Fears: Investment Risk
Facing My Financial Fears: Investment Risk
November 23, 2006 @ 12:01 pm - Written by Trent
This week, The Simple Dollar is doing a five part series on financial topics that scare me just a bit. Researching and then writing about them will (hopefully) alleviate some of that fear
Other fears include buying a car, estate planning, and Roth IRAs.
My fear of financial risk goes back to the stock market crash of 1929 and the subsequent bank collapses of the early 1930s. My grandfather was a young entrepreneur in the late 1920s who held almost all of his assets in either stocks or in a local bank; between 1929 and 1931, he lost everything he had. After that, he did all of his savings in large glass jars.
This rubbed off on me as a child. I would watch him keep money in jars all over the place on his property and when I would ask him why he didn’t put it in a bank, I would get a very angry old man railing about how banks stole all of his hard-earned money and that they’re all crooked.
I eventually started a savings account at a local bank, but before I did I insisted on a copy of the FDIC guarantee on the account and, for almost my entire life, I’ve either held my money in my hands or kept it in that bank.
This fear is really my grandfather’s fear, I guess; I worry that I will simply lose everything I have if I entrust it to others. Whenever I make a decision to move my money, I still do it with extreme care, checking the history of the bank and the insurance on the accounts. I now have savings at three different banks, though it took me a while to reach that point.
The next step was taking the risk of investing in a retirement plan. Even with 100% matching from my employer, I felt on some level that I was “giving away” money. I spent an entire day asking all sorts of questions to a financial planner (who apparently later indicated to others that perhaps I was a bit paranoid) before finally investing in a 403(b).
We’re not even talking about the risks of investing in the stock market, though once I was able to push through that first barrier, I began to slowly look at other types of investment as well.
I spent most of the last year carefully examining the possibilities of a mutual fund, thinking about it, weighing the multiple levels of risk (in my mind), and finally, I pushed past that fear. I opened a mutual fund account and made my first investment within the past week.
It was a major psychological hurdle for me to cross, but it is exhilirating to know that my money is now actually working for me instead of merely sitting somewhere, just reinforcing my fears.
http://www.thesimpledollar.com/2006/11/23/facing-my-financial-fears-investment-risk/
November 23, 2006 @ 12:01 pm - Written by Trent
This week, The Simple Dollar is doing a five part series on financial topics that scare me just a bit. Researching and then writing about them will (hopefully) alleviate some of that fear
Other fears include buying a car, estate planning, and Roth IRAs.
My fear of financial risk goes back to the stock market crash of 1929 and the subsequent bank collapses of the early 1930s. My grandfather was a young entrepreneur in the late 1920s who held almost all of his assets in either stocks or in a local bank; between 1929 and 1931, he lost everything he had. After that, he did all of his savings in large glass jars.
This rubbed off on me as a child. I would watch him keep money in jars all over the place on his property and when I would ask him why he didn’t put it in a bank, I would get a very angry old man railing about how banks stole all of his hard-earned money and that they’re all crooked.
I eventually started a savings account at a local bank, but before I did I insisted on a copy of the FDIC guarantee on the account and, for almost my entire life, I’ve either held my money in my hands or kept it in that bank.
This fear is really my grandfather’s fear, I guess; I worry that I will simply lose everything I have if I entrust it to others. Whenever I make a decision to move my money, I still do it with extreme care, checking the history of the bank and the insurance on the accounts. I now have savings at three different banks, though it took me a while to reach that point.
The next step was taking the risk of investing in a retirement plan. Even with 100% matching from my employer, I felt on some level that I was “giving away” money. I spent an entire day asking all sorts of questions to a financial planner (who apparently later indicated to others that perhaps I was a bit paranoid) before finally investing in a 403(b).
We’re not even talking about the risks of investing in the stock market, though once I was able to push through that first barrier, I began to slowly look at other types of investment as well.
I spent most of the last year carefully examining the possibilities of a mutual fund, thinking about it, weighing the multiple levels of risk (in my mind), and finally, I pushed past that fear. I opened a mutual fund account and made my first investment within the past week.
It was a major psychological hurdle for me to cross, but it is exhilirating to know that my money is now actually working for me instead of merely sitting somewhere, just reinforcing my fears.
http://www.thesimpledollar.com/2006/11/23/facing-my-financial-fears-investment-risk/
The Value of Personal Trust
The Value of Personal Trust
April 7, 2008 @ 12:30 pm - Written by Trent
A really good discussion about personal trust and honesty developed out of the most recent reader mailbag that I thought was worth discussing on its own. First of all, I made a pretty big mistake in my answer. I made a giant assumption that the readers called me on, and it’s worth discussing further.
On a very regular basis, I give cash gifts to people I trust who need them or could, at the very least, use them. I take this out of money that I have and just give it to people that could use it. I’ll give some cash to a relative to help that person cover their power bill. This is something that’s common and normal to me.
When I do this, I am pretty picky about who I give the cash to, but if they’re someone I trust personally, I don’t hesitate to do it. If I found out my grandmother was having difficulty keeping her house, I’d be right there with a check in hand to help her. If one of my cousins that I trust was trying to start a business and needed some seed money, a check would be in the mail in a heartbeat. I almost always do this without asking, and I don’t expect a dime back from them.
Why do I do this? I don’t need any sort of written agreement to know that if I needed something, these people I trust would be there for me. When those people are in a pinch, I will help them, no questions asked. When those people are trying to reach for a dream, I will try to boost them if I can.
To me, personal trust and personal relationships like these are more valuable than money. I can’t possibly put a cash value on knowing that if I lost my home, my family, my children, my job - everything - there are people who would take me in and care for me. I was able to make the leap to being a full time writer because of the support and trust and help given to me by family and friends. I rely on this - it’s an integral part of who I am.
Here’s another way to think about it, through the eyes of charities. I tend to not donate to charities unless I know them well. I need to either be intimately involved myself or have someone I deeply trust be involved before I’ll donate. When I do build that trust, though, I’ll write checks to those charities without even thinking. I’ll evangelize for those charities. I’ll do what I can to help them, because I trust them. I don’t worry any more about whether my check is really helping - I trust the charity, so I don’t worry about it. I don’t worry about what I’ll get out of it - I just trust that they’re doing the right thing for something I care about.
Quite often, I assume the same kinds of dynamics in other families and friendships - and I did so to my own detriment earlier. My response to a reader question about what to do with extra cash was to give it away to a trusted family member or a trusted friend, which is exactly what I would do. I’d look for someone I trusted and use that money to seed something they wanted to do, and I’d be very liberal about it.
My response, which basically just assumed much of this, said to give the cash to a trusted family member and then that family member would probably help with college. I also suggested that giving this money away - because it would provide the added kicker of helping with one’s financial aid case, might be unethical to some, but I considered it completely fair because it’s within the rules - nowhere does it outlaw giving away your money. I did not advocate sheltering money - that’s against the rules entirely.
This was met with instant derision that I was advocating truly cheating the system, and looking back on it, I can see where the outrage came from. The outrage comes from the sense that you should never trust anyone when it comes to money, and that’s a sensible and safe philosophy to live by. The only drawback is that you limit yourself in how much you can trust others, and that cuts you off from some things. Is that a good thing or a bad thing? It’s a personal call each person has to make.
A reader asked me:
Let’s turn the tables. If you randomly received a check for $10,000 in the mail from a relative with no note, what would you do with it? What do you think they would want you do to with it?
I’d probably call them up and ask them why they sent it. If they said, “It’s help for you getting started with your writing career” or something like that, I’d give a big “thank you” and put it in the bank. I can think of a lot of other reasons why I’d just happily accept the gift, and they’re mostly borne out of trust and long-term trusting relationships with people.
Honestly, I wouldn’t really question the gift very much, and this in itself is a demonstration of what I’m talking about.
Furthermore, I’m planning already to give my nieces and nephews some gifted financial help when they go to college. I have no obligation to do so. But their parents have helped me a lot during my young adult life.
Should that be reported on the FAFSA? I think it’s ridiculous to think so. There was no implication whatsoever that any help my brother or sister-in-law gave me, in the form of gifts or personal help or advice, was to be repaid in the form of some assistance to their children. If they had a windfall and mailed me a check right now without a note, I’d still not think of it as any sort of implication that I should assist their children with college.
This all translates directly to my advice to the earlier family. In essence, giving that money to Uncle Phil is just another kind of investment. It’s an investment in people, in trust, in a bond that can’t be quoted in dollars. If you give that money to Phil when he has a good use for it, you’ve probably cemented a bond with someone who will help you in countless ways throughout your life, in ways you see now and ways you don’t, in ways you can measure in dollars and cents and ways you can’t.
From my perspective, trust is about helping people you care for because you can and because you want to, not because you’re obligated to.
If this kind of trust seems alien to you, then you’re not alone. There are a lot of people out there who are guarded, and it’s usually because they’ve been bitten after trusting someone, or they’ve heard too many stories about trust falling apart. They call such trust “naive” or “foolish” - and maybe it is.
But when I go back to my hometown and spend an evening around people I trust that deeply, I realize I wouldn’t trade that sense of trust for anything in the world. It’s that valuable, if you can find it.
So what did I learn? First, I learned that assuming things about the relationships between others can usually get you into hot water. I assumed far too much about the trust in relationships in this family, and because of that, I gave advice that was probably not the best advice to give. I gave advice from my own heart, based on what I would do in that situation - if I had money that I was trying to get rid of in order to get in a better state for financial aid, the first place I’d look is my family, the people that I trust. In a family without that trust, my advice was horribly bad - it either implies an illegal financial agreement or it suggests just tossing your money into the breeze and watching it fly away. Trust makes all the difference, and I assumed too much of it.
Second, I learned that when you give money to others, the worst-case scenario is usually assumed by others. If I give some money to my uncle or my cousin, it’s reasonable to think that others are assuming I’m doing it for personal gain over the long haul, that I must be expecting to be paid back in some fashion. That’s not how I view the world, and viewing it that way takes a big stretch for me.
I’ve explained how I view trust, and how that view can skew things. How do you view trust? How deep does it go? How much value does it have for you? Have you ever been hurt by trusting too much? Have you ever been helped by relying on a trusting relationship?
http://www.thesimpledollar.com/2008/04/07/the-value-of-personal-trust/
April 7, 2008 @ 12:30 pm - Written by Trent
A really good discussion about personal trust and honesty developed out of the most recent reader mailbag that I thought was worth discussing on its own. First of all, I made a pretty big mistake in my answer. I made a giant assumption that the readers called me on, and it’s worth discussing further.
On a very regular basis, I give cash gifts to people I trust who need them or could, at the very least, use them. I take this out of money that I have and just give it to people that could use it. I’ll give some cash to a relative to help that person cover their power bill. This is something that’s common and normal to me.
When I do this, I am pretty picky about who I give the cash to, but if they’re someone I trust personally, I don’t hesitate to do it. If I found out my grandmother was having difficulty keeping her house, I’d be right there with a check in hand to help her. If one of my cousins that I trust was trying to start a business and needed some seed money, a check would be in the mail in a heartbeat. I almost always do this without asking, and I don’t expect a dime back from them.
