You are currently browsing the monthly archive for July, 2008.
tennet mountain
Anway, back on topic - I like to read up on finding different things to do each time I go. I want to learn the area and know my way around in the woods up there. The Art Loeb trail has always stuck out to me. I’ve read about it numerous times, but I had never hiked any portion of it until I went a couple of months ago. Since that trip, I can’t get my mind off of it. The only problem is that I don’t have the time to go enjoy it. I’m basically out of vacation time, and it’s hard to find some one who would want to spend 4 days hiking in the woods. I’ve read stories of people covering the 30 miles in 2 days, but I want to enjoy it. 4 days seems reasonable. That’s still an average of 7.5 miles per day which is a lot for someone who isn’t in the greatest shape with a 50+ lb pack on their back.
So here’s my invitation. If you have interest in something like this, let me know. It would be good if you had a better sense of direction than me, because mine isn’t very good (but I do have a handheld GPS!!).
Here are a few pics of the Art Loeb Trail from my last journey with Chester.
You heard it first from me. All of the banks in the U-S of A are going to fail. They are all going to go under. You need to go out and dig a hole in your backyard and put all of your money there. Yes, I know, you won’t be able to keep up with the current 15% rate of inflation, but if you don’t bury it you will lose it all by the end of the year when all banks will cease to exist. I know that you know that FDIC provides $100,000 of insurance for your money at each bank, and you can bend the rules to get more coverage. But not even FDIC insurance provided by our governement will cover your money. Don’t put it in the stock market, because it’s going to die as well. It’s already dying. Can’t you tell? I’ve lost $10,000 in 1 day in my 401k. My rate of return this year is -50%.
Seriously, this is how people are reacting right now to the crazy financial unsteadiness right now. I heard a story (one that I know is true!) of a guy who took $150,000 out of a money market account paying 4% and put ALL OF IT in a safe deposit box that he paid $30/year. Not only is he not earning interest, he is PAYING to put it somewhere “safe.” Also, he could have restructured the account so that it would be FDIC insured. I understand the people who lived the depression, and why they have these fears, but this guy was born a few years after the depression ended. And this story is something that happened LAST week, not 80 years ago! I seriously couldn’t believe it.
Of course, if I had over 100,000 I may feel a little bit different about the current situation, but I’m far from it. I trust the current financial system will pull through, and I think that these people who are freaking out now, will be freaking out when they miss out on the gains that are bound to come in the stock market. They will also feel stupid when only a few banks go under, and they’ve been losing interest on that money for all that time. If I thought my bank was going under, I’d be looking for a new job, but everything is going to be fine.
The main problem here is the media. There are some “real problems” out there with some banks, corporations, and financial entities, but as a whole, the media is the main problem. They have made things out to be much worse than they really are. This creates the panic that I have seen first hand for the past few weeks. It has been a crazy few weeks in my banking world because everybody is freaking out!
So for all of my millionaire friends out there who read this (count=0), don’t freak out. It’s going to be OK!!!
Why do I lead worship? That’s a good question, and one that I ask myself from time to time. I think it’s good to always evaluate why we do the things we do in life. I’ve been reading around some blogs from other worship leaders, or other people hating on worship leaders, and some other random things and it’s really had me thinking the past couple of weeks.
First of all, the main reason I lead worship is because I feel that it is an area that God has called me to serve, and it’s an area where he’s gifted me. I’ve been leading worship since high school, and I ‘ve really learned a lot since those early days. I also feel that it’s a priviledge to do what I do each week. I get to use music to facilitate a time of corporate worship, and that’s pretty neat.
Why do I lead worship at Midtown? That’s an easy question with a quick answer. I TRUST THE LEADERSHIP. I will never work for a pastor that I don’t trust or admire. I want to enjoy serving under a pastor and learn from him. I want to be challenged by him. There have to be open lines of communication as well. I trust the leadership at Midtown. I trust the deciscions that are made by Dustin. He’s not in it for himself. He’s not trying to be the coolest church planter and grow an enormous church at record speed. If the church grows, he’s not going to take credit, and if he gets a big head about it, there will be 10 guys there to humble him really quick.
