No BS Finance

I just learned today that Morningstar, best known to me as rater of mutual funds, has an investing education center. A large number of mini-tutorials or short courses are available - 172, by my count, all free. Besides being a good basic education on stocks, funds, portfolios, and bonds, taking the courses and taking a 5-question quiz at the end of each, earns points towards various Morningstar products.

I’ve taken a couple of the courses - I’m impressed as to how well they cover the basics.

Cost: free registration

“The truth is, if you’re changing your long-term plan with every media blip or bump in the market, you don’t have a long-term plan.”

- Peter Lynch

I used to check the balance of my 401(k) daily. I tallied the mutual fund closing value and had a mega-spreadsheet to see up-to-the-minute performance.

Thankfully I got better. It only took 3 years of pain to realize I wasn’t gaining anything by focusing on ultra-short-term results. Now I check the 401(k) every other week - and that’s only to enter in the new purchases. I take a hard look at the actual contents every 1-2 years. That’s often enough to avoid the knee-jerk behavior of over-trading, yet still jettison the true dogs.

In fact, it’s time for some changes rtight now. I’ve sold off my individual stocks and am ready to rebalance/reallocate my holdings. More on that next week.

I never realized Parade magazine (a Sunday newspaper insert across much of the United States) was online. Last week (March 12), they had their annual survey of salaries across te country. The online version lacks the at-a-glance cornucopia of people, places, occupations, and salaries, but makes up for it with actual comments from some of the particpants in the gallery accompanying the story.

Even though the numbers aren’t able to be extrapolated across the entire country, it really lets you see where the cost of living is high and helps provide a reality check as to what actual people earn.

The same issue also featured a nice little story about What You’ll Really Need To Retire.

One of the great attractions of index funds are that they should have low fees. The expense ratios should be tiny. By far the two best-known low-expense-ratio mutual funds come from Fidelity and Vanguard.

I came across an ad for Fidelity today that touts the expense ratios of 0.10% for their Spartan 500 Index, Spartan Total Market Index, and Spartan Extended Market Index. They drop to 0.07% if the account balance in one of the funds is over $100,000.

Even though the similar Vanguard index funds are slightly higher - 0.18% for the Vanguard 500 Index, 0.19% for the Vanguard Total Stock Market Index, and 0.25% for the Vanguard Extended Market Index - you’re still way ahead of the game compared to actively-managed funds.

I ran a few numbers today and came up with a shocking realization - since 12/31/2000 our net worth has increased at a rate of 2.13% per month!

How much is that? Well, if you had $10,000 and were able to invest it at that rate, you would have almost $1.6 million in 20 years.

Now, I don’t think this rate is sustainable in the true long term, but it sure is nice to contemplate. It’s “easy” to pad net worth percentage-wise when selling a home or getting a bonus at work.

What are the “secrets”:

• Saving in my 401(k) for at least enough to get the company match. Often I was contributing double the minimum or more.
• Spending significantly less than we earn, even after the 401(k) contributions.
• Working for a company with a nice bonus and relocation plans.
• Selling a home after a nice run-up in prices.
• Being married to someone who shares the same financial goals.