In class today we worked on the first phase of our Real Life Project. By the end of class, our goal was to have picked a school we'd graduate from, find the average starting salary out of that school, tax that salary, and finally find a realistic house/apartment to rent out. For some lucky students, their parents are willing to give them a large down payment or even offer them one of their houses/apartments to live in. That will be a huge money saver for them. Unfortunately for myself, the only house my family owns in the US is our one in Maine, where there aren't many opportunities for young professionals. I would like to graduate under-grad from Duke University, and if I work hard enough there, I might be accepted into the New York University Stern School of Business. This school is rated in the top ten business graduates schools in the nation by U.S. News & World Report. On the Stern website, I found that for 2011 graduates, the average starting salary was $105,798 with a signing bonus of $30,127. I found a good website to find the net salary (Salary Calculator). It came out to be $89,797 the first year with the bonus, and $71,151 for the following years. I would take the difference of those two, $16,646, and use it as a downpayment for my apartment in New York. Divide my annual salary by twelve to find my monthly salary and it came out to be a little less than $6,000. Since I am renting a place, not buying, I don't want to put too much of that towards my apartment. So $2,000 is the most I'll pay. I am trying to find a roommate, so I can get a nicer apartment and pay half.
I found an apartment I might be interested in http://www.renthop.com/listings/exchange_place_wall_street/2210/1905698). The apartment is located in the financial district, right around where I will most likely be working. I think Zack would be a good roommate, since we are both interested in finance. The apartment is $3,395 a month, which would be about $2,000 a month for each of us. This would leave me over $4,000 a month for living and investing. I also could use my bonus to pay for my first eight months at the condo. The condo has two bedrooms and a fitness center downstairs. The condo even allows for pets incase Zack and I want a dog or something!
I had a conversation with my parents about this topic. Here's what they said: My mom thought it was a good idea to share an apartment with a friend because I'll save rent money and won't feel lonely. Living in New York City helps because I won't need a car to get around places. For furnishings, my parents don't have much besides tables and burrows, so maybe the Chaudhrys can help us out there. My Mom likes how I would be close to family, who generally live in New England. She doesn't think I should get a dog right away since it costs money and the "poor little doggie will be all be itself." My mom thinks it will be interesting to see how much food will cost in New York.
Tuesday 27 November 2012
Sunday 25 November 2012
November 25 - Real Life Project
Last class, Sohrob re-did his investment project. I was very impressed by his presentation. Not only did he engage the audience with some humor, but he had a loud, clear voice that was topped off with some top-notch information. Sorhob showed us perhaps the easiest way for someone like us to start investing. Using screenshots, he walked us through the Vanguard website. Using an UGMA account, is it so simple for a minor to start investing. With the supervision of their parent, they can set up an account on their parent or guardian's account, which will automatically be transferred to their own account once they turn eighteen. As far as I know, Sohrob and I are the only ones in class who have started investing. I feel we have an advantage because most students will forget about the class and investing once this semester ends. Sohrob does have a great advantage on me however, he has several large accounts while I just have one small one! Great job Sohrob.
I can't really remember what we went over last class minus Mr. Hallam introducing our next project. For this "Real Life Project," first we need to pick a college we think we may realistically graduate from. This is iffy for me, since I really want to attend Duke University, but it is tough to get into. I'll just pick that school anyway. From there I will find the average salary out of Duke and add 10% to that (hoping I'm above average). From there, I'll have to find an actual house or apartment for rent that I could afford. Then I have to take into account housing expenses (laundry, furniture, AC, etc). Then I have to take into account many more other variables (transportation, travel, entertainment).
I'm looking forward to this project because it will actually have help us in our near future.
During vacations, I typically spend much more than I do during an average school week. However, this past Thanksgiving break wasn't typical for me. I stayed in Singapore the whole time, only traveled to the city once, and ate most meals at home. Most money I spend is for transportation and entertainment. The money I spent these past five days were for groceries and some snacks at school where I was umpiring. I made $180 this weekend for umping. I'm going to put this cash towards my investing!
I can't really remember what we went over last class minus Mr. Hallam introducing our next project. For this "Real Life Project," first we need to pick a college we think we may realistically graduate from. This is iffy for me, since I really want to attend Duke University, but it is tough to get into. I'll just pick that school anyway. From there I will find the average salary out of Duke and add 10% to that (hoping I'm above average). From there, I'll have to find an actual house or apartment for rent that I could afford. Then I have to take into account housing expenses (laundry, furniture, AC, etc). Then I have to take into account many more other variables (transportation, travel, entertainment).
I'm looking forward to this project because it will actually have help us in our near future.