Why do I lead the way that I do? I lead in a way that reflects my personality. Most importantly, I don’t want to do anything that is distracting, although I’m sure at times I do. I am not a preacher, so you will not hear any mini-sermons. If Dustin starts singing, we’ve got a problem (although he can play some drums-well, somewhat), and if I start preaching, we’ve got another problem. There is nothing worse than a pastor leading up to some type of an inviation or quiet reflection, and the worship leader comes right up and gives ANOTHER 5 minute sermon before even playing a song. It’s awful - just shut up. I understand God may have laid something on your heart, but find a better time to say it, and do it in 1 minute and not waste 5.
Being prepared
One phrase that I hate to hear is, I’m not a musician, I’m a worship leader. Well, correct me if I’m wrong, but you are playing music right? So that makes you a musician. Saying, “I’m not a musician” is not an excuse for poor musical preparation. I’d much rather play with a well prepared average musician, than an unprepared fabulous musician who has a lazy approach to the whole thing. Of course I’d like to have the best of both worlds: a well prepared good musician. I only say this becuase I think that preparation is incredibly important for a succesful set on Sundays with minimal distractions. A band or worship team that is not tight will provide one of the greatest distractions. Of course we have our hiccups on Sunday nights - we’re not perfect, but we give our best.
Life Applications
I think that some of this can apply to all types of things in life.
1. Find a job/hobby/place to serve that allows you to be who you are. Let your personality come through in what you do. Enjoy what it is that you are doing.
2. Prepare, prepare, prepare. Can’t put it any clearer than that. It’s one of my biggest pet peeves. I see it all the time - in the banking world and beyond. Midtown puts a lot of emphasis on preparation and it shows. Being unprepared comes down to pure laziness in my opinion. For a few months, I nearly killed myself working 40 hours a week at a bank, doing 5 church services on Sundays (total of 15 hours at church on Sunday), plus spending at least 1 or 2 nights a week working on church stuff. And I was still able to be prepared almost all of the time. So the excuse, “I’ve just been too busy” doesn’t go very far.
3. Work with people you trust and admire. Work with someone who communicates well with you and that you in turn can communicate with without having to climb a mountian. Lack of communication can create a lot of holes in the relationship and it will eventually crack.
So, this is the end of this post. Yes, I know it jumped around all over the place, and I probably should have taken my own advice and taken more time to prepare to write this post, but I’ve never called myself a good writer or even half decent writer, and if you got bored, confused, or lost at any time, you could just move on to a better blog.
Last night, Luda preached from one of my favorite passages of scripture ever. It’s Phillipians 4:10-13. Here’s verses 11-13:
I am not saying this because I am in need, for I have learned to be content whatever the circumstances. I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do everything through him who gives me strength.
This verse speaks to me on multiple levels. Of course we’ve all heard Phillipians 4:13 for as long as we’ve been in church. Even those that grew up outside of the church circle have probably heard it at some point. “I can do all things through Christ who gives me strength.” I think sometimes we hear that verse so much that we lose sight of what it really means. If Christ lives in us, we will know the secret to being content in any and every circumstance. We have the strength through Christ that lives in us.
Contentment is what I strive for in life. It’s one of my top goals. I’ve got more than I need. God’s always provided for me. I’ve rarely been in “need.” I am a professional “wanter” though. I can “want” from the time the sun rises until the sun sets. It’s always something different. Sometimes it’s guitars, sometimes TV’s, sometimes a fancy car, sometimes just plain junk, and almost all the time I wish I made more money. More than anything though, I want to be satisified with what God has given me. This doesn’t happen overnight. Somedays, I feel 100% content, and some days I just want more.
On the other side, I think that God is glorified when we work hard using the gifts He has given us to achieve more and be succesful in life. I want to excel in my career - that means getting promoted and earning pay increases. But there is such a fine line between being an ambitious hard worker and someone who always wants more.
True contentment can be a hard place to find in life. There’s no doubt in my mind that God’s given me everything that I need and MORE! I too often forget, but that’s why I’m constantly learning what it means to live a life of contentment.
