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$64.51 Giveaway – Community and Charity 10% Monthly Blog Income Give Back # 6 – March 2012 Edition
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The 10% give back giveaway fun rolls on for the month of March!
In case you missed the first five editions of the 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:
- 1) The readers – Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
- 2) Charitable organizations – If you’ve read my blog before, you know that I’m a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).
Because of these considerations, I’ve decided that each month going forward, I’m going to give away 10% of my net (after-tax) blogging income/profit to My Personal Finance Journey readers (5%) and to charity (5%). Listed below is how the process will work:
- After each calendar month passes, I’ll tally up my net blog income and determine what Dollar value correlates to 10%.
- I’ll post the giveaway (similar to this post you’re reading now), and you’ll have approximately 2-3 weeks to enter (I apologize for the late start this month!).
- Once the giveaway is over, a grand prize winner will be announced, and then I’ll donate another 5% of my blog income to a charity. Once the giveaway entry window ends, I’ll send out the money to the blog reader winner(s) and personally drop off the charity donation.
- So far, I’ve been very happy with the success of the first 5 editions of the 10% income give back.
- In October, $205 total was given away, with $100 being donated to the charity, GreenPeace.
- In November, $201.40 total was given away, with $100 being donated to the charity, The Blue Ridge Area Food Bank. If you’re interested, you can view the details of me going to drop off the check at the Food Bank by clicking here.
- In December, $74.52 total was given away, with $38 given to Big Brothers Big Sisters of Central Blue Ridge. You can view the details of the donation drop by clicking here.
- In January, $196 total was given away, with $96 given to the Sexual Assault Resource Agency. You can view the details of the donation drop by clicking here.
- In February, $141.20 total was given away, with $70 given to the Blue Ridge Chapter of the National Multiple Sclerosis Society.
- $64.51 total blog income to give away – $34.51 to a My Personal Finance Journey reader and $30 to the National Multiple Sclerosis Society – Blue Ridge Chapter.
- $34.51 in the form of one prize available to one reader as follows –
- 1) Grand Prize = $34.51 Amazon Gift Card or $34.51 cash via PayPal.
- It’s been very fulfilling developing a relationship with the local chapter of the National Multiple Sclerosis Society through the MS150 fundraising bike ride I do each year. Click here to see the details for the 2012 edition of the ride I’ll be doing! I look forward to continuing to raise money for their efforts.
How to Enter the Giveaway – Deadline to Enter is Midnight, March 31st, 2012
Like last month, I’ve decided to use the RaffleCopter giveaway management tool to handle sign-up facilitation for the March giveaway, so simply go through the steps listed in the widget below to enter the running for the prize and accumulate entry points.
There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 170 entry points! Or, if you link to the giveaway more than once, you can accumulate those 7 entry points multiple times. You can also retweet the giveaway and/or share other My Personal Finance Journey articles via social media sites once per day. In the event of a tie, I will be using a random number generator to select the winner.
Important instructions: After you complete an entry method, make sure to click and fill out the “I Did This” or “Enter” button in the widget so that I have a record of your points.
a Rafflecopter giveaway
<a href=”http://rafl.es/enable-js”>You need javascript enabled to see this giveaway</a>.
Remember, the deadline for entries will end at midnight on March 31st, 2012 (about 2 weeks from today – the start of the give back). Good luck to you all! Please contact me if you have any questions. After the deadline for entries passes, the winner (one with the most points accumulated) will be contacted via email to receive their prize.
The Best Financial Calculators Government and Academia Provide
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post from Amanda Green. Enjoy!
Love it or hate it, the United States government is a source of unprecedented human capital and resources. While we can’t say that Uncle Sam’s wealth trickles down to only the most necessary of places, it’s a guaranteed fact that the overwhelming majority of federal funds go to useful things, such as services to the public and grants to universities. The existence of online financial calculators stemming from both government agencies and state schools is an example of the capability and reliability of public service and funding.
While they won’t replace the expert advice of a financial advisor, the following six calculators available through various federal agencies and public universities are free to the web-connected public and above all, are trustworthy:
University of Maryland Medical System Cost-of-Smoking Calculator
For those of you who dealing with a cigarette addiction, this cost-of-smoking calculator puts the price of your daily pack on an annual scale. While not the main reason to quit, the financial benefits are a definite perk.
