- 403b plans for self and wife are maxed out at $15,000 each = $31,000
- My 457 contribution will be $13,500
- Have contributed only $300 to my IRA and only $950 to wife's IRA
- Have contributed only $100 to my son's ESA.
- Have contributed $300 to son's Georgia's 529 plan (Path2College)
- Total Contributions: $45,800
- Future Contribtuions: $10,500
- EVENTUAL TOTAL CONTRIBUTIONS: $56,300
Wednesday, December 3, 2008
2008 Financial Goals
Hello readers...Mom and Ray. I was looking at my savings contributions to various retirement and educational accounts. Here is what I found out:
Tuesday, December 2, 2008
2009 Outlook: Vanguard’s Bogle Sees Long Recession
Here is an good interview with St. Jack. Here is the source.
By MARK JEWELL
Associated Press
Tuesday, December 02, 2008
John C. “Jack” Bogle, founder of The Vanguard Group Inc., is 79, and has seen 10 bear markets in more than five decades in the investment business. So is he questioning his fundamental beliefs amid a U.S. recession that was officially declared Monday, and has erased trillions of dollars in stock market value? Hardly.
The founder of the Vanguard 500 Index Fund — the first index mutual fund, created in 1975 — is more vocal than ever in urging long-term investors to bet on the market as a whole rather than picking individual stocks. It’s a low-cost alternative to actively managed funds, and an approach that Bogle championed during more than two decades as Vanguard’s chairman and chief executive.
In a telephone interview with The Associated Press, Bogle discusses his expectations for a market rebound, and a slow economic recovery from recession. He also talks about his own portfolio, and yours:
Q: How long do you expect the U.S. recession to last?
A: I believe it will take longer than most experts believe to get through this. I’d say it will be a year and half to two years before we turn upward. The international economy is going to go through a similar phase.
Q: Where should we look for clues that the economy is rebounding?
A: In the U.S., the first signs will come when employment starts to tick up again, and when retail sales pick up. That could be as long as the next Christmas season. It’s sure not going to happen this Christmas season.
Q: What’s that mean for investors, given stocks’ historic returns of about 9 percent a year?
A: I believe in owning the entire U.S. stock market, and holding it forever. Or, to put it another way, to own the entire U.S. business sector, and the stock market will ultimately reflect that sector, forever.
I think it’s likely — and here I’m just totally guessing — that the stock market anticipated most if not all of the decline we’re facing in the economy. It almost always moves before the economy goes up and down.
I think investments you continue to hold through this decline will give you a return better than you can find in other places. And that is a crucial part of this analysis. We know what bond returns will be in the next 10 years — roughly 5 percent for long-term government bonds, or about 4 percent for short- to intermediate-term bonds. So if stocks produce 6 percent, while you endured the volatility, you increased your total return.
Money-market funds are now yielding less than 2 percent — call it about 1.5 percent. That doesn’t look anything like 6 to 9 percent for stocks, especially when you compound them over a decade. I would not flee the market now.
Q: So does it make sense for investors to stay mostly in stocks, even with the high volatility?
A: Any investor who looks at probabilities has got to look at their own consequences. For example, if you are so close to the edge in the value of your retirement plan that you can’t afford to have stocks go down one more iota, you have to get out of the stock market. I hate to say it, but if the consequences to you are disaster, you can’t be there, it’s risky. On the other hand, if you’re young and have many years to recoup, you can be there and should be there.
Q: What about for someone older, like yourself? You’re 79.
A: If you’re older and have taken my eternal advice, and think about a rough rule of thumb that your bond position should be roughly equivalent to your age. I should be 79 percent in bonds. It turns out I’m at about 80 percent.
I happened to start this in 2000 when the stock market was absurdly high. I was about two-thirds in stocks when I made the changes in my asset allocation. So I switched to about two-thirds bonds. I haven’t changed my allocation since then.
But with the bond market having a positive total return in the eight years since then, and the stock market having a fairly substantial negative return since then, that’s driven my stock position down and my bond position up to 80 percent. It’s not some slavish adherence to a rule of thumb.
I feel like anybody naturally would — stupid to not realize it could get this bad, but on the other hand, I think most people would be envious over my return of the last 10 years.
