11 February 2007, 10:07 pm
After reading 100’s of articles and discussing with various brokers and investment bankers, I’m convinced that the perfect mix for an investment portfolio will be a never ending debate. After this many years of stocks, bonds, real estate, etc., one would think a universal equation would have been derived that would take into account one’s asset amount, age, risk tolerance and investment timeframe. In the absence of such an equation, I’ve decided to publish yet another proposed “magic formula” to simplify the thought process of diversified investing. While none of the individual rules are original, they do represent a mix of various opinions and suggestions on the topic.
Rule 1: Percentage invested in stocks: 100 minus current age.
Rule 2: Percentage invested in fixed income: everything else not invested in stocks.
Rule 3: Use future investments to keep the first two rules in check and avoid transferring money to and from investments as much as possible.
Rule 4: Point at which readjustment should be made: when the first two rules are off by 5% or greater.
Some FAQs for the equation:
- An example for a 35 year old: 100-35=65% invested in stocks. 35% would be in bonds and/or other fixed income investments.
- The equation does not account for investments one might have in their primary residence. A future post will discuss this matter.
- The stock mix could (and most likely should) include mutual funds and individual stocks in a variety of sectors.
- An additional method for keeping the first two rules in check is to use money from the fixed income and/or dividends to fund the lagging area.
14 November 2006, 10:12 pm
If you ever watched a NASCAR race, one question quickly comes to mind: Was this sport created by car enthusiasts or by brilliant marketers? This is the only sport (and I use the term loosely) where the souvenirs and even the sport itself represent the sponsors more than the people involved in the sport.
To my knowledge, this the only sport where people would actually purchase an orange $500 leather jacket covered with Home Depot logos, while the term “NASCAR” is hidden on the inside tag. The sponsors of this sport have an ulterior motive in selling this paraphernalia than say the average Fortune 500 company buying a sign out in center field. The NASCAR sponsors are literally “allowing” people to pay to become walking billboards. In fact, it’s no wonder the drivers are awarded points for being in first place the most laps. Guess which car, I mean logo, is shown on TV the most?!
Why haven’t companies pushed other professional sports onto this strategy and to this extent? While the target audience might seem restricted to some, it’s actually quite diverse. I can’t speak for all readers out there, but I can’t wait to start wearing my Southwest Airlines blazer to the next family dinner.
1 November 2006, 11:08 pm
While running cables through the wall for my new TV, the decision about which cables to buy came up again. Every time I hook up any new audio/video equipment, there is always this moment at the electronics store trying to decide if a $200 Monster Cable will really make a difference. First it was the optical fiber, then came the component video, and now the all-inclusive HDMI cable.
Thanks to my good friend Brandon, I subscribed to the online version of Consumer Reports (CR) more than a year ago, which provides all the information from the magazines in a searchable online format. As luck would have it, CR had an article titled “HDMI: the new jack on the box”, and in the article, they strongly recommended against purchasing “premium-grade” cables for hundreds of dollars. Good to know, I thought and headed to local bricks-and-mortar electronics store not wanting to wait for the cables to be shipped.
At ~$200/cable and needing 2-3 cables, the premium grade cables were going to add quite a bit to the project, so I asked the friendly sales rep at Best Buy what he suggested. As you might have guessed, this guy knew more A/V acronyms than I know computer acronyms, and that’s saying a lot. I mentioned the CR recommendation, and he bluntly said that CR was dead wrong. He explained a bunch of experiences with interference and how the TV actually becomes an antenna, attracting even more imperfections for that perfect high definition picture.
Knowing that rewiring all of this was not worth the effort, I caved and bought a fancy HDMI cable and went middle-of-the-road for the other cables. Everything looks great, but I wonder if I was taken or if I got lucky. Thoughts?
27 October 2006, 7:30 pm
I’m guessing many dear readers have been waiting day and night for the details on the money saving method mentioned in Part I, and some may have delayed their closing date. (OK, I’m being delusional that anyone even read Part I, much less believed it could be true.) Well, I wouldn’t spend those saved $1000’s before finishing the rest of this post.
