Thursday, December 06, 2012

Finances - and the cliff

This time of year I always find myself thinking about our finances.  I should probably think about it more often but the end of the year it is pretty much guaranteed.   Tax season will be upon us next quarter so that is part of the reason.  Of course everyone wants to know how they have done over the last year so that’s another reason. 

This year I’m planning on giving up some of the mutual funds we’ve held for many years and going to more index-based products.  The amazing Random Roger posted a graph a couple months ago showing the correlation between various large funds and the index they follow; it was amazing!  The correlation is really strong, as I guess you would expect, so why pay for a managed fund if you aren’t getting any extra return?  Guess I’m kind of slow to have this dawn on my after all these years but what can I say?  Better late than never? 

I’m still a fan of ownership if specific companies.  I think you can get a better overall return even if there is statistically more risk.  I don’t like to admit it but we do have one investment that is way too large a proportion of our portfolio.  It is a company I used to work for and I just let the investment grow rather than sell parts of it off during my years there.  Aside from that, most of our individual investments are 2-5% of our net worth.  Over the years we’ve lost 100% of our investment in a couple companies but when you are talking that size investment it’s hardly a bump in the road. 

This year I have an additional challenge in that Number One Daughter has asked me for some investment advice.  She has a 401k that she wants to roll over to something else.  That will be a challenge because she isn’t very patient so a 5% yearly increase isn’t going to make her happy but losing money will make her even less happy.  It will be a learning experience for us both I’m sure. 

I wish I could get the old crystal ball shined up but it is just as cloudy as ever.  About the best I can say is that I don’t think the sky is falling quite yet.  Even if we do go over the fiscal cliff, which I certainly hope those idiots in Washington manage to avoid, I imagine things will keep moving in the same general direction.  Paying more and getting less is not a new idea.  It has been happening pretty much my entire life.  Lots of us were driving when we paid $.30 a gallon for gas.  Doesn’t anyone else remember when the Post Office delivered more letters than advertising fliers?  (As an aside, I was talking to a guy who has a little local magazine.  He said it is $.14 a copy to flood the town with his magazine.  Really!  And a postage stamp costs $.44, right, that's clever.)

Speaking of the fiscal cliff, I’m going to write emails to a bunch of folks in Washington including the Pres, our state representatives and the leaders of the House & Senate.  I wish LOTS of people would drop them a line explaining what idiots they will be if they don’t get something going.  I’m going to be stressing the statesmanship aspect of their jobs rather than the partisan politics that they all seem to prefer.  It probably will just be a waste of time but I’d feel really dumb not doing anything.  So get out there & write!

And have a good one!

1 comment:

JoeinVegas said...

Uh oh, you aren't going to become that guy are you - the one who's name we recognize in the letters to the editor because he writes so much?