First of all, I just have to say that John Mayer is amazing. His new live album is out of this world. If you appreciate good music from an extraordinary musician, you need to get this, or at least watch the DVD with someone. I think his music will be around for a long, long time.
I imagine that by now, most people have the new Coldplay CD. I’ve been listening to it off and on for awhile, and I do like it. Some songs I don’t like much at all, but some I love. Strawberry Swing, Violet Hill, and Death and All His Friends are by far my favorites. I honestly didn’t listen to Coldplay much until I met my wife. I didn’t dislike them, just never really got into it. We went to go see them in concert after we got married, and it was incredible. Probably one of the best shows I will ever see. The X&Y album is what really got me into Coldplay the most.
After listening to the new album for awhile, Ashley was playing some music from Pandora and one of the songs from Rush of Blood to the Head Came on. I really think I liked Coldplay’s songs from their whole career better than I do Viva La Vida and Death and All His Friends. I know it’s different, and I do think it’s great and I like that it’s different, but I have to say, I like the old Coldplay better. I’ve talked with a few people about this and it seems that I’m in the minority.
So, I wanted to ask everyone, which Coldplay do you like better? Viva La Vida or everything else? Let the arguments begin!
**for more music related discussions and recommendations, head over to the Melodies page**
So, today is July 15th. I have been waiting for this day for almost 6 months. NCAA Football 2009 comes out today. I bought an X-Box 360 in December, and I bought it for the sole reason of being able to play this game. I didn’t buy last years game, because I wanted to wait for this one. There has never been a better game made in the sports gaming industry. I have never even seen ANY version of NCAA football on the 360, but I will today. And I will probably play at least 4 games (3-4 hours) today when I get off work. I will get the game at lunch and read through the whole manual numerous times. And then, when I play Dustin and Rhodesy, I will dominate them using the USC Gamecocks against their pathetic Clempson Tigers.
I have never posted a video, but I couldn’t resist this one. This was from The Soup on “E” last Friday. You may remember my post on the new iPhone that just came out. I wish I would have had this video then, but better late than never.
YOU HAVE GOT TO WATCH THIS!
Lee, don’t worry, I’m not hating on you. If I had AT&T, I would very likely have one too…but this was absolutley hilarious..and for the record, I think the iPhone is awesome.
So, I’ll be heading to Charleston for 3 days to spend 3 days at the beach. I haven’t been in almost a year to the sand and salt water and all this talk of people getting bit by sharks in SC doesn’t scare me a bit. If only I could catch a couple fishing from the surf.
I love the beach, and this year is probably the least amount of time I’ve spent at the beach in a long time. We’ve made more trips to the mountains than normal though in the past year as well. I really can’t decide which I love best. I love to go to the beach, fish in the mornings and evenings, and sit on the beach ALL day and read 4 books during the week. However, I love packing up and heading to the mountains for some hiking and camping. So, this brings me to my question of the day.
Which do you like better? The beach or the mountains? If you have only 3 days of vacation, where are you going to spend it?
Make It Automatic
This is the best piece of advice that I feel I can give. Make it automatic. Choose what you want to invest in and then automatically contribute the same amount to it every month. Have it set up to automatically come out of your checking account the SAME DAY you get paid. In the book “Automatic Millionaire,” David Bach calls this “paying yourself first.” It’s a good book to read, or at least skim through. I don’t agree with everything, but it’s a good place to start with some very valid points. However, you just have to remember, that whatever money you put into an IRA is hard to get back out until you are 59 1/2. Unfortunately, many people in today’s economy of spend first and pay later are having to borrow money from their 401(k) plan at work. Not a good idea. I would hate to spend my career saving money only to have to borrow that money back before retirement.