As it turns out, my friend was able to enact this transaction and actually did save the purported $1000’s mentioned in the original story using a little known discount called a reissue rate, which can save up to 50-60% of a full policy. This effectively involves using the existing owner’s insurance company to “reissue” the policy to the new owner. It makes sense that a discount would be in order since the insurance company has already done a significant portion of the work for the existing owner and won’t be starting from scratch. Many brokers won’t mention this due to existing relationships with certain title companies, and there’s no motivation for the insurance company to mention it either, so the catch is to know the discount exists and to ask for it.
In the end, the reissue method was adequate enough for my friend’s mortgage company to endorse the mortgage, but whether this is the case in all mortgage applications can only be determined on a case-by-case basis. As more of the deed and mortgage processes are handled by computers, the risk afforded by title insurance will continue to decrease, and it’s likely title insurance companies will have to look for other ways to generate revenue. That’s when we can really start saving.
24 October 2006, 10:31 pm
A friend was recently explaining how he saved thousands of dollars purchasing his new (yet previously-owned) home. Knowing there was a strong likelihood I would someday upgrade my own home, I listened intently to the story and was amazed by the simplicity.
Effectively, my friend described a loophole in the Texas title insurance system, where the owner’s previous title insurance company can sign over the title insurance to the new owner for a nominal fee ($100’s), which is much cheaper than purchasing new title insurance ($1000’s). The argument for this makes a lot of sense since most liens in Texas have to be registered with the state and easement issues in well-established neighborhoods are virtually nonexistent. Great, I thought to myself. I’ll use this in the future to save a few bucks, or at worst, it’ll make a great conversation piece at parties. Before any bragging rights could be claimed, I wanted to do a little research to verify the method.
The first person I mentioned this story to was a recently licensed real estate agent from my neighborhood. She began to explain why someone would be crazy to avoid purchasing title insurance, but I was still skeptical of this advice knowing she probably gets a cut of the insurance fee. This put my curiosity in a whirlwind, and after many additional conversations and a couple hours of research, the facts behind this fee-saving method have been uncovered. Stay tuned for an exciting second post explaining the particulars of this loophole. In the meantime, if you have any insight to offer on the subject, comments are welcome.
17 October 2006, 10:36 pm
As a wise accountant once told me (i.e. my CPA mother), all financial decisions should be first weighed against one thing: The Pillow Test. What do bedding and money have in common you might be wondering at this point. I had the same question, when I first heard it, but after many years of managing my own personal finances, I have come to fully understand and appreciate its simplicity.
The Pillow Test is a simple measure of a person’s capacity for handling risk. Plainly put, if a new financial transaction is going to cause a person to lose sleep, the investment or venture is most likely not worth the time, regardless of its potential. This measure of one’s tolerance for risk is not only a litmus test for going into new transactions; it can also serve as a wake up call for getting out of transactions. In other words, if money woes are creating sleepless nights, it might be time to consider unwinding some financial risk, because the best test is how well you rest.
2 October 2006, 12:50 pm
A friend was recently revealing his encounters with someone writing forged checks all over town with his bank account and driver’s license numbers. While identity theft seems like one of those media generated fear campaigns, it is a real occurrence, and until I had heard this real life incident, I hadn’t realized how easy it was for someone to get your information and how much of a pain it is to fix the problems. Granted, your bank or credit card company already has a plan to get your money back, but the real issue becomes spending days and days fixing your credit, filing police reports, and dealing with all the merchants who have turned your information into collections agencies. Based on the information gathered from my friend’s frustrating misfortunes, here are some simple changes I’ve already made or will be making in the near future.
- Never write checks for anything. It’s hard to say ‘never’ on this one, but online checking will definitely be the preferred method for me as it already is for most reoccurring bills. The hard part will be paying cash or credit card for the variety of home services work such as home improvements or housecleaning, but as mentioned earlier, this inconvenience is relatively minor.
- Never put anything with theft potential in an unlocked mailbox. This one is easy to say ‘never’ due to the number of convenient secure mailboxes located around any city. Fortunately, I have centralized security mailboxes in my neighborhood, but the friend mentioned above believes his home-based mailbox is how his checking account information was acquired. The police mentioned it is very common for thieves to check the unsecured, individual mailboxes outside of many homes.