Q: How do you respond to people who say markets have become so volatile that conventional wisdom to buy stocks and hold them long-term no longer makes sense?
A: They’re wrong to question it. Because for all of the last century really, stocks have gone up and down with some frequency. In fact, this is my tenth bear market, and two of them, in 1973-4, and then in 2000-2002, markets went down 50 percent — more than the current market decline.
Q: To what extent is the market decline a reflection of decreased earnings?
A: The total value of the U.S. stock market had dropped from about $18 trillion dollars to about $9.5 trillion. So there has been an $8.5 trillion drop in the perceived value of corporate America. I think that’s inconceivable. I don’t think the value of corporate America has dropped by almost half.
I mean, these are companies with capital — they make useful products and services, they’re efficient, competitive, innovative. Does anybody really think the value of American business changes by a trillion dollars a day? Well, they may, but I don’t.
It may be the market was overvalued at the beginning of the period. It may have been $1 trillion or $2 trillion overvalued when this thing started. But that still leaves $7.5 trillion to account for.
Q: Does your index fund philosophy still hold up in this economy?
A: The index is the ultimate buy-and-hold, all-American business strategy. It is the gold standard; there is no way around it. Mathematically, indexing wins. And if the data don’t show indexing wins, well then, the data are wrong.
By MARK JEWELL
Associated Press
Tuesday, December 02, 2008
John C. “Jack” Bogle, founder of The Vanguard Group Inc., is 79, and has seen 10 bear markets in more than five decades in the investment business. So is he questioning his fundamental beliefs amid a U.S. recession that was officially declared Monday, and has erased trillions of dollars in stock market value? Hardly.
The founder of the Vanguard 500 Index Fund — the first index mutual fund, created in 1975 — is more vocal than ever in urging long-term investors to bet on the market as a whole rather than picking individual stocks. It’s a low-cost alternative to actively managed funds, and an approach that Bogle championed during more than two decades as Vanguard’s chairman and chief executive.
In a telephone interview with The Associated Press, Bogle discusses his expectations for a market rebound, and a slow economic recovery from recession. He also talks about his own portfolio, and yours:
Q: How long do you expect the U.S. recession to last?
A: I believe it will take longer than most experts believe to get through this. I’d say it will be a year and half to two years before we turn upward. The international economy is going to go through a similar phase.
Q: Where should we look for clues that the economy is rebounding?
A: In the U.S., the first signs will come when employment starts to tick up again, and when retail sales pick up. That could be as long as the next Christmas season. It’s sure not going to happen this Christmas season.
Q: What’s that mean for investors, given stocks’ historic returns of about 9 percent a year?
A: I believe in owning the entire U.S. stock market, and holding it forever. Or, to put it another way, to own the entire U.S. business sector, and the stock market will ultimately reflect that sector, forever.
I think it’s likely — and here I’m just totally guessing — that the stock market anticipated most if not all of the decline we’re facing in the economy. It almost always moves before the economy goes up and down.
I think investments you continue to hold through this decline will give you a return better than you can find in other places. And that is a crucial part of this analysis. We know what bond returns will be in the next 10 years — roughly 5 percent for long-term government bonds, or about 4 percent for short- to intermediate-term bonds. So if stocks produce 6 percent, while you endured the volatility, you increased your total return.
Money-market funds are now yielding less than 2 percent — call it about 1.5 percent. That doesn’t look anything like 6 to 9 percent for stocks, especially when you compound them over a decade. I would not flee the market now.
Q: So does it make sense for investors to stay mostly in stocks, even with the high volatility?
A: Any investor who looks at probabilities has got to look at their own consequences. For example, if you are so close to the edge in the value of your retirement plan that you can’t afford to have stocks go down one more iota, you have to get out of the stock market. I hate to say it, but if the consequences to you are disaster, you can’t be there, it’s risky. On the other hand, if you’re young and have many years to recoup, you can be there and should be there.
Q: What about for someone older, like yourself? You’re 79.
A: If you’re older and have taken my eternal advice, and think about a rough rule of thumb that your bond position should be roughly equivalent to your age. I should be 79 percent in bonds. It turns out I’m at about 80 percent.
I happened to start this in 2000 when the stock market was absurdly high. I was about two-thirds in stocks when I made the changes in my asset allocation. So I switched to about two-thirds bonds. I haven’t changed my allocation since then.
