Archives for December 2014

Investment Returns By Asset Class, 2014 Year-End Review

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I don’t always check my portfolio performance, but when I do, I do it at the end of the year. Here are the trailing 1-year returns for select asset classes as benchmarked by passive mutual funds and ETFs. Return data was taken from Morningstar after market close 12/29/14.

2014performance

Stocks. The Total US Stock Market (VTI) went up nearly 15%, while the rest of the world’s markets (VXUS) dropped around 3%. Europe specifically struggled, and Emerging Markets (VWO) only eeked up 1.5% total return. US REITs (VNQ) went on a tear, up 32%.

Bonds. The Total US Bond Market (BND) went up ~6%, even though most market pundits thought rates would go up in 2013. Short-Term Treasuries (SHY) were mostly unchanged, while Long-Term Treasuries (TLT) shot up 27%. Inflation-linked TIPS (TIP) inched up 3%.

Gold (GLD) had its gyrations but ended the year with very little change, down ~3% over the past year.

In the end, nothing really went down that much and a few things did really well. It was another year where half of the predictions were wrong, and new predictions will no doubt sprout up soon. Business Insider has a hilarious post on completely meaningless market phrases that sound smart. On that note, my official position will be “cautiously optimistic” for 2015.

The overall asset allocation of my personal portfolio hasn’t changed much since my October 2014 update, but I’ll probably do a final update once the year is officially over. Some quick calculator work indicates the overall 2014 return to be roughly 7%.

Cook It Yourself: Learn a Skill, Save Money, Improve Your Health

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I’m still into the “Cook It Yourself” movement/meme/trend/whatever. If you’re looking for a new year’s resolution and consider yourself a DIY person, why not CIY in 2015? Knowing how to cook simple, delicious food is a great skill to have and it can’t be bought with money. Here is a collection of articles and quotes related to this idea.

Corporations cook differently than humans. The New York Times has a neat article called What 2,000 Calories Looks Like. Basically, industrial food is made to be cheap but tasty. That usually involves adding a bunch of salt, fat, and sugar. So, you could have a single peanut-butter milkshake (2,090 calories):

200cala

Or you could cook yourself a feast including pasta, potatoes, eggs, chicken wings, turkey chili, coffee, and even beer and stay within 2,000 calories:

200calb

Writers, nutritionists, doctors, chefs and Michelle Obama have all been promoting a hot new diet: home-cooked food. “People who cook eat a healthier diet without giving it a thought,” Michael Pollan recently told Mark Bittman, both authors and advocates of the cook-it-yourself diet. “It’s the collapse of home cooking that led directly to the obesity epidemic.” The magic of the diet, its advocates say, is that it doesn’t mean skimping on portions or going without meat, eggs, cheese, alcohol or dessert.

This is Michael Pollan’s position of Eat Anything You Want, Just Cook It Yourself, as put into a short 2-minute video:

Well-known food writer Mark Bittman has a new book called How to Cook Everything Fast which mixes the right recipes with time-management tips to bring homemade food to tired weekday cooks. You can find a long list of reviews for it here. I enjoyed his quote that “the most radical thing that you can do for your health, if not the world at large, is cook.”

Here’s another good 2-minute video with Mark Bittman taken from the Time article The Truth about Home Cooking that explains some of his philosophy.

When I talk about cooking, something I’ve been doing for the better part of five decades, I’m not talking about creating elaborate dinner parties or three-day science projects. I’m taking about simple, easy, everyday meals. My mission is to encourage novices and the time- and cash-strapped to feed themselves. Which means we need modest, realistic expectations, and we need to teach people to cook food that’s good enough to share with family, friends and, if you must, your Instagram account.

Because not cooking is a big mistake—and it’s one that’s costing us money, good times, control, serenity and, yes, vastly better health.

Don’t let the corporations convince you that cooking is too hard; it really is doable if you avoid the common pitfalls and plan ahead. I agree with Bittman in that you should learn to make food you really want to eat, first and foremost. See if these Bittman recipes excite you: quick spaghetti squash or quick chicken parmesan.

Want more recipe ideas? Skip the poorly-chosen recipe from Sam Sifton’s Home Cooking Manifesto and try these 10 realistic recipes from Megan McArdle instead. Also see the links inside my Dinner A Love Story book review.

Feel free to share your own links and thoughts in the comments.

Season’s Greetings!