Why do I do this? I don’t need any sort of written agreement to know that if I needed something, these people I trust would be there for me. When those people are in a pinch, I will help them, no questions asked. When those people are trying to reach for a dream, I will try to boost them if I can.
To me, personal trust and personal relationships like these are more valuable than money. I can’t possibly put a cash value on knowing that if I lost my home, my family, my children, my job - everything - there are people who would take me in and care for me. I was able to make the leap to being a full time writer because of the support and trust and help given to me by family and friends. I rely on this - it’s an integral part of who I am.
Here’s another way to think about it, through the eyes of charities. I tend to not donate to charities unless I know them well. I need to either be intimately involved myself or have someone I deeply trust be involved before I’ll donate. When I do build that trust, though, I’ll write checks to those charities without even thinking. I’ll evangelize for those charities. I’ll do what I can to help them, because I trust them. I don’t worry any more about whether my check is really helping - I trust the charity, so I don’t worry about it. I don’t worry about what I’ll get out of it - I just trust that they’re doing the right thing for something I care about.
Quite often, I assume the same kinds of dynamics in other families and friendships - and I did so to my own detriment earlier. My response to a reader question about what to do with extra cash was to give it away to a trusted family member or a trusted friend, which is exactly what I would do. I’d look for someone I trusted and use that money to seed something they wanted to do, and I’d be very liberal about it.
My response, which basically just assumed much of this, said to give the cash to a trusted family member and then that family member would probably help with college. I also suggested that giving this money away - because it would provide the added kicker of helping with one’s financial aid case, might be unethical to some, but I considered it completely fair because it’s within the rules - nowhere does it outlaw giving away your money. I did not advocate sheltering money - that’s against the rules entirely.
This was met with instant derision that I was advocating truly cheating the system, and looking back on it, I can see where the outrage came from. The outrage comes from the sense that you should never trust anyone when it comes to money, and that’s a sensible and safe philosophy to live by. The only drawback is that you limit yourself in how much you can trust others, and that cuts you off from some things. Is that a good thing or a bad thing? It’s a personal call each person has to make.
A reader asked me:
Let’s turn the tables. If you randomly received a check for $10,000 in the mail from a relative with no note, what would you do with it? What do you think they would want you do to with it?
I’d probably call them up and ask them why they sent it. If they said, “It’s help for you getting started with your writing career” or something like that, I’d give a big “thank you” and put it in the bank. I can think of a lot of other reasons why I’d just happily accept the gift, and they’re mostly borne out of trust and long-term trusting relationships with people.
Honestly, I wouldn’t really question the gift very much, and this in itself is a demonstration of what I’m talking about.
Furthermore, I’m planning already to give my nieces and nephews some gifted financial help when they go to college. I have no obligation to do so. But their parents have helped me a lot during my young adult life.
Should that be reported on the FAFSA? I think it’s ridiculous to think so. There was no implication whatsoever that any help my brother or sister-in-law gave me, in the form of gifts or personal help or advice, was to be repaid in the form of some assistance to their children. If they had a windfall and mailed me a check right now without a note, I’d still not think of it as any sort of implication that I should assist their children with college.
This all translates directly to my advice to the earlier family. In essence, giving that money to Uncle Phil is just another kind of investment. It’s an investment in people, in trust, in a bond that can’t be quoted in dollars. If you give that money to Phil when he has a good use for it, you’ve probably cemented a bond with someone who will help you in countless ways throughout your life, in ways you see now and ways you don’t, in ways you can measure in dollars and cents and ways you can’t.
From my perspective, trust is about helping people you care for because you can and because you want to, not because you’re obligated to.
If this kind of trust seems alien to you, then you’re not alone. There are a lot of people out there who are guarded, and it’s usually because they’ve been bitten after trusting someone, or they’ve heard too many stories about trust falling apart. They call such trust “naive” or “foolish” - and maybe it is.
But when I go back to my hometown and spend an evening around people I trust that deeply, I realize I wouldn’t trade that sense of trust for anything in the world. It’s that valuable, if you can find it.
So what did I learn? First, I learned that assuming things about the relationships between others can usually get you into hot water. I assumed far too much about the trust in relationships in this family, and because of that, I gave advice that was probably not the best advice to give. I gave advice from my own heart, based on what I would do in that situation - if I had money that I was trying to get rid of in order to get in a better state for financial aid, the first place I’d look is my family, the people that I trust. In a family without that trust, my advice was horribly bad - it either implies an illegal financial agreement or it suggests just tossing your money into the breeze and watching it fly away. Trust makes all the difference, and I assumed too much of it.
Second, I learned that when you give money to others, the worst-case scenario is usually assumed by others. If I give some money to my uncle or my cousin, it’s reasonable to think that others are assuming I’m doing it for personal gain over the long haul, that I must be expecting to be paid back in some fashion. That’s not how I view the world, and viewing it that way takes a big stretch for me.
I’ve explained how I view trust, and how that view can skew things. How do you view trust? How deep does it go? How much value does it have for you? Have you ever been hurt by trusting too much? Have you ever been helped by relying on a trusting relationship?
http://www.thesimpledollar.com/2008/04/07/the-value-of-personal-trust/
Personal Finance and Intrusion
Personal Finance and Intrusion
April 18, 2008 @ 8:00 am - Written by Trent
I’m worried about my grandmother’s finances. She lives on Social Security and a small pension from the state, but if that were all there was to her story, it would be fine - she owns her residence and is just fine in terms of taxes and debt. The problem is that her oldest son still lives with her and is a constant drain on her financial state. He’s simply incapable of holding down a job.
My grandmother is far too caring of a person to allow one of her children to be out on the street, so she allows him to live with her and has likely agreed to leave her home to him when she passes on.
The end result of this situation is that there are two adults living on a small pension and one person’s Social Security benefits. This worries me and makes me sad on a daily basis - I think about her and really wish there were a way I could help her with her situation. The only problem is that if I do financially assist her, that assistance will translate directly into spending money for her son, who I don’t really want to help because of how he’s draining away my grandmother’s golden years.
A big part of me wants to intrude in this situation. I want to somehow be able to storm in the door and somehow make everything all right for my grandmother.
In the end, though, this intrusion would serve no real purpose. She’s a grown woman with a caring heart who has the power to make her own choices, and she chooses to spend her extra money taking care of her son. It has very little to do with how I feel about it - it’s really her choice, not mine.
I hear often from readers who are faced with a similar situation in their own lives. They see a financial mess in the life of someone they care about and they desperately want to intrude in it. Much of the time, I feel like they’re writing to me for “permission” - some sort of approval of their intrusion.
My reaction is pretty much always the same: don’t intrude unless it directly affects you and even then, only intrude in business to the extent that you need to to protect yourself. Don’t stick your nose into someone else’s business - all you’ll do is create resentment and almost always you’ll fail to solve the problem you wish to address. Often, you’ll make the problem worse.
Instead, just let the people you care about know that you’ll help them if they need it, in the form of advice or financial assistance or whatever the situation calls for. Sit down with just that person (or persons), let them know that you care for them, and let them know that you want to help them specifically, but don’t push them. Let them make the choice - it is their life, after all.
Of course, some situations demand that you protect yourself, and you should always take any measures you feel are necessary to protect yourself. Just make sure that everyone involved in that protection is on the same page - that means, if you’re married, talk over such decisions with your spouse.
As for my grandmother, I talk to her on the phone every week and I’ve had a few conversations with just her about her situation, just letting her know that if she ever needs anything at all, I’m just a phone call away and I’ll help her in any way that I can. But I won’t make her pick up that phone - it’s her life to lead and her choices to make, even if I don’t agree with the choices.
http://www.thesimpledollar.com/2008/04/18/personal-finance-and-intrusion/
April 18, 2008 @ 8:00 am - Written by Trent
I’m worried about my grandmother’s finances. She lives on Social Security and a small pension from the state, but if that were all there was to her story, it would be fine - she owns her residence and is just fine in terms of taxes and debt. The problem is that her oldest son still lives with her and is a constant drain on her financial state. He’s simply incapable of holding down a job.
My grandmother is far too caring of a person to allow one of her children to be out on the street, so she allows him to live with her and has likely agreed to leave her home to him when she passes on.
The end result of this situation is that there are two adults living on a small pension and one person’s Social Security benefits. This worries me and makes me sad on a daily basis - I think about her and really wish there were a way I could help her with her situation. The only problem is that if I do financially assist her, that assistance will translate directly into spending money for her son, who I don’t really want to help because of how he’s draining away my grandmother’s golden years.
A big part of me wants to intrude in this situation. I want to somehow be able to storm in the door and somehow make everything all right for my grandmother.
In the end, though, this intrusion would serve no real purpose. She’s a grown woman with a caring heart who has the power to make her own choices, and she chooses to spend her extra money taking care of her son. It has very little to do with how I feel about it - it’s really her choice, not mine.
I hear often from readers who are faced with a similar situation in their own lives. They see a financial mess in the life of someone they care about and they desperately want to intrude in it. Much of the time, I feel like they’re writing to me for “permission” - some sort of approval of their intrusion.
My reaction is pretty much always the same: don’t intrude unless it directly affects you and even then, only intrude in business to the extent that you need to to protect yourself. Don’t stick your nose into someone else’s business - all you’ll do is create resentment and almost always you’ll fail to solve the problem you wish to address. Often, you’ll make the problem worse.
Instead, just let the people you care about know that you’ll help them if they need it, in the form of advice or financial assistance or whatever the situation calls for. Sit down with just that person (or persons), let them know that you care for them, and let them know that you want to help them specifically, but don’t push them. Let them make the choice - it is their life, after all.
Of course, some situations demand that you protect yourself, and you should always take any measures you feel are necessary to protect yourself. Just make sure that everyone involved in that protection is on the same page - that means, if you’re married, talk over such decisions with your spouse.
As for my grandmother, I talk to her on the phone every week and I’ve had a few conversations with just her about her situation, just letting her know that if she ever needs anything at all, I’m just a phone call away and I’ll help her in any way that I can. But I won’t make her pick up that phone - it’s her life to lead and her choices to make, even if I don’t agree with the choices.
http://www.thesimpledollar.com/2008/04/18/personal-finance-and-intrusion/
The Intelligent Investor: The Investor and His Advisers
The Intelligent Investor: The Investor and His Advisers
December 19, 2008 @ 8:00 am - Written by Trent
This is the eleventh in a weekly series of articles providing a chapter-by-chapter in-depth “book club” reading of Benjamin Graham’s investing classic The Intelligent Investor.
Warren Buffett describes this book: “I read the first edition of this book early in 1950, when I was nineteen. I thought then that it was by far the best book about investing ever written. I still think it is.” I’m reading from the 2003 HarperBusiness Essentials paperback edition. This entry covers the tenth chapter, which is on pages 257 to 271, and the Jason Zweig commentary, on pages 272 to 279.
I found it very refreshing that in this chapter, Graham didn’t just focus on professional investment advisors when using the term “advisor.” Instead, under this umbrella, Graham included relatives, friends, local bankers, brokerage firms and other investment houses, financial service providers of all stripes, and professional finance advisors.
