September 27 - Balancing Your Investment Portfolio

           Last class, we finished up our Ivy League Debate projects.  As expected, all of the groups held a similar standpoint on the matter.  If you are taking out loans for your college tuition or your parents are giving you the difference of going to a cheaper school rather than an expensive one, then it is not worth it one bit.  All of the presentations gave evidence that attending a cheaper "non-top tier" college instead of an Ivy could save you several million by the latter part of your life.  The one (and rare) situation where there might be an advantage to going to an Ivy League school is if your parents covered the complete cost of school's tuition.  In this case, the only deciding factor for picking your college should be the average starting and median salaries coming out of those schools.  The majority of Americans are not financially blessed enough to have their parents pay their full tuition though.  In fact, according to this article (http://www.thecollegesolution.com/stunning-how-many-are-borrowing-for-college), The New York Times found that 94% of college students earning their bachelor degrees take out student loans!
          In Mr. Hallam's article, "Millionaire Teacher Sells %50,000 of bonds (http://andrewhallam.com/2011/08/millionaire-teacher-sells-50000-dollar-of-bonds/), he teaches us by example how to diversify your investing portfolio.  One of the basic rules he teaches is that your bond percentage should be similar to your age.  The reason for this is that bonds are generally pretty consistent, they never have steep falls or increases.  So as a person reaches retirement, usually around 60 years old, more than half of their investment portfolio should be bonds, since they don't want to risk losing their savings before retirement.  Another important lesson Mr. Hallam teaches us is that we shouldn't have our portfolio dominated by one of the three indexes (U.S., International, and bond).  So if one of Mr. Hallam's indexes gains, what he'll usually do is sell enough of those funds so that he can use that money to purchase more for the index that is falling.

Look at this picture.  It shows that over a 5 month span, the Canadian Stock Market fell quite dramatically but the Canadian government bond index.  That's proof that bonds are usually more consistent.

          My sister is a prime example of the Ivy League problem.  Last year as a senior at SAS, she was accepted to several schools, including Cornell University.  This was probably her first choice because the Cornell has a great school for the area she wanted to major in: Human Psychology.  The one problem was that Cornell was the most expensive by quite a bit.  They also offered her the least in scholarship ($5,000).  Heather decided to go to another school, Furman University, which is a private school in South Carolina.  Although that school is expensive too, it costs less than Cornell and she received much more in scholarships.  She doesn't regret her decision one bit and loves it there.  It would be interesting to find the starting average salaries of those two schools and see the possible reward of going to Furman.

September 23 - The Laptop Debate

          Last class, two groups presented their College Opportunity Cost presentations.  The first presentation was comparing two universities: Columbia University and Georgia Tech.  Their presentation was organized well and their transitions were smooth.  I felt like Tanya did the best job speaking.  By the time the presentation was over, the audience was generally convinced that there wasn't much benefit from going to Columbia vs. going to Georgia Tech.  The next group included Jack, Dennis, Nick, and Sohrob.  Their presentation had a lot of good data in it, but it was very difficult to follow.  I don't think there will be one presentation who tries to prove that an Ivy League diploma will do you any better in the long run than a "non-top tier" school will.
         Last Thursday my laptop stopped working.  It had a full battery, but it wouldn't turn on.  My mom brought it into a mac repair store and the lady there told her that it was a problem with the mother board, and it would cost about S$1000 to repair.  Since my computer it already pretty old, my parents don't see a point in spending so much money on a repair when it will likely break again soon.  I e-mailed my father about it (he's in KL for work) and he told me to start researching laptops I am interested in buying.  My first choice for a computer would be a MacBook Pro 15".  If I were to buy it off the Singapore Apple website it would cost S$2,488 (MacBook Pro 15").  On the American Apple website, the same computer costs US$1,799(US MacBook Pro 15").  If you convert that price to the Singapore currency (1.225), using an online converter (http://www.xe.com/), the price becomes $2,203.  This is over 200 dollars less than the price on the Singapore Apple site.  It would cost quite a bit to ship over a laptop from the US though, and I have no relatives coming from their to visit until Christmas (an awfully long time without my own laptop).  The next laptop I'm researching is a ASUS K501.  This laptop only costs S$750.  The difference between prices is S$1,738.  If I were to invest this with a 9% interest rate for 40 years I'd make S$54,589.  I could buy multiple laptops with that money!
         In Zarima's most recent blog, http://sb-sas33372.blogspot.sg/2012/09/sept-10-2012.html, she talks about the 529 plan.  The Greco's use this plan for college savings.  They put money into an investment fund and an investment manager manages it.  As the time comes closer to Zarima's first year of college, the majority of the plan is in bonds (the most reliable).  I wonder if a better option would to just make your own index and manage it yourself instead of paying a manager to do it for you.
       

