Archive for investment

Investing Experiment

I’ve always had a fascination with riskier investments. Up ’til now I’ve kept most of my money in index funds of various sorts but I’d like to get investing in stocks on a more frequent basis just for fun. So, I’m developing an investment strategy that I’ll let you guys in on as soon as it’s settled and I’ll keep you guys updated periodically of my progress. Then, we’ll see what happens!

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Allocating my 401(k)

Keeping to my post from yesterday, I thought I’d share my process of choosing how to allocate my money in my 401(k).

I knew I couldn’t just leave it in cash. Though this is certainly the easiest way, it is also the most pointless since my money won’t grow enough to keep up with inflation.

I have been excited about Vanguard funds and had been looking forward to getting in them once I finally had a 401(k) without a minimum limit. However, I pulled up the website and looked at the choices available to me and recognized none of them. This depressed me a bit.

There were managed plans in which I could just stick my money in it based on my risk level. The managers would then invest for me and reallocate my money for me in exchange for a small fee. Unfortunately, I’m too cheap to pay a fee when I could just DIY with my money.

I tried figuring out how to invest in Vanguard but according to the website, I would not be able to invest in other mutual funds or stocks without opening another account linked to my account and paying fees for every trade as well as sticking to the minimum limit (which I had nowhere near enough in my account to do).

So, I resigned myself to the funds accessable to me and decided to research them and see which ones were the best. I turned to Morningstar and looked up each fund. I knew I wanted to keep it diversified and I wanted about 3 funds. When I researched the funds, the first three things I noticed was:

1. They all had low minimum limits (not that it matters in a 401(k))
2. They all were rated pretty low in Morningstar
3.They all had ridiculously expensive expense ratios

This didn’t make me feel any better naturally. So, first, I just cut out anything lower than 4 stars in Morningstar which left me about 4 funds. Then, I just compared them by how much they’ve been earning (or losing) over a year, 5 years, and 10 years to see their long-term potential. Then I looked at their top holding and noted the ones that were holding stocks that tended to have solid returns year after year. Finally, I looked to see what categories they were in so that I could properly diversify.

In the end, I chose 2 pretty solid long-term funds (allocated 35% each) and 1 more risky fund for a little thrill (allocated 30%) for a total of 100%.

Now, I just need to watch over the funds and reallocate about once a quarter just to make sure that my funds are doing all right and I’m not bankrupt.

Any other advice you can offer?

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“Rich Girl, Poor Girl” from Cosmogirl May 2003

I was doing some cleaning since I’m redecorating my bedroom when I came across a truly humongous stack of old teeny-bopper magazines dating back to 1999.  I decided to recycle them all since I wasn’t ever going to read them anymore and they were just taking up space.  But, being the packrat I am, I just couldn’t recycle them all until I had flipped through all of them and rip out the articles I liked just in case I wanted to read the individual articles again.

Going through my Cosmogirl magazines, I stumbled upon this article.  Here are 5 tips that Robert Kiyosaki, the author of Rich Dad, Poor Dad, gives to teenage girls “to go from normal to super-wealthy” (I’m just writing the tip, not the description.  I add a basic summary in parentheses afterwards):

1. Spend Later – Wealth is about how much you keep, not how much your earn (save more than you spend)

2. Be Desperate – A paycheck is not enough if you want to live the good life (find alternate sources of income)

3. Buy Assets – Money isn’t just for spending, it’s for making more money (invest money in things that will go up in value later)

4. See Green – Opportunities to get rich are all around you (lots of ideas to make extra bucks are all around you, you just need open your eyes)

5. Learn How – If you know how money works, it can work for you (learn from lots of different sources on how to manage and invest money)

What do you think?

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Stock Regrets

I’ve made some good decisions on stock investing.  CEO is up more than 30% from when I bought it.  DELL is doing surprisingly well.

However, as I’m researching, I find that I missed on some good deals.  I should’ve bought Nintendo when I first started putting in money because the Wii sales actually is lasting a lot longer than I thought.  Instead of investing in a general international index ETF, I should have poured my money in a China ETF or an emerging markets ETF which are doing ridiculously well to the point that I can’t really afford it on my limited funds anymore. I really regret it but really, there’s no point in dwelling on regrets.

Mostly, I find that I shied away from amazing opportunities because I was afraid of the risk, afraid of making a wrong decision, afraid that at any second (as soon as I pour my money in) that the stocks will drop like a rock.   I must learn to trust my instincts more and give my intelligence more credit.

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The Frustrations of Different Terminology

I’ve been trying to use Excel spreadsheets to calculate various formulas for me with the financial information I pull off Google Finance because I’m trying to determine what are solid companies for me to invest in.  However, I needed certain numbers that Google Finance was not able to give me right off the bat and I didn’t want to flip back and forth between multiple tabs on Firefox just to get a few numbers.

Time to pull out my dusty old accounting book (I took one basic accounting class in college).  Turns out, I had to calculate some of the numbers myself.  Even more frustrating is that the accounting book uses different terms that Google Finance uses so I had to carefully read everything to make sure they were really the exact same thing.

Now, because I’m so frustrated, I’m determined to learn all the different terminology and the different terms for them just so it doesn’t take 15 minutes to do one simple calculation on Excel.  I suppose some good came out of that.  I figure it’s also time to brush up on accounting.

Once I figure everything out, I’m going to make up a reference sheet for myself that I can constantly refer to.

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Having Patience in Investments

I keep telling myself I’m a buy-and-hold kinda gal.  I try to buy stocks when I feel they are pretty low and I tell myself that I’m only selling when they’re decently high.  Or at least that’s the theory.

However, it’s nerve-wracking when a particular day was particularly bad for the market and all my stocks are down and it can get even worse when all my other stocks do well and just one of them is abysmal.  Then, I keep thinking to myself, should I sell it now and cut my losses when it could get any worse?

Or when a particular day comes when one of the companies are doing particularly well, jumping up beyond my expectations.  Then, I frantically ask myself whether I should sell it or will it keep going up?

I try to be emotionless about my investments but that’s the thing about personal finance: they’re deeply personal to me.  I feel like an anxious mother, exulting at the highs and worrying at the lows.  But, I keep telling myself to be patient and to be cool about it.  I keep telling myself to buy at the price I determine and the to sell at the price I also previously determined.

Though, I may wince a little when I sell a stock and it keeps going drastically higher or buy a stock whose price then drops like a rock, I keep trying to be patient.  In the end, I figure, I’m pretty bullish and the market will be fine in the end.

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