Why is this distinction important? We don’t just get our financial advice from “financial advisors.”
Take this blog (and countless others like it). We’re not financial advisors. I tend to think of myself as closer to the definition of “friend” than of financial advisor. I’m simply out here sharing my own reflections and experiences, letting people know where I succeed and where I fail.
Take the talking heads on CNBC. Those people may be financial advisors, but they’re speaking in a role where they’re not actually providing financial advice. They’re actually just being entertainers. Have you ever seen the disclaimer that precedes or follows any segment with Jim Cramer?
Yet there’s all this advice out there, and we do incorporate it into our knowledge, whether consciously and directly or not. The question is how can we know what knowledge is actually worthwhile and what isn’t? What advice is worth paying for and what isn’t? That’s really what Graham is seeking here.
Chapter 10 - The Investor and His Advisers
Even though this chapter is fairly long, Graham’s principles for how to deal with personal finance advisors - and personal finance advice - are pretty simple.
Be wary of all advice. You should never absolutely trust anyone with your money. Couple their recommendations with your own research and have an idea of what you want. Don’t just follow blindly with whatever an advisor says.
Avoid people who claim absurd returns. If returns seem to excessively beat the market, stay away. Almost always, it’s either a scam or it’s a person playing a very short term game that’s likely not to work next year. In either case, you don’t need their advice.
Stick with certified advisors or advisors from large, reputable houses. You’ll have to pay for both of these, of course, but the advice here is pretty good if you’re just seeking what a well-informed and cautious investor might be doing.
Truly defensive investors may not need advice at all. Defensive investors stick with high-grade bonds and common stocks of large, stable corporations and are likely to want to know exactly what they’re buying. In that case, you should be doing the research yourself - advisors might only be helpful in special situations (like a giant windfall, for example).
Make your advisors prove themselves to you. Just because someone has some impressive accomplishments in their past doesn’t mean that they’re guaranteed to be a great advisor. Be limiting in your trust until they show you repeatedly that they’re providing great advice for you.
Commentary on Chapter 10
Zweig puts more of a modern spin on Graham’s advice in the commentary. He seems to be even less inclined to recommend financial advisors than Graham is, arguing that one should only hit a financial advisor if you’ve tried things yourself and are experiencing waters that are far more turbulent than you’d like.
Zweig’s mantra? Research, research, research. Find out everything you can about your potential advisor before you even begin taking advice. Google them, find out about any complaints (using http://www.advisorinfo.sec.gov/), and ask around about them.
When you decide to give one a shot, don’t just dive into their advice. Zweig offers two long pages of questions you might want to ask a new advisor in order to get to know where they stand on things.
The biggest flag of a good advisor (from Zweig’s perspective) is interest in your specific situation. Are they asking about your budget? Your goals? Your frustrations? Your psychological makeup (asking about how you handle conflicts)? A good advisor will want to know all of these. If they’re not asking, they don’t care, and that’s dangerous.
I found it very refreshing that in this chapter, Graham didn’t just focus on professional investment advisors when using the term “advisor.” Instead, under this umbrella, Graham included relatives, friends, local bankers, brokerage firms and other investment houses, financial service providers of all stripes, and professional finance advisors.
Why is this distinction important? We don’t just get our financial advice from “financial advisors.”
Take this blog (and countless others like it). We’re not financial advisors. I tend to think of myself as closer to the definition of “friend” than of financial advisor. I’m simply out here sharing my own reflections and experiences, letting people know where I succeed and where I fail.
Take the talking heads on CNBC. Those people may be financial advisors, but they’re speaking in a role where they’re not actually providing financial advice. They’re actually just being entertainers. Have you ever seen the disclaimer that precedes or follows any segment with Jim Cramer?
Yet there’s all this advice out there, and we do incorporate it into our knowledge, whether consciously and directly or not. The question is how can we know what knowledge is actually worthwhile and what isn’t? What advice is worth paying for and what isn’t? That’s really what Graham is seeking here.
Chapter 10 - The Investor and His Advisers
Even though this chapter is fairly long, Graham’s principles for how to deal with personal finance advisors - and personal finance advice - are pretty simple.
Be wary of all advice. You should never absolutely trust anyone with your money. Couple their recommendations with your own research and have an idea of what you want. Don’t just follow blindly with whatever an advisor says.
Avoid people who claim absurd returns. If returns seem to excessively beat the market, stay away. Almost always, it’s either a scam or it’s a person playing a very short term game that’s likely not to work next year. In either case, you don’t need their advice.
Stick with certified advisors or advisors from large, reputable houses. You’ll have to pay for both of these, of course, but the advice here is pretty good if you’re just seeking what a well-informed and cautious investor might be doing.
Truly defensive investors may not need advice at all. Defensive investors stick with high-grade bonds and common stocks of large, stable corporations and are likely to want to know exactly what they’re buying. In that case, you should be doing the research yourself - advisors might only be helpful in special situations (like a giant windfall, for example).
Make your advisors prove themselves to you. Just because someone has some impressive accomplishments in their past doesn’t mean that they’re guaranteed to be a great advisor. Be limiting in your trust until they show you repeatedly that they’re providing great advice for you.
Commentary on Chapter 10
Zweig puts more of a modern spin on Graham’s advice in the commentary. He seems to be even less inclined to recommend financial advisors than Graham is, arguing that one should only hit a financial advisor if you’ve tried things yourself and are experiencing waters that are far more turbulent than you’d like.
Zweig’s mantra? Research, research, research. Find out everything you can about your potential advisor before you even begin taking advice. Google them, find out about any complaints (using http://www.advisorinfo.sec.gov/), and ask around about them.
When you decide to give one a shot, don’t just dive into their advice. Zweig offers two long pages of questions you might want to ask a new advisor in order to get to know where they stand on things.
The biggest flag of a good advisor (from Zweig’s perspective) is interest in your specific situation. Are they asking about your budget? Your goals? Your frustrations? Your psychological makeup (asking about how you handle conflicts)? A good advisor will want to know all of these. If they’re not asking, they don’t care, and that’s dangerous.
Where Do You Get Your Financial Advice?
Where Do You Get Your Financial Advice?
November 14, 2007 @ 10:00 am - Written by Trent
Some of my most faithful commenters have personal finance blogs of their own, and one of them, Mrs. Micah, asked a question that really got me thinking: where do you get your financial advice?
The more I thought about the question, the more I realized that the answer isn’t as obvious as it seems at first, so I’ll progress through my ideas about that question.
My first and most obvious answer is the personal finance resources that I read regularly, like personal finance books, blogs, magazines, and so on. Most of the raw personal finance information that I absorb comes from these sources.
But that’s the easy answer. Where do I really get my personal finance advice? To me, advice means more than just absorbing information from others - it also includes the situations where people provide direct comment on my own life and how I live it.
In that light, my biggest source for financial advice is my wife. She might not be the most informed individual about how to eke out an extra percentage from my investments, but she does know me - who I am, what our situation is, and where we’re going. Often, I’ll collect the data I need for various points of view and then present them to her, and together we talk through the situation and determine a plan. When I’m trying to make a decision about my financial situation, she is the first person that I turn to.
If that’s not enough, I turn to my parents. They generally offer lots of good arguments for staying the course in whatever I’m doing, simply because things have turned out all right so far since I began turning my financial ship around. Before then, I didn’t really talk to them at all about my finances, but I’ve come to find them to be excellent advisors when I’m troubled. I’m also coming around to talking to my mother- and father-in-law about things, but since my relationship with them is still relatively young, I sometimes don’t ask such strong questions of them.
After that, I listen to my readers. Quite often, if something is still troubling me, I’ll voice that concern in the form of a post here at The Simple Dollar and then take all of your comments to heart. Often, writing the post makes the answer clear; other times, I’ll rely on your comments for guidance. Often, you say what I’m already thinking; other times you rip my ideas to shreds. Either way, you aren’t afraid to pull punches and call me out when I’m getting overly confident or am looking down an inconsistent path.
If that’s still not enough, I turn to meditation and/or prayer. I take in all of the advice that I’ve heard and spend some time in deep meditation. The answer - the truly right answer - then comes from within. I won’t debate whether that’s a subconscious thing or a supernatural thing, but I find that such steps are often the key to me finding the right answer.
Those are my key sources for financial advice. I start with information (books, magazines, blogs), talk to those who love me, reformat that question as an article that addresses my readers, read the responses, then take all of that and meditate on it. In the last year, these sources have served me incredibly well.
http://www.thesimpledollar.com/2007/11/14/where-do-you-get-your-financial-advice/
November 14, 2007 @ 10:00 am - Written by Trent
Some of my most faithful commenters have personal finance blogs of their own, and one of them, Mrs. Micah, asked a question that really got me thinking: where do you get your financial advice?
The more I thought about the question, the more I realized that the answer isn’t as obvious as it seems at first, so I’ll progress through my ideas about that question.
My first and most obvious answer is the personal finance resources that I read regularly, like personal finance books, blogs, magazines, and so on. Most of the raw personal finance information that I absorb comes from these sources.
But that’s the easy answer. Where do I really get my personal finance advice? To me, advice means more than just absorbing information from others - it also includes the situations where people provide direct comment on my own life and how I live it.
In that light, my biggest source for financial advice is my wife. She might not be the most informed individual about how to eke out an extra percentage from my investments, but she does know me - who I am, what our situation is, and where we’re going. Often, I’ll collect the data I need for various points of view and then present them to her, and together we talk through the situation and determine a plan. When I’m trying to make a decision about my financial situation, she is the first person that I turn to.
If that’s not enough, I turn to my parents. They generally offer lots of good arguments for staying the course in whatever I’m doing, simply because things have turned out all right so far since I began turning my financial ship around. Before then, I didn’t really talk to them at all about my finances, but I’ve come to find them to be excellent advisors when I’m troubled. I’m also coming around to talking to my mother- and father-in-law about things, but since my relationship with them is still relatively young, I sometimes don’t ask such strong questions of them.
After that, I listen to my readers. Quite often, if something is still troubling me, I’ll voice that concern in the form of a post here at The Simple Dollar and then take all of your comments to heart. Often, writing the post makes the answer clear; other times, I’ll rely on your comments for guidance. Often, you say what I’m already thinking; other times you rip my ideas to shreds. Either way, you aren’t afraid to pull punches and call me out when I’m getting overly confident or am looking down an inconsistent path.
If that’s still not enough, I turn to meditation and/or prayer. I take in all of the advice that I’ve heard and spend some time in deep meditation. The answer - the truly right answer - then comes from within. I won’t debate whether that’s a subconscious thing or a supernatural thing, but I find that such steps are often the key to me finding the right answer.
Those are my key sources for financial advice. I start with information (books, magazines, blogs), talk to those who love me, reformat that question as an article that addresses my readers, read the responses, then take all of that and meditate on it. In the last year, these sources have served me incredibly well.
http://www.thesimpledollar.com/2007/11/14/where-do-you-get-your-financial-advice/
Building Knowledge
25 Rules to Grow Rich By #11: Building Knowledge
November 27, 2006 @ 10:23 am - Written by Trent
Rule #11: If you don’t understand how an investment works, don’t buy it.