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

fam2014a

Thank you very much for reading qara.info this year. It’s now been over 10 years… where has the time gone! I still look forward to learning and sharing something new every day. Here’s hoping that you are happy, healthy, and moving ever closer toward your goals.

Remember that you can follow updates via RSS feed, daily e-mail subscription, following me on Twitter, or liking my Facebook page.

True Meaning of Christmas: Making a Charitable Giving Plan

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giftbox2If you celebrate Christmas, you may have seen this quote about keeping with true values behind the holiday:

Want to keep Christ in Christmas? Feed the hungry, clothe the naked, forgive the guilty, welcome the unwanted, care for the ill, love your enemies, and do unto others as you would have done unto you. – Steve Maraboli

Along those lines, now is the time that many people donate to the charities of their choice ( it’s the end of the tax year). Carl Richards of the NY Times makes a good point it that you should create a charitable giving plan and then stop feeling guilty all those other times you get asked for money.

Whether you donate time, money, or whatever, make a conscious choice as to where to give. Use the best charity comparison websites to find those that are financially healthy, committed to accountability and transparency, and creating measurable results. I wish there was an option for charities that promise not to bombard you with future letters asking for more money. Arrgh.

We created our first charitable giving plan in 2010 and have been doing it every year since. It definitely helps to sit down with each other and discuss our priorities. Some of the charities have changed, but I’m happy to say the total amount donated has grown.

I won’t lie, it also makes me feel better about the huge pile of presents our two little girls have from our generous friends and family!

Saving Money on Cold & Flu Medicines

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It’s flu and cold season, and I’m just recovering from being sick myself. Who knew there was even something called Tylenol Cold Multisymptom Liquid Severe or Mucinex Fast-Max Severe Congestion and Cough? That is, if you can find it while wading through an ocean of this:

iodinecolds

Plus it costs nearly 10 bucks? This Atlantic article reminds us that all of these over-the-counter drugs are just combinations of the same old drugs like acetaminophen (Tylenol) or diphenhydramine (Benadryl). Even better, you can buy the generic versions for a fraction of the price, either individually or in their common combos.

The most important part is convincing yourself that generic versions of medicine have exactly the same effectiveness that the name-brand versions. Per the article, in order to be allowed on a pharmacy shelf, the generic version of a drug must deliver the same amount of active ingredients into your bloodstream in the same amount of time as the brand-name drug. You know which group of people buys the most generics? Pharmacists, because they see past all the marketing gibberish.

A new site called Iodine has a Cold & Flu Helper Tool that will help you determine what you need based on your symptoms, and help you find the generic version from places like Costco Kirkland, CVS, Walgreens, or Safeway. Or you can do what the author (an MD) does and keep generic versions of each individual drug, and make your own combo as needed.

Learn something, save money, and avoid taking unnecessary drugs with their potential side effects. Win-win-win!

US Treasury Bonds Negative Correlation with Stocks

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Here is an interesting chart comparing the correlation of various asset classes to the S&P 500 over the last 5 years. Chart is from Richard Bernstein Advisors, found via The Reformed Broker.

5yearcorr

A negative correlation between two asset classes means that they tend to move in opposite directions. While long-term US Treasury bonds have been the most strongly uncorrelated, it is also worth noting that intermediate-term US Treasuries (5-7 years) were nearly as uncorrelated. Of course, this is the past and correlations can and will change.

Still, this would seem like good news for people who hold a “total” bond fund like the Vanguard Total Bond Market Index Fund (VBMFX, BND) or iShares Barclays Aggregate Bond Fund (AGG) as these contain ~70% US government bonds and have an intermediate average maturity. You want your bonds to serve as a hedge against stock movements, and they did over the past 5 years while still maintaining positive returns (~4% annualized for AGG, ~15% annualized for S&P 500).

Free EPIX Movie Membership Trial

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epixlogoMovie streaming service EPIX and the NHL are giving away a free trial membership good until March 6, 2015. Only thing you really need is a working e-mail address; no credit card or personal information required.

Won’t work on your TV, you’ll need an internet connection. Compatible with iPhone/iPad app, Android app, Chromecast, Roku, PS3, PS4, XBOX 360, and other streaming devices. Note: When logging in, under provider choose “Free NHL Trial”.

If you already have Amazon Prime, you’ll see a lot of overlap as Amazon has a partnership agreement with EPIX. Otherwise, a nice freebie, especially for the cable TV cord-cutters out there in need of some free holiday viewing material.