September 13 - Ivy League Dilemma

       I sat down with my father again tonight and asked him the Ivy League question.  Is it worth spending the tuition fees?  Does an Ivy League diploma really help you in the long run?  My dad's opinion is that it can go either way.  He doesn't have a preference on whether or not able people should go to an Ivy League.  "It's not your college that you come from, it's your dedication and hard work that lands you a good job," says Doug Erdmann.  What is the question we are really asking for this project though?  Does attending an Ivy League determine success more than a state or private school does?  To answer this, first we need to define success.  In Finance class, success would most likely be defined as: accumulating the most wealth, so getting the highest salary.  For people like my father, success is not defined by your paycheck, but rather the difference you make in the world.  So in his opinion, going to an Ivy League doesn't determine success any more than another university would.
        http://blogs.ajc.com/momania/2010/12/01/ivy-league-or-state-school-does-your-college-determine-success/
           Here is a blog titled Ivy League or State school: Does your college determine your success?
The New York Times quoted a survey by the National Bureau of Economic Research on 6,335 college graduates.  This survey was to see how students who applied to Ivy Leagues and were either rejected or chose not to attend, stacked up against Ivy League graduates.  The results were jaw dropping.  The students who didn't go to the Ivy Leagues actually ended up generally earning higher incomes than the actual graduates.  The Bureau concluded that the real determining factor for success is "student motivation, ambition, and desire to learn."  So, this study is saying that jobs don't hire based on your college, but rather your history of hard work and ambition.  I no longer see the desire in attending say Yale or Dartmouth, than maybe impressing a few people over your life time with the fact you graduated from there; however, if you really love an Ivy League (not just for the name) then be sure to go for it!  For myself, I would rather find a college I love and work hard there to be prepared for the work force.

Here's a list of the top 10 schools with highest career median salaries.  Sure, there are three Ivy Leagues there, but don't ignore the seven NON-Ivy League schools.  This is proof that you don't need an Ivy League diploma to make a lot of money.

This is Tobin's latest blog - http://sb-sas17682.blogspot.sg/2012/09/september-4th-beating-hedge-funds.html.  In the conclusion, he talks about how his family invests.  They do not use hedge funds and invest their money through a trusted, retired investment manager.  They stocks are spread across the stock market.  They do not have bonds however.  I know the Hamby's and I know that Mr. Hamby makes a lot of money.  It shows that you can earn lots through your career, even though investing can help.

Projectile Motion Video Lab Analysis

Graph of x-position vs. time (including best fit lines)

Equations for x-position vs. time

y = 2.286(m/s) x - 0.981(m/s)
For about 1.5 seconds, the slope is 2.286. This slope remains until the second bounce of the ball.  The new equation is y = 1.137(m/s) x + 0.712(m/s).  The reason why the slope dropped after hitting the floor was because gravity doesn't allow the ball to bounce quite as high as the previous bounce.

Description of the Horizontal Motion

This graph's horizontal velocity is constant, meaning it has no acceleration.  That is why the line is linear. For this experiment, we are ignoring air resistance.  The horizontal motion changes after the ball bounces because of the momentum shift.

Graph of y-position vs. time (including best fit lines)

Describe the Vertical Component of the Position of the Projectile

The vertical component is not linear, mainly because of gravity.  The component is both negative and positive at certain points.