The sheer hubris of the above statement is incredible. “Leave the real money makers to the experts; you go along and play with your savings account at your local bank, junior.” It’s typical of the attitude of many people in the financial sector as they try to play Prometheus, bringing the fire of financial knowledge from the gods of Wall Street.
The fact is that most investments are not all that complicated. If you are interested in a particular investment, pick up a book at your local library (or your local bookstore) and read about it. This is an opportunity to learn something that could be directly useful to your pocketbook, not an excuse to run for the hills like a coward.
I agree that you should never buy an investment that you don’t understand, but merely saying, “I don’t understand it, so I’m not going to buy it” is a losing philosophy. You’re much better off saying, “I don’t understand it, so I’m going to learn about it.”
Let’s rewrite that rule:
Rewritten Rule #11: If you don’t understand how an investment works, do some research before you invest; don’t just write it off.
http://www.thesimpledollar.com/2006/11/27/25-rules-to-grow-rich-by-11-building-knowledge/
November 27, 2006 @ 10:23 am - Written by Trent
Rule #11: If you don’t understand how an investment works, don’t buy it.
The sheer hubris of the above statement is incredible. “Leave the real money makers to the experts; you go along and play with your savings account at your local bank, junior.” It’s typical of the attitude of many people in the financial sector as they try to play Prometheus, bringing the fire of financial knowledge from the gods of Wall Street.
The fact is that most investments are not all that complicated. If you are interested in a particular investment, pick up a book at your local library (or your local bookstore) and read about it. This is an opportunity to learn something that could be directly useful to your pocketbook, not an excuse to run for the hills like a coward.
I agree that you should never buy an investment that you don’t understand, but merely saying, “I don’t understand it, so I’m not going to buy it” is a losing philosophy. You’re much better off saying, “I don’t understand it, so I’m going to learn about it.”
Let’s rewrite that rule:
Rewritten Rule #11: If you don’t understand how an investment works, do some research before you invest; don’t just write it off.
http://www.thesimpledollar.com/2006/11/27/25-rules-to-grow-rich-by-11-building-knowledge/
25 Rules to Grow Rich
Money Magazine’s 25 Rules to Grow Rich By - Reevaluated
November 13, 2006 @ 12:06 pm - Written by Trent
Categories: 25 Rules To Grow Rich By
Recently, I had the opportunity to read and reflect upon an article in Money Magazine entitled 25 Rules to Grow Rich By, a brief piece outlining 25 basic financial principles that should, in theory, bring about financial success. As a young person looking to build the foundations of a financially successful life, my first read-through of the rules made me reflect on my own lifestyle in relation to each rule. Was I following that rule? Was I really following this one?
But as I thought about them, I began to wonder how valid each rule really was. Were they actually sound financial rules, especially for someone in my shoes? Or was it just an off-the-cuff article, not really meant to be taken seriously? I began to wonder, so I began to consider them more carefully and to dig a little deeper. What I found was a lot of accuracy, but the accuracy varied depending on the audience of the article.
Over the next twenty five weekdays, I’m going to evaluate each rule in detail, discussing mostly the pros but also the cons. The perspective that I’m going to use is generally my own (with a bit of additional fact-based research), meaning that I’m looking at this list through the eyes of a twentysomething who is climbing out of debt and has (most of) a lifetime of financial choices still to be made. Which rules apply to me now? Which ones will apply in the future?
If you want to keep tabs on this series, bookmark this post. I will be using it as a table of contents for the series, adding each rule to the list below as I post it. At the end of the series, this post will tie together extensive reflections on Money Magazine’s 25 Rules to Grow Rich By.
So, let’s start wandering down the yellow brick road together, shall we?
Rule 1: For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
Rule 2: It’s worth refinancing your mortgage when you can cut your interest rate by at least one point.
Rule 3: Spend no more than two times your income on a home. For a down payment, it’s best to come up with at least 20%.
Rule 4: Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
Rule 5: Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Rule 6: All else being equal, the best place to invest is a 401(k). Once you’ve earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
Rule 7: To figure out what percentage of your money should be in stocks, subtract your age from 120.
Rule 8: Invest no more than 10% of your portfolio in your company stock–or any single company’s stock, for that matter.
Rule 9: The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
Rule 10: Aim to build a retirement nest egg that is 25 times the annual investment income you need. So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million.
Rule 11: If you don’t understand how an investment works, don’t buy it.
Rule 12: If you’re not saving 10% of your salary, you aren’t saving enough.
Rule 13: Keep three months’ worth of living expenses in a bank savings account or a money-market fund for emergencies. If you have kids or rely on one income, make it six months’.
Rule 14: Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or cover it from your income.
Rule 15: You need enough life insurance to replace at least five years of your salary–as much as 10 years if you have several young children or significant debts.
Rule 16: When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.
Rule 17: The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.
Rule 18: The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
Rule 19: Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit-card account is a scam artist.
Rule 20: The best way to save money on a car is to buy a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.
Rule 21: Lease a new car or truck only if you plan to replace it within two or three years.
Rule 22: Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
Rule 23: Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
Rule 24: Don’t redeem frequent-flier miles unless you can get more than a dollar’s worth of air fare or other stuff for every 100 miles you spend.
Rule 25: When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.
http://www.thesimpledollar.com/2006/11/13/money-magazines-25-rules-to-grow-rich-by-reevaluated/
November 13, 2006 @ 12:06 pm - Written by Trent
Categories: 25 Rules To Grow Rich By
Recently, I had the opportunity to read and reflect upon an article in Money Magazine entitled 25 Rules to Grow Rich By, a brief piece outlining 25 basic financial principles that should, in theory, bring about financial success. As a young person looking to build the foundations of a financially successful life, my first read-through of the rules made me reflect on my own lifestyle in relation to each rule. Was I following that rule? Was I really following this one?
But as I thought about them, I began to wonder how valid each rule really was. Were they actually sound financial rules, especially for someone in my shoes? Or was it just an off-the-cuff article, not really meant to be taken seriously? I began to wonder, so I began to consider them more carefully and to dig a little deeper. What I found was a lot of accuracy, but the accuracy varied depending on the audience of the article.
Over the next twenty five weekdays, I’m going to evaluate each rule in detail, discussing mostly the pros but also the cons. The perspective that I’m going to use is generally my own (with a bit of additional fact-based research), meaning that I’m looking at this list through the eyes of a twentysomething who is climbing out of debt and has (most of) a lifetime of financial choices still to be made. Which rules apply to me now? Which ones will apply in the future?
If you want to keep tabs on this series, bookmark this post. I will be using it as a table of contents for the series, adding each rule to the list below as I post it. At the end of the series, this post will tie together extensive reflections on Money Magazine’s 25 Rules to Grow Rich By.
So, let’s start wandering down the yellow brick road together, shall we?
Rule 1: For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
Rule 2: It’s worth refinancing your mortgage when you can cut your interest rate by at least one point.
Rule 3: Spend no more than two times your income on a home. For a down payment, it’s best to come up with at least 20%.
Rule 4: Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
Rule 5: Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Rule 6: All else being equal, the best place to invest is a 401(k). Once you’ve earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
Rule 7: To figure out what percentage of your money should be in stocks, subtract your age from 120.
Rule 8: Invest no more than 10% of your portfolio in your company stock–or any single company’s stock, for that matter.
Rule 9: The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
Rule 10: Aim to build a retirement nest egg that is 25 times the annual investment income you need. So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million.
Rule 11: If you don’t understand how an investment works, don’t buy it.
Rule 12: If you’re not saving 10% of your salary, you aren’t saving enough.
Rule 13: Keep three months’ worth of living expenses in a bank savings account or a money-market fund for emergencies. If you have kids or rely on one income, make it six months’.
Rule 14: Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or cover it from your income.
Rule 15: You need enough life insurance to replace at least five years of your salary–as much as 10 years if you have several young children or significant debts.
Rule 16: When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.
Rule 17: The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.
Rule 18: The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
Rule 19: Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit-card account is a scam artist.
Rule 20: The best way to save money on a car is to buy a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.
Rule 21: Lease a new car or truck only if you plan to replace it within two or three years.
Rule 22: Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
Rule 23: Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
Rule 24: Don’t redeem frequent-flier miles unless you can get more than a dollar’s worth of air fare or other stuff for every 100 miles you spend.
Rule 25: When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.
http://www.thesimpledollar.com/2006/11/13/money-magazines-25-rules-to-grow-rich-by-reevaluated/
The Best Money Advice, in Ten Words or Less
The Best Money Advice, in Ten Words or Less
June 30, 2009 @ 8:00 am - Written by Trent
About a week ago, I challenged my followers on Twitter to give me their best single piece of money advice in ten words or less.
I was flooded with responses.
After spending quite a bit of time sifting through them, here are the fifty best pieces of advice that came my way (out of well over a hundred - I actually used a spreadsheet to help me figure out the best ones to include). All of these are stellar money tips - and all of them come in with ten words or less. Enjoy.
writealvaro: Don’t invest in what you don’t understand.
mmmeg: I only need one word! ASK!
The_Weakonomist: index emergency fund to unemployment. 9% = 9 months.
MichaelBRubin: Spend more time, less money.
fiscalgeek: The secret to money management is learning to be content.
pearbudget: Know what really matters. Don’t spend money on other stuff.
creditgoddess: Don’t borrow more than you can repay.
dgstinner: A fool and his money are soon parted
jacobmlee: Be mindful of how you spend money.
JoeTaxpayerBlog: Don’t walk away from 401(k) match, regardless of debt situation.
EdenJaeger: Live below your means and save all you can.
tonyblacknyc: Better to sell a little early than a little late.
Kplavcan13: Pay yourself first, you can’t give yourself a bill.
dweliver: Be content with what’s yours and you’ll always have plenty.
centsiblelife: Spend less than you earn. Earn more.
MoneyEnergy: Don’t save at 2% when you’ve got debt at 10%.
thefinancialqb: If you try to get rich quickly, you will go broke fast.
ObliviousInvest: Diversify. Minimize costs. Stay the course.
Matt_SF: Borrowing money for a depreciating asset is a fool’s errand.
benburleson: If you can’t afford it, don’t buy it.
mapgirlsfc: Save regularly and spend less than you earn.
jj_observations: Learn to love left-overs!
tusharm: Don’t spend money that you don’t have.
danielckoontz: Never reach for yield.
randypeterman: “Where will you & your stuff be in 100 years?”
Cat8040: Don’t take on debt.
KasyAllen: Don’t be afraid to ask for the savings!
nhldigest: Best money advice “Don’t Spend More Than You Earn”.
Green_Panda: My advice: Change one money habit at a time.
MoneyEnergy: Don’t count all your chickens before they’ve hatched.
fcn: Save and invest for the long term.
MyLifeROI: If it depreciates, don’t pay interest on it!
jessw61: Save/invest as much as you can.
Lisa_S_47: working hard doesn’t mean you deserve anything you can’t afford.
mtswartz: I’ll do it in two: Spend Less!
