Thursday, June 20, 2013

Do You Know Where Your Money Is?


Okay, okay, I will write about money.  Specifically, managing your investments... 

I started managing my own 401k back when dinosaurs roamed the earth, in the mid-1990s.  All I knew about investing was what we all know, that old Warren Buffet chestnut: Buy low, sell high. 

I have spent the intervening years trying to figure out exactly what he meant by that.  Turns out, he meant exactly what he said. 

It's easier to say than do. 

People have a lot of qualms about following that advice.

Here is a list of common qualms:

1. There is some formula that demonstrates that buying and selling and buying and selling the same stock is not, over time, as profitable as just holding onto that same stock over a ten-year period.
  • Perhaps.  But if you got out of the market before the dot-com bubble collapsed, you dodged a bullet.   And if  you sold Amazon last week when it was high, you could have bought it the very next day when it was lower, and by this week you would be making a profit on it again.  I'm just sayin'.
2. I have a financial expert who manages my investments.
  • Have you seen the Fidelity or E*TRADE websites lately?  They're super user-friendly.  They give you the tools you need to make informed decisions about your money.  More on that anon.
  • Furthermore, these articles keep popping up everywhere about those big investment firms (J.P. Morgan and Wells Fargo, to name two) who have been caught with their giant corporate hands in the proverbial cookie jar.  And whose proverbial cookie jar might that be?  It might be yours.
  • I have a lot more to say about that, but I'm trying to pace myself.
3.  I don't want to spend my time managing money.
  • But you spend so time making that money...! 
  • Managing your own investments is surprisingly fun.
4.  I don't want to be a "day trader."  Ew!
  • True, you don't want to spend twelve hours a day staring into your computer (as if you don't do that already), obsessively watching the numbers go up and down, trolling for opportunities, reading annual reports, Dorito crumbs filling the crannies of your key board which is sticky from the Mt. Dew that you spilled in the wee hours of the morning.... 
  • There is a middle path. 
5.  I don't know why, but I believe that taking responsibility for my investments is the road to rapacious, miserly greed; that I will morph into a capitalist pig full of contempt and self-loathing; and then I won't be able to occupy Wall Street because I'll be one of THEM.
  • Okay... Do you know where your money is?  If you have mutual funds (and most people feel most comfortable having well-diversified mutual funds), then you are most likely invested in companies like GE and other energy companies that get very low marks for being environmentally responsible.  Most of those big energy companies pretty much ravage the environment.  They get a "red" ranking on Fidelity for environmental responsibility.  That means they don't give a crap. 
  • You're probably also invested (via your mutual funds) in financial institutions that you loathe, like Bank of America and all of those big nasty mortgage profiteers who foreclosed on people's houses, etc. 
  • I make it a point to avoid mutual funds for those reasons. I do not want my money contributing to the ravaging of the environment or the pillaging of villages, etc.

Food for thought.  To be continued...


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