Graph of y-velocity vs. time (including best fit line)

What can you say about the rate of change of the y-velocity as a function of time? How does the value of the slope of the linear fits compare to the acceleration of a freely falling object?

Rate of change is slope.  If our slope was steeper, it would have fell at the rate of gravity (-9.8 m/s/s) instead of -10.56 m/s/s.  Acceleration increases as the slope increases.

Explain the differences in the horizontal and vertical components of the motion of the projectile in terms of the force(s) acting on it after it was launched.

Horizontally, the components experienced no acceleration.  Horizontally the velocity did not change, it was constant throughout the video.  The only force it had horizontally was the force from the thrower, gravity, and air pressure.  Gravity created acceleration for the vertical component.  The force for the basketball came from gravity.  Once the ball passed it's origin (the throwers hands) on the way down, it's velocity increases.

September 9 - The Investment Magazine Dance

           Last class we spent the majority of the time reviewing Chapter 3 of Millionaire Teacher.  It was obvious that some students hadn't read it yet, so the discussion was sub-par.  We still got in a few points however.  These included 1) all investing portfolios should have three index funds (US, International, bond) 2) passive investing is more reliable than active 2) there are online financial service companies that help you invest for a small fee (Vanguard) and 3) Financial advisors want you to buy mutual funds rather than index funds because the advisors get more money that way.
           Magazines make their money through two ways: their readers and their advertisers. The readers pay a monthly or yearly subscription to the magazine to keep receiving it in the mail and the advertisers pay the magazine to have their ads put in the magazine.  Of course, it's very important to please both.  In Mr. Hallam's article, "The Investment Magazine Dance," (http://assetbuilder.com/andrew_hallam/the_investment_magazine_dance) he recalls one time where he wrote in an article that it is smarter to buy used cars rather than new. An advertiser for that magazine that sold new cars wasn't so pleased.  I think that is a tough lesson for Americans to learn.  Nobody wants to buy a car that somebody has already enjoyed before them.  We want the newest of the new, even if it would put us into debt.  On Chevrolet's website, they list their 2012 Tahoe starting at $40,000. (excluding taxes).  I found a used 2011 Tahoe for only $30,000 online.  That's $10,000 less for only a car that is only a year newer! If you were to take that $10,000 saved, invest it with a 9% interest for thirty years, you would make over $150,000 (http://www.moneychimp.com/calculator/compound_interest_calculator.htm).  You could buy three new Tahoes with that money!   Back to Mr. Hallam's article, it says that if an article does happen to say something that might offend an advertiser, there will be another article in the same issue refuting it.  Say an article is written on how passive funds almost always outplay mutual funds in the long term.  The next article might talk about how one mutual fund has beaten the stock market for five years.  I'm guessing the magazine does this so no readers or advertiser wants out.
        In Zarima's blog http://sb-sas33372.blogspot.sg/2012/09/august-4-2012.html she discussed how her finance tracking has gone.  In the month of August, she spent $827! This money was used for food, transportation, dinner, gifts, etc.  Grocery money wasn't even included in this sum.  Zarima is fortunate to be able to spend so much, but she could save hundreds of dollars by packing lunches and taking the subway.

       
       