GlennLucas: Prevent your government from bankrupting your nation.
myfindependence: Be thrifty but don’t forget to enjoy yourself
spendingsmart: You can’t outearn dumb spending.
randallkirsch: A penny saved is more than a penny earned.
Grumpicus: Use credit cards, NOT debit cards.
flexo: The only one who cares about your money is you.
ceetastic: Before purchasing, I ask myself, “Can you justify the expense?”
moneyhighway: Money comes and goes the memories stay
robertsm85: If you don’t have the money then don’t spend it.
roryboy: if you need to use plastic, you can’t afford it!
msimonkey: Keeping up with the Jones’s is plain stupid.
maverickstruth: Know what comes in, and what goes out.
crazy_eddy: Let your assets buy your toys.
sfordinarygirl: Buy generics/private label because it’s way cheaper
jasonbob7: One word: leftovers!
Now, how about you? What’s the best money advice you can give in ten words or less? Leave yours in the comments!
http://www.thesimpledollar.com/2009/06/30/the-best-money-advice-in-ten-words-or-less/
June 30, 2009 @ 8:00 am - Written by Trent
About a week ago, I challenged my followers on Twitter to give me their best single piece of money advice in ten words or less.
I was flooded with responses.
After spending quite a bit of time sifting through them, here are the fifty best pieces of advice that came my way (out of well over a hundred - I actually used a spreadsheet to help me figure out the best ones to include). All of these are stellar money tips - and all of them come in with ten words or less. Enjoy.
writealvaro: Don’t invest in what you don’t understand.
mmmeg: I only need one word! ASK!
The_Weakonomist: index emergency fund to unemployment. 9% = 9 months.
MichaelBRubin: Spend more time, less money.
fiscalgeek: The secret to money management is learning to be content.
pearbudget: Know what really matters. Don’t spend money on other stuff.
creditgoddess: Don’t borrow more than you can repay.
dgstinner: A fool and his money are soon parted
jacobmlee: Be mindful of how you spend money.
JoeTaxpayerBlog: Don’t walk away from 401(k) match, regardless of debt situation.
EdenJaeger: Live below your means and save all you can.
tonyblacknyc: Better to sell a little early than a little late.
Kplavcan13: Pay yourself first, you can’t give yourself a bill.
dweliver: Be content with what’s yours and you’ll always have plenty.
centsiblelife: Spend less than you earn. Earn more.
MoneyEnergy: Don’t save at 2% when you’ve got debt at 10%.
thefinancialqb: If you try to get rich quickly, you will go broke fast.
ObliviousInvest: Diversify. Minimize costs. Stay the course.
Matt_SF: Borrowing money for a depreciating asset is a fool’s errand.
benburleson: If you can’t afford it, don’t buy it.
mapgirlsfc: Save regularly and spend less than you earn.
jj_observations: Learn to love left-overs!
tusharm: Don’t spend money that you don’t have.
danielckoontz: Never reach for yield.
randypeterman: “Where will you & your stuff be in 100 years?”
Cat8040: Don’t take on debt.
KasyAllen: Don’t be afraid to ask for the savings!
nhldigest: Best money advice “Don’t Spend More Than You Earn”.
Green_Panda: My advice: Change one money habit at a time.
MoneyEnergy: Don’t count all your chickens before they’ve hatched.
fcn: Save and invest for the long term.
MyLifeROI: If it depreciates, don’t pay interest on it!
jessw61: Save/invest as much as you can.
Lisa_S_47: working hard doesn’t mean you deserve anything you can’t afford.
mtswartz: I’ll do it in two: Spend Less!
GlennLucas: Prevent your government from bankrupting your nation.
myfindependence: Be thrifty but don’t forget to enjoy yourself
spendingsmart: You can’t outearn dumb spending.
randallkirsch: A penny saved is more than a penny earned.
Grumpicus: Use credit cards, NOT debit cards.
flexo: The only one who cares about your money is you.
ceetastic: Before purchasing, I ask myself, “Can you justify the expense?”
moneyhighway: Money comes and goes the memories stay
robertsm85: If you don’t have the money then don’t spend it.
roryboy: if you need to use plastic, you can’t afford it!
msimonkey: Keeping up with the Jones’s is plain stupid.
maverickstruth: Know what comes in, and what goes out.
crazy_eddy: Let your assets buy your toys.
sfordinarygirl: Buy generics/private label because it’s way cheaper
jasonbob7: One word: leftovers!
Now, how about you? What’s the best money advice you can give in ten words or less? Leave yours in the comments!
http://www.thesimpledollar.com/2009/06/30/the-best-money-advice-in-ten-words-or-less/
As an investor can I rely on technical analysis?
Wednesday July 1, 2009
As an investor can I rely on technical analysis?
Personal Investment - A column by Ooi Kok Hwa
Investors need proper training as this area requires a lot of subjective judgement and experiences
ALL the famous investment gurus in the world, like Benjamin Graham and Warren Buffett, say that we should not try to time the stock market because we will not be able to predict its movement.
However, professional technical analysts believe that investors are able to time the market by looking into the historical price trends and trading volumes. They believe that the weakness in fundamental analysis is it is unable to provide the timing to buy or sell stocks.
Fundamental analysts are able to detect good quality stocks for long-term investments. However, they do not know when to accumulate or to dispose the stocks.
Technical analysts believe that a lot of good fundamental factors for certain stocks may have already been reflected in the stock prices. As a result, any investor who would like to purchase the stocks may not be able to make gains as the stock prices have already included the good fundamental factors.
Nevertheless, if investors know technical analysis, they may be able to discover the stocks much earlier than the others. A lot of time, these fundamental factors may not be made known to the public.
However, some investors, who are aware of these fundamental factors, may start accumulating the stocks. Technical analysts believe that these early actions can be detected by looking into charts.
Technical analysis is based on the interaction between the supply and demand for the stocks, which can be caused by the rational and irrational factors.
Technical analysts believe that prices move in trend and can persist for a long time until something happens to the stocks.
Even though technical analysts do not know all the factors that influence the buying or selling of all stocks, they believe that investors are able to know the actual shifts in the supply and demand of stocks by looking into their market price behaviour.
One of the advantages of technical analysis is that it is simple to use. Compared with the fundamental analysis, investors do not need to read financial statements before using technical analysis. Nevertheless, investors are still required to have adequate knowledge on how to interpret various types of charts.
Given that there are many types of charts, investors may get confused as some charts may indicate buying signals while others may indicate selling signals.
Sometimes, when there are too many investors using different types of charts, the effects may be neutralised between each other.
For market efficiency believers, they postulate that it is not possible make any gains by merely looking into stock prices and volumes because they believe that the stock market may have reflected all these factors. They label this phenomenon as weak-form of market efficiency.
In most academic researches on testing weak-form stock market efficiency (testing the market based on stock prices and volumes), they discovered that investors cannot consistently outperform the market.
Fundamental analysts believe that by merely looking into technical charts alone may sometimes cause investors buying into poor fundamental stocks.
However, technical analysts argue that these negative factors can also be detected using charts because poor fundamental stocks will normally face heavy selling by investors.
The technical charts will indicate when the stocks start facing selling pressures and investors need to sell the stocks once the charts indicate the selling signals.
Some investors believe that there may be self-fulfilling prophecy on technical analysis.
When many people are using the same technical chart on one company and the chart shows a buy on the stock, many investors will follow to buy the stocks. These may cause the stock prices to go up and reinforce the idea that the technical rules work.
We believe that investors need to know both fundamentals as well as technical analysis as these two methods can complement each other. Both methods have their strengths and weaknesses.
Sometimes we may want to use fundamentals to identify the stocks for purchase, then, use technical analysis to gauge when to buy the stocks; or we can use technical analysis to select stocks and use fundamentals to confirm the quality of the companies.
In conclusion, as technical analysis requires a lot of subjective judgement and experiences, we believe that investors need to have a proper training in this area. Interested investors are encouraged to read books related to this area to have better understanding.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
As an investor can I rely on technical analysis?
Personal Investment - A column by Ooi Kok Hwa
Investors need proper training as this area requires a lot of subjective judgement and experiences
ALL the famous investment gurus in the world, like Benjamin Graham and Warren Buffett, say that we should not try to time the stock market because we will not be able to predict its movement.
However, professional technical analysts believe that investors are able to time the market by looking into the historical price trends and trading volumes. They believe that the weakness in fundamental analysis is it is unable to provide the timing to buy or sell stocks.
Fundamental analysts are able to detect good quality stocks for long-term investments. However, they do not know when to accumulate or to dispose the stocks.
Technical analysts believe that a lot of good fundamental factors for certain stocks may have already been reflected in the stock prices. As a result, any investor who would like to purchase the stocks may not be able to make gains as the stock prices have already included the good fundamental factors.
Nevertheless, if investors know technical analysis, they may be able to discover the stocks much earlier than the others. A lot of time, these fundamental factors may not be made known to the public.
However, some investors, who are aware of these fundamental factors, may start accumulating the stocks. Technical analysts believe that these early actions can be detected by looking into charts.
Technical analysis is based on the interaction between the supply and demand for the stocks, which can be caused by the rational and irrational factors.
Technical analysts believe that prices move in trend and can persist for a long time until something happens to the stocks.
Even though technical analysts do not know all the factors that influence the buying or selling of all stocks, they believe that investors are able to know the actual shifts in the supply and demand of stocks by looking into their market price behaviour.
One of the advantages of technical analysis is that it is simple to use. Compared with the fundamental analysis, investors do not need to read financial statements before using technical analysis. Nevertheless, investors are still required to have adequate knowledge on how to interpret various types of charts.
Given that there are many types of charts, investors may get confused as some charts may indicate buying signals while others may indicate selling signals.
Sometimes, when there are too many investors using different types of charts, the effects may be neutralised between each other.
For market efficiency believers, they postulate that it is not possible make any gains by merely looking into stock prices and volumes because they believe that the stock market may have reflected all these factors. They label this phenomenon as weak-form of market efficiency.
In most academic researches on testing weak-form stock market efficiency (testing the market based on stock prices and volumes), they discovered that investors cannot consistently outperform the market.
Fundamental analysts believe that by merely looking into technical charts alone may sometimes cause investors buying into poor fundamental stocks.
However, technical analysts argue that these negative factors can also be detected using charts because poor fundamental stocks will normally face heavy selling by investors.
The technical charts will indicate when the stocks start facing selling pressures and investors need to sell the stocks once the charts indicate the selling signals.
Some investors believe that there may be self-fulfilling prophecy on technical analysis.
When many people are using the same technical chart on one company and the chart shows a buy on the stock, many investors will follow to buy the stocks. These may cause the stock prices to go up and reinforce the idea that the technical rules work.
We believe that investors need to know both fundamentals as well as technical analysis as these two methods can complement each other. Both methods have their strengths and weaknesses.
Sometimes we may want to use fundamentals to identify the stocks for purchase, then, use technical analysis to gauge when to buy the stocks; or we can use technical analysis to select stocks and use fundamentals to confirm the quality of the companies.
