Carnival of Money Stories: Edition #81

Welcome to this week's edition of Carnival of Money Stories, I’m SoCal Savvy and I’m very excited to be hosting this event!

I am pleased to welcome all new readers to SoCal Savvy. I’m newly married and out-of-work. On one income I’m making our bucks stretch and still enjoying everything Southern California has to offer us. I want to save a buck, but also enjoy life as a twenty-something in the city. It’s a process, but I want to share what I’ve learned and get feedback from others!

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There were many submissions to the carnival this week, but many were not "money stories" or "money experiences" as specified by the carnival guidelines. (If you’ve never hosted a carnival you wouldn’t believe how many self-promoting ads and much spam there is!) Here are the submissions that made the cut:

Editor's Picks
Being creative pays off big time for The Personal Financier

Personal Finance Analyst provides five funny ideas on what to do with your gas guzzler. However: I’m not sure I’d want my mother-in-law to live in my driveway….

If you had revealed your deepest, darkest financial secret to Broke Grad Student you could have won a computer!

Credit
The Stylist Tycoon proves that you can reverse credit card fees.

Ask Mr. Credit Card poses a scenario where you are asked to help your son by co-signing the loan, and the possible bleak result.

Debt
Soon to be Debt Free writes what happens when you wrestle with inner demons- and lawn mowers.

Taxes
Ever wonder if those politicians really know what their talking about? The Wandering Tax Pro gives them an earful.

Market Crisis
Advice from an old classmate of Joe Manausa

Maintaining an even keel in a topsy-turvy market, simple advice from Uncommon Cents.

Investing
Which investor do you see yourself in? Money and Such reviews how three investor friends have responded to the roller coaster stock market.

Asset allocation can be a retirement saver in this fictional scenario put forth by No Debt Plan

A needless run on the bank as viewed by Cash Money Life.

The topic of risk is explored by Investing School.

A reminder that we could all learn from our mistakes was presented by Stock Market Investing For Beginners

The Investor’s Journal.Com takes a look back his first stock purchase… ahhh… the naïve days…

Wealth
Now if only I lived next door to Oprah… Actorlicious provides 10 tips to gaining wealth.

Real Estate
To List or Not To List? BeThisWay ponders the question.

Wow-weee, Not the Jet Set finds a good surprise on a mortgage statement.

The bleak reality of neighborhood foreclosures by Funny about Money

Hopefully not too many people are indulging in the unintended consequence described by Kirby on Finance.

Serendipity is brutally honest with what it is like to be in foreclosure.

Other
Don’t we all fear getting ripped off by the mechanic? Just this happens to Debt Prison and he’s steaming mad at them!

What would happen to your goals if your expected bonus didn’t come? Budgets are $exy reevaluates.

A good deal for the East Coast commuting contingency presented by BluePrint for Financial Prosperity.

Harvesting Dollars didn’t get the pink slip, but wonders about those who did.

The most magical mailbox belongs to Almost Frugal as she got over five hundred euro in checks and a 6% interest rate on her French ING account! (My own California mailbox is quite jealous!)

Constructive complaining can be lucrative as Two Pennies Earned shows.

Another pet peeve of mine- pressure driven sales! Living Almost Large has a bad experience with a rude HVAC serviceman.

Financial Wellness Project loses money on free books because it is so easy to do so.

Until Debt Do Us Part reminds us that we all must take care of ourselves when tackling tough issues.

Saving even $14 is a big deal for Free Money Finance

MoneyNing shows that money philosophies can be handed down from father to son.

Thanks to everyone for submitting such great work! Tune in next week to blog host The Financial Wellness Project for the 82nd Carnival of Money Stories.

~SoCal Savvy

Hosting the 81st Carnival of Money Stories

I’m hosting the 81st Carnival of Money Stories which will début on the 21st of October! It’s my first time hosting a carnival and I’m a) excited and b) not sure what to expect. Any advice?

I’m hoping that lots of people submit their blogs, and if you have a story you’d like to share please submit it at the Carnival of Money Stories site!