Department of Energy Fuel Economy Comparison Calculator
Analysts say to prepare for $5.00 gallons of gas by the end summer. Those thinking about trading their gas guzzler for a more fuel efficient ride can’t afford not to stop by the DOE’s fuel economy comparison calculator to see their options side-by-side.
Department of Agriculture Cost of Raising a Child Calculator
Before you and your loved one decide to start a family, make sure it’s the right time financially by using this cost of raising a child calculator. It’s also useful for existing families looking to see the bigger picture regarding the expenses of parenthood.
Federal Reserve Credit Card Repayment Calculator
While minimum payments give you more spending money today, they’ll result in massive amounts of interest paid over time. To get a glimpse at the long-term state of your credit card debt at the rate your going, use this repayment calculator.
Penn State Living Wage Calculator
Many cost-of-living calculators exist online. But, none get as specific as this living wage calculator created through economics research conducted at Penn State. While it focuses primarily on the necessary wages needed for low income living, it provides an accurate portrait of living conditions in cities across the United States.
Lawrence Berkley National Laboratory Home Energy Savings Calculator
By plugging in information about your geographical area, home, utility bills, energy habits, and existing efficiency efforts, this handy calculator will tell you the ways in which you can further increase sustainability and eliminate waste. It’s ideal for families as well as college roommates.
Uncle Sam has never had much of a glossy reputation, but our tax dollars do go to more useful things than we tend to think about. The aforementioned online calculators, and the inevitable financial information you’ll gain from using them, are proof of the benefits of public funds and service.
How about you all? Do you use any financial calculators online? Have the ones you’ve had more success with been provided by the non-profit (academia/government) or for-profit sector?
Share your experiences by commenting below!
***Photo courtesy of http://opencage.info/pics/files/800_4543.jpg
Welcome Budgets are Sexy Readers!
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Welcome Budgets are Sexy readers! Thanks so much for stopping by my site by way of the my guest post today over at J. Money’s blog listed below. I’m very happy to have you here! 🙂
How to Save Even MORE on Hotel Rooms Using Both Priceline and Hotwire
And, thanks to J. Money, I actually found out that the post was lucky enough to be mentioned at the following places as well. I’m glad that everyone seems to be benefiting from sharing this simple money saving strategy.
LifeHacker.com – Get Better Hotel Deals
College Candy – Cheap Candy
If you’re stopping by my site for the first time, I just wanted to give a little guide towards what I offer here, since information overload can occur quickly and time is our most valuable asset.
To introduce myself, my name is Jacob. I started this site back in January of 2010, and since then, have poured my heart and soul in to the site to produce a product I am proud of and I think adds value to the world. You can read a little more on my background and even see a picture of me on the “About” or “First-Time Visitor” pages to find out more about us.
WHAT I WRITE ABOUT HERE AT MY PERSONAL FINANCE JOURNEY
In short, I like to offer actionable personal finance advice with the goal of achieving long-term success.
Specifically, I really enjoy writing about the following areas (I’ve also listed several posts related to each topic in case you’re interested in reading more):
- Long term investing and asset allocation strategy analysis
- Vanguard vs. Fidelity – Which Funds Are Better?
- Dollar Cost Averaging vs. Dollar Value Averaging – Which Makes You More Money in the Long Run?
- What To Do With Your 401k Savings When Leaving Your Employer
- The Permanent Portfolio by Harry Browne – Component Returns Correlation Analysis and My Future Plans
- Valuation Informed Index Investing vs. Passive Investing – Which is Better?
- Performance Analysis of the American Growth Mutual Fund
- Was the Lost Decade Really Lost for Investors?
- Deciding how to prioritize new funds as they come in to various spending requirement areas
- Account Prioritization Hierarchy – Which Monetary Needs Come First?
- How Do Mortgage Payments Fit in to the Account Hierarchy?
- How to develop a lifestyle of frugality and live according to your life dreams and life values
ARTICLES SIMILAR TO MY GUEST POST TODAY AT budgets are sexy
Additionally, if you liked the theme (how to save money / frugal living) of the guest post I wrote for Budgets are Sexy today and are interested in similar posts I’ve written in the past, you might want to check out the ones below:
- Frugal Living Idea – Skip the Barber and Cut Your Own Hair
- Should I Buy Life Insurance Even Though I Don’t Need It?
- What Do You Refuse to Go Cheap On?