In conclusion, as technical analysis requires a lot of subjective judgement and experiences, we believe that investors need to have a proper training in this area. Interested investors are encouraged to read books related to this area to have better understanding.
Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
Budgeting for Future Success
Today's world and workplace are considered a "global village." Telecommunications and air transportation make finance, technology, and labour available to a world economy. Increased knowledge and skills will be required to compete in the changing workplace created by the world economy.
To be prepared for a career in this new world, people will need a variety of skills. The use of budgets is one such necessary skill. Allocating money, solving problems, and making decisions are skills needed to create and use either a personal or business budget. These skills are also critical for people who want to be ready to achieve personal and professional success.
If you learn good budgeting skills and are able to apply them to different situations, people will take notice. At your current job, you can impress your employer by suggesting possible budgeting improvements. If you help your boss now, he or she will help you later. Maybe your boss will write you a good recommendation for a future job. Or perhaps he or she will help you find a good job when you finish the present posting. Whatever the case, using your budgeting skills now can only benefit you in your future career.
You will also find that balancing your current budget, no matter how little money it may involve, will help you balance your personal budget in the future. You will be making more money when you begin your career, but balancing your budget then will involve the same steps that it does now. That way, when you do begin to earn more money - and possibly even have to balance a budget that includes a spouse and children - you will be well prepared to do it.
Success with budgets can be achieved. Many people start with basic personal budgets when learning to budget money. Tracking budget items and adjusting the budget over time gives experience that can be used with more complex budgets. Budgeting your allowance prepares you to budget when you have income from a job, for example. And budgeting part-time earnings prepares you to budget for your own business someday.
A budget may not make you rich. But when used with creativity, budgets can provide a sound basis on which to make decisions that will be easy to live with.
Good budgeting skills will get you noticed in the highly competitive workplace. Questions to ask yourself:
To be prepared for a career in this new world, people will need a variety of skills. The use of budgets is one such necessary skill. Allocating money, solving problems, and making decisions are skills needed to create and use either a personal or business budget. These skills are also critical for people who want to be ready to achieve personal and professional success.
If you learn good budgeting skills and are able to apply them to different situations, people will take notice. At your current job, you can impress your employer by suggesting possible budgeting improvements. If you help your boss now, he or she will help you later. Maybe your boss will write you a good recommendation for a future job. Or perhaps he or she will help you find a good job when you finish the present posting. Whatever the case, using your budgeting skills now can only benefit you in your future career.
You will also find that balancing your current budget, no matter how little money it may involve, will help you balance your personal budget in the future. You will be making more money when you begin your career, but balancing your budget then will involve the same steps that it does now. That way, when you do begin to earn more money - and possibly even have to balance a budget that includes a spouse and children - you will be well prepared to do it.
Success with budgets can be achieved. Many people start with basic personal budgets when learning to budget money. Tracking budget items and adjusting the budget over time gives experience that can be used with more complex budgets. Budgeting your allowance prepares you to budget when you have income from a job, for example. And budgeting part-time earnings prepares you to budget for your own business someday.
A budget may not make you rich. But when used with creativity, budgets can provide a sound basis on which to make decisions that will be easy to live with.
Good budgeting skills will get you noticed in the highly competitive workplace. Questions to ask yourself:
- How can knowledge of budgetting help you in your career?
- Would budgeting help you if you owned your own business?
- Would a budget be useful if you had a family of your own?
Tuesday, 30 June 2009
A reputation build over 30 years can be destroyed in 5 minutes.
30 Jun 09, 17:32
RR: If you don't believe, or have some doubts on him.. then just forget about ICAP.
30 Jun 09, 17:32
RR: If TTB is my real life buddy, i think i would have put 90% of my portfolio with him. Just wanna stress again, ICAP = TTB. Believe TTB, hold/buy ICAP.
30 Jun 09, 17:30
RR: cause i actually believes WB said "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will. "
30 Jun 09, 17:30
RR: So.. so far.. I am not with ICAP yet:) I mostly invest in things that the business itself has its own edge, without really counting on the person in charge.
30 Jun 09, 17:25
RR: the only doubts will be, is TTB a person who I can really believe in? A person with integrity where I can put ALL my savings with him? I personally am not sure..
30 Jun 09, 17:22
RR: So.. my 2 cents is that, if you believe in TTB that his investing style works and he will be employing this investing method as long as he lives. I think, you should keep holding the stock.
30 Jun 09, 17:21
RR: You believe what TTB believes. We believe him, because he has been publishing his method of investing for some time. We believe that he will continue with that style.
30 Jun 09, 17:17
RR: However, it is hard to see any durable competetive advantage ICAP has over other funds. ICAP is all about TTB.. If you are buying into ICAP. You must have known TTB well.
30 Jun 09, 17:16
RR: Taking RM1.80 as current price, ICAP has around 16% compounded return since 2005. As for me, ICAP is one of the business that I can understand and its performance is easy to track.
---
RR, I find your reasoning interesting and would like to offer my comments here:
The track record of iCAP closed end fund is short. Yes, it has given a very good return (cumulative total return and compound annual return). This cannot be extrapolated to future years. Investment returns are often unpredictable.
Over the longer term, it is generally expected that most funds will give returns close to those of the market returns. This is based on statistics and probabilities. We know that. In fact, given the cost of some funds, most funds will give returns lower that the market return.
If you are an enterprising investor, like Leno, with a proven track record, you should continue your own investing. On the other hand, if you have been an investor who has lost money consistently or with a very poor return from your investment, you should seriously consider whether you should be doing your own investing or otherwise.
The issue of integrity of the fund manager is important and cannot be treated lightly. In the light of Madoff, one cannot be too careful. But then, how do you judge integrity in the person? Review how you judged a person to be your business partner or a lady to be your life partner. What criterias did you use? What outcomes, deemed important, did you factor into these criterias? As much as you and I like to be totally objective, often judgement is also a very subjective matter.
Warren Buffett has written on integrity. He would like his managers to have integrity, intelligence and lots of energy. Above all, integrity. Without integrity, these traits of intelligence and energy in the manager will work against the interest of the owner.
Like Warren Buffett, we should only invest in a fund manager with integrity, intelligence and a lot of energy. The managers of these funds also realise the importance of their integrity in their business and their relationship with their investors. A reputation build over 30 years can be destroyed in 5 minutes.
This assessment of the integrity of the fund manager can best be summed up as difficult, subjective and based on your personal views. This view is also influenced by your interactions with others and this fund manager in the same industry. Eventually, in the majority of situations, it is a personal opinion.
For the defensive investor, what are the options? My personal advice, don't even buy a share, if you are not familiar with equity investing and the market place. It is far too dangerous a place for someone with no investing or financial education. Therefore, park the money in FDs and be grateful for the 'safety of capital' and meagre return these offer. But the risks are those of inflation eroding the real income and capital, and also, not meeting your investing objectives.
The next best thing, is to have friends or relatives who are able to invest for you or to advice you on your investments. I was fortunate to have this guidance for many years. But beware of professionals with some knowledge. I have known of investors who ask their remisiers for some stock recommendations with varying results.
Then, you are still faced with how to invest your money safely, for higher return, over a long period. Who do you turn to now?
Here is my suggested approach to investing into icap fund or any other funds. We start with a very big assumption, that the fund we invest in will perform reasonably well under a good manager, and over the years, the manager will continues to grow the value of the investment.
For the investors of the fund, it would then be the simple matter of investing into the fund at the time when it was trading at a bargain, usually coinciding with the market at a low point. However, there is still another important factor to consider.
It was Peter Lynch (I think), who wrote that during his tenure of his fund, the majority of investors who bought and sold his fund lost money. This was despite the fund growing in value at a compound annual rate of 30% or so, for almost 30 years.
The inference, even if you have selected the right fund or fund manager, your returns may be negative due to factors unrelated to them, but to yourself.
This is what I do for a portion of my money. But then, you are not me. Your circumstances will definitely be different. So, please follow your own analysis and make your own decision. You are the better judge of yourself, always.
Also read:
Games people play
To be a winner, choose the games one wishes to play in carefully. Investing is likewise not dissimilar. One need to have the investing knowledge before "playing this game" intelligently, lest one ends up not winning but losing.
RR: If you don't believe, or have some doubts on him.. then just forget about ICAP.
30 Jun 09, 17:32
RR: If TTB is my real life buddy, i think i would have put 90% of my portfolio with him. Just wanna stress again, ICAP = TTB. Believe TTB, hold/buy ICAP.
30 Jun 09, 17:30
RR: cause i actually believes WB said "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will. "
30 Jun 09, 17:30
RR: So.. so far.. I am not with ICAP yet:) I mostly invest in things that the business itself has its own edge, without really counting on the person in charge.
30 Jun 09, 17:25
RR: the only doubts will be, is TTB a person who I can really believe in? A person with integrity where I can put ALL my savings with him? I personally am not sure..
30 Jun 09, 17:22
RR: So.. my 2 cents is that, if you believe in TTB that his investing style works and he will be employing this investing method as long as he lives. I think, you should keep holding the stock.
30 Jun 09, 17:21
RR: You believe what TTB believes. We believe him, because he has been publishing his method of investing for some time. We believe that he will continue with that style.
30 Jun 09, 17:17
RR: However, it is hard to see any durable competetive advantage ICAP has over other funds. ICAP is all about TTB.. If you are buying into ICAP. You must have known TTB well.
30 Jun 09, 17:16
RR: Taking RM1.80 as current price, ICAP has around 16% compounded return since 2005. As for me, ICAP is one of the business that I can understand and its performance is easy to track.
---
RR, I find your reasoning interesting and would like to offer my comments here:
The track record of iCAP closed end fund is short. Yes, it has given a very good return (cumulative total return and compound annual return). This cannot be extrapolated to future years. Investment returns are often unpredictable.
Over the longer term, it is generally expected that most funds will give returns close to those of the market returns. This is based on statistics and probabilities. We know that. In fact, given the cost of some funds, most funds will give returns lower that the market return.
If you are an enterprising investor, like Leno, with a proven track record, you should continue your own investing. On the other hand, if you have been an investor who has lost money consistently or with a very poor return from your investment, you should seriously consider whether you should be doing your own investing or otherwise.
The issue of integrity of the fund manager is important and cannot be treated lightly. In the light of Madoff, one cannot be too careful. But then, how do you judge integrity in the person? Review how you judged a person to be your business partner or a lady to be your life partner. What criterias did you use? What outcomes, deemed important, did you factor into these criterias? As much as you and I like to be totally objective, often judgement is also a very subjective matter.
Warren Buffett has written on integrity. He would like his managers to have integrity, intelligence and lots of energy. Above all, integrity. Without integrity, these traits of intelligence and energy in the manager will work against the interest of the owner.
Like Warren Buffett, we should only invest in a fund manager with integrity, intelligence and a lot of energy. The managers of these funds also realise the importance of their integrity in their business and their relationship with their investors. A reputation build over 30 years can be destroyed in 5 minutes.
This assessment of the integrity of the fund manager can best be summed up as difficult, subjective and based on your personal views. This view is also influenced by your interactions with others and this fund manager in the same industry. Eventually, in the majority of situations, it is a personal opinion.
