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I Opened an ETRADE Account to Buy some Stocks

February 27, 2009 · Filed Under Investing · 10 Comments 

I opened an ETRADE account the other day with the sole purpose of buying a few individual stocks (two to be exact).  Considering that I am a big advocate of index fund investing throughout this blog, I thought it might be a good idea to be transparent and mention this new account.

So you are a day trader now?

No, no, I won’t be buying and selling on an hourly basis or anything like that. In light of current economic and stock market conditions, there are a number of stocks that are trading much, much lower than they were a few months ago (well, yes, I realize that covers almost all stocks, but I do have a few particularly slammed stocks in mind).  My wife and I have decided that taking a risk and purchasing some shares in the hopes of them returning to their previous values (or closer to them) would be acceptable at this time.    I will buy some shares of these companies and hold them for a year or so while they (hopefully) (eventually) increase in value.

This is not our investing technique

To be clear, this is not part of my normal investing strategy.  This is taking a risk with the hopes of it paying off with a big reward.  To me, investing involves buying a diversified set of low-cost index funds.  After you do that, then you buy more.  And you don’t do anything with them other than occasionally rebalancing your portfolio.  That is investing to me…this is speculating.  I do own one other individual stock – that of my employer that I purchase through an employee stock purchase plan.  Ok, my wife does own one share of Disney stock (a gift) and a share or so of Johnson Controls (another, somewhat stranger, gift).

This is a big risk

If you didn’t believe it before last year, you certainly realize now that investing in the stock market is inherently risky.  Even my diversified index fund portfolios have shed a lot of value since the fall.  And if an index fund of hundreds of stocks can drop that much, certainly individual stocks can be extremely volatile and risky.  As an example, examine the plight of all the people who currently own Circuit City stock.

Minimizing the risk

The way that we have chosen to minimize the risk to our financial situation is to keep the total amount of cash invested to a very small percentage of our portfolio.  I am planning on using approximately 1% of our net worth for these stocks.  In that way, if either or both of these companies do realize the worst case scenario and cease to exist, we will not really notice a 1% drop in net worth (besides – it’s been dropping more than that each month since the fall!).

So, that’s our plan.  We’re buying a few shares of two companies and hoping that their prices return to whence they came and we realize a significant monetary increase.  I opened the account Tuesday evening and then transferred some money from my savings account into it Wednesday morning.  I then clicked the button to buy some shares Wednesday afternoon.  Unfortunately, ETRADE gently reminded me that I can not purchase stocks that cost less than $10 until 7 business days after opening a new account…..

ETRADE reminds me that you can't purchase stocks that cost less than $10 for 7 business days

so I have not actually bought any shares yet….but someday (if I can remember in seven business days from now that I started this process), I just might…

Photo Credits: wsilver

Once-a-Month Grocery Shopping and Cooking

February 24, 2009 · Filed Under Once a Month Cooking & Shopping · 15 Comments 

Since we’ve had kids, my wife has become much more cognizant of what we all eat on a daily basis.  We certainly eat much healthier now that when she was an internal medicine resident and didn’t have the time to regularly meal plan for us  (let’s just say that I can certainly follow a recipe and do some cooking, but creatively planning a variety of meals is not my spiritual gift – "sure, tacos again…but they are so yummy!")

No, not one meal per month

Anyway, my wife recently got a copy of a book from Focus on the Family called Once-a-Month Cooking .  The basic idea is that you spend one (loooong) day per month preparing your meals (and then go out to dinner that night!).   The result is that you have a month’s worth of home cooked meals ready to reheat at any time.  And though frozen, these are "real" frozen meals – not those frozen TV dinners with who knows how much sodium in each serving.

Well, my wife read this book and is sold on trying it.  It actually makes a lot of sense from an efficiency standpoint.  Think of all the meals you cook throughout the month – aren’t there some that are repeated?  Some that have the same ingredients?  Think of it in terms of economies of scale: If it takes you a certain amount of time to prepare, boil, and clean-up one pound of chicken, it will only take you a small increment more time to do two pounds if you do them at the same time.

The book is actually quite exhaustive in that it lays out an entire month’s worth of meals complete with the exact shopping list for everything! Then it shows exactly how to prepare everything including the order to do each step to maximize those economies of scale.  I’m not sure if this will save any money, but she and I are just so excited for the potential time savings.

