I’m a Terrible Investor and So Are You

George WashingtonThe Dow Jones Industrial Average is at over 19,000, its highest ever.  Everyday there seems to be some bad news that will lower the stock market, but it continues its march to new highs.  Trump elected, big drop followed by super massive positive streak.  Then Italy votes against current government consolidation which may be another domino to fall for the EU, but the market decides higher it is.  Meanwhile, I am convinced that the market is overvalued, but this is speculation on my part.  I certainly don’t know what the market is going to do, but I’m making my investments as though I do.  That means I am my own worst enemy.  Right now I’m not participating in the significant gains, but instead earning .95% in my savings account.  I’m young, so now is the time to start investing because my money can compound, so what is the problem and solution?

Problem

Since turning eighteen the market has doubled, however my initial money has not.  I decided to pick certain stocks, sell too early, buy low quality stocks, and pay lots of transaction fees.  All this lead to greatly reduced returns.  It is easy to win when the market is going up and people will think they are doing a great job, but when it goes south people freak out.  The 2008 crisis made the market drop 40% and I bet there were people that sold all the way down and decided that stock was too risky.  However, since that bottom the market has almost tripled, more than erasing any losses.  In the long run the market has always gone up and I anticipate this going forward though perhaps at a slower rate.  As one person I met with last week put it, the market is not made for human trading.  You may not have had breakfast, feeling tired, or decide to sell your stock before going on vacation.  However, a computer is told what to do and will not let emotions get in the way of executing that plan.

Solution

Since you can’t trust yourself you have to come up with a plan that takes yourself out of the investment equation.  In order to do this you can stick with indexing, robo-investing, or a professional money manager.  A manager will charge you a percent or more.  Over many years this will mean tens of thousands less in returns available to you, so I’d stay away from that as well.

Index funds

Indexing is where you put your money in fund  which holds a huge basket of stocks so your portfolio does what the market does rather than just a few stocks and is therefore safer.  You can do this in any type of account you where you can own stock and funds.  However one company which is committed to always lowering fees is Vanguard.  They are the leader in indexing and I would recommend an account with them to get very low fees and a company committed to you.

Robo-investing

Robo-investing is trusting your money to a company that charges a low-fee and holds index funds as well.  The benefit to this is that they will choose the funds for you based on your risk level and other factors you pull in.  Always read about the fees to know what you are paying.  I use Wealthfront and another popular one is Betterment.

Conclusion

Despite the solutions available to you, you will still need to practice restraint.  You are free to take money from your accounts (assuming it isn’t a retirement one) and that means you could try to play the market as well, but statically you are going to lose.  In order to retire early one must partner with the market (or other money-generating asset) to make returns to live on, so it is best to get comfortable with keeping your money in the market even when it seems terrible.  As for me, I’m keeping cash for now since I’m going into a transition and may need the money so I don’t want to be forced to sell low.  However, for others, if you have money to invest for a long time make sure you are not putting it something with high fees.  Good luck and be patient.

This entry was posted in Invest.

Black Friday, Cyber Monday, and Shopping

BR OrderYou may be thinking that this article is coming out late when Black Friday already passed and you’d be right.  But since I only have a dozen consistent readers at the moment, I think this article will be more of a guide for future readers.  Did you buy anything this year?  Being frugal you may have thought I didn’t, but after years wearing the same wardrobe, I decided to get new pants and shirts.

My deal

Gap and Banana Republic had a 50% off sale on Black Friday.  I went into the store and purchased one shirt and one pair of pants.  This was a good decision because it confirmed what size I am.  I then paid with a gift card I used my Discover rewards to get.  An $80 shirt became $40 + tax and I used $40 of Discover rewards to get a $50 Banana Republic gift card.  They gave me the $7 gift card balance in cash, so I got an $80 shirt for $33, a 59% discount.  If you don’t have Discover rewards you can often buy discounted gift cards on many sites including Staples, eBay, or Raise.  I had a good start, but my day didn’t end with a pair of pants and a shirt.  I went back home to their website where I purchased five more items.  The benefit to shopping online is you can use a cashback portal, but you can’t cash out the gift card balance.  The portal gave me an additional 5% cashback.

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The Library Still Exists?

Library FineYou may think the library is a place for children, but you may be mistaking that with the children’s section.  The library really has the more resources for adults and has resources for the 21st century.  A few months ago I purchased When Breath Becomes Air because it was a new release and those take a long time to get your hands on at the library, or so I thought.  My mother was number 130 on the waitlist, but in a couple weeks they called and said it was her turn and needed to pick up the book by the next day.

Reading

I think reading can be a surprising expensive hobby.  Buying a few books a month will cost a few hundred a year.  My wife is currently late with a Barefoot Contessa book which is running us 25 cents a day.  We can’t return it because we are out of town burning some airline miles, but the book is $20 on Amazon ($15 used).  Paying the late fees are way cheaper than the cost of the book.  I like reading the newspaper and used points to get it, but now try to spend more time learning more skills rather than keeping up with the news.  I think reading is a good hobby and keeps your mind sharp and entertained, but I don’t think it is good if it becomes too much like TV and saps your time and life away.