One reason to make it automatic is called dollar cost averaging. It’s a very simple strategy that is easy to understand. Dollar cost averaging is basically investing a fixed amount of money at regular intervals over a very long period of time. The amount of money contributed each time is the same, but the number of shares you are able to purchase will be different each time based on the current market value of the shares at the time of purchase. If the market is up, you buy more shares, and if the market is low like it is now, you are able to buy more shares. Therefore, you aren’t trying to time the market. The cost of all of the shares you have bought over the life of the investment is averaged out. This is a great strategy for investing in mutual funds, whether it be through an IRA, 401(k), or other tax sheltered or non-tax sheltered plans. Just remember that this is a long term strategy, and is not to be used for quick short term gains.
Another reason to make it automatic is because of Compounding. According to our friends at Wikipedia who are always 100% correct in my opinion, “compound interest is the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on.”
Kiplingers, a trusted financial publication had this to say in a recent article:
-”Compound interest has been called the eighth wonder of the world. And with good reason. It magically turns a little bit of money, invested wisely, into a whole lot of cash. Even Albert Einstein — a bit of a smarty pants — is said to have called it one of the greatest mathematical concepts of our time.”
-”Here’s the gist: When you save or invest, your money earns interest or appreciates. The next year, you earn interest on your original money and the interest from the first year. In the third year, you earn interest on your original money and the interest from the first two years. And so on. It’s like a snowball — roll it down a snowy hill and it’ll build on itself to get bigger and bigger. Before you know it … avalanche!”
*I’d strongly advise you to go and read this whole article. It’s very easy to understand and probably says it a lot clearer than I’ve tried to in these last 4 posts*
We have one advantage right now that we will not have forever. We are young. I have 40 years until I retire. I want to do as much as I can. Right now, what I contribute does not seem to be a lot, but I am at least doing something.
Series Wrap-Up
This is the final post in the investment series. I hope that some of this has been helpful to you in your financial journey. I am not an expert, but this is something that I am passionate about. I want to see people that I care about be wise with their finances and really take an interest in planning for their retirement. I hope that you are encouraged to start investing now. I hope that you don’t think you don’t have enough money to invest, because you do. I hope that you don’t think you are too young to invest, because when you are young, that’s the best time to star. Whatever you do, just start now.
Do something!
*leave some comments and let me know if this has been helpful to you, and if you’d like to see more of this in the future*
So now what do I do? Hopefully you aren’t too confused about the difference between Roth IRA’s, Traditional IRA’s, 401(k)’s, tax sheltered plans, non-tax sheltered plans, mutual funds, and stocks. Knowing the difference is not enough. You have to know which company to invest with, which funds to invest in, and how to go about doing that. Here’s my best attempt at helping. My goal is to help a first time investor find an investment that they feel comfortable with while they start building for their future retirement.
The Big Ones
There are a few big companies that you see commercials for on a regular basis - Vanguard, T. Rowe Price, Fidelity, Charles Schwab, TD Ameritrade, and more. I will focus on what I feel are the best 2 options for beginning investors. The 2 that I have chosen are Vanguard and T. Rowe Price(TRP). I did not choose Fidelity, because they require an initial $10,000 investment to invest in their funds.
T. Rowe Price
Advantages of TRP
-TRP has a great selection of target date retirement funds. Basically, you take the year that you are planning to retire, and find a fund that is dated for that time period. For me, it will be between 2040-2045. So the TRP Retirement 2045 would be the best choice for me. Within this fund, I am invested in many different TRP funds, 14 to be exact. 91.50% is invested in stocks while 8.50% is in bonds. In my opinion this is a good aggressive mix for people in the mid to early twenties. You are invested in some international markets, emerging markets, small cap stocks, different types of large-cap stocks, mid-cap stocks, domestic bonds, and high-yield bonds. If that sounds like French to you, all it means is that you are diversified.
-TRP has incredibly low requirements when starting up your fund. Most investments with other companies require an initial investment anywhere from $1,000-$10,000. With the automatic asset builder from TRP, you can start with as little as $50, but you have to contribute at least $50 each month through an automatic withdrawal from your checking account. If you choose not to do this, you can start with the intial $1,000 investment which still is not bad at all.
-TRP has a great website. It’s very user-friendly and easy to understand.
- It’s free to trade among other TRP mutual funds (but you don’t want to do this very often)
- TRP has plenty of No-Load funds to choose from.