- How I Saved Myself Money With Rental Cars (And You Can Too)
WAYS TO STAY IN TOUCH WITH NEW CONTENT
- If you would like to receive free updates on articles by email, then sign up here.
- Or, you can subscribe to the RSS feed.
- Also, follow/like our pages on Twitter or Facebook.
10% MONTHLY BLOG INCOME GIVEAWAY
Also, each month, I give away 10% of any income I make from this site, with 5% going to blog readers and the other 5% going to a charity selected by the grand prize winner. You can read about all of the details by clicking here.
So far, we’ve given away:
- Current total given to charity = $334
- Current total given to blog readers = $345
If you want to enter in to the March 2012 giveaway, it will be on the way in a few days. Stay tuned!
Thanks for visiting! Keep on learning!
***Photo courtesy of http://s0.geograph.org.uk/geophotos/01/29/34/1293468_818276a6.jpg
Professional Indemnity Insurance Explained
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post. Enjoy!
How about you all? If you are a business owner, do you have business insurance and/or professional indemnity insurance? Why or why not?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Personally, I have zero experience dealing with business insurance, so I cannot comment too much on the points in this article.
- Overall, I think that having business insurance is a very good idea for most business owners.
- However, before blindly deciding to take on this added insurance, you should make sure that the nature of your business warrants the need for this added protection and expense item.
- For example, for my sole proprietorship that I have set up for my blog, I don’t believe there is very great of a need for business insurance since 1) I don’t have a separate physical office away from my home that needs to be protected, 2) have no employees to look after, and 3) I do not provide physical goods or services to customers/clients that I could be sued over if something went wrong.
- Sure – there still exists the minute risk of me being sued for something like slander or using intellectual property without authorization, but there are many steps that can be easily taken to avoid/control these things. So, overall, I don’t feel that I need business insurance just yet.
- However, if I had a business such as a doctor’s office or bakery, I would be much more apt to have a business insurance policy.
***Photo courtesy of http://www.public-domain-image.com/cache/people-public-domain-images-pictures/male-men-public-domain-images-pictures/employees-discuss-in-office_w725_h483.jpg
The Case Against Passive Investing
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post by Rick from Invest In 2012. Enjoy!
I’m not much of a passive investor myself, as I like to get in and out of markets within just a few weeks. But with all due respect, I do know some people who are wealthy and are also passive investors. So, taking their opinions into consideration, here’s my case against passive investing.
As a trader, passive investing is unappealing to me in two ways.
1) Your portfolio rises and falls with the markets. Naturally, I want every single one of my trades to be profitable, so I can’t stand following the market’s ebbs and flows.
2) Patience has never been a big virtue of mine. I might be able to wait up to a year for the right opportunity to come along, but no more than that. I can’t just watch my portfolio sink 30% in one year. I feel like I have to do something about it.
But a lot of people are passive investors because they simply don’t have the time to invest actively. Fine. But still, I don’t think passive investing is very effective. Here are it’s flaws.
Advocates of passive investing often cite the “over 40 years, the stock market moves up”. That sounds great, but if you think about it, who can hold on to an asset for 40 years? Even 30 years seems like a stretch. Most passive investors and mom and pop investors don’t hold for 50 years; they hold for 10 at most. The reason why markets fall and rise in extreme volatility is because it’s very painful to hold onto a stock for 10 years and not realize any gains, so passive investors are lulled into selling at market lows!
And even if passive investors do intend on holding a stock for 40 years, many of them simply can’t! While some people have the capacity to ride out an economic storm and buy on the dips, the majority of Americans can’t. The next time the recession hits, or the next time they’re out of a job: they have to make ends meet at home. Considering that the American savings rate is so low, the only way to rustle up some instant cash is to sell their equities portfolio! And as chance has it, you’re most likely to be out a job at the bottom of a recession, when (non-coincidentally), stocks are also at market lows. Talk about bad timing. Passive investing asks you to buy when the market dips. And when the market dips badly, unfortunately, most passive investors (who work at a job during the day) don’t have any cash to buy!
Also, stocks (just like everything else in this world) have cycles, usually lasting 15 years. Fifteen years of good times, and 15 years of bad times. So what happens if you get out of college, land a job, plan to start investing, but the beginning of a 15 year recession hits? You’d have to have the stomach to hang on during those 15 years and not see any profits! There’s going to be a lot of really scary market crashes, which is why the end of a market crash is usually signalled by the panicked selling by a lot of buy-and-holders (no offense to the buy-and-holders out there).