But wait, there’s more!

So I was sitting around the other day looking through a copy of an old Economides newsletter (you know – America’s Cheapest Family ) and what do I read there?  Well, I read that they spend $350 per month on groceries and household goods.  And I read that one of their strategies is to shop only one day per month! So, you see where this is going, right?  This dovetails perfectly and now I’m really excited – if we are going to cook only one day per month, maybe we should only shop one day per month as well!

So, we have this huge shopping list prepared and we are gearing up to put this into practice for the first time this weekend.  I’m not actually concerned about saving money, but I really, really would like to realize some time savings. If you’re only at the grocery store once a month, think of all the "quick trips" (that actually take at least 40 minutes) that will be eliminated (saving time) and all the impulse buys as well (saving money).

The downside

So, it is going to be pretty crazy to buy a month’s worth of food and paper goods in one shopping trip.  Actually, we are planning a trip to Sam’s Club to try out their Click’n’Pull deal for the first time and then we’ll hit a regular grocery store for the remainder of the list.  But I’m anticipating having to fold down the back seat in the minivan to fit all these groceries in there.  Certainly, you have to have room to store all of the food too…that might be a bit iffy for us.  We do have a big freezer out in the garage, though, which does seem like a necessity to implement this plan.

And then there’s the bill. It’s not going to be cheap.  But, if it works out right, at least this will be the only trip this month.

Like I said, we are putting it into practice this weekend.  We’ll be shopping Friday and cooking Saturday.  I will let you know how this goes.  Of course, it might not look so pretty on Saturday evening, but I’m hoping that three Saturdays from now, after no more trips to the store and yummy meals each night with no real "cooking," that it will have been well worth it.

Has anyone tried either or both of these before?  If so, did it work?  Do you have any suggestions/comments/warnings?

Photo Credits: Mykl Roventine

Get $100 from Suze Orman & TD Ameritrade

February 18, 2009 · Filed Under Random · 2 Comments 

A friend pointed me in the direction of Suze Orman’s Save Yourself website yesterday for a very interesting offer.  Suze and TD Ameritrade are offering you $100 to open up and consistently fund (there’s always a catch!) an account there.  Check out the details on this page .

To get the $100, you will need to open a non-retirement Save Yourself account and deposit at least $100 per month for an entire year.  At the end of the year, they will drop in another $100 to the account.

A few things to keep in mind

The account type is a Money Market Deposit Account (MMDA) with a variable interest rate.  Currently, the interest rate is only 1.0% and (of course) subject to change at any time.  That’s a pretty low interest rate compared to some other high-yield savings accounts like EmigrantDirect (2.4%) and  HSBCDirect (2.45%).

On the other hand, those banks aren’t going to give you an extra $100 at the end of the year.  If you are going to put in close to $100 per month, you will come out significantly ahead by opening up the Save Yourself account.  On the other hand, if you have a lot of money to deposit each month, you might be better off with a higher yield (Frankly, if you have that much money to deposit each month, you probably shouldn’t be putting it into a savings account, but that’s a different post)

The account is FDIC insured

In light of today’s economy, I’m sure that the first question you asked yourself was, "is this account FDIC insured?"  A very important question and yes, it is according to their website (I would not be putting this info on here today if it was not FDIC insured).

Get into the habit

I really like that this offer provides an incentive to get you into the habit of saving.  If you aren’t currently "paying youself first" and saving regularly, this is a great way to get started (with a nice reward attached).

Oh, yeah, you also get online access to Suze Orman’s book Women & Money. (I don’t know if men are allowed to read the book or not, but they can take part in the Save Yourself promotion).

ChristianPF’s Top 20 Christian Financial Websites

February 16, 2009 · Filed Under Blog Links · 5 Comments 

Bob over at ChristianPF recently created a post where he detailed his Top 20 Christian Financial Websites and I am thrilled to say that BFN actually made the list! This is a really big deal for me because the ChristianPF blog is one of my biggest blogging inspirations.

When I first started getting serious about understanding and improving my financial situation, I spent a lot of time reading various blogs and books.  The two blogs that initially caught my attention and introduced me to blogging were The Simple Dollar and ChristianPF . I spent a lot of time reading posts from these sites and I was amazed at how much useful information the authors shared.  They introduced me to blogging as the powerful platform that it is.