September 5 - Small Percentages Pack Big Punches

        Chapter or Rule #3 of Mr. Hallam's book, Millionaire Teacher, dishes out proof after proof of why nobody should invest in mutual funds.  Rather, they should invest in index funds. Mr. Hallam suggests three different index funds to have in your portfolio: 1) U.S. Stock Index Fund 2) International Stock Index Fund and 3) Government bond index.  Each index fund should take up one-third of your portfolio.  If one of the indexes grows too much, you should sell some of it and use the sales to buy more of the other two indexes.  For example, say your US Stock Index is taking up 30 percent of your portfolio, your International Stock Index is taking up another 30 percent, and the Govt. bond index has 40 percent.  You would want to sell some of your bonds and buy more international and US stock indexes so the portfolio settled at 33%, 33%, and 33%.  You always want them even because if for some reason one of the indexes drops, it won't have a huge lasting effect on your portfolio as a whole.
        In class, Mr. Hallam was telling us stories of how some families put all of their child's college savings into mutual funds.  When the stock market crashed in 2008, they lost all of their savings.  However, if they had put all the savings into an index fund, they would have lost just a percentage of what they lost with mutual funds.  Here is an article talking about how Americans, since the stock market crash, have lost faith in the market and aren't willing to invest their money: http://themoneyupdate.com/tag/invest-their-savings/.  Interestingly, this article gives no advice on investing passively; rather, it concludes with a link to the site of a personal financial advisor! This article is telling the public that it is safe to invest when really, mutual fund investing isn't.  It's a shame that worried Americans can be sucked back into the schemes of sweet-talking advisors, when they could be saving much more safely by investing in the entire stock market.
        Here is a link to Tobin's last blog: http://sb-sas17682.blogspot.sg/2012/09/september-4th-beating-hedge-funds.html. In it, Tobin discussed Mr. Hallam's "Couch Potato Investing" blog.  Tobin relays Mr. Hallam's evidence that just one hour of portfolio re-arranging a year can save you hundred of thousands of dollars than can be lost through mutual funds. I wonder if hedge fund managers will still have their monstrous salaries towards the second-half of our lives. Perhaps by then Americans will realize that they are the wrong way to go.
     

Speeding Up and Slowing Down Lab

(g) On the observed graphs, describe the slope as 

a) constant, increasing or decreasing

b) positive or negative
c) state what the slope represents

Graph #1
This graph is both decreasing at first, and then increasing. It is never constant though.  The graph starts positive, then finishes back in negative ground. The slope represents the car moving up the ramp then coming back down the ramp without ever coming to a complete stop.

Graph #2
This graph is constant from start to finish.  The graph is negative. The slope represents that the velocity starts high when the spring is released, then it comes to a stop at the top of the ramp.  The cart velocity returns to the initial velocity before it hits the bottom of the ramp again.

Graph #3
The graph is constant throughout, there are no changes in acceleration.  The acceleration is negative because gravity is always pushing the cart back to the ground.  This slope represents that even though the velocity is changing throughout the ramp, the acceleration never changes.  When an object is moving up, there is always a negative acceleration because of earth's gravity pull. If the acceleration wasn't negative, the object would never stop moving up.

August 3 - Spend Like You Want To Grow Rich

      Right now I'm reading through Mr. Hallam's book, "Millionaire Teacher."  In chapter 1, Mr. Hallam talks about the difference between being rich verse living rich.  Being rich means you have financial freedom; the financial ability to take off work for a year or two and still living comfortably. Opulent folks tend to have high salaries (although not necessary) and invest smartly. Of course there are the outliers who get rich through luck (lotteries) or come from a wealthy family.  Unlike most SAS students, Mr. Hallam came from a humble background.  In a way, we have a disadvantage in this aspect.  We tend to assume we'll be wealthy forever and don't have to work for it like our parents did. Or even worse, we spend extravagantly as adults when we don't have the money because that is what we are accustomed to.  Poor kids have better intentions for becoming rich because they know what it's like not having money.  Here is an article on how to make yours kids rich: http://money.usnews.com/money/blogs/On-Retirement/2011/07/06/5-ways-to-help-your-children-become-wealthy
       Number one says to develop frugal habits yourself. This one basically says that your kids learn through your actions, not your words.  For example, if you smoke around your kids but tell them that it's bad for you, they are more likely to follow your actions than listen to your advice.  So when you show your kids that you save money, they will probably start doing the same with their allowance no matter how small it may be.
      Number three states that parents should teach their kids excitement of improvement. There are many small ways to save money: fly economy instead of business, take the public bus rather than cab, or even just eating at home rather than out. Kids will pick up on these actions and learn from them.

      I added up all my purchases since the start of class in August to the beginning of September. The total amazed me. $518. Never before had I imagined I spent this money on average. Probably the biggest factor that had been hidden to me before was the endless grocery bills. My mom goes grocery shopping almost everyday and the Cold Storage prices are almost double that of Fairprice. Too me it's not an issue though, us American's love our food.