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Directionless Investing

October 28th, 2013 at 05:47 pm

My income has been steady over the past few months, so I have concentrated my efforts on funding my Roth IRA account. My goal is to fully fund the account for the 2013 tax year. I've been working toward that goal to the detriment of paying off my credit cards and building an emergency fund. I have no emergency fund. I feel that I will never get this year back to build up a Roth IRA, so I have to start using my retirement building years productively. In this case, I have to start using them because I have neglected to do so for so long.

So far, I have contributed $1170 in my Roth. I calculated that I can contribute $170 a week minimum to make it to April 15, 2014 for the 2013 tax year. I've actually been contributing more than that $170 threshold in the event that I have a period of unemployment.

I really don't have specific plans for investing. At first, I started putting my money in a S&P 500 Index fund with low fees. In addition to this IRA, I have $8,000 from an old pension and 401K in a rollover account. These investments are in mutual funds. Since the bulk of my small estate is in mutual funds, I decided to dabble in stocks.

I feel that I have a good grasp of financial analysis. I did a lot of work in securities litigation so I'm familiar with the concept of securitization. However buying stock as a small potato investor is difficult. For one thing, I don't really have a lot of money to invest up front, so I buy a few stocks at a time. Plus I am with E-Trade and the commission is $9.99 a transaction for stocks. At the time I created my Roth IRA, I did not think that I would want to buy and sell stocks. At this point, I really don't want to change accounts because I already have my money with them and it's easier to keep track of contributions if you have one account.

I'm not even sure if I should buy stock since I buy stock a little at a time and right now, with the commission costs and market "losses", my stocks are worth "less" than my contribution. My thought is that perhaps mutual funds and stocks are really not great investments for retirement. They can gain a lot of traction, but they also can "lose" as well. I even wonder if my "losses" are really losses. The stock market is so speculative and stock prices increase/decrease on the whims of the buyers and sellers. I guess if a lot of people want to buy a stock, it may say something about a company's value. But is that really the case?

I purchased shared in three companies: Nokia, Ford and Coty. I needed a new cell phone and got so excited when I saw the Lumia at Verizon. I did not buy the Lumia because Verizon wants to phase out the unlimited data plans so I had to buy a phone full price on the market and have them hook it up. I went with an LG Intuition that cost significantly less from an Ebay seller (plus I got it brand new) than the Lumia would have cost from Verizon. However I was sufficiently impressed that I thought that maybe I should get stock in that company because the phone was so sharp. The price was affordable and I bought a few shares. With my next contribution, I wanted to buy more shares of Nokia. I really like the phone that much. It seemed that either a lot of investors really liked the Nokia phones or were just gambling with the stock because the price increased very quickly. I got scared and decided not to acquire more shares.

My next purchase was Coty stock. I was shopping at TJ Maxx and picked up Meow from Katy Perry and JLo's Glo. I knew that Coty made those perfumes and then I decided to see if they had stock. Amazingly enough, Coty was listed and had just had an IPO. Furthermore, the stock was priced a little more than $16 a share. That's less than a bottle of those perfumes I had picked up and only a fifth of what I spent for JLo's Glo back when it came out on the market. Then I looked at Coty's 10K filing and got even more excited. They own Sally Hanson as well! My thought was that I probably had spent at least a few thousand dollars on Coty products in my lifetime and that investing $200 would not be the worse decision in the world. It was confusing, because analyst reports said that Coty’s IPO was "not beautiful" and that it was not for the stockholders but for the current shareholders. They also said that Coty wanted to issue stock so it can make more acquisitions. Now how do I interpret this analyst report? I know what I spend on Coty. The analysts are saying that the shares are not that great and the price is only $16 a share, yet I have a few hundred dollars of its products sitting on my shelf. I went with my gut and bought the stock because my rationale was that the money I spent on Coty products is dead, however at least there was a chance that the stock may pay a dividend or increase a value. It certainly is doing more than just sitting on my shelf.