But with the bond market having a positive total return in the eight years since then, and the stock market having a fairly substantial negative return since then, that’s driven my stock position down and my bond position up to 80 percent. It’s not some slavish adherence to a rule of thumb.
I feel like anybody naturally would — stupid to not realize it could get this bad, but on the other hand, I think most people would be envious over my return of the last 10 years.
Q: How do you respond to people who say markets have become so volatile that conventional wisdom to buy stocks and hold them long-term no longer makes sense?
A: They’re wrong to question it. Because for all of the last century really, stocks have gone up and down with some frequency. In fact, this is my tenth bear market, and two of them, in 1973-4, and then in 2000-2002, markets went down 50 percent — more than the current market decline.
Q: To what extent is the market decline a reflection of decreased earnings?
A: The total value of the U.S. stock market had dropped from about $18 trillion dollars to about $9.5 trillion. So there has been an $8.5 trillion drop in the perceived value of corporate America. I think that’s inconceivable. I don’t think the value of corporate America has dropped by almost half.
I mean, these are companies with capital — they make useful products and services, they’re efficient, competitive, innovative. Does anybody really think the value of American business changes by a trillion dollars a day? Well, they may, but I don’t.
It may be the market was overvalued at the beginning of the period. It may have been $1 trillion or $2 trillion overvalued when this thing started. But that still leaves $7.5 trillion to account for.
Q: Does your index fund philosophy still hold up in this economy?
A: The index is the ultimate buy-and-hold, all-American business strategy. It is the gold standard; there is no way around it. Mathematically, indexing wins. And if the data don’t show indexing wins, well then, the data are wrong.
Thursday, July 17, 2008
The Case for Index Funds
Most people know that I prefer index fund over actively managed funds. Here is a good article on the subject. Enjoy.
Quotes from article:
"I think investors should recognize that the odds are stacked against actively managed funds" said Sauter. "The majority will underperform."
"Indeed, many institutional investors, such as pension plans, opt for index funds because of the long-term returns and low costs."
"The greatest selling point for index funds -- and a key reason for the long-term outperformance -- is the price. The average U.S. stock fund carries an expense ratio of 1.51%; the average Vanguard fund, by comparison, carries a 0.27% expense ratio."
"Indeed, many institutional investors, such as pension plans, opt for index funds because of the long-term returns and low costs."
"The greatest selling point for index funds -- and a key reason for the long-term outperformance -- is the price. The average U.S. stock fund carries an expense ratio of 1.51%; the average Vanguard fund, by comparison, carries a 0.27% expense ratio."
Tuesday, April 29, 2008
The One-Year $1 Million Challenge
Here is a very thought-provoking article explaining how to become a retirement millionaire. The most amazing idea is that retirement wealth can be achieved with one-year's worth of savings. Here are the numbers:
- Investor's Age = 26
- Return = 10%
- Time Period = 41 Years
- Initial Investment = $20,500
- Future Value = $1,000,000
Sunday, February 10, 2008
How I Plan to Make My Son Wealthy
With the birth of our son Bruce two years ago, my wife and I decided that we wanted to do all we could to provide him with a sound financial foundation that should last him a lifetime. To this end, we have opened a number of accounts for him to cover three savings/investment areas.
First, we opened a Coverdale ESA a Vanguard to save for his university studies. Next, we opened an account in Georgia's Path 2 College plan to save even more money for his education. Thus far, we have invested the maximum $2,000 a year in the Coverdale ESA and $25 a month in the 529 plan. Our plan is have enough money for Bruce to attend college in Georgia; we are not planning on paying for out-of-state or private school tuition. If he wants to go to Davidson College like his old man, he'll have to be a good rebounder or get a perfect score on his SAT. (I was a rebounder not a scholar.) Currently, Bruce has about $4,200 invested for his retirement; our plan is to save about $30,000 in total.
Next, we opened a UTMA mutual fund account at Vanguard. Our initial investment was $1,050 in the Star fund because this fund only required a $1,000 investment. The money in this account will provide with Bruce with a taxable investment that he will inherit when he turns 21 years old. I hope to teach him about the ins and outs of investing by that time. This account is funded with birthday and Christmas money from relatives. I also funnel all my loose change into this account. This week Bruce's will have $150 transfered into his UTMA account: $90 of loose change and $60 of birthday money. With this weeks investment, Bruce's account will stand at about $1,500.