For the defensive investor, what are the options? My personal advice, don't even buy a share, if you are not familiar with equity investing and the market place. It is far too dangerous a place for someone with no investing or financial education. Therefore, park the money in FDs and be grateful for the 'safety of capital' and meagre return these offer. But the risks are those of inflation eroding the real income and capital, and also, not meeting your investing objectives.
The next best thing, is to have friends or relatives who are able to invest for you or to advice you on your investments. I was fortunate to have this guidance for many years. But beware of professionals with some knowledge. I have known of investors who ask their remisiers for some stock recommendations with varying results.
Then, you are still faced with how to invest your money safely, for higher return, over a long period. Who do you turn to now?
Here is my suggested approach to investing into icap fund or any other funds. We start with a very big assumption, that the fund we invest in will perform reasonably well under a good manager, and over the years, the manager will continues to grow the value of the investment.
For the investors of the fund, it would then be the simple matter of investing into the fund at the time when it was trading at a bargain, usually coinciding with the market at a low point. However, there is still another important factor to consider.
It was Peter Lynch (I think), who wrote that during his tenure of his fund, the majority of investors who bought and sold his fund lost money. This was despite the fund growing in value at a compound annual rate of 30% or so, for almost 30 years.
The inference, even if you have selected the right fund or fund manager, your returns may be negative due to factors unrelated to them, but to yourself.
This is what I do for a portion of my money. But then, you are not me. Your circumstances will definitely be different. So, please follow your own analysis and make your own decision. You are the better judge of yourself, always.
Also read:
Games people play
To be a winner, choose the games one wishes to play in carefully. Investing is likewise not dissimilar. One need to have the investing knowledge before "playing this game" intelligently, lest one ends up not winning but losing.
Where is your focus in your investment returns?
Are you focussed on absolute return and capital preservation?
Or, are you more focussed on relative return to a certain benchmark?
Perhaps you are more focussed on one or the other at different market environments. Certainly these are food for thoughts.
But then, it was also ridiculous to an individual investor, for his fund manager to talk about beating a certain market benchmark during the recent severe bear market when the absolute return of the fund was negative and the capital was also down by a large amount!
Or, are you more focussed on relative return to a certain benchmark?
Perhaps you are more focussed on one or the other at different market environments. Certainly these are food for thoughts.
But then, it was also ridiculous to an individual investor, for his fund manager to talk about beating a certain market benchmark during the recent severe bear market when the absolute return of the fund was negative and the capital was also down by a large amount!
How To Raise A Rich Daughter
Brown Heidi,
Forbes.com
06/29/09 19:00:10 GMT
How To Raise A Rich Daughter
Women hold half of the investable wealth in the U.S. and account for 43% of all Americans who have a net worth of $1.5 million or more. Yet only 10% of asset managers are female, says a new report from the National Council for Research on Women.
Recent studies show that, as with other areas of business, women make investment decisions differently from men. They consider contradictory information and study company fundamentals more carefully before investing. Over the long term, funds run by women, who tend to be more risk-averse in general, outperform those of men. The Hedge Fund Research Diversity Index, for example, which has 50% female managers, returned an annual average 8.21% since 2003, while the broader index returned 5.98%.
That's all well and good, until you consider that many women simply aren't going into finance. The NCRW says a major cause of the dearth of women in finance is the "pipeline"--the supply of future finance professionals. Not enough girls and young women even consider finance as a career choice, so there are fewer candidates for finance jobs and even fewer women-run funds. In part, this stems from girls' lack of interest in science and math--even though studies have shown they have the same aptitude as boys.
The problem starts early, explains Barnard College President Debora Spar, who spoke at a NCRW conference earlier this week.
Part of this might be due to computer games used in schools. Math-based games, noted Spar, are almost always of the "shoot-em-up" variety which appeal to boys; whereas games which the girls prefer such as "Dora the Explorer" are not math-based. Multimedia math tools and early learning toys that appeal to girls are needed, said Spar.
Anecdotally, she said, years ago she taught an elementary school math class; both sexes did equally well at the subject. But within eight months, she saw girls' interest in math wane, while boys remained engaged.
Once in high school, most female students "tend to focus on application-based information," she said. "They think, 'How will trigonometry help me in the real world?' A guy, by contrast, might take finance classes because his friend is doing it or his father's golf buddy is on Wall Street."
To engage girls in math, Spar thinks more female math teachers, from elementary school through college, would help enormously. The National Bureau of Economic Research released a study in May that looked at the difference in math and science performance between male and female students at the U.S. Air Force Academy and found that women who have female math professors tend to stick with the subject until graduation.
But many math departments have few, if any, women math teachers.
A brief survey of three schools show this playing out: At Caltech two of 18 math professors are women, at the University of Virginia four of 28 math professors are women and at the University of Chicago zero out of 32 math professors are women.
With so few women in the pipeline, investors are losing out by not benefiting from women's prudence and women are losing out by not gaining access to the basis of power: big money.
Keep reading at ForbesWoman.
http://news.my.msn.com/lifestyle/article.aspx?cp-documentid=3417377
Forbes.com
06/29/09 19:00:10 GMT
How To Raise A Rich Daughter
Women hold half of the investable wealth in the U.S. and account for 43% of all Americans who have a net worth of $1.5 million or more. Yet only 10% of asset managers are female, says a new report from the National Council for Research on Women.
Recent studies show that, as with other areas of business, women make investment decisions differently from men. They consider contradictory information and study company fundamentals more carefully before investing. Over the long term, funds run by women, who tend to be more risk-averse in general, outperform those of men. The Hedge Fund Research Diversity Index, for example, which has 50% female managers, returned an annual average 8.21% since 2003, while the broader index returned 5.98%.
That's all well and good, until you consider that many women simply aren't going into finance. The NCRW says a major cause of the dearth of women in finance is the "pipeline"--the supply of future finance professionals. Not enough girls and young women even consider finance as a career choice, so there are fewer candidates for finance jobs and even fewer women-run funds. In part, this stems from girls' lack of interest in science and math--even though studies have shown they have the same aptitude as boys.
The problem starts early, explains Barnard College President Debora Spar, who spoke at a NCRW conference earlier this week.
Part of this might be due to computer games used in schools. Math-based games, noted Spar, are almost always of the "shoot-em-up" variety which appeal to boys; whereas games which the girls prefer such as "Dora the Explorer" are not math-based. Multimedia math tools and early learning toys that appeal to girls are needed, said Spar.
Anecdotally, she said, years ago she taught an elementary school math class; both sexes did equally well at the subject. But within eight months, she saw girls' interest in math wane, while boys remained engaged.
Once in high school, most female students "tend to focus on application-based information," she said. "They think, 'How will trigonometry help me in the real world?' A guy, by contrast, might take finance classes because his friend is doing it or his father's golf buddy is on Wall Street."
To engage girls in math, Spar thinks more female math teachers, from elementary school through college, would help enormously. The National Bureau of Economic Research released a study in May that looked at the difference in math and science performance between male and female students at the U.S. Air Force Academy and found that women who have female math professors tend to stick with the subject until graduation.
But many math departments have few, if any, women math teachers.
A brief survey of three schools show this playing out: At Caltech two of 18 math professors are women, at the University of Virginia four of 28 math professors are women and at the University of Chicago zero out of 32 math professors are women.
With so few women in the pipeline, investors are losing out by not benefiting from women's prudence and women are losing out by not gaining access to the basis of power: big money.
Keep reading at ForbesWoman.
http://news.my.msn.com/lifestyle/article.aspx?cp-documentid=3417377
Should you hold iCap?
"Always look at the valuation and the price.
Value a company on a long-term basis.
Many companies are still trading below its long-term valuation. "
Would you hold icap as a fund for your investment?
How good are the fund's managers and analysts?
When investing into icap, one is effectively employing ttb and his team to pick securities for you. ttb has a investment newsletter for many years. His philosophy and strategy are known. The few model portfolios in his newsletter have outperformed the market benchmarks. However, for many investors, his truly transparent real life performance will be gauged on his performance in icap closed end fund.
What is the strategy and how well is it executed?
Using his philosophy and strategy, ttb has consistently added value to the fund he is managing. By sticking to his approach with conviction, he has delivered excellent returns to date. More importantly, there is consistency in the returns during different environment, in good and in bad times of the investing period.
Is the fund a good value proposition?
The cost is lower for this fund than other open-ended funds in the market. As many stocks are bought and held, there is less transaction costs involved too. Also, there are times when you can invest into this fund at a steep discount to its NAV.
Have the fund and its advisor been shareholder-friendly?
Some bloggers hammered ttb on this. They lament that icap should reveal its portfolio at every quarter. icap should at the least inform the shareholders of some of the transactions. If not, how can these investors make an informed decision?
Value a company on a long-term basis.
Many companies are still trading below its long-term valuation. "
Would you hold icap as a fund for your investment?
Let's take a look at this by seeking answers to the following questions.
How good are the fund's managers and analysts?
When investing into icap, one is effectively employing ttb and his team to pick securities for you. ttb has a investment newsletter for many years. His philosophy and strategy are known. The few model portfolios in his newsletter have outperformed the market benchmarks. However, for many investors, his truly transparent real life performance will be gauged on his performance in icap closed end fund.
What is the strategy and how well is it executed?
Using his philosophy and strategy, ttb has consistently added value to the fund he is managing. By sticking to his approach with conviction, he has delivered excellent returns to date. More importantly, there is consistency in the returns during different environment, in good and in bad times of the investing period.
Is the fund a good value proposition?
The cost is lower for this fund than other open-ended funds in the market. As many stocks are bought and held, there is less transaction costs involved too. Also, there are times when you can invest into this fund at a steep discount to its NAV.
Have the fund and its advisor been shareholder-friendly?
Some bloggers hammered ttb on this. They lament that icap should reveal its portfolio at every quarter. icap should at the least inform the shareholders of some of the transactions. If not, how can these investors make an informed decision?
icap does keep investors up to date on changes to their fund, but only once a year. Those who are subscribers of icap newsletter may get an inkling of the stocks bought or sold indirectly.
- How critical is it for the investors to know what icap bought or sold recently?
- How critical is it for the investors to know what icap bought or sold recently, if they have a long-term horizon?
My take on this, is that those long-term investors into icap will find it more useful and rewarding understanding the philosophy and strategy of ttb and the icap fund, than harping on this issue constantly.
icap is one of the fund with the lowest cost I know. That to me is investor friendly. Of course, being an investor into icap may make my views less objective, but I try to give an honest appraisal of these issues.
Why has the fund performed the way it has?
http://spreadsheets.google.com/ccc?key=roHksSrHHyf0Roi1sJE36Wg
The short-term track record since Oct 2005 has been excellent. Perhaps, we will have a look at this in detail later.
Sunday, 28 June 2009
Ownership of Financial Assets in US
Interesting, abeit old, statistics. The distribution of wealth in the United States was, and probably is, terribly unequal.
Ownership of Financial Assets in US in the 90s.