20% off Gift Cards to Various Retailers & Restaurants

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

chilicardAmazon runs various temporary “Lightning Deals”, but if you filter to only show the Gift Card deals you’ll see a running list of gift cards to various retailers at 20% off for a limited time. Amazon Prime members get early access, but many of them don’t sell out and there is also a waitlist option.

For Thursday, December 18th, the line-up includes Chilis/Maggianos/Romano’s Macaroni Grill, Dave & Busters, and AMC Theatres. Seems like an easy way to knock out some last-minute gifts at 20% off face value (i.e. , $20 for $25 gift card, or $40 for $50 gift card). Physical cards get free shipping.

Stack this discount with the 5% cash back at Amazon from Chase Freedom and Discover It cards this quarter.

Similar deals!

  • Get a $20 eGift card if you buy $100 in eGift cards for Panera Bread.
  • Get a free slice of cheesecake with a $25 gift card purchase (electronic or physical) at Cheesecake Factory.
  • Free large pizza if you buy a $25 gift card at Papa Johns.
  • Get $5 eGift card if you buy $25 eGift card at Petco.

Find more special offers by going through the list here at Cashstar and looking for the red “Special Offer” banner.

Alan Watts: What If Money Didn’t Matter?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Alan Watts was a “British-born philosopher, writer, and speaker, best known as an interpreter and populariser of Eastern philosophy for a Western audience.” I actually stumbled upon his readings via a trailer for Days of Our Youth, a movie about people who grew up to be professional skiers.

Anyhow, he turns out to be pretty popular but if you haven’t heard of him before, I think listening to his voice is the best way to experience it:

Here is a transcript of the YouTube video above:

What makes you itch? What sort of the situation would you like? Let’s suppose, I do this often in vocational guidance of students: they come to me and say well, we are getting out of college and we haven’t the faintest idea what we want to do. So I always ask the question: What would you like to do if money were no object? How would you really enjoy spending your life? Well it’s so amazing as the result of our kind of educational system, crowds of students say ‘Well, we’d like to be painters, we’d like to be poets, we’d like to be writers’ But as everybody knows you can’t earn any money that way! Another person says ‘Well I’d like to live an out-of-door’s life and ride horses.’ I said ‘You wanna teach in a riding school?’

Let’s go through with it. What do you want to do? When we finally got down to something which the individual says he really wants to do, I will say to him ‘You do that! And forget the money!’ Because if you say that getting the money is the most important thing you will spend your life completely wasting your time! You’ll be doing things you don’t like doing in order to go on living – that is to go on doing things you don’t like doing! Which is stupid! Better to have a short life that is full of what you like doing then a long life spent in a miserable way. And after all, if you do really like what you are doing – it doesn’t really matter what it is – you can eventually become a master of it. It’s the only way of becoming the master of something, to be really with it. And then you will be able to get a good fee for whatever it is. So don’t worry too much, somebody is interested in everything. Anything you can be interested in, you’ll find others who are.

But it’s absolutely stupid to spend your time doing things you don’t like in order to go on spending things you don’t like, doing things you don’t like and to teach our children to follow the same track. See, what we are doing is we are bringing up children and educating to live the same sort of lives we are living. In order they may justify themselves and find satisfaction in life by bringing up their children to bring up their children to do the same thing. So it’s all retch and no vomit – it never gets there! And so therefore it’s so important to consider this question:

What do I desire?

Alternatively, Gavin Aung Than of Zen Pencils turned the quote into a very cool comic:

alanwatts_zenp

Stuff like this is always controversial. Too dreamy? Too hippie? My current opinion is that it all depends on the person. Some people don’t have a strong affinity towards anything, they may value safety or prestige other things. (Is that really wrong if that’s what they want?) But to some people, they do have a latent desire, and reading such stories is like a wake-up call. Yes! That thing that you always think about in the shower, or right before you go to bed? Yes you should try that!

In the end, I think if you are going to spend a huge chunk of your life doing anything, then it should be at least be aligned with your personal beliefs. Only you can decide if that is currently the case, or if a change must be made.

