Last week I finally figured out why I had some problems using the Discover Debit card in the past. My problems typically occurred when I purchased gasoline at the Sam’s Club gas station and then went in to purchase my groceries. Little did I know that “they” put a $100 hold on my account in addition to my gasoline purchase. So my available balance would be down $100 for three days. I guess I should see what other debit cards do.
About a year and a half ago the company I work for closed down their 401K and I rolled it over to an IRA. My wife recommended that I talk to her Schwab advisor and he recommended two nice mutual funds, Buffalo Flexible Income(BUFBX) and Yacktman Focused Service(YAFFX). At first glance they both looked good since Morningstar gave one of them four stars and the other five stars. Being the analytical guy I went over to Yahoo finance and compared them to S&P 500. I was not impressed so I decided to look at ETF alternatives. I ended up settling on an ETF that focused on U. S. Stock companies with dividends, SCHD. It not only had better performance over the last year than the two mutual funds but it had lower transaction costs and a lower initial investment requirement. I decided I would look at those mutual funds again in about six months.
Six months later I am watching Consuelo Mack’s Wealthtrack and one of her guests is making a strong argument that a fundamentally weighted index fund he created for Schwab was the better mousetrap when it comes to maximizing index fund performance. So I compared his fund(FNDX), the dividend fund(SCHD), and the mutual funds recommended to me to the S&P 500. The S&P 500 and FNDX were tied and SCHD was not far behind. I found it interesting that the mutual funds were still doing poorly.
Last month my son came home for Christmas and complained that his mutual fund lost money. About the middle of last year he set up a Roth IRA and started investing monthly in a moderately conservative mutual fund from USAA(UCMCX). Despite a four star rating from Morningstar he had lost money. The irony of a conservative investment losing money in a good market had me chuckling. So I did a what-if simulation of him buying Buffalo Flexible Income instead and found that he would of lost money, too. I was beginning to see the trend. Passive investing trounced active stock pickers in 2014 and the money was flowing out of active funds into passive funds. A couple of days later my suspicions were confirmed when I read this article, Mutual Funds: Why Vanguard Won 2014, and What That Means for 2015.
As the S&P 500 index climbed to one record after another last year, the vast majority of mutual fund managers actively picking stocks to try to beat the market fared very, very poorly. Among the 1,417 large-cap growth managers that Morningstar tracks, only 171, or about 12 percent, managed to beat the 13.7 percent total return of the S&P 500 for the year.
I do not know if active stock pickers can catch up to passive investors in 2015 but it they do not, there will be a lot less of them in this business by the end of the year.
This is a somewhat humorous question for Dave Ramsey.
- Do you think the Clinton’s made a written budget?
- Did you think the Clinton’s considered selling one of their houses?
- What do you think of the Clinton strategy of getting gazelle intense about increasing their income rather than cutting costs and working the debt snowball?
- What can the average Financial Peace University attendee draw from the Clinton experience?
Last month I bit the bullet and decided to be a bit more proactive about my spending, budgeting, and saving. Part of the problem is that I need to save more money for my emergency fund and I am embarrassed with 2013 spending. With the likelihood that my health insurance deductible will be much higher, a larger emergency fund is required. After analyzing my Amazon spending for 2013, I can see that I can make a major improvement in my spending by controlling my Amazon spending. With the recent problems with credit card theft it is in my best interest to watch my credit card expenses very closely. The solution to these problems is to give every dollar a name and monitor my progress with Quicken 2014. As I enter my second month on the system I can say that my budget is reasonable and balanced. The biggest psychological boost comes from monitoring the accounts frequently and seeing that you are winning.
Yesterday Amazon announced that it may be raising the price on Amazon Prime by $40. That got me to thinking. Was the Amazon Prime subscription a good deal for me? Since I track my expenses in Quicken I ran a report on my payments to Amazon. Next I imported the report into Quicken to do some quick calculations. I found that I had 5 transactions that were less than $35 and greater than $10. Transactions greater than $35 are generally free shipping and last year I bought my niece a bunch of books for school. They cost less than $10 and did not qualify for Amazon Prime. Then I remembered that two of the remaining 5 transactions did not qualify for Amazon Prime. Wow, I was very good to Amazon last year! I did not break even on the shipping, I barely used the video streaming, and I did not use the Kindle lending. My calculations tell me to cancel my subscription. I did.
This week we had another credit card breach announcement, Michaels Warns Customers of Possible Credit/Debit Card Leak. This breach sounds more like the Target breach rather than the alleged security problems with www.healthcare.gov. Once again the best information on the breaches can be found at KrebsOnSecurity. Unlike the problems identified at www.healthcare.gov by TrustedSec, the problems at Target and Michaels appears to require some inside access to get the malware on point of sale terminals. Like most security breaches we, the public, will not know the extent of the problems for some time. The good news is that I can minimize my exposure to credit card fraud and identity theft by avoiding these places. As an additional security measure I bit the bullet and installed the mobile client for Quicken 14 on my phone. Although I am a long time user of Quicken I am updating on a three year cycle. This version has a mobile client. I was not excited about using the mobile client until I got worried about credit card fraud and identity theft. My solution is to minimize my credit card use and monitor my spending habits more closely. Even though I may become a victim of credit card fraud, I can minimize the damage.
Last week I took a closer look at T-Mobile’s two cell phone plans. As a long time T-Mobile user with four lines on our family plan, I have very little interest in switching plans. One of the primary reasons people switch carriers is to get a new phone but I just don’t need one right now and my old G2 is doing just fine. However I am very interested in ways to lower my cell bill and that is where T-Mobile’s new plan fits in. It is called the Value plan and it looks like it will save me $30 each month while providing us with slightly more services. I have unlimited texting now! Now I can bug my son with texts even more!