Disadvantages of TRP
- TRP has a stupid $10 fee for those of us who have balances less than $5,000. At least for this year, this will be me. Once you get over $5,000, there are no additional fees.
- TRP’s expense ratio is a tad bit higher than Vanguards. For the 2045 Retirement fund, the expense ratio is .74%
Vanguard
Advantages of Vanguard
- Vanguard is the low cost leader in mutual funds. They will almost always have the lowest expense ratio. For their 2045 Retirement fund, the expense ratio is .20%.
- They have a better reputation than TRP. Not that TRP is bad, Vanguard is probably just more well-known.
- Vanguard also has a tremendous selection of mutual funds as well as index funds. (In a nutshell, an index fund “aims to replicate the movements of an index of a specific financial market” such as the S&P 500.) Vanguard also has a target date retirement fund for just about anybody. Looking at the Vanguard Target Retirement 2045, you’ll see it is very similar to TRP’s 2045 Retirement fund. This fund invests in 89.73% stocks, 10.01% in bonds, and .26% in short term reserves. I honestly don’t know the point of that .26%. Within this fund you are invested in the following: Vanguard Total Stock Market Index Fund, Total Bond Market Index Fund, European Stock Index Fund, Pacific Stock Index Fund, and the Emerging Markets Stock Index Fund.
- Vanguard normally charges a $20 feeif balances are less than $10,000. However, they just recently eliminated this feeif you receive electronic statements. Not too bad! This is a nice advantage over TRP’s $10 fee even if you have electronic statements.
- It’s free to trade between Vanguard funds.
Disadvantages of Vanguard
- Vanguard requires an initial investment of $3,000. This is hard for most new/young investors. They offer a fund called the Star Fund that you can start with $1,000, but I do not like the way the funds are allocated (63% stock, 25% bonds, 12% cash). It’s a little too conservative for me.
My Opinion
I feel that TRP is very accessible and beneficial for young investorswho don’t have a lot of money to start with. The main drawback of TRP is the fees. They are a little bit higher than Vanguard. The Target Date Retirement funds are very comparable though. TRP has outperformed Vanguard this year, but just barely, and in the long run, who knows what could happen.
Because I opened a Roth IRA for my wife and I, to go with Vanguard I would need to have $6,000. And once you put money in any type of IRA, that’s money that’s hard to get back without penalties. I personally didn’t have $6,000 to start with. Therefore, I went with TRP and the 2045 Retirement Fund. I haven’t been hit with the $10 fee yet, but I will be before the year ends. I contribute the same amount each month to each of our accounts, and I will add any extra money that we have been able to save at the end of the year. My emergency fund has been my main focus up until this point, but now that the balance is close to our goal, all extra money will start going to the IRA’s.
Once I reach the $3,000 balance in each of the TRP funds, I will most likely switch to Vanguard for the long haul. The expense ratio is lower, and that will play a big role as time goes on. Also, once my balances get high enough, I may create my own allocation for the funds instead of letting Vanguard do it for me. I’ve yet to determine this though, and it will be awhile before I have to cross this bridge.
Why post this?
So the question is why did I post this. The main reason is that I want to see people save and not spend. I don’t want to see my friends retire with no money (or not enough money). I want to see people save more than they earn. Most importantly, I wanted people in their 20’s to see that it’s easy to start now. It doesn’t take a lot of money. Investing is not just for the rich, it’s for everyone. And remember, I’m no expert, it’s just my opinion. Also, remember that anytime you’re in the stock market, you will always have a chance of losing money. Hopefully you’ll always gain more than you lose though.
Mutual Funds, IRA’s, and Roth IRA’s
As promised, today I’ll be taking a look at the different options available for 1st time young investors. Let’s start with explaining what a mutual fund has to offer.
Mutual Fund
A mutual fund is a type of investment that allows you to invest in multiple types of funds. In a single mutual fund, you can be invested in stocks, bonds, short term money markets, or other securities. Instead of having to buy a handful of individual stocks or bonds, you get multiple stocks and bonds in one package. Mutual funds are managed by a fund manager who decides which individual stocks and bonds that fund will invest in. At the end of 2007, more than $26 trillion was invested in mutual funds worldwide.