So let’s assume that you are a passive investor, and you’ve actually had the guts and the capability to sit back and hold on to your portfolio for 30 years. Now, you’re 57 years old, and close to retiring. All of a sudden, the country plunges into a recession, and BOOM, 50% of your retirement fund is wiped out in a flash. At your previous annual growth rate of 7%, how long would it take for your portfolio to climb back above pre-crisis levels (adjusted for inflation)? A long time. Hence, it is not surprising that soon-to-retire passive investors were among the hardest hit in the 2008/2009 financial crash. While the young guy still has 20 or 30 years to grow his retirement fund, the soon-to-retire guy doesn’t!
For every market winner, there’s a market loser. For every dollar made, there’s a dollar lost. Warren Buffett once said “If you don’t know who the fool in the game is, it’s probably you.” If a laid back, passive investor is making money, who’s the one that’s losing?
And above all, as a passive investor, your fate is in the hands of the market. You’ll be completely exposed to the ups and downs of the market.
How about you all? Do you follow a passive or active management style in your investing strategy? Why do you choose one method or the other?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Thanks for this insightful guest post, Rick! Even though I’m pretty devoted/convinced passive investor myself, I always like to hear different perspectives.
- My thoughts on the various arguments mentioned in the post are listed below:
- Since I realize that I have a fairly biased perspective on this topic, I welcome any and all feedback in the comments section below!
- However, before we get started, I just wanted to point out that passive investing (at least as I have learned it) does not actually involve buying and holding individual stocks. Instead, this is avoided by purchasing shares of index mutual funds or ETFs that represent the entire market through a target asset allocation.
- With this distinction in mind, let’s continue.
- @ Reason #1 why passive investing is unappealing -“1) Your portfolio rises and falls with the markets. Naturally, I want every single one of my trades to be profitable, so I can’t stand following the market’s ebbs and flows.”
- While it’s absolutely true that with passive investing, you do have to bear the ups and downs of the market in a controlled way (through a target asset allocation – more on this in a second), this argument is not convincing to me because history has shown time and time again that it’s HIGHLY unlikely that an individual person (or even investing professional) will have the foresight to make money 100% of the time on their trades, or even a high enough percentage of the time to make enough to stay ahead of the market returns over long term periods.
- I’m not going to say that this never happens (i.e Peter Lynch, Warren Buffet), but it is rare, and it’s even harder to predict ahead of time who these investing magicians will be.
- @ Advocates of passive investing often cite the “over 40 years, the stock market moves up” –
- From what I’ve seen so far, I do not believe you need 40 years in order to realize the benefits of passive investing over active investing.
- Sure – a long period of 20 years may be needed in order to realize the historical average return of the stock market of around 10%, but I simply am not convinced that by using active trading, you can guarantee that you will make that kind of return either.
- Thus, the main benefit (in my mind) of passive investing over active investing is that it saves investors from being their own worst enemy because history has shown that people are not able to time the market and/or buy and sell individual stocks in a way that enables them to beat the market return.
- @ “Most passive investors and mom and pop investors don’t hold for 50 years; they hold for 10 at most. The reason why markets fall and rise in extreme volatility is because it’s very painful to hold onto a stock for 10 years and not realize any gains, so passive investors are lulled into selling at market lows!”
- I had two general comments that came to mind when reading this portion of the article.
- First, I think that my experiences have been fundamentally different than that described above. I know people that do hold on to index mutual funds in their retirement accounts for very long term periods, and so I am convinced that people have the resolve to do so.
- Second, while it is true that the markets do rise and fall in a volatile nature, as a passive investor, the risk you expose yourself to is done so in a manageable way (in my opinion).
- How is this done?
- Easy – through target asset allocation percentages.
- By choosing a mix of index investing instruments from different asset classes ranging from volatile (equities) to more secure (fixed income securities), you are able to control how much risk you expose yourself to.
- For example, if you are the 57 year old soon-to-be retiree and are using an intelligent life cycle asset allocation plan recommended in any quality passive investing book, you will have no where near 100% stock exposure at that point in your life. Thus, you will not lose 50% of your assets overnight because the majority of your money will be in fixed income assets.
- @ “And when the market dips badly, unfortunately, most passive investors (who work at a job during the day) don’t have any cash to buy!”
