The Workermonkey

Wednesday, March 01, 2006

On Wealth 

# posted by wyldshaman @ 3/01/2006 08:54:00 AM

For we have brought nothing into this world, and it is certain that we can carry nothing out.
And having food and clothing, with these we shall be content.
But those who desire to be rich fall into temptation and a snare, and into many foolish and harmful lusts which drown men in destruction and perdition.
For the love of money is the root of all kinds of evil,...
The First Epistle of Paul the Apostle to Timothy 6:7-10

My Current Investment Strategy:
Minimume 10% into 401K - diversified to at least 40% overseas holdings.
Weekly $ amount buying of I(inflation) Bonds taken directly out of paycheck.
Extra money placed in 3 month CD's.

401K - Its good, you get tax breaks for amount you put in, but its not good if you need the money soon, but you can also take loans against your holdings in an emergency. But depending on your plan, some 401K's have limited mutual fund options, like 5 lossers. My plan has 20+ through Merril Lynch, the website sucks, but i can alway move money into winning funds. I dont micro manage this, i rework my holds every quarter based on my own analysis, normally what funds are making the most recently.

I Bonds - US Gov bonds, why let the Chinese pay for American dept, be a patriot, invest in the USA. These bonds are exempt from state tax's and exempt from federal taxes if used to pay for higher education, great way to save for a childs education. They currently pay 6.73%, 1% above inflation. But if Hyper-Inflation sets in the inflation adjustment will fall behind as its re-calculated every 6 months, but i think that will be the last of our worries then.

Bank CD - Short term CD's are best when interest rates are on the rise, like now, the FED has raised rates like 18 times or something in a row and i think they will do so at least 2 more times. In a more stable finacial environment, long term CD's would be better, 1 year plus, i think. But i use CD's as a sort of savings account, with different 3-month cd's rolling over each month always giving me money if needed to pay bills. Currently my 3-monthers are paying 4.25%, the rates have gone up each time the FED raises rates which is every quarter. A good one year CD will pay 4.8% give or take, but remember your real earnings on this is -1% as the current US inflation rate is 5.73%(give or take).

IRA/Roth IRA/Brokerage Accounts/Stuff - Great if you have buku bucks, awhile back i opened a brokerage account and a Roth IRA, but i was so worried all the time about my stocks and the market, plus i knew i wasnt paying enough attention to the market, lost some money, made some money. And worst of all each time i found a "good" stock, i would soon find out the dark side of the company, like BP, they were using slaves in Tibet to build oil pipelines so i sold my shares of them, but they continued to make money, my dad was sure to tell me that, as i gave him that stock pick. So now i just go with the 3 investments listed above, at least with the 401K my money is all over the place, i just hope im not supporting too much slavery or too much pollution and such.
If people do get into Brokerage or IRA accounts i would suggest Vanguard, they are the leader in Index and low-cost mutual funds. The finacial sector's job is to make money, sure they want you to make money too, but really "they" want to make money, most try to take at least 3% off the top of your earnings, so if you should be making 10%, really you only made 7%.(I think Tim can back me up on this) But many of Vanguards mutual funds have fractional percentage managment fees, like 0.35%, this is really good, it can mean an extra 1-2% in profits for you each year and this is huge in the long run. Also im a huge fan of Index funds.

But most of this talk is nonsense, becuase there really are massive problems in the US, that the people and politicians refuse to deal with. But i think i have talked alot alread so, i wont get into these. Maybe a future post if people are interested?

Ron sorry for any misspellings, but the spell check did not work and i only go a D+ in high school english.

2 comments

As per the Motley Fool, mutual funds are awful as most often you are paying the manager to underperform the market. You can get any broker and buy an index fund with some fraction of a percent expenses, and it outperforms something like 65% of actively managed funds. I use Scottrade and have been quite happy, though I can't buy CDs in my IRA since the minimums are $10k, but why would I want to? Stocks kill any guaranteed investments in the long term and IRAs have limited reasons to take the money out if you are less than 60. If anyone does open a Scottrade account, please talk to me beforehand as I get a kickback. Also as TMF advises, the money in my IRA could be lost without causing me hardship, so I can happily swing for the fences, and have picked I think 6 stocks that I saw double, but found none of TMF's "10-baggers" i.e. 10 times increase in value. Naturally some have crumbled too, like Merck :) And one was even delisted.

By  Damon, at Wednesday, March 01, 2006 11:48:00 AM  

My family likes Scottrade too. I personaly like E*Trade for its one-stop shopping, i have my checking, savings and CD's through them, and their Brokerage/IRA platform is top notch, but the cost-to-trade is higher.

Having little desire to be rich, i dont worry about "10-baggers" i just think if i live modest and save, i can be happy now and in the future.

By  wyldshaman, at Thursday, March 02, 2006 8:33:00 AM  

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