Finally, I made Bruce the primary beneficiary on a Roth IRA with a current market value of $5,000. So, when I die, Bruce will inherit this Roth IRA account. He will not have to withdraw from this account until his retirement. Best of all, this withdrawals will be tax-free (at least under current tax law). At a 10% return over the next 58 years, Bruce's $5,000 investment should be worth more than $1,258,000.
If you have any suggestions, please give me some feedback.
- College Savings
- Taxable Investments
- Retirement Savings
First, we opened a Coverdale ESA a Vanguard to save for his university studies. Next, we opened an account in Georgia's Path 2 College plan to save even more money for his education. Thus far, we have invested the maximum $2,000 a year in the Coverdale ESA and $25 a month in the 529 plan. Our plan is have enough money for Bruce to attend college in Georgia; we are not planning on paying for out-of-state or private school tuition. If he wants to go to Davidson College like his old man, he'll have to be a good rebounder or get a perfect score on his SAT. (I was a rebounder not a scholar.) Currently, Bruce has about $4,200 invested for his retirement; our plan is to save about $30,000 in total.
Next, we opened a UTMA mutual fund account at Vanguard. Our initial investment was $1,050 in the Star fund because this fund only required a $1,000 investment. The money in this account will provide with Bruce with a taxable investment that he will inherit when he turns 21 years old. I hope to teach him about the ins and outs of investing by that time. This account is funded with birthday and Christmas money from relatives. I also funnel all my loose change into this account. This week Bruce's will have $150 transfered into his UTMA account: $90 of loose change and $60 of birthday money. With this weeks investment, Bruce's account will stand at about $1,500.
Finally, I made Bruce the primary beneficiary on a Roth IRA with a current market value of $5,000. So, when I die, Bruce will inherit this Roth IRA account. He will not have to withdraw from this account until his retirement. Best of all, this withdrawals will be tax-free (at least under current tax law). At a 10% return over the next 58 years, Bruce's $5,000 investment should be worth more than $1,258,000.
If you have any suggestions, please give me some feedback.
Thursday, February 7, 2008
Cocktail Portfolio Update for February of 2008
My portfolio has seen a few changes. Last year my Back Yard Burgers and Gateway stocks were bought out, so those monies are now in my cash account. Overall, my account has lost almost 18%, but I am not worried. Remember, this account is for conversational purposes only; my retirement does not hinge on this account. My best stock of the year was my $5.30 in Good Times Restaurants. Not only did it appreciate 65 cents, the annual report included a $10 meal coupon!
- BBI BLOCKBUSTER INC
- ROX CASTLE BRANDS
- DENN DENNY'S CORP
- DCU DRYCLEAN USA INC
- MSN EMERSON RADIO CORP
- FA FAIRCHILD CORP
- F FORD MOTOR COMPANY
- GAX GALAXY ENERGY CORP
- GTIM GOOD TIMES REST NEW
- HPOL HARRIS INTERACTIVE INC
- MTE MAHANAGAR TEL NIGAM LTD M
- HJ MAN SANG HLDGS INC
- PZZI PIZZA INN INC NEW
- PWAV POWERWAVE TECHNOLOGIES INC
- REVU PRINCETON REVIEW INC
- HOOK REDHOOK ALE BREWERY
- RAD RITE AID CORP
- SIX SIX FLAGS INC
- TOF TOFUTTI BRANDS INC
- TGS TRANSPORTADORA DE GAS SUR
- VRAI VIRAGEN INC
- WVVI WILLAMETTE VY VINEYARD INC
- WLSN WILSONS THE LEATHER EXPERTS
- WILC G WILLI FOOD INTL LTD
- Total Securities Market Value: $112.79
- USAA Brokerage Cash: 12.43
- Total Market Value: $125.22
- Initial Investment: $152.03
- Market Lose: $26.81
- Return: -17.7%
Friday, February 1, 2008
How I Made a 200% Return on One Stock in Less Than 10 months
As most of my dedicated readers know (Mom and Ray!), I have a small portfolio of stocks that I refer to as my Cocktail Portfolio. I own these stocks for one reason only: they allow me to talk about stocks when the topic presents itself. So, ask me, "Ger, how are your stocks doin'?", and I have an answer for you. Obviously, I do not believe that the average Joe, or even the above-average Joe, has much of a chance of picking market-beating stocks. Nonetheless, it sure is fun to have a portfolio. Each stock is like a child--I feel good when their prices rise and I feel disappointed when they slump. After all, I spend a lot of time selecting these little babies. Actually, that isn't quite true; I picked 25 stocks with the sole criteria that they be under $10 a share. Next, I picked things that I like: beer, wine, liquor, food, and basically any company whose name I recognized. All in all, it is quite an amazing stock portfolio...at least conversationally.