LendingClub IPO for P2P Loan Investors: First Day of Trading Over

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(Updated. Lending Club ended their first day of trading at $23.43 a share, up 57% from their IPO price. With roughly 361 million outstanding shares, LC is roughly a $8.5 billion dollar company! I have updated the post to include the rest of the IPO documents and process. I ended up selling my 100 shares for roughly a $800 gain during the first day of trading. Details and rationale below.)

LendingClub connects individual borrowers with individual lenders, and I’ve been writing about them since 2007. They successfully had their IPO on Thursday, December 11th, 2014 and they actually set aside a few shares for individual investors. Usually you’d either need serious cash or insider access. If you were an investor at LC by 9/30/14 you should have gotten an e-mail asking if you were interested.

I participated in this IPO for a few reasons:

  • I’ve been a lender on LendingClub since 2007 and have been following their progress since.
  • I have never participated in an IPO before, and am curious about the process.
  • I view this investment as purely speculative. It is not an investment, it is a gamble!
  • I can commit as little as $250 and up to about $5,000 (details below). I can choose a number that will keep my interest but it won’t break the bank either way.

I’ve documented the process below:

11/17/2014. I got an e-mail with the subject “Lending Club IPO – Directed Share Program (DSP)” telling me that I was eligible to participate and that I had to opt-in to sharing my information with Fidelity Investments. Here is a screenshot:

lcipo1

I clicked, and then was instructed to wait. (More below)

[Read more…]

Bogle Interview: Why You Don’t Need International Stocks, Why To Hire An Advisor

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Whenever Vanguard founder Jack Bogle speaks, I listen. He has spent more time thinking about how to help the average investor than I have been alive. I found this recent Bloomberg interview covered a lot of topics regarding portfolio construction. Here are my notes, I have paraphrased what is not in quotes:

  • “The best thing you can do for yourself is to make your choice [of a long-term strategy], keep it simple and stick with it.”
  • The traditional 60/40* balanced fund is still a fine, simple choice for a portfolio. He prefers that over a target-date fund. (*60% stocks, 40% bonds)
  • For the stocks portion, a traditional total US stock market fund is fine. You can add a little international stock exposure, but you don’t need it. The long-term returns for foreign companies will likely be similar but with increased currency risk.
  • For the bond portion, a traditional total bond fund is fine. Higher yield won’t come without higher risks.
  • Even if valuations are currently high on a relative basis, you should take the long-term view and invest now.
  • “Financial planners and advisers need to sell their value as keeping their clients from doing the wrong thing at the wrong time.” That is their value-add, and it can be significant.

Keep in mind these are Bogle’s opinions and not necessarily my own.

The Invention of the Fixed Rate Mortgage

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homefrontBusinessweek magazine celebrated their 85th anniversary by listing what they deem the 85 inventions with the greatest impact over the last 85 years. #1 was jet engines, but #17 was the fixed-rate mortgage.

At the time, it was bold and controversial decision done in response to the Great Depression. The government wanted a way to refinance home mortgages currently in default to prevent foreclosure:

In 1933, to provide stability, the now-extinct Home Owners’ Loan Corp. introduced a new type of mortgage: It had a fixed rate and was fully amortized, meaning borrowers paid off the entire loan by the end of the term. Not everyone cheered. Critics railed that it was “crazy and un-American [to be] putting people in debt for 15 years,” says Louis Hyman, author of Debtor Nation: The History of America in Red Ink.

That last quote suggests that a 15-year mortgage was really long and people used to pay off their mortgages a lot faster. I’m not really sure if that was the case, or if there was just a big split between people who could pay cash for a house and those that couldn’t. Wikipedia states that the previous standard in the 1920s was either 3-5 year interest-only mortgages offered by commercial banks or 10-12 year loans which required buying shares in the lender itself (not good when the share value plummets in an economic crisis).

If you think about it, fixed-rate mortgage are pretty reasonable terms. A fixed payment every month evenly spread out over 30 years, and as long as you don’t miss any payments you’ll be fully paid off by the end of the loan period. It kind of makes you wonder if private companies would have created such an instrument in the “free market” absent government intervention. Of course, you have to wonder what would housing prices be like without their existence? (Just today I see that Fannie and Freddie announced the backing of 3% downpayment mortgages.)

Since they do exist, I still think people should use them to time their mortgage payoff with their retirement date. For many people, a 30-year fixed rate mortgage will do just that if they don’t refinance into a longer term. Start at age 30-something, finish at 60-something. For those that are serious about early retirement, then the 15-year mortgage may be a better fit.

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