Wednesday, August 26, 2015

Stock Market Panic
Yesterday (which was Monday, August 24, as I write this), the stock market tanked. It was down over 1,000 points in the early hours and manged to recover a bit to close "only" down 588 points. Headlines were, predictably, full of fear mongering: "A meltdown on Wall Street. Have you looked at your retirement fund today?"

Once again, the media, which needs something to write about every day, is trumpeting panic and instilling fear in people that their retirement has just been destroyed. Unless you just happened to retire and cash out all your stocks yesterday, it hasn't. As I mentioned before, you need to take a long term view of your investments. Stock market declines, even crashes, happen. You should expect it. Corrections are how the market re-adjusts when prices have gotten too high.

There were reports of people being unable to trade stocks using TD Ameritrade and Scottrade. This is actually probably for the best for them. Panic selling is never wise

If you are invested in mutual funds, panic selling is even worse. Mutual funds don't trade until the end of the day when the market has closed. So even if you had a crystal ball that told you in the morning that stocks were going to fall 1,000 points that day and you entered an order to sell your mutual fund in the morning, you wouldn't avoid the fall, because the fund won't be sold until the market has closed and by then, the damage has been done. Same thing with re-buying during a bounce or a rally. If the market is taking off in the morning and you put in a buy order for your mutual fund, it won't be settled until the end of the day. Even if the market closes up 1,000 points for the day, you've missed out on that gain because your order isn't filled until the close. Congratulations. You've just sold low and bought high. When trading mutual funds, dollar cost averaging by buying shares consistently over a period of time is the only way to go.

You can't time the market, people.

Thankfully, there were some saner heads in the media. I was pleased to see this article telling people not to panic and that corrections are normal. Kudos. I hope people read that article and take it to heart.

It pays to keep these three quotes from Warren Buffet in mind:

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.

During yesterday's decline, I felt zero concern for my portfolio because I followed that advice.

Wednesday, August 19, 2015

Congratulations, Americans, On Saving More!

Just over 1 year ago, I wrote that the savings rate in America has been declining and was currently at the woeful level of 3.8%. But it looks like that has turned around. Now, according to this article, the personal savings rate has increased to 5.15%.  This is great news. The article does go on to mention that it seems most of the savings have been going into building up emergency funds rather than into retirement savings accounts (either 401(k)s or IRAs). I can understand that and, to some extent, am OK with it. Chances are an emergency will arise well before you retire. However, it is important to start funding your retirement plan as soon as your emergency fund is filled. Ideally, you should be building both at once, even if it means splitting the money between the two and taking longer to fully fund the emergency account.

Why is funding a retirement account so important? Time. You want to leave your money invested and earning interest as long as possible. That is the difference between retiring with a million dollars or more or retiring with just enough to splurge on the wet cat food once a month.
Don't let your retirement pantry look like this
Another point the article makes is that 25% of the people saving in a 401(k) that features an employer match are not contributing enough to get the full match. This is missing out on free money. But the good news is that this figure is down 1 percent form last year, so things are moving in the right direction.

Perhaps the long economic downturn and anemic recovery have taught people the importance of financial security. One can only hope.

Wednesday, August 12, 2015

Don't Leave Money On The Table: Paribus

Many stores, both traditional and online, offer a buyer protection program where, if the price of an item you purchased goes down within a certain amount of time, they will refund you the difference between the price you paid and the new lower price.  It's cheap marketing for the stores because few people, if any, will ever take them up on the offer. Unless you are spending a large amount of money, most the time, you shop around for a bit, make your purchase, and then stop price comparing.

Online retailers have much more flexibility in changing their prices than traditional stores do. They can alter their prices second by second, based on your past shopping habits, your geographical location (as determined by your IP address), or hundreds of other items. Retailers call this dynamic pricing and it makes it difficult to know when you are getting the absolute best price.

I am a fan of the CamelCamelCamel browser plugin. This plugin will show you the pricing history of an item and you can set up alerts to be notified when a price hits a certain point. Because it's a browser plugin, it can show you the price history without ever leaving the website you are on:

This can help you decide if you should buy something now, or wait until the price drops, based on past history. In all honesty, I only use this when shopping for items costing maybe $100 or more. Otherwise, I tend to just buy whatever I need at whatever price it's at. I don't want to spend time tracking prices for low cost items.

Enter Paribus.