- Keep your driver’s license hidden as much as possible. Apparently, the state doesn’t consider driver’s license numbers as protected, and most likely, you won’t be able to get a new one if your identity is abused. Therefore, it’s up to each individual to secure their license, even though it can be acquired via the Internet with a little bit of work. This latter fact is why it’s so important to protect the other account numbers, because the combination of license and account is all that’s needed.
- Lock information inside your home. This can range from buying a small safe or just keeping account numbers in a locked file cabinet. Leaving bank and credit card statements out is just asking for trouble from the various services groups (air conditioning, painting, housecleaning, etc.) that may be inside a house over the course of time.
- Shred everything before trashing. Apparently, another sneaky way to acquire information is by digging through the trash, and since a small shredder is so cheap, there’s no reason to throw out any documents without being shredded.
6 September 2006, 10:14 pm
One of our recent house projects was aimed at dealing with the Central Texas sun. The key reason for this was a desire to get rid of the heat pockets around our windows when the sun was in its afternoon path. The options we considered were (1) new blinds, (2) solar screens, and (3) window film. After a lot of research, we decided that new blinds wouldn’t really help the situation, plus without some protection from the outside, the blinds would just continue to take a beating. After looking at several houses with solar screens, we could see that the screen material would start to sag rather quickly, and the almost black windows are not as visually pleasing from the outside as those with window film. (Obviously, this is just one opinion.) In addition, looking out through the solar screens does not provide as crisp of a view, so in the end we focused our attention on the window film.
The real question was does the film help with the heat, and the answer is emphatically “yes”. Here are a few specs on some of the various films we used. After having the film for a couple of weeks, there is a significant difference around the windows. While the specs say that 50-60% of the heat was blocked, my perception is that the air around the windows is 30-40% cooler, and the heat pockets throughout the house are virtually gone. In addition, when we arrive home at a time when the program is set high, the house is not unbearable, and my rough calculations say the house is 5-8 degrees cooler than it was prior to the film. That doesn’t sound like much but consider how long it takes for an air conditioner to drop the temperature that many degrees.
In the end, the cost was in the $1500 range for all the windows from Sunsational Solutions, and we were pleasantly surprised to receive a refund check from the city for making energy saving improvements, so the cost was reduced several hundred dollars. As an added bonus, the glare on the TVs throughout the house has been decreased to a point that is it not noticeable; consequently, HD looks just that much better. Here are a few pictures I took to compare the differences.
Window without any film or screen. (They missed this one but will be coming back to get it.)
Window with solar screens. (The neighbor’s house…)
Window with film. (Subtle contrast with the stone…)
30 August 2006, 6:41 pm
While I was incredibly impressed with True to Our Roots: Fermenting a Business Revolution, I’ll spare all readers with another review of the content that can be had somewhere else. Instead, it’s much more beneficial to comment on an aspect that the author just touches in a few places but doesn’t seem to emphasize. To give a bit of background, the story is written by the CEO of Fetzer Vineyards, Paul Dolan, who helped transform the vineyard and a large part of the California wine industry into a “environmentally and socially conscious” industry. While doing this, he grew the company at double digit earnings increases for ten or so years, and now, he is promoting this sort of change in corporate business policy to all companies and industries.
Dolan’s sale to the corporate world seems to be based more on the moral and socially responsible aspects of making these changes to business, but he doesn’t seem to accentuate the aspects that might have a bigger impact in converting the CEOs of the world, such as increased sales and higher profits margins. Here are some of the advantages I see from adopting the Fetzer philosophy, if the philosophy alone isn’t reason enough.
1) Employees that are motivated by more than money will work harder, work for less, and enjoy working much more.
2) Consumers will prefer an earth-friendly product over the contrary at the same price point, and in many cases, consumers will pay a premium for these products.
3) Consumers prefer purchasing products from companies with happy employees.
4) Companies that engage in these practices are often publicly awarded for making strides in environmental and social change.
5) In many cases, converting operations to an environmentally sound approach can lower operating costs over the long term.
CxO interpretation: lower costs, increased sales, higher productivity per employee, less employee turnover, free viral marketing, increased brand awareness
24 July 2006, 8:07 pm
I was happy to see Edward Jones get high rankings. They received the best ratings in all categories, except ‘Stock Picking’. I’m betting they are proud of this fact, since they don’t typically advocate buying individual stocks, and neither do I. If I want to gamble, I’ll head to Vegas. 