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Play with Gold and you May Get Burned, or Robbed

Credit Score DecreaseSo you may remember I like using credit cards to collect free flights and hotel nights.  Many times there is a $3,000 minimum spend required to get the bonus points or bonus cash.  Well, we don’t have a ton of expenses that can be paid by credit card, especially if you’re living with parents, so sometimes that can take a bit of effort.  Months ago I realized that I was not going to make it to $3,000 so I tried to figure out what I could buy and resell while minimizing the amount I lost, so I bought a bar of silver.  A bar was $1,600, so it put me over the $3,000 amount.  If I sold it as soon as I got it I would have lost $100 which wasn’t too bad for the bonus 50,000 miles which could be a roundtrip to Europe.  Since I got back from China I realized that you could get $1,300 of gold at only $10 above the spot price and then I got greedy.  So as a great guinea pig, let me share my experiences.

What I did

Recently Marriott purchased Starwood and their reward programs got combined.  They opened up transfers between the programs so 1 Starpoint could be turned into 3 Marriott points.  Marriott has some ways to earn turn points into hotel stays AND airline miles.  At the low end, I would need 200K Marriott, but that is only 67K Starpoints, so I thought that would be achievable with gold.  67K points is $67,000 spent or 52 ounces of gold, so at $10 lost a bar, I would spend $520 to get 7 nights in a category 1-5 hotel and 55K United miles, what I would consider a killer deal.  That would be around a $1,500 value.  So I started with 10 bars, then 10 more, then 5 more and thought I would sell them, then buy some more.  Sounds good right…

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This entry was posted in Earn.

Amazon Prime, Worth It or Not?

Prime BenefitsI’ve had Amazon Prime for at least five years, but I think it is time to consider whether I would like to keep it going forward.  My current subscription expires in July 2017 and that would be the first time I am ineligible for Amazon Student’s discounted $49 rate.  $99 is expensive and the reason I haven’t analyzed its cost yet is because I bought an Amazon Fire Phone for $125 that included a year of prime, thus delaying this analysis.  Now wasn’t that a killer deal?  I’ll run through the features I use it for, but here is a comprehensive list.

Shipping

I believe the original benefit of Amazon Prime was the free shipping.  Now they have really stepped it up with free two-day shipping and often even faster.  This is good in some respects because you save money on shipping.  However, I have noticed that Prime makes it too easy to buy stuff.  I am dropping money for small things here and there that having a minimum purchase for free shipping would help slow my decisions and probably eliminate some items.

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How to Watch Your Videos

VidAngelSo I guess we are all addicted to video content.  We like our TV shows and movies.  Personally, I decided not to buy a TV and think that has been a great decision.  It means I definitely do not have cable and you probably shouldn’t either.  I will go through the more affordable ways to watch videos.  You probably read my blog because you are looking for ways to save money without depriving yourself, so let’s get started.

Device

It is crazy how some people will pay over $100 a month and have a 28″ 720p TV.  They pay so much and in my opinion, aren’t receiving all the benefits.  Anyway, you can certainly watch your videos on a TV and if you need a different one make sure to get a good deal.  If you have a smart TV then you can use many of the streaming services, otherwise you’ll have to get a smart device to plug into the TV.  You can use a computer, Apple TV, Chromecast, Roku, Fire TV, or other device to access a ton of apps which provide videos.  Not all the devices can access the apps you want, so make sure to check what you need once you decide which apps you need.

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Lord of the Mattresses

BedIt is kind of embarrassing to admit, but in the year after getting married we owned six mattresses.  If that is not bad enough, they were all Cal Kings.  The average price of these beasts was $1,000 but fortunately didn’t drop 6 Gs into the mattress.  I’m not one to take advantage of the system, but picking a mattress is tough work and I’ll share my story to help make a better next purchase.

Our mattress saga

Costco had a sale on mattresses so I bought a Luxury Plush firmness one which was Mattress #1.  It worked for a little bit but then we found it ultra soft.  So we put the mattress on top of my dad’s truck and returned it to Costco.  Finding it so soft we jumped to Extra Firm, big mistake.  That one was too hard, which is funny now if you recall the picture of my piece of foam on wood in Taiwan.  Back through the exit of Costco where everyone stares at you because the receipt checker has to stop the outflows of people so your double-wide cart can fit through.  On the first trip, they sent me back out to wrap it in plastic. The following two times I knew to wrap it up first.  Next, Costco’s Firm and final chance was delivered to our house and we liked Mattress #3. Continue reading →

Free Money without Robbing the Bank

HSBC OfferI have collected bank bonuses in the past and did so for two this summer, what I didn’t realize is just how much free money was available for the taking.  So I decided to see if I could take advantage of two more and end the year with $1,550 in bonuses.  The money is free, but it will be taxed as interest.

So far I have opened a Chase account which provided me with $200.  They also provide $150 to open a checking, but I had one already.  A Bank of the West account gave me $600.  This was a mail offer I received, so be on the lookout. The other ones which I am trying to complete are Citibank which should give us $400 if we maintain $15,000 for 30 days and an HSBC one for $350.  This article will walk you through the HSBC one so you can collect your $350 as well.

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This entry was posted in Earn.