Paribus will track my purchases for me and notify me if the price of something drops after I have purchased it. More importantly, and this is the good bit, Paribus will automatically submit a refund request to the website so that I get the lower price. No action needed on my part! While Amazon's computers juggle their prices, Paribus' computers monitor them and make sure I get the lowest price.

Right now, Paribus works with about 20 of the largest internet retailers, including Amazon, Newegg, Walmart, and Target. See their full list here.

How does Paribus work?

In order for Paribus to work, it needs to know what you bought and for how much. To do this, it scans your email for receipts from retailers, so you'll need to grant it access to the accounts your receipts are sent to. In the case of Amazon, because their receipts do not contain pricing data, you'll need to grant it access to your Amazon account itself. If you are concerned about security, check out their security FAQs here.

In return for finding you money, you agree to pay Paribus 25% of your refund. If they don't get you a lower price, it doesn't cost anything.

Does It Work?

It sounds great, but does it work? I do a large amount of shopping at Amazon, so I figured I'd give Paribus a try. I signed up last week, which was as easy as a couple mouse clicks, and that was it. 5 days later, my wife bought a pair of shoes on Amazon. The next day, I got an email from Paribus saying they found a $23 price drop and submitted a claim. A few hours later, I got a response from Amazon saying they credited me the difference.

That easy. That fast. My wife bought the shoes at $44. We got a $25 refund (the price drop plus sales tax refund). Taking into account Paribus' fee, we saved $18.75 - about 43% - with zero effort!

The Amazon refund was in the form of an Amazon gift card credit, not a credit card credit, but I buy from Amazon all the time, so that's fine. Paribus will charge their fee to my credit card, not take it out of my refund, but that's fine too. I have to say, it's been 10 days since I signed up and I'm pretty impressed!

If you are interested, leave a comment here with your email address and I'll send you a referral code that gives you a 5% discount on any Pairbus charges you get from now until December. (Their terms of service prevent me from posting the code here.) If you don't want your comment / email address published on the blog, say so in the comment and I won't publish it.

(UPDATE: 5-23-16) Amazon has changed their price matching policy. From now on, they will only price match televisions. Given this, I have cancelled my Paribus account, as Amazon was the only retailer I used it with. I wonder if the popularity of sites like Paribus and Earny, which tracked Amazon prices for users, was a contributing factor to this change. Needless to say, I no longer have referral codes to give out.

Wednesday, August 5, 2015

Goal Update: End Of July 2015

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of July, 2015
Current value: $15,754
Change from last month: +$1,808
Percent of Goal:  14.49%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

After five months of hovering just under the $14,000 threshold, I finally broke through in July – and broke through big time. My account value blew through the $14,000 tier and crossed over $15,000! Nice! I added $367 from my online course sales, plus my regular savings deposits, but the big boost came from Realty Income stock finally going up. I fully expect the stock to pull back a little next month, so I don't think I'll be at this valuation for long.

As I was writing this, it dawned on me that I have not received any ebook royalties in a while. Not that they have ever been a huge source of income (I don’t think I’ve ever received more than $10 in a month), but I took a look to see what was going on. Amazon pays royalties on ebooks 60 days in arrears. I didn’t sell any books in April or May, so that explains the lack of payments. I did sell 3 copies in June, so I should get a few bucks at the end of August or beginning of September.

I released a new online video course in July, so hopefully that will drive some additional income. If anyone is interested in Understanding Statistics in SQL Server, use coupon code BLOG15OFF for a 15% discount or use this link.

Next month will have a lower contribution to this fund than normal as I’ve decided to take the monthly income from my online courses and send it all to the tax man. As I found out last March, my online training income is taxed as self-employment income, so rather than get hit with a big tax bill next April, I’m going to take the earnings from one month and send it all in as an estimated tax payment. The figures aren't final yet, but it’s looking like my sales / tax payment will be on the order of $325 or so.

But, as I mentioned before, the good news is I broke the $15,000 threshold! That means I unlocked another achievement!

My original plan was to invest in stock until I reach $20,000 and then move that money from stock into a hard money loan, where I can earn 9% interest. I'm approaching that milestone and am starting to look in that direction. I might have to modify my plan slightly. My real estate investing partner whom I do my hard money lending with currently doesn't have many opportunities - our biggest borrower has taken a year or so break and we have fewer deals to fund now. Also, the low interest rate environment means we're only getting 8% on our money instead of 9%. (Back when I started, we were getting 12%!) Hopefully, that will change by the time I hit $20,000.