- Two arguments for this statement:
- First, one could say that this reasoning applies to active stock picking too. If the market is going down and your stocks have dipped as well, you’re not going to have excess cash either.
- Second, the overall goal of passive investing is to maintain a set/target asset allocation at any one time between various asset classes (fixed income, real estate, equities).
- So, in the case of a market dip (a big decrease in equity prices), what would actually happen is that your fixed income and other asset classes would become too large a percentage of your portfolio. So, what you would do is actually sell those shares to buy more equity shares during the dip. In this way, you wouldn’t be drawing upon new money in order to buy more equity shares.
- @ “Also, stocks (just like everything else in this world) have cycles, usually lasting 15 years. Fifteen years of good times, and 15 years of bad times. So what happens if you get out of college, land a job, plan to start investing, but the beginning of a 15 year recession hits? You’d have to have the stomach to hang on during those 15 years and not see any profits!”
- Personally, I have never heard of recessions lasting 15 years.
- For example, let’s say that you landed your first job and started investing right when the recession started around Summer 2008 (actually, this was when I got my first job out of college).
- If you used typical dollar cost averaging in order to invest money in your retirement fund in passive investing instruments each month, it would not have taken too long at all to start seeing a return on the shares that were purchased at very cheap prices during the market bottoms of March 2009, etc.
- In other words, I don’t think that it takes 15 years to see results from following the periodic investing strategy that most passive investors employ when saving for retirement.
***Photo courtesy of http://www.flickr.com/photos/twobears2/4252297559/sizes/l/in/photostream/
How to Save Money on ATM Fees
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post by Anthony (a fellow Yakezie participant!) from Fiscally Sound. Enjoy!
How to Save Money on ATM Fees
I recently heard the argument for removing the penny from the US currency. It made me wonder if we will ever get to the point where we don’t have currency at all since so many people use plastic. I mean, if you have a (debit) card that represents your money, what else could you need?
Well, the problem comes in when you use that same card to get cash. At least that’s where the fees can come in, and they can add up too. It can turn a $2.00 ice cream fix into a $7.50 crime. Imagine you just want that ice cream fix but you don’t have cash. You are at a little ice cream stand that doesn’t take plastic, so you run to the closest ATM machine. They charge a $3.50 fee, but your bank also charges a $2.00 fee. But, you aren’t thinking about that. You are just thinking that it’s hot and you want some ice cream. When you sit down and do the math, that ice cream just doesn’t taste as good.
So let’s chat about how to keep that from happening. Here are some tips for reducing ATM fees.
- Better Planning. If you use an envelope system for your budget, then you will either have the money or you won’t and if you stick to that, you will reduce random ATM runs.
- Get Cash Back. If you are using your debit card for a purchase, there is rarely – if ever – a charge for getting cash back from your transaction. Do some pre-planning when you are going shopping and think ahead to see if you will need any cash.
- Find a Fee Free ATM. You can do a Google search to find fee free ATM’s in your area, or you can visit AllPoint to find one of their fee free ATM’s. They also feature a mobile app for convenience.
- Find a Better Bank. Some banks or credit unions offer fee free ATM’s and reimburse you for any out of network ATM’s. If yours doesn’t, it might be a good opportunity to switch banks.
- Micro Emergency Fund. My dad taught me to always keep an extra $5, $10, or $20 bill in my wallet for the unexpected. That can really pay off these days, more so than when he recommended it.
In the end (and thankfully) cash is still king. I have not heard of anyone charging surcharges for using cash, yet.
Hopefully you found this helpful. If you want to put it in perspective, if you save one $3.50 ATM fee every week, that can add $182.00 per year to your savings. And if you compound that savings over 20 years at just 3%, you will have nearly an additional $5,000 in your retirement. Look, you just paid for your retirement cruise. 🙂
How about you all? How often do you find yourself paying ATM fees for getting cash? Does it happen often, or only in rare occasions where you are in a bind/emergency? Does your bank charge you a fee to use the ATM?
In the future, do you think a fee will start being charged for using CASH?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Great post here, Anthony! Thanks so much for sharing it with us today!
- It really breaks my heart when I am in a bar, restaurant, or convenience store and see someone using the “convenience ATM” within the establishment, as you can almost be assured that this person is paying a pretty hefty fee just to withdraw the small amount of money needed to cover their bill.