My most recent purchase is Ford. My family has a lot of experience with Ford cars. I have owned two Ford Tauruses that were acquired used and two Lincolns that were passed down from my father. I gave the Taurus cars away when I got my Lincoln and one Lincoln went to 350,000 miles and the other was over 400,000 miles before Sandy destroyed it. My father routinely gets 300K+ on his Lincolns and he takes very good care of the cars. So Ford is priced well now and I guess everyone is buying it because it posted good earnings. With the government bailout of GM, Ford’s stock took a beating. This is the issue I have with stocks and stock prices because they fluctuate so much even if the company is good and makes a great product. So is Ford intrinsically better now than it was 4 years ago? Or does opinion play too much of a factor in stock pricing?
The hardest part about a Roth IRA is that unless the contributions are in a bond or CD, or just sit in the account, the money fluctuates. A $5,500 contribution may be worth more, or it could be worth much less depending on the market. Even mutual funds are not immune from these fluctuations. They always recommend that people have to take risk and buy stocks or stock based investments however there are no real guarantees that the stocks will be valued at what you paid for them. It just seems that timing plays so much of a role in whether your investment will make money or not.

I'm not really sure what is really the best investment strategy is. I guess all I can do is take a chance and hope it all works out.

The Illusion of Having One's Act Together

August 20th, 2013 at 02:43 pm

Yesterday I was tooling around on LinkedIn when I saw an old article on the new way women curse. This article discussed a January Glamour magazine cover in which one of the featured titles was "12 Ways to Get Your Sh*t Together." The LinkedIn article was about the decreasing shock value of expletives. I was more interested in finding out what the article said. Unfortunately Glamour didn't put the content online, however from my Google search, I found many other websites concerning one getting one's "sh*t" together, including an actual website called http://getyourshittogether.org/ which provides guidance on life and death planning that most people neglect when they are healthy but can leave a huge mess for their descendants.

There were a number of other sites that discussed ways in which one can get his or her act together. It was very amusing and somewhat affirming that according to many of these sites, I actually have my act together as I am not on drugs, have a planner and a work bag (!).

As I reflected upon that, I realize that having one's act together is entirely perception. I know many people here may not feel that I have my act together because I buy lunch out. Yet when I chop my fruit in the morning and put it together my brought from home items of whole grain cereal and cottage cheese, many of my colleagues comment on how healthy my breakfast looks.

Also keeping with the "illusion" of having my act together is my planner. I don't have a formal budget but I spend the same on a weekly basis for transportation, food and gym. My expenses decrease when I am not working. In my planner I record all my outstanding debt, when my payments are due and my weekly take home pay. As I make my payments, I subtract the money accordingly from my available money and keep a running tally of what I have left to live on until the next paycheck. I also keep a running tally of my total outstanding debt as well. Since these are all in writing, I can see my progress or lack of progress. Some credit cards have increased while other have decreased. Overall I am $4,000 less in debt than I was the previous year.

In my case, the mere act of writing down my debts and looking at them makes them less scary and manageable. I've been a temp for over five years. Many of my colleagues have put their student loans in forbearance and have watched their loan balances swell. Mine are decreasing and it comforts me that I have been able to make payments on the student loans, and all my other bills, in spite of working as an independent contractor.

Back where I began...

August 1st, 2013 at 11:40 am

When I was in my 20s and starting out, it was pretty common to exist with $10 in my bank account and wait for pay day. After years of having credit card access and having developed the habit of making purchases on credit cards if I didn't have the cash, I have forgotten what it was like to have to wait for pay day.

So I'm in that position now. I am not making as much money on this project as I had for other projects and I only have $5 left in my checking account until this week's check gets deposited. This week I had $70 to live on. Sounds like a princely sum until you factor in a lunch with my colleague at a place that was deceptively pricey. Maybe I should have requested a cheaper place to eat, but I hadn't seen him in a while.

I made a vow not to charge groceries and transportation on my credit cards so I live on the money I allot for my weekly budget and not a penny more. It has been frustrating though because I worked on lucrative projects in the past and it feels wonderful to have enough money left over after paying bills and daily living expenses to put away and not feel deprived.

My colleagues and I were commiserating about our financial situations. Many are relying on their credit cards to see them through the lean times. I am happy that I am not using my credit cards as a crutch, but it is very difficult at this time.