A mutual fund is not a place to make a quick dollar(although I’m sure some have found a way). It’s a long-term investment. It’s not one that you trade on a regular basis for a different fund, although it is good to re-balance your fund choices periodically. A good mutual fund will average somewhere between 7%-12% over a 5 year period. It’s possible to have a year with a -10% return, but it’s also possible to have a year where you can have a 15%-20% gain. 2008 is shaping up to be on the losing side, but you can rest assured that there will be a good year ahead in the future.
As mentioned before, each mutual fund is managed by a fund manager. And you know that the fund manager has got to be paid right? This is where mutual funds can get a little complicated. There are 2 types of ways that fees are charged - Load or No-Load. Load funds charge a commission while no-load are commission free. Within Load funds, there are Front-End load funds, and Back-End. It’s exactly what it sounds like - with front-load, you pay a percentage of the investment as a commission up front. With Back-end, you pay when you sell. Check out this chart from YahooFinance. It starts with a $10,000 balance assuming a 9% rate of return. Assuming the market reflects the assumptions made in this chart, a no-load fund is the way to go.
| Start | Year 1 | Year 2 | Year 3 | |
| 100% No-Load | $10,000 | $10,900 | $11,881 | $12,950 |
| 5% Front-End Load | $ 9,500 | $10,303 | $11,174 | $12,119 |
| 3% Back-End Load | $10,000 | $10,845 | $11,762 | $12,374 |
IRA’s - Roth and Traditional (plus 401k’s)
What is an IRA? It is an Individual Retirement Arrangement (most think its Individual Retirement Account, but it’s not - but that really doesn’t matter!) It is also a tax-sheltered account. To contribute to an IRA, an individual has to have earned income during the year. To withdraw from an IRA, the individual has to be over 59 1/2, however a few exceptions do apply.
The main difference between a Roth IRA and Traditional IRA has to do with the wonderful world of TAXES!
With a traditional IRA, you do not pay taxes on the money that you contribute. Your taxable income at the end of the year is reduced by whatever money is contributed to the IRA. This means that you pay less taxes the year that you contribute. However, when you start withdrawing the money during retirement you pay taxes on everything.
Roth IRA’s are the exact opposite. Every dollar contributed to a Roth has already been taxed. But when the time comes to start taking distributions, you do not pay any taxes.
So what’s better? I think that a Roth IRA is best, but like I said - I am no expert. There are experts though who are on both sides of the fence. In a traditional IRA, you are able to contribute more money than you could to a Roth because the money is tax free. The maximum amount you can contribute is $5,000 to a Roth, but $5,000 after tax is a lot less than $5,000 before tax. I prefer a Roth IRA because I think it is a wonderful investment tool. I also think that I am in a lower tax bracket now than I will be in 40 years. This means I pay a smaller percentage of tax. Plus, not many people see taxes being reduced in the future. You can almost bet that taxes will be raised on a consistent basis (unless someone like Mike Huckabee is president and initiates a flat-tax policy.)
A 401(k) is very similar to a traditional IRA. It is also a tax sheltered plan and all contributions are pre-tax. The difference is that a 401(k) is an employer sponsored plan. I have one of these where I work, and most larger companies will have some type of plan that you can enroll in. I contribute a certain percentage of my salary and a part of each paycheck goes straight into the 401(k). It is invested in different mutual funds. Unfortunately, sometimes companies do not give you good funds to choose from, but fortunately, I have a lot of funds to chose from through Fidelity.
So what’s best?
Although I like the Roth IRA for a variety of reasons, the best answer is to be diversified. You don’t want to have all of your eggs in 1 basket. For example, I contribute to a 401(k) through work, individual company stock of my employer, and a Roth IRA on my own. Finally, I also have a Mutual Fund that is not a tax-sheltered investment. So, I have 2 tax sheltered investments - one is pre-tax dollars and the other is after-tax. I have 2 investments that aren’t tax sheltered - stock in 1 individual company plus 1 mutual fund that is heavily invested in multiple stocks. With all of that said, diversity is the key. My strategy isn’t brain science, but it’s also not a get rich quick scheme. I have got 40 years to reach my goals. There could be better ways to go about it than I am now, but I feel confident in the path that I have chosen. At least I’m investing in something right?