- Personally, I think that in today’s competitive banking environment, people should not have to EVER pay an ATM fee, as there is almost always some way to avoid it (except maybe when you are traveling abroad in another country – it’s hard to get around it totally in that case!).
- @ How I avoid ATM fees –
- For the most part, Anthony covered the main ways I save myself from having to pay ATM fees.
- First, my bank (Bank of America) does not charge fees in general to use the ATM. In fact, it seems that they prefer you to bank that way to save on cost of labor inside branches.
- Second, I try to always carry around about $20-$30 in cash in my wallet at all times. I use this cash only in case of emergencies when credit cards/debit cards are not accepted.
- @ Will there ever be a surcharge for paying in cash?
- Anthony brings up an interesting idea to think about – will stores start charging a fee in order to pay with cash vs. paying with plastic?
- With the funds infrastructure the way it currently is (I don’t think it costs anything for a store owner to go to the bank and withdraw cash to use for change, etc), I think we’re still a good ways from this happening.
- What do you all think about this question?
***Photo courtesy of http://www.flickr.com/photos/z0/5544921651/sizes/l/in/photostream/
The Permanent Portfolio by Harry Browne – Component Returns Correlation Analysis and My Future Plans
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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This past Monday, Flexo from Consumerism Commentary was very gracious to feature a guest post written by me analyzing whether or not investors can/should use the late financial adviser, Harry Browne’s, Permanent Portfolio asset allocation strategy as a way to obtain market-beating returns. If you haven’t yet read the post, you can stop by and have a look at the link below:
Can Investors Use The Permanent Portfolio to Beat the Market?
In order to improve the ease of reading and keep the focus centered in the guest post, I decided not to include several side analysis portions of the original piece I put together when I was researching the Permanent Portfolio topic. As such, the purpose of this post will be to fill in some of these gaps and give some added information on the following subject areas relating to the Permanent Portfolio that were not included in the guest post:
- A correlation coefficient matrix analysis of the returns of the various components of the Permanent Portfolio I defined the the Consumerism Commentary guest post.
- An explanation of my future plans for using the Permanent Portfolio, given the conclusions I arrived at in last week’s guest post above.
What is the Permanent Portfolio? – A Quick Review
For those of you that are hearing about the Permanent Portfolio for the first time, I just wanted to give a quick review about what it involves/does not involve.
- Permanent Portfolio Goal: There are two types of money – money that you can afford to lose and money that you cannot afford to lose. The goal of The Permanent Portfolio is to provide safety and stability to the money you cannot afford to lose in any economic climate.
- There are four broad movements to cover pretty much any economic climate – prosperity, inflation, tight money/recession, and deflation.
- The Permanent Portfolio is a passively managed asset allocation strategy constructed by components in such a way that at least one component is favored by any of the broad movements mentioned above. The Portfolio components are as follows, each carrying equal weight for as long as you hold the Portfolio:
- 25% in stocks, which do well in times of prosperity. Harry recommends that an investor select three index mutual funds to make up this portion of the portfolio. However, index mutual funds and ETFs have improved in recent years, and I now believe that an investor could do this quite effectively with a single fund. It’s important to note that he only mentions that the components should “represent the entire market.” He did not specify whether or not this meant the entire international stock market, or just that of the US. We’ll touch on this more below:
- 25% in gold, which does well in times of inflation, in the form of buying actual bullion coins.
- 25% in bonds, which increase in price during times of deflation, in the form of actual 30 year year long-term US Treasury Bonds.
- 25% in cash, which does well in times of tight money/recession when interest rates rise. Harry recommends investing in a money market mutual fund that invests only in short-term US Treasury securities.
- Rebalancing – Harry recommended that the portfolio be rebalanced once a year back to the 25% allocation targets, but only if a specific component is greater than +/- 10% off from target.
“Refined” Permanent Portfolio Component Return Correlation Coefficient Matrix Analysis
- 25% in stocks – Vanguard S&P 500 Index Fund (ticker symbol: VFINX).
- 25% in gold. Vanguard Precious Metals and Mining Fund (ticker symbol: VGPMX).
- 25% in bonds. Vanguard Long-Term Treasury Fund (ticker symbol: VUSTX).
- 25% in cash. Vanguard Short-Term Federal Fund (ticker symbol: VSGBX).