The Carnies are taking over!

Yes, I know another carnival! This time it was the 79th edition of the Carnival of Money Stories hosted by Living Almost Large. Featured was my story about saving money on car insurance- and I don’t suggest that you have to follow that talking gecko!

Also good were:

It’s a tear jerker- Do you appreciate what you have? posted at Gather Little by Little.

Ask for discounts, my hubby is good at this, and apparently so is A Good Money Day! posted at SimplyForties.

Haha.. everyone loves a limerick- Dear “Everyday Working Class” Sarah posted at Mad Kane’s Political Madness

A book I also love was reviewed at Actorlicious

Painfully relevant job seeking advice- Looking for a Job? Here are 4 Steps to Find a Great One posted at ProsperingServant.com.

A common scene and relatable experience: Credit Card Companies Peddling On My College Campus posted at Trees Full of Money.

173rd edition of Carnival of Personal Finance

It’s up: 173rd edition of Carnival of Personal Finance hosted by Girls Just Wanna Have Funds! I think this is the first time my blog has been mentioned in a real personal finance category. Yes, my blogs are normally relegated to the “Other” category (even if I select something different). However, this time I’m in the Economy section- whoo who! Check out my blog and some of my favorites from the Carnival!

LivingAlmostLarge presents what happens when people willingly want to Walk away from foreclosures

The Passive Dad presents Free Creative Ideas to Help Friends Facing Foreclosure or Bankruptcy

Orange Dealing with Money presents good basic advice on Women and Retirement.

The gold medal for explaining Mint goes to: Blueprint for Financial Prosperity: Mint.com Review: Beautiful Money Management Tool

As an educator I found this blog especially interesting: Free College Education Exists by Destroy Debt

Looking at the alternative costs of the fiscal rescue plan: Free From Broke presents New Economic Stimulus Package - The $700 Billion Bailout

Cute but real suggestions during past hard times: Miss Thrifty presents Make Do And Mend: ‘Vogue’ for the Credit Crunch Bunch

As a psychology major I also loved: Greener Pastures presents The Psychology of Money - Neuropsychologists Study Spending Patterns at Auctions

I’ve always wondered how to do this: Ask Mr Credit Card presents How To Dispute An Item On Your Credit Report

Something that was on my “to-blog list” but Beyond Paycheck to Paycheck got there first! “Does anybody really believe that financial education is harmful? Apparently.”

78th Carnival of Money Stories

My blog on Murphy was featured in 78th Carnival of Money Stories hosted by Funny About Money! I always love getting the little email that says you’ve been accepted and that I can read some of the best of the week’s postings all in one spot!

So here are my favorites of the favorite:

Proof that it can be done:
Dividends4Life figures out a way to make blog income grow.

Free Money Finance's movie theater manager jumps into The Great Debate over Sneaking Popcorn into Movie Theaters, and the readers’ debate grows hotter.

While I’m not in total agreement with her title, this well-written strong mama article is fun to read!

Who doesn’t love a cute family story?
The Life Less Traveled features a Family Downsizes Life to a Camper, the Open Road, and Adventures Rich in Simple Pleasures.

Short. Simple. Who doesn’t like a good limerick?
Madeleine Begun KaneMad Kane’s Humor Blog Wall Street Woes

I’ve got the "LALALA!" feeling and so does The Digerati LifeFinancial Crisis in the Media: Is the Economic Crisis Overhyped?

Another example of why big business isn’t always smart is exhibited by GraceGraceful Retirement Are We Sure Our Banks Know What They Are Doing?

Kelly at Almost Frugal highlights reality with Three Life Lessons Learned Last Week.

171st Carnival of Personal Finance

Yesterday ushered in fall and with it came the 171st Carnival of Personal Finance hosted by Sound Money Matters. My blog highlighting blogging tips from Martha Stewart’s show was featured!

My other favorite blogs that were highlighted include:

Retiring at 29 by My Dollar Plan Not likely to happen to me, but still inspirational in an extremely jealous sort of way.