Up next: detailed advice on which funds and companies are best.
Over the next week, I will have a few posts on some different investment ideas. Yes, I work at a bank, but I am no expert in the area of investments, but I enjoy learning and researching the many different types of investments that are available. My hope is to share with you some of what I’ve learned.
This first post will deal strictly with the mindset that you need before you start investing in the market. I have been “in the market” now for almost 2 years. I wish I would have started about 4 years a go on the day that I got out of college. I would not have been able to invest a lot since I hardly made enough that first year to cover the bills, but I could have invested something.
Here is a brief overview of my current investments. The next post will go into more detail on these different types of investments and the benefits and downfalls of each.
Overview
I started contributing to a 401k through my employment at the bank as soon as I was hired. Not knowing what I was doing or how much to save, I contributed the “default” amount to my plan. This was only 3%. At this rate, I could retire at 165 instead of 65. Once I realized that 3% was not much, I made a significant change in this percentage. After I had been there for almost a year I was eligible to contribute to our company stock. Here is where it gets a lot sweeter. Our company does not match any contributions to the 401k, but they will match $.50 for each $1.00 I contribute. However, I can only contribute 5% of my yearly salary to this stock option plan. I also opened a mutual fund account with another company during this time. This was not a tax sheltered plan (meaning that I have to pay taxes on whatever I earn), and I contributed to it monthly after an initial lump-sum investment. Finally, I recently started contributing to 2 Roth IRA’s for my wife and I.
The mindset needed to invest
When I first started contributing to my 401k, I did not pay much attention to what was going on. I chose my investments and left it alone. Mainly because I did not know how to check anything or monitor the progress. I just knew that money was coming out of my check each month and that was enough. Once I opened the mutual fund, I became completely obsessed. I went to the website and checked it almost every day. I was focused on my rate of return and how much money I had earned. Well, from day 1, I lost money. It seems that since I’ve been “in the market,” I have done nothing but lose money. It’s not because my investment choices aren’t wise or smart, it’s just because the market in general has performed very poorly. Becuase I was losing money, I didn’t want to contribute more money. I did continue to contribute, but it was driving me crazy. It was always on my mind. Obviously, this is not the mindset needed to be a succesful investor.
To make matters worse, between February and July, our company stock has dropped over 35%. This is pretty typical for bank stocks. Obviously this is only a small part of my investment portfolio, but it still hits hard. However, it finally seems to be coming back up (it’s up 5% just today.
Let’s fast-forward to my current mindset. In a nutshell, I don’t worry about it anymore. Yes, it really sucks that the market has been so bad, but there is nothing I can do about it. I feel confident that I am invested in the right funds. I’m not extremely aggresive, but I’m not conservative at all either. For my age and the length of time until I retire, I feel that I am in the right place. I have 30-40 more years to be invested in the market and based upon the history of the stock market, I can be 100% sure that I will earn back everything that I have lost in the past year. Even more important is the fact that I am able to buy many more shares with the same amount of money than I was before. I still check my balances, and the rate of return on my accounts, but not nearly as often. I only check the rate of return every couple of months. It doesn’t do me any good to be obsessed with each individual account each and every day. Don’t freak out when the market is going down. It’s going to come back up. But don’t get greedy when it’s on the way back up. Find a plan and stick with it for the long run. Invest wisely, and trust yourself. Find something that works for you. If you are a conservative person by nature and can’t handle the risks of the stock market, then invest accordingly. Finally, remember this: It’s a marathon, not a 100-yard dash to retirement. You don’t get rich overnight. It’s a very slow process and it requires a lot of patience.
Simply put, the most important thing is to START NOW. Don’t wait another day.
Next up: What’s a Roth IRA and where do I get one from?