My Future Plans With The Permanent Portfolio
- Stock Portion – 17.5% of portfolio funds invested in the Vanguard Total Stock Market ETF (ticker symbol: VTI) and 7.5% of portfolio funds invested in the Vanguard Total Int’l Stock Index ETF (ticker symbol: VXUS). These ETFs invest in securities in a manner that tracks the performance of the broad US and all-world ex-US stock indices, respectively, and therefore, represent the entire market, as Browne intended.
- Gold Portion – 25% of portfolio funds invested in the iShares Gold Trust ETF (ticker symbol: IAU). This ETF’s goal is to match the price movements of physical gold bullion. I had considered using the other gold ETF, GLD, but I found that it’s expense ratio was higher than the iShares ETF.
- Bond Portion – 25% of portfolio funds invested in the Vanguard Long-Term Gov’t Bond Index ETF (ticker symbol: VGLT). This ETF tracks the price movements of an index of long-term (>10 years) US Treasury and US Government agency fixed-income securities
- Cash Portion – 25% of portfolio funds invested in the Vanguard Short-Term Gov’t Bond Index ETF (ticker symbol: VGSH). This ETF tracks the price movements of an index of short-term US Treasury and US Government agency fixed-income securities.
Carnival of Passive Investing # 15 – What Passive Investing Is and Is Not – February 2012 Edition
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Welcome to the February 2012 (the 15th total!) edition of Carnival of Passive Investing – a monthly collection of the best and most intelligent passive investing strategy articles around the internet! Some people foolishly want to beat the market (want being the key word), but we just want to invest with it.
As discussed in my introductory post for this carnival, the purpose of this carnival is two-fold:
- To provide a forum to showcase articles and research in passive investing strategies (i.e. investing in ETFs, index mutual funds, etc. in such a way that one avoids employing active stock picking). By investing with the market, we are able to beat 70-80% of investment “professionals.”
- To create a community of passive investment bloggers to connect and share expertise.
As such, I thought it might be nice to make the theme for this month’s Carnival as showing several examples of topics that are and are not passive investing to keep this distinction fresh in our minds. This isn’t meant to point fingers or criticize anyone, but rather is simply for the sake of continuous improvement to our focused goal here with the Carnival of Passive Investing.
Please enjoy and stop by my blog on my non-carnival days as well.
In this article, Nick takes a look at several things. First, he analyzes how much extra time it takes to do the research necessary to attempt to outperform the market and points out how for most smaller investors, the added return this will give (if any) is often not worth the time commitment. Second, he discusses the dangers of following the advice of market pundits in the financial media on the direction of the markets in the future.
Echo presents a direct comparison of the performance of active vs. passively managed mutual funds from the same asset classes over the past year years. The results strikingly show that the passively managed index funds not only have lower fees, but also significantly outperform the actively managed funds when considering the growth of a $10,000 initial investment.
Interesting article here about international bonds/bond funds! Right now, my fixed income investment asset allocation only includes US securities. However, I’ve often wondered if there are any additional diversification benefits of expanding this to foreign fixed income securities as well. Any one have any thoughts on this?
While this post isn’t about a specific passive investing strategy, I really liked the graph that shows the levels at which Larry Fink predicted that the stock market was set to take off. One of these times was March 13th, 2008, and we all know where the markets headed shortly after that date. If the CEO of Blackrock apparently has trouble predicting the direction of the market, it seems like it would be even harder/impossible to do so for average investors like me. This is why I choose to stick with a passive investing strategy instead of trying to time the market.
Steve presents My Secret to Get Rich Quick (Enough) posted at Money Infant
Teacher Man presents Should You Invest In Individual Stocks? posted at My University Money.
LivingInVol presents Mad Skillz [part 1] posted at Living in volatility, saying, “A reality check for the difficultly of active trading.”
Well, that wraps up this month’s edition. A big thanks to everyone for participating!
You can submit your passive investing posts for the March 2012 edition of the Carnival of Passive Investing (hosted by Free From Broke) by clicking the link below:
Blog Carnival HQ – Carnival of Passive Investing – Submit Your Posts
***Photo courtesy of http://images.cdn.fotopedia.com/flickr-2200500024-hd.jpg
Welcome Consumerism Commentary Readers!
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $141.20 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is February 29th, 2012.