Love the simplicity on Free From Broke

Reitred at 47 has in interesting way of looking at products through price ratios

Cash on the barrelhead is another Mint lover like me!

Distilled Rose has dove into a place I’d like to once I get a job- being a lender at Prosper

Since I don’t have an investment advisor I saw Funny About Money’s post about emails with their adviser as oddly interesting.

JoshuaBest also praises ING in his Ladder approach to emergency accounts

En Garde!

I maybe an out-of-work academic (although I’m trying to stay in teaching), but I know faulty logic when I see it. Let me tell you, I saw it somewhere I didn’t expect to- on the 169th edition of Carnival of Personal Finance. Yup, Steadfast Finances rightfully called himself a black sheep as he tried to convince people that index funds are bad for your investment portfolio.

I love a good debate, when two people come with facts and logical arguments to discuss the finer points of an issue. I applaud BankerGirl for including a different point of view in her carnival; however, most of Steadfast Finances’ points aren’t well supported by the data.

The five supposed reasons Steadfast Finances thinks bloggers like index funds (and my responses):
1. Index funds are very easy to understand.

Once you’ve got a bit of financial knowledge under your belt, yes they are easy to understand.

2. They likely know little to nothing about the stock market.

Nope. I’d say most financial bloggers are financial bloggers because they are interested in finance. Besides professionals, I’ve found that most financial bloggers are serious about their hobby. I know I am. While I can’t say all financial bloggers understand the stock market, I think it’s safe to say most do.

3. They don’t want to recommend individual stocks or mutual funds for fear of reprisals.

Fear reprisals? No we don’t fear them. We know that most individual stocks are riskier than indexes. We're savvy, not fearful. Most individuals don’t have the capital or time to actively manage a balanced portfolio of individual stocks. Fear implies that people who prefer indexing are afraid of something. While no investor is Spock, indexers know that no one can predict the future earnings with complete accuracy, and indexers prefer methods that control risk to the point that makes emotional and intellectual sense.

4. It’s an easy answer to a difficult question because index funds require little to no research whatsoever.

Indexing still requires research. Every investor should know their portfolio. Does indexing take less time to research than a balanced portfolio full of actively traded stocks? Yes, of course it takes less time. That’s a good thing for an individual who doesn’t make finances a hobby or profession.

5. Everyone recommends them, so they feel safe passing along the same recommendation as the rest of the herd. So if the market tanks, they got fooled like everyone else and everyone likes to fit in.

First: Oouch! The tone here is harsh! Herd-mentality? Tanking-markets taking all indexers down! It’s hard to convince people that your point of view is better if you resort to animosity. Your audience in the Carnival of Personal Finance is varied- be aware that you just lost some audience by offending them.

Second: Good indexing requires a balanced portfolio. No one should be just in one index, because that negates the whole point of controlling risk. Every investor should research their options. No one should make financial decisions based on the current fad.


Next, Steadfast Finances makes an illustration to try and show that there are better options than the S&P 500. Using one fund, CGM Focus, he compares it to the last 10 years of the S&P 500. CGM Focus is a domestic large capital growth fund run by Capital Growth Mgt Ltd Partnership. On the surface it does look good. Top Morning Star ratings, acceptable expense ratio, and a return of 320% compared to 25% for the S&P 500 in the same time frame.

What Steadfast Finances didn’t say is that CGM is already regressing to the mean. It’s had a great first year yielding 71%, at three years it’s returning 38.5%, at five years 35%, and at 10 years 26%. It’s current year-to-date return is -5.12%.

While there is no way to know what it will be doing in another 10 years, statistical rules like regression to the mean, say the returns will go back to a more average amount. It may still be better than the S&P 500 index for a short while, but over a extended period of time it will probably make average returns. BTW over the life of the S&P 500 the return is around 7%, not the high 25% we’ve seen in these last ten good years (Jeremy Siegel in Farrell’s Right on the Money).