Up until today, I did not think I had any stock picking expertise to share with the world, but that has all changed. Warren Buffet watch out because I am here to announce that I am now a stock picking expert! As the title of this article indicates, I have stuck gold. On March 10th of 2007 I bought some stock in Good Times Restaurants Inc. (GTIM); in fact I bought one share for a measly $5.30. Today my single share of stock sits a lofty price of $5.95--at 12.3% increase in share price in less than 10 months. But that is only part of the story. This week I received GTIM's 2007 Annual Report and began thumbing through this dry, lifeless document. When I got to the back cover, I was ecstatic to find a $10 coupon good for any Good Times Restaurant! To summarize, I paid $5.30 to buy one GTIM stock, the stock rose to $5.95, and GTIM sent me $10 coupon. If you ask me, that represents stock picking expertise! Why? Easy, the $10 coupon represents a return of 188.7% return on investment ($10/5.3). In total, my $5.30 investment has netted me a 200% return: stock appreciation of 12.3% and my coupon dividend of 188.7%!
Unfortunately, there is only one problem. The nearest Good Times Restaurant is in Colorado, well over 1,400 miles from my hometown of LaGrange, Georgia. If you have any suggestions as to what I should do with this coupon, please contact me.
Up until today, I did not think I had any stock picking expertise to share with the world, but that has all changed. Warren Buffet watch out because I am here to announce that I am now a stock picking expert! As the title of this article indicates, I have stuck gold. On March 10th of 2007 I bought some stock in Good Times Restaurants Inc. (GTIM); in fact I bought one share for a measly $5.30. Today my single share of stock sits a lofty price of $5.95--at 12.3% increase in share price in less than 10 months. But that is only part of the story. This week I received GTIM's 2007 Annual Report and began thumbing through this dry, lifeless document. When I got to the back cover, I was ecstatic to find a $10 coupon good for any Good Times Restaurant! To summarize, I paid $5.30 to buy one GTIM stock, the stock rose to $5.95, and GTIM sent me $10 coupon. If you ask me, that represents stock picking expertise! Why? Easy, the $10 coupon represents a return of 188.7% return on investment ($10/5.3). In total, my $5.30 investment has netted me a 200% return: stock appreciation of 12.3% and my coupon dividend of 188.7%!
Unfortunately, there is only one problem. The nearest Good Times Restaurant is in Colorado, well over 1,400 miles from my hometown of LaGrange, Georgia. If you have any suggestions as to what I should do with this coupon, please contact me.
Monday, January 14, 2008
Wednesday, December 26, 2007
This Time the Government Got It Right
Most of the time people do not mention efficiency and government in the same sentence. However, when it comes to setting up cost-efficient retirement plans, the government has done an outstanding job. Take a look at what it costs to invest in the various funds offered in the Thrift Savings Plan.
- Lifecycle Funds (L funds): 3 basis points!
- Government Securities Investment Fund (G fund): 3 basis points!
- Fixed Income Index Investment Fund (F fund): 3 basis points!
- Common Stock Index Investment Fund (C fund): 3 basis points!
- Small Capitalization Stock Index Investment Fund (S fund): 3 basis points!
- International Stock Index Investment Fund (I fund): 3 basis points!
Indexes and Percentile Ranking
This chart is very interesting to me. It shows that over a 10-year period ending on December 31st, 2004 index mutual funds beat the majority of actively managed mutual funds. This chart shows some real index advantages at both the large- and mid-cap asset classes. The earning differential is not as great at the small-cap level, but even here index funds appear to have the advantage.
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