Welcome Consumerism Commentary readers! Thanks so much for stopping by my site by way of the my guest post today over at Flexo’s blog listed below. As the picture to the right shows, I’m very happy to have you here! 🙂
Can You Use Harry Browne’s Permanent Portfolio in Your Own Investing Strategy to Beat the Market?
If you’re stopping by my site for the first time, I just wanted to give a little guide towards what I offer here, since information overload can occur quickly and time is our most valuable asset.
To introduce myself, my name is Jacob. I started this site back in January of 2010, and since then, have poured my heart and soul in to the site to produce a product I am proud of and I think adds value to the world. You can read a little more on my background and even see a picture of me on the “About” or “First-Time Visitor” pages to find out more about us.
WHAT I WRITE ABOUT HERE AT MY PERSONAL FINANCE JOURNEY
In short, I like to offer actionable personal finance advice with the goal of achieving long-term success.
Specifically, I really enjoy writing about the following areas (I’ve also listed several posts related to each topic in case you’re interested in reading more):
- Long term investing and asset allocation strategy analysis
- Vanguard vs. Fidelity – Which Funds Are Better?
- Dollar Cost Averaging vs. Dollar Value Averaging – Which Makes You More Money in the Long Run?
- What To Do With Your 401k Savings When Leaving Your Employer
- Deciding how to prioritize new funds as they come in to various spending requirement areas
- Account Prioritization Hierarchy – Which Monetary Needs Come First?
- How Do Mortgage Payments Fit in to the Account Hierarchy?
- How to develop a lifestyle of frugality and live according to your life dreams and life values
ARTICLES SIMILAR TO MY GUEST POST TODAY AT Consumerism commentary
Additionally, if you liked the theme (investing strategy / asset allocation analysis) of the guest post I wrote for Consumerism Commentary today and are interested in similar posts I’ve written in the past, you might want to check out the ones below:
- Valuation Informed Index Investing vs. Passive Investing – Which is Better?
- Performance Analysis of the American Growth Mutual Fund
- Was the Lost Decade Really Lost for Investors?
WAYS TO STAY IN TOUCH WITH NEW CONTENT
- If you would like to receive free updates on articles by email, then sign up here.
- Or, you can subscribe to the RSS feed.
- Also, follow/like our pages on Twitter or Facebook.
10% MONTHLY BLOG INCOME GIVEAWAY
Also, each month, I give away 10% of any income I make from this site, with 5% going to blog readers and the other 5% going to a charity selected by the grand prize winner. You can read about all of the details by clicking here.
So far, we’ve given away:
- Current total given to charity = $334
- Current total given to blog readers = $345
If you want to enter in to the February 2012 giveaway for $141.20, click here. It ends February 29th!
Thanks for visiting! Keep on learning!
***Photo courtesy of http://farm1.static.flickr.com/47/173590997_4f6930be15.jpg
The Importance of a Good Credit Rating
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $141.20 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is February 29th, 2012.
The following is a guest post. Enjoy!
The Importance of Keeping Track of Your Credit Report/Score
The Threat of Identity Theft
How about you all? How often do you check your credit report and/or score? What service do you use to check it? Do you have to pay a fee, or do you view it for free?
Are you actively doing anything now to protect yourself from identity theft?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Good post here. It’s always worthwhile to get a reminder every once in a while about remembering to check my credit report/score occasionally.
- Right now, I probably check my credit report less than I should (once a year is generally how often I check it). When I do check it, I do so for free using AnnualCreditReport.com. Unfortunately, you can only view your credit report (not score) for free once per year. So, if you want to check in more often, you have to find another paid service to help you. But, they are easy to find.
- I was also recently exposed to a service that claims to let you check your credit score for free – Credit Karma. However, one of my fellow blogging friends (Wealth Informatics) pointed out that the score reported on Credit Karma is not your actual FICO score, but rather something called the Transunion TransRisk score. The problem with using this credit score as your sole source of information is that not all lenders will use this score when assessing your ability to lend/repay money.
- Regarding identity theft, this is becoming more of a prevalent problem in today’s society.
- Previously on my site, I described a list of 4 things a person can do for very little money to help protect themselves from identity theft.
- Two free and effective things included on this list were placing a free fraud alert on your credit report every 3 months and to Opt out Pre-Screen from receiving as much junk mail (which contains your personal identifying information on it).
***Photo courtesy of Image: David Castillo Dominici / FreeDigitalPhotos.net