The problem with your argument is that you’re picking optimal times in the past to get into this fund. If someone had gotten in recently, they would be down and out of money. Very few funds can consistently beat the market in the long run. Without considering mutual fund expenses, only half out perform the market. Only 1 in 3 funds outperform the market when taking into account the fees (Zweig Your Money and Your Brain). That’s why it’s so hard for individual’s to make prudent picks, past performance doesn’t predict future success.

The Consumer Price Index increased at about 3% since 1914. The S&P 500 returned an average 7% return and that is after adjusting for inflation (Jeremy Siegel in Farrell’s Right on the Money). That’s not huge, but it will buy you gas and food. This is assuming you’re just in the S&P 500. Which, let’s be honest, isn’t the only index. You should have more variety than just the S&P 500 in your portfolio.

Steadfast Finances nicely illustrates a normal curve to show the variety you get when you index. He quotes “buying basic index funds - you get some good, some bad, but mostly average performing stocks.” This is a good thing! You’re getting average (7%) returns! This would be hard for individuals to do by picking individual stocks. Also, you’re getting a good rate of return without being extremely risky.


How do I make my money work harder? Steadfast Finances solutions and my responses:

1. Pick mutual funds with an excellent track record of out performing the S&P 500. Any website like Morningstar, Kiplinger’s, or blogs like mine will always cover the better performing mutual funds and exchange traded funds (ETFs).

The problem with this is that there are a lot of opinions of what is good. There are many professionals who are touting the next hot financial product. The problem for an individual investor is that there is a lot of noise out there. These financial gurus are passionately convinced that their way is the right way. It can be flat out confusing for a novice investor. Trying to find that 33% of mutual funds that outperform the market any one year means that 66% of funds picked won’t even get a 7% return.

2. Setup an account with a full service brokerage firm. These are more expensive, but like anything, you get what you pay for.

Since 1976 the Wiltshire 5000 index has done better than 2/3 of money managers (Meir Statman in Farrell’s Right on the Money). While you can’t control the future earnings of a specific fund, you can control your fees. Money managers take a cut of your money. Whether you do well or poorly, they will get their fees- with most of them not outperforming the larger index.

3. Hire a financial planner. If you are looking for more better than average returns, let him/her know your goals and it’s just that simple.

Hiring a financial planner is smart. Talk to someone for a fixed fee if you need advice for a specific issue. Or if you are petrified by making a financial decision on your own, hire a planner and start investing something. It will be better to start investing early, than to wait until retirement is right around the corner.

4. Ask for advice from a trusted colleague/friend with investment experience. I learned how to invest from a family friend, and it’s one of the best financial moves I ever made.

Good idea. However, don’t confuse this with acting on friend’s advice. Your cousin may say he’s made $20,000 in the energy sector, but he may not as forthcoming with his losses. Asking advice is fabulous! Acting on partial information isn’t.

5. Do it yourself and build your own mutual fund. There are many websites and blogs that cover mutual funds or individual stock research, so grab a few RSS feeds, do your own research, and away you go. Just make sure you know what you’re doing, and start small in the beginning.

Also wonderful advice! If you have time to make your own mutual fund this is a fun activity. Take a small percent of your overall portfolio and play! Don’t make your financial goals contingent on these- you could be taking on extraordinary risk.


In summary: I like his closing comments.

“I’m merely pointing out that you shouldn’t close off the possibility of
owning several traditional mutual funds or ETFs that have superior historical
returns. By allocating a certain percentage of your overall portfolio to
higher risk investments, your returns could potentially be far better than using
index funds only.” - Steadfast Finances

His title is misleading if his ending sentiments are honest. However, with a little updating to his supporting evidence, I think we could have a nice little debate on our hands!

This is the balanced advice I wish made up the bulk of this blog. I was so relieved to find out he isn’t a day-trader or exults only managed funds. We have a lot more in common than I initially thought. We both want people to be fiscally-literate and to seek professional help when they need it. We both want financial peace of mind for ourselves and others. We just have a small disagreement over the best way to do that.

