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What Kind of Person is the Stock Market?
02.13.08 | Online Investing | 1 Comment | by junger

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Stanley Bing has an amusing post up today about the qualities of the stock market and how they translate into a person.

Among them, he offers up:

Rich: There’s a lot of money in the stock market. Having all that money doesn’t really make it any happier, though.

Nervous: In fact, being so wealthy and privileged makes it incredibly anxious. If peace of mind rests in the feeling that one has nothing to lose, the Market is the exact opposite. It has everything to lose, first and foremost in its anxious, monkey mind.

Greedy: Over-riding that anxiety is a fine patina of opportunism and atavistic desire to get more, have more, to profit while others are screaming down into the ocean of defeat. When the greed overcomes the nervousness, the Market is happy and flies very high;

Gutless: On the other hand, even the specter of a shadow of a doubt that things could go the other way and the Market starts heading for the exit. In a disaster, this is not the person you want in the lifeboat with you. If it doesn’t push you overboard, it will try to eat your leg;

Intelligent: Nobody is saying the Market is stupid. It’s not. It’s just like a lot of my friends — too crazy to be smart a lot of the time;

Irrational: I don’t care how many PowerPoint presentations investment bankers, lawyers and security analysts offer to me at boondoggles past, present and future, nobody will ever convince me that the Market is rational. Buffett to the rescue! Hurrah! Let’s go up! Oooh. Wait. Buffett’s motives are impure. Ouch. Let’s go down. Sure, apologists for the Market will come up with a million reasons it does things. So do we all.

Of course it's possible to beat the market. It can be done, and it has been done.

But the more important question: is it worth it? What will it cost you to beat the market?

I don't know about you, but I don't have the time or money to try and beat the market. The chances of it happening are slim, and even if it happens, it'll cost you the difference in fees.
10 Smart Money Moves We Made in 2007
01.04.08 | Money | 4 Comments | by junger
2007 was a great year for us financially. No, we didn't win the lottery or get any other kind of windfall, but we made a bunch of smart money moves that will pay off well in the long run.

Here are 10 smart money moves we made in 2007, in no particular order.
- We Moved Cities
  It wasn't a cheap move, but by moving to a more affordable area, we're much more prepared to purchase real estate. Moving is not a small change — but it can have big effects on your financial situation.
- We Started a Housing Fund
  In order to meet our home-savings goal, we opened a new online savings account earmarked for housing money. Every month, HSBC automatically pulls money from our checking account and deposits it — paying ourselves first.
- We Started Using Index Funds
  Rather than trying to beat the market (an unsuccessful long-run plan), we transferred our Roth IRAs from Ameriprise to Vanguard, investing in low-cost index funds.
- Increased Monthly Roth IRA Contributions
  In addition to our move to Vanguard for our Roth IRAs, we increased our automatic monthly contributions. Last year, we used a chunk of money from our tax returns to max out our Roth IRAs — this year, we'll be closed to maxing them out without additional funds.
- Got a Promotion
  Earlier this year, I got a promotion at work, leading to more responsibility, more work and, yes, more money. While my paycheck is a bit fatter, our lifestyle isn't. We're spending nearly the same amount of money as we were before the promotion — pocketing the difference for savings.
- Bumped Up 401(k) Contribution to 10%
  At the same time I got a promotion, I upped my 401(k) contributions to 10% of my salary. Because I did it at the same time my pay went up, I never "knew" the difference and questioned its worth.
- Opened an FSA
  As I've said, the smartest $400 I ever spent was on my FSA. With a flexible spending account, the money comes out pre-tax, and with a debit card, purchases are seamless. Since it's not coming from my normal accounts, it's like buying things for free!
- Joined Yodlee to Track Finances
  If you don't know where your money is going, you don't know how to save. Even though we use a written budget, we joined Yodlee for more automatic budgeting and to track all of our accounts and net worth.
- Downgraded Cell Phone Plan
  I wasn't using all of my cell phone features, so why should I pay for them? Earlier this year, I downgraded my cell phone plan, saving money every month on features I don't use. (Even though Spring screwed up my plan change.)
- Automated Our Finances
  Even though we think about our finances daily, we don't worry about when bills are due or if we can pay for them. Nearly all of our bills are paid automatically, our savings are transferred without a key stroke, and our salaries are deposited directly.
Well, you've heard our smart money decisions for last year. Now, we want to hear yours.

What were the smartest money moves you made in 2007?
Money Management is Simple: Don't Listen to the Noise
12.28.07 | Money | 4 Comments | by junger

I like to read (and sometimes answer) the questions on LinkedIn (add me to your network) every so often, especially in the personal finance and Web development categories.

The other day, I ran into a great question with some not-so-great answers.

Money Management: They teach in school that best way to generate returns from capital is through proper money management. What is your money management method? How do you ensure that you are employing your savings profitably? What are the best ways to protect investments from market crash and along with saving taxes?

This question goes to the heart of managing your money.

How do you save? How do you ensure you're getting good returns on your money? How do you prepare yourself for highs and lows in the markets?

As is usually the case with LinkedIn questions, the people providing the answers are the ones hoping to make some money off of the question. There's nothing inherently wrong with that, but (as often happens) the answerers are providing poor information in hopes of making a buck.

Check out these answers.

From a Capital Market Professional: "I am afraid there is no direct answer. But there are mitigation possibilities. If you find the equity market has gone over board from medium / long term point of view, start moving moneys to fixed return investments (basically debts-deposits, etc)."

From a Manager Product Marketing: "Not having any investments takes away the sorrow of having to protect it. So I would say that proper money management is to spend it."

From the Owner of a Personal Wealth Management company: "Wealth Management - my thoughts though influenced by U.S. laws (eg. tax statues) are universal: [LINK TO WEBSITE]"

These aren't bad answers, per se, but none of them are truly helpful.

Money management isn't hard, and if you know the basics, you don't need to listen to the noise. Here's my answer to the question.

There are tried-and-true, easy ways to properly manage your money. You don't need to pay for someone to tell you these.

1) Spend less than you earn.
2) Pay yourself first.
3) Automate your payments and savings/retirement contributions.
4) Invest in index funds.
5) Diversify your investments — stock funds, bond funds and int'l funds.
6) Stick with it. Don't time the market.

On a side note, make sure you're getting the most from your checking/savings account. FDIC-insured online accounts often yield much higher interest rates than brick and mortars.

Most of these people are out there to make a buck off of you, but you don't have to be afraid of managing your own money. In fact, once you get the fundamentals down, you can even purchase investments that outperform the "professionals."

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