ChristianPF especially was my biggest inspiration when I first got the crazy idea of creating my own personal finance blog.  Bob created so many useful and Biblically sound posts and has a great knack for sharing Biblical wisdom in a practical way.  When I decided to create this blog, I decided to aim high and hope to do as good of a job as he did in creating useful resources for his readers.

With all that being said, this list that Bob has created is a great resource for anyone hoping to increase their financial intelligence.  I am familiar with a number of sites mentioned on the list, like Bible Money Matters and Gather Little By Little , but am thrilled that there are so new resources for me to check out!  I urge you to check the ChristianPF list out for yourself.

Thanks for making up a list with so many resources, Bob, and thanks for including BFN on it!

Why Should I Care about Spending Less/Saving/Investing?

February 11, 2009 · Filed Under Frugality · 3 Comments 

A while ago, my wife and I were sitting around the table chatting and working and, as often happens with me, I must have made some comment about saving money or avoiding debt.  She asked me what the big deal was about not having debt?  Why should we sacrifice to spend less so we can get out of debt and save and invest?  If so many people are using credit cards and home equity loans to buy the stuff that they want, do we really need to care about this stuff so much?  Are all of those people going to end up destitute or are they all going to be fine even if they used credit throughout their life?

Aside: I’m not sure why she asks me questions like this.  Sometimes, I think she just says this stuff to see how I’ll react ("I wonder if his head will explode if I ask him this?").  Maybe she is truly curious.  Possibly, she is trying to engage in an honest, albeit slightly controversial, conversation.  You know, like she pushes some buttons to try to get me thinking about things from a different perspective.  Yeah, let’s go with that one.

Anyway, given the current economic conditions in the US, this is a good time to discuss this topic (Ok, actually, it’s about a year too late to do anything positive about your situation, but humor me here).  First of all, a good deal of the economic turmoil we are currently experiencing is related to debt in one way or another…but that’s a topic for another post.

Fewer monthly expenses and more savings

So, let’s look briefly at some of the benefits of not having large amounts of debt in a time like this.  Obviously, if you don’t have a lot of debt payments to make, you therefore have less fixed expenses each month.  And if you have been paying yourself instead of paying debtors, then you probably have more money in savings and investments (well, in savings at least).  And put those two things together in a box and wrap it up and you’ve some protection and flexibility.

You have protection that enables you to pay big expenses that might arise  (like if your water pipes froze and burst ) or help you through situations such as losing your job or encountering some other major problem.  You also have flexibility in your life.  While most people are just very happy to have a job in times like this, your reduced expenses and increased money in the bank allow you to retain your flexibility – if you really hate your job and/or (somehow) see a better opportunity, you can actually consider taking that risk.

Not only surviving but also thriving

Most people focus on survival in these economic conditions, but there is another aspect that should be considered.  If you have done a good job of staying out of debt and saving some money, you are in a relatively unique position right now.  You  have money at a time when things are on sale.  Think about it – houses can be purchased for much, much less than a year or so ago.  The same is true of stocks.  You are not in a position, like so many appear to be, of hoping to survive, you are surviving and looking to thrive.

I can’t remember who said it (I think it was someone with a large net worth) so I can’t look it up, but I always found this (paraphrased – since I can’t look it up) quote interesting:

You make most of your money during a recession, you just don’t know it at the time.

If your job is secure and your debt load is low and you have money on hand, maybe now is the time to invest in that rental property you’ve been considering for a long time.  Been thinking about purchasing a property in foreclosure?  There are many available right now.  Almost all stocks are much less expensive than a year ago so even dollar cost averaging should pay off in the long-term.  These are but a few examples of opportunities that are available if you look around.

Then again, I’m sure the government will take care of us no matter what

On the other hand, to my wife’s point, why worry too much about debt and what-not – we’re in a bad place right now but our wise leaders in Washington are hurrying an economic stimulus package that I’m sure will help everyone out and immediately get us out of this funk.  Pork?  nah, surely they have the people’s best interest in mind and not only their own…(and if that doesn’t scare you into wanting to get out of debt, I don’t know what will).

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