In all honesty, we’re probably both right. There are circumstances where one school of thought is better than the other. There are some great mutual funds out there and they can be beneficial for some people (a lucky 33% of people).

However, in my humble opinion and those of many indexing advocates, there are many people who would be better off with balanced indexing. It’s great for individual investors who are educated about the stock market and in ways to control risk. It’s a nice way for people who want to manage their own money to do so and still have a life. These are people who want to do all of this for little cost and great peace of mind.

Top picks from the top picks

After a morning of more applications, I received a bunch of comments on my post: the 1950’s housewife. It turns out I was included in the Carnival of Personal Finance hosted by Banker Girl! Such a nice surprise- as I wasn’t sure how people would respond to that post.

Please check out all the entries including my favorites:

Not the Jet Set croons a financial lesson via a country song.

My Dad (my parent’s are my most frequent readers- Hi Mom and Dad!) would like Christian Finance's blog. This blogger is trying to convert a car to run on water. This is proving easier than walking on water, but still not an easy feat.

An ode for my husband (who so graciously backed me up in front of TheBigFatSexist): Beyond Paycheck to Paycheck writes how saving is like football- go 49ers!

A great list for those who are trying to save an extra buck was presented by Squakfox (sorry people- no fido, but please use condoms!).

Being in SoCal we can relate to Miss Thrifty’s home dreams.

No Debt Plan lays out ways to fight the fees (much like my husband did).

Frugal Fu has thoughts from the throne.

Good morning September!

After a nice Labor Day weekend at the in-laws, I’m back home and found a nice little email: I was accepted into the Carnival of Personal Finance hosted this week by That One Caveman!

It was quite the spread (I'm a kabab), with some of my favorites being:

Squawkfox

Value For Your Life

Financial Ramblings

Saving Advice

Gold Medal Blog

I’ve been spending a lot of time looking at that famous bird’s nest in Beijing as we’ve attempted to watch all the Olympics by setting our DVR to record them all.

Yes, I said record them all. I have mastered the art of 4x fast forwarding through water polo (sorry- but on TV you can’t see much of what’s really going on) to get to the good stuff!

While some parts have paid off (Phelps races, watching a sorority sister’s efforts, all the great human interest stories…), we’re just now watching Wednesday evening’s events last night. So we’ve been avoiding the news networks so that some of the surprise remains intact for those events scheduled for the tail end of those two weeks.

Which is why I’m glad Broke Grad Student didn’t spill all the beans on the Carnival of Personal Finance that he just hosted (although we hadn't yet seen the 4x100 relay- grrrrr...). With his Olympic theme, he included my "Feathering the Nest" blog, which was very exciting!

To enjoy this round of fighting against our financial enemies please visit: here.

Accepted

This round of Money Stories’ Carnival was hosted by Broke Grad Student and I was accepted into their back to school edition! Go check it out here.

Stand out articles to read include:
A success story on Poorer Than You
9 Biggest Money Mistakes made by Art of the Coupon
When being extremely frugal- isn’t. By Erica.
Because I don’t like Ralph’s I enjoyed Sound Money Matters rip on them
An excellent shopping experience with My Daily dollar
A paradigm switch for Trees Full of Money

Happy reading!

Girls’ weekend!

I’m excited to announce that I got selected for my first Carnival! It was put on by ThisWritersWallet and you can view it at:
http://www.thiswriterswallet.com/2008/07/16/money-hackers-carnival-xx-chicago-style/

I’ve also realized that since I’ve never been involved in one of these things, that I’m not sure if it’s an honor, or if it’s like little league where everyone gets a participation trophy… oh well. Either way, I’m always excited that people actually read what I write!

Beyond that, I’m leaving for my long Girls Weekend. We’re heading to a beach shack on the central coast for lots of sun, fun, and wine. I’m excited about getting away from wedding planning and having an old fashion sleep-over with a handful of my favorite friends. I’ll probably do a couple posts early next week, but then I’ll be gone for my wedding and honeymoon!