Trolling the Blogoverse: 5/23/07 Edition

The latest Carnival of Personal Finance is up at FIRE Finance. I just wanted to comment on a few posts…

10K!!!

I mentioned earlier that I didn’t know about the 401(k) where I work until a little less than two years ago. (Yes, I know…everyone should know about these kind of things…) When I found out, I immediately signed up, but only started by putting in 5% of my salary. After a few months, it didn’t look like enough, because let’s face it, 5% isn’t that much. So I upped the contribution to 7%. Still not working for me. 10%? Uh…no. Now I’m up to 12%. I’m comfortable where I am now, but will probably increase that in the future. My funds returned over 18% last year, and I am looking at 10% return year-to-date, so I’ve got that going for me.

Well, with the recent run-up in the markets, I finally broke $10,000 in my 401(k)!  About time!  When I started out, it seemed that my balance was increasing soooo slowly, but now I’m at five figures.  Sure, most of the increase is due to my contributions, but after a few years, the investment growth will really start to add up (I hope).  Anyway, it’s a milestone that I wasn’t even thinking about when I started because it seemed so far away, but now I’m there.  Let’s see how long it takes to get to 25k…

Investment Choices…

So, what to do with my money? Here’s the breakdown for my 401(k): 35% international, 35% small-cap, 15% mid-cap, 15% large-cap. Like I said before, I have 30+ years until retirement, so I can afford a little risk right now, which is why I’m overweighted in international and small-cap. However, I’m limited to the options in the plan.

My IRA and Roth accounts at Fidelity are heavily weighted towards large-cap (~70%), with the rest in international. About 40% of this is in Fidelity’s US Equity Index, a nice S&P 500 index. But the rest…

I’m a fan of index funds, although I have only a small portion of my total investments in them (it’s not my fault my 401(k) doesn’t offer them). Warren Buffet is a fan of index funds. Free Money Finance is all over index funds. What’s so great about index funds? Two thing: 1) low costs, and 2) more importantly, most actively managed funds do worse compared to their index benchmarks. And they offer instant, broad diversification (as long as the underlying index is broad and diversified). Ok, so that’s three good things.

The problem I have is that the index fund choice is limited at Fidelity, where I currently have my money. Although the choices are pretty good, the minimum investment amount for most of the index funds is $10,000, which I do not have yet. So, either I wait and build up my balances, taking advantage of actively managed funds, or go to Vanguard, where the minimum balance amounts are much lower ($3000), although this would mean having different accounts in different financial institutions. Since my actively managed, large-cap fund is doing pretty well, I think I’ll stick with that, although I will still research to keep my options open.

Trolling the Blogoverse: Cinco de Mayo Edition

Here’s my take on some of the posts at the latest Carnival of Personal Finance…

Trolling the Bolgoverse

I was looking at the latest Carnival of Personal Finance today, and a few of the “state of the economy” posts caught my eye.

The first post is “Subprime Bail Out? Hell No!” while the next two posts deal with the lack of American savings.

Where we are now, financially…

So I moved all may accounts over to Fidelity. What do I have? An IRA and Roth IRA for both my wife and I, which were the transferred accounts, plus my wife’s 401(k), are at Fidelity. I have my own 401(k) through my work at yet another company. I was initially interested in Vanguard, with its extensive line of index funds. However, I had less in the Roth IRA accounts than the account minimum, which is currently $3000. (Vanguard also charges a $10 fee on accounts of less than $5000, which also includes my IRA account, plus a $10 fee on each index fund in each account.) So, for the moment, Vanguard is out, although I might consider moving the accounts over once I have more than in each account. In any event, as my wife and I are contributing into our 401(k)s, I will roll over the IRAs into the Roth IRA accounts in 2010, when the income limits on this type of transaction go away.

Karmic Moose

Wow, is it fate? Is the world trying to tell me something? Or maybe I’m just that good…oh yeah…

I was checking on Yahoo finance, because I always like a good stock day (and seeing all the up arrows when I check on my portfolio), and I saw this article on young investors getting investing information from the internet. And I was all over that yesterday! Yeah, go internet!

One site mentioned is I Will Teach You to be Rich, a site that I have not seen before, but looks interesting based on my quick glance, so I’ll put it in the links. And here’s the quote: “Investors of his generation are smart enough to do financial research and planning on their own, he said. But he advises readers to get a variety of perspectives through their research, never limiting information and advice to just one source.”

Knowledge is power, baby…

A little more history

The last post got me thinking about my “financial advisor” and how his knowledge, and my lack of knowledge, got me in the position I was in. Looking back, here the problems that I had:

• Load, which I explained earlier, and have since learned that you should not pay it.
• Account fees, in addition to the load, I was charged an account maintenance fee or something like that. These were flat fees, and combined with the relatively low amounts in the accounts, came out to about 1% on each of the accounts.
• Fund fees, which were over 1% for each of the funds that my wife and I owned.
• Finally, poor performance. None of the funds performed well during the last few years. In fact, one fund I was in even lost value during 2006 (on top of all the fees). Did I mention that there’s been a bull market for the past few years?

My situation, of course, can be applied to many people that deal with the financial industry. At first, I felt uncomfortable “asking questions,” like I was disputing the advice I was given. But then that made me angry. First of all, I shouldn’t have to deal with the fees and the poor returns. The financial industry is a competitive market. If I didn’t like the service I was receiving, I could vote with my wallet, and take my business to another company that could provide me with better options for my money. Secondly, I worked hard for that money, and I shouldn’t have to feel uncomfortable worrying about hurting someone’s feelings if I am losing money.

This brings me to my third point (and the moral of this post): the more knowledge you have, the better off you will be. The reason I was in this position was because I didn’t know any better. After seeing that my investments were not performing that well, I realized that I needed to take charge. I looked at the company that was holding my money, looked at other companies, and found out I could do better, so I switched my money out. If you are not sure about where to invest, for mutual funds there is Fidelity, or Vanguard with its extensive index funds, or other companies where you could purchase stocks individually (with low trading fees), such as Scottrade or Share Builder. The point is that doing a little homework can make life much easier.

So, the “gem of wisdom” I can impart today is to learn from my mistake, and educate yourself, learn your options, and then make your decision. You may still make mistakes, but you can learn from them. And at least now I’ve realized now that there are things I must learn, and this entire process (of saving and investing) is one of constant education and continuous improvement. So, next up, where I am now, and what I am doing to improve…

A Little History

OK, a little backstory on where we’ve been…

It’s the late 90’s, my wife and I have a little bit in a couple of IRAs from old jobs, but they’re just sitting a money market, not doing anything. We met up with one of those salesperson/”financial advisor” types, you know the one, “get a free lunch if you listen to our pitch” thing. Mrs. Moose and I didn’t know anything about finances, so we fell for it.