The Very Rich (1% of the Population)
46%
The Affluent (the Next 9%)
36%
The Rest (90% of Americans)
18%
Share of Income Collected by American Households
The Very Rich (1% of the Population)
1962 9.3%
1992 15.7%
The Affluent (the Next 9%)
1962 21.5%
1992 25.2%
The Rest (90% of Americans)
1962 69.2%
1992 59.1%
Ownership of Financial Assets in US in the 90s.
The Very Rich (1% of the Population)
46%
The Affluent (the Next 9%)
36%
The Rest (90% of Americans)
18%
Share of Income Collected by American Households
The Very Rich (1% of the Population)
1962 9.3%
1992 15.7%
The Affluent (the Next 9%)
1962 21.5%
1992 25.2%
The Rest (90% of Americans)
1962 69.2%
1992 59.1%
iCap Closed End Fund Track Record for last 2 years
Click on this busy spreadsheet.
http://spreadsheets.google.com/ccc?key=roHksSrHHyf0Roi1sJE36Wg
There has been a lot of "cowshit" written on icap closed end fund. I decided to just review the performance of this fund for my personal benefit. Well, not too bad so far.
Related posts:
iCap sold Axiata and bought Astro
Morningstar's Approach to Analyzing Mutual Funds
Always buy, hold or sell based on fundamentals.
http://spreadsheets.google.com/ccc?key=roHksSrHHyf0Roi1sJE36Wg
There has been a lot of "cowshit" written on icap closed end fund. I decided to just review the performance of this fund for my personal benefit. Well, not too bad so far.
Related posts:
iCap sold Axiata and bought Astro
Morningstar's Approach to Analyzing Mutual Funds
Always buy, hold or sell based on fundamentals.
Saturday, 27 June 2009
iCap sold Axiata and bought Astro
The icap portfolio dated 11.6.2008 listed 17 stocks. VADS was taken private, leaving 16 stocks.
Let us make an (unlikely) assumption that the portfolio of 16 stocks has not changed over the last 1 year. Using the share prices of 26.6.2009 revealed some interesting figures.
Click to view:
http://spreadsheets.google.com/ccc?key=rPy-muVrt2cj5PSRqXgtT2A
Let us make an (unlikely) assumption that the portfolio of 16 stocks has not changed over the last 1 year. Using the share prices of 26.6.2009 revealed some interesting figures.
Click to view:
http://spreadsheets.google.com/ccc?key=rPy-muVrt2cj5PSRqXgtT2A
Observations:
1. 8 stocks are showing gains, 8 stocks are showing losses.
2. The winners are: Parkson, PetDag, F&N, Padini, PIE, HaiO, LionDiv, and PohKong, in descending order of gains.
The corresponding percentages of gains for each of these stocks in the same order are: 106.3%, 101.2%, 46.2%, 69.6%, 33.7%, 33.4%, 78.7%, and 2.5%.
Total of these 8 stock gains is: $49,797,470.00
3. The losers are: Boustead, TM, Swee Joo, Mieco, Integrax, Suria, Tongher and TMI, in ascending order of losses.
The corresponding percentages of losses for each of these stocks in the same order are: -5.4%, -7.9%, -46.8%, -76.7%, -23.4%, -43%, -44.1%, and -71.1%.
Total of these 8 stock losses is: $-24,278,277.00
4. The total gains exceed total losses by $25,519,193.00. Gains : Losses = 2.05 : 1.0
5. TMI (Axiata) accounts for 52% of the total losses ($12.7 million). The other 7 losing counters contribute 48% of the total losses.
6. Parkson is the top gainer; it accounts for 44.8% ($22.3m) of the total gains. The top 3 stock gainers (Parkson, PetDag and F&N) contribute 82% ($40.9m) of the total gains. The other 5 winning counters account for 18% of the total gains.
7. Of these 16 stocks, 10 can probably be considered thinly traded most of the time (illiquid).
8. TMI is the second largest stock in icap portfolio, based on cost. Here are the stocks, in descending order, based on cost: Parkson, TMI, F&N, PetDag, PIE, Boustead, Integrax, TM, Tongher, Padini, Suria, Swee Joo, Mieco, HaiO, PohKong, and LionDiv.
9. The biggest gainers are also the bigger stocks in icap, based on cost, namely, Parkson, F&N, PetDag and PIE. TMI is the big stock in icap showing a very big loss. To fathom this, the loss of TMI wipes out all the gains of PetDag.
10. The total cost of these 16 stocks is $127,425,010.00. The total market value of these 16 stocks is $145,453,495.00. Other gains not taken into account in this observation are the capital gains from stocks sold and dividends received by icap portfolio.
What are your conclusions on these observations?
In the latest report by icap, Axiata (previous TMI) was sold and Astro was bought.
Among the reasons for selling stocks would be:
- If you need cash urgently for various reasons.
- When the fundamental of the stock has deteriorated.
- When you need to raise cash to invest into another stock with better potential.
- When your stock is overpriced, reducing the potential of gain.
Why did icap sell Axiata, probably at a low price?
Well, it should be interesting to find out at the next icap AGM.
Meantime, please continue with your good work, Mr. ttb.
Related posts:
iCap Closed End Fund Track Record for last 2 years
Morningstar's Approach to Analyzing Mutual Funds
Why Invest in Stocks? An Example in Practice
If you are a newcomer to investing, you may still doubt that you are capable of building a portfolio of stocks that will make you rich.
Not all stocks are going to live up to their early promise, no matter how much time you devote to making a selection.
In the other hand, even if you pick your stocks blindfolded, you will have some winners.
10 years - $118,368
20 years - $280,221
10 years - $66,172
20 years - $291,911
10 years - $70,986
20 years - $201,558
20 years - $265,330
One final note. If you figure in taxes, you look even better, since the capital gains (on your stocks ) are taxed at a much lower rate than ordinary income (which applies to CDs). And, you wouldn't even have to worry about capital gains on your stocks if you elected not to sell them.
(Comment: My personal guideline is this. Of 5 stocks you buy, expect 1 to do very well, 3 to be average, and 1 to do poorly.)
Read also:
Why Invest in Stocks?
Why Invest in Stocks? Look at the Facts
Why Invest in Stocks? Investing for the Long Term
Why Invest in Stocks? Some Profitable Comparisons
Why Invest in Stocks? Why Doesn't Everyone Buy Common Stocks?
Why Invest in Stocks? An Example in Practice
Not all stocks are going to live up to their early promise, no matter how much time you devote to making a selection.
In the other hand, even if you pick your stocks blindfolded, you will have some winners.
An Example
Investing into Common Stocks
Let's suppose that you want to invest $100,000 in 20 stocks, or $5,000 in each. Some will work out and some won't.
So so news - 10 of 20 stocks will just plug along
Hypothetically, it does not seem unreasonable to project that 10 of these stocks will just plug along, making you neither rich nor poor. Suppose we assume that these 10 stocks will appreciate (rise in value) an average of only 7% per year over the next 10 or 20 years. Toss in a 2% annual dividend and the total return adds up to 9% per year. That is not exactly riches, since stocks over the last 75 years have averaged about 11%.
At any rate, here is what your $50,000 will be worth at the end of:10 years - $118,368
20 years - $280,221
Good news - 3 of 20 stocks performed above your wildest dreams
Next, let's look at the 3 stocks that performed above your wildest dreams. They appreciated an average of 15% per year. Add in a modest annual dividend of only 1%, and you have a total return of 16%.
Assuming you invest $5,000 in each of these stocks, that $15,000 will be worth over the next:10 years - $66,172
20 years - $291,911
Bad news - 2 of 20 stocks skid and never recovered
So far, so good. Now, for the bad news. Two of your stocks hit the skids and never recovered. Total results for the $10,000 invested in these losers is: zero
10 years - $00,000
20 years - $00,000
Fair news - 5 of 20 stocks performed about average
Finally, 5 of your 20 stocks do about average. They appreciate an average of 9% per year and I have an average yearly dividend of 2%. That's a total return of 11%. Since you have 5 stocks in this category, your total investment is $25,000. Here is what you end up with in the next:10 years - $70,986
20 years - $201,558
Adding Up these Returns
If we add up these various results, the final figures make you look reasonably rich:
10 years - $255,525
20 years - $ 773,690
Investing into CDs
By contrast, had you acted in a cowardly manner and invested exclusively in CDs that gave an annual return of 4%, you would have only the following at the end of the two periods:
10 years - $162,88920 years - $265,330
One final note. If you figure in taxes, you look even better, since the capital gains (on your stocks ) are taxed at a much lower rate than ordinary income (which applies to CDs). And, you wouldn't even have to worry about capital gains on your stocks if you elected not to sell them.
(Comment: My personal guideline is this. Of 5 stocks you buy, expect 1 to do very well, 3 to be average, and 1 to do poorly.)
Read also:
Why Invest in Stocks?
Why Invest in Stocks? Look at the Facts
Why Invest in Stocks? Investing for the Long Term
Why Invest in Stocks? Some Profitable Comparisons
Why Invest in Stocks? Why Doesn't Everyone Buy Common Stocks?
Why Invest in Stocks? An Example in Practice
Why Invest in Stocks? Why Doesn't Everyone Buy Common Stocks?
Why doesn't everyone buy common stocks?
That's a good question. Let try to find some satisfactory answers.
Part of the reason may be ignorance.
Not everyone is willing to investigate the field of common stocks.
These noninvestors may be too preoccupied with their jobs, sports, reading, gardening, travel, or whatever.
Then, there are those who are heavily influenced by family members who have told them that stocks are too speculative and better left to millionaires. (Of course, that's how many of those millionaires become millionaires.)
Even if you are convinced about the potential of stocks, you are probably wondering how anyone can possibly figure out which stocks to buy, since there are tens of thousands to choose from.
That, in essence, is the purpose of all my postings in this blog - to get you excited in pursuing financial education to benefit from your investing into common stocks.
Read also:
Why Invest in Stocks?
Why Invest in Stocks? Look at the Facts
Why Invest in Stocks? Investing for the Long Term
Why Invest in Stocks? Some Profitable Comparisons
Why Invest in Stocks? Why Doesn't Everyone Buy Common Stocks?
Why Invest in Stocks? An Example in Practice
That's a good question. Let try to find some satisfactory answers.
Part of the reason may be ignorance.
Not everyone is willing to investigate the field of common stocks.
These noninvestors may be too preoccupied with their jobs, sports, reading, gardening, travel, or whatever.
Then, there are those who are heavily influenced by family members who have told them that stocks are too speculative and better left to millionaires. (Of course, that's how many of those millionaires become millionaires.)
Even if you are convinced about the potential of stocks, you are probably wondering how anyone can possibly figure out which stocks to buy, since there are tens of thousands to choose from.
That, in essence, is the purpose of all my postings in this blog - to get you excited in pursuing financial education to benefit from your investing into common stocks.
Read also:
Why Invest in Stocks?
Why Invest in Stocks? Look at the Facts
Why Invest in Stocks? Investing for the Long Term
Why Invest in Stocks? Some Profitable Comparisons
Why Invest in Stocks? Why Doesn't Everyone Buy Common Stocks?
Why Invest in Stocks? An Example in Practice
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