During vacations, I typically spend much more than I do during an average school week. However, this past Thanksgiving break wasn't typical for me. I stayed in Singapore the whole time, only traveled to the city once, and ate most meals at home. Most money I spend is for transportation and entertainment. The money I spent these past five days were for groceries and some snacks at school where I was umpiring. I made $180 this weekend for umping. I'm going to put this cash towards my investing!
Thursday 8 November 2012
November 8 - Gifts or Transfers to Minors
Unfortunately for me, being under eighteen years old means that I cannot possess my own Vanguard mutual fund. I want to start investing now though, so my father and I looking for ways to get me a fund even though I'm two years too young. Right now, my father proposed that we can use one of his small, current funds ($361) and he will just transfer it completely over to me on my eighteenth birthday. Most students in this class most likely don't have a parent with an account they're willing to hand over, so I researched other ways to start investing now. I was planning on calling a Vanguard rep with my father to ask them how I could receive my fund when I'm older. However, my dad just got back from a business trip and was too tired to call up a rep tonight. I found an uncomplicated Vanguard method however (http://www.vanguard.com/pdf/bgtm.pdf). Uniform Gifts to Minor Acts (UGMA) and Uniform Transfers to Minor Acts (UTMA) are two methods. These accounts provide a simple way to give gifts or transfer assets to a minor without the complications of a formal trust. According to my dad (a lawyer), a real trust fund requires an attorney. For UGMA accounts, an account is created by an adult on behalf of the minor. These accounts are controlled by the adult until the minor comes of age. This could be a good option for students in our class wishing to invest before they become "adults."
Today in class we learned about classes of equity mutual funds. Mr. Hallam showed us a large variety of different mutual funds we can use. Lets go through them. One type is a large cap mutual fund. This fund includes only big businesses (from the S&P 500) and only invests in those. Mid cap funds are similar except in that they invest only in mid-sized businesses. Small cap funds are the same thing except that they invest in small companies that haven't hit it big yet. A value fund is interesting in that it ONLY invests in cheap stocks, so you won't have to pay much to buy them. A growth fund invests in companies with fast growing profits. Remember that you can also buy mid-cap, small-cap, value and growth indexes. If you were to buy a total stock market index (what Mr. Hallam invests in), you are investing in over 6,000 stocks. One very important thing to remember is that a balanced actively managed index has within it both actively managed stocks and actively managed bonds.
This article http://andrewhallam.com/1901/01/calling-fee-based-financial-advisors/ on Andrewhallam.com interested me. Mr. Hallam is trying to recognize the rare financial advisor who are true fiduciaries (def: a trustee). These advisors can be super helpful because not only will they not act in order to increase their income, they instead only charge a 1% annual fee. Mr. Hallam's upcoming page: Financial Advisors With a Conscience will be very helpful for all his subscribers who may need a bit of help investing. This is a great idea by Mr. Hallam to recognize these financial advisors.
Sunday 4 November 2012
September 11 - Stock Market Profits
The number one most important thing we learned last class was the two ways the stock market gives profit. Those two ways are 1) Share price increases and 2) Dividend payouts. When share prices increase, your stock is worth more money, so you can sell that stock for a higher price than you originally bought it for. So for those who bought stock from Apple when the company was just starting spent very little cash on the stock. Now an Apple share costs around $700, so if you held onto the stock you would make hundreds of dollars per share. What most Americans do unfortunately is buy the stock when it’s already high and successful, so there isn’t much room for the stock to go but down.
I was a little confused on dividends during the class period so I decided to ask my dad about them. He told me that the way dividends work is that the company decides whether or not to use some of their profits to give back to their stockholders. Every company has a board of directors, of which the stockholders vote on, and the directors decide whether or not to give out dividends. Most companies do give out dividends. Stockholders can either use these dividends to buy more stock or to keep for themselves. My father’s company receives dividends from their stock, but instead of using it to buy more stock they use it on current expenses.
This is a link to Home Depot’s stocks over the past ten years. As you can see, the stocks are at it’s highest right now in 2012. This would be a good time to sell! However, it might be a good time to buy too because the stocks could continue to rise. The stock market is a gamble; just remember to follow your head, not your heart.
November 4 - Investing Dilemma
Today, my father and I attempted to start up my investing account with Vanguard. We tried using the Vanguard Target Retirement 2045 Fund like Mr. Hallam suggested, but when we tried making it joint-operated under my name too, we couldn't because I am too young to be a part-owner. What my father is now proposing is that I just take over one of his small, current investments and once I'm 18 he will just give it to me. This account currently has $161 already in it, and I wouldn't have to put in $1,000 to start a new one (no loan!). The one problem with this mutual fund is that instead of a Vanguard Target Retirement 2045 Fund, it is a 500 Index Fund Admiral Shares fund. Do you know if there is a big difference between the two Mr. Hallam? Is this one perhaps more or less risky?
I just had a look at Mr. Hallam's latest article, "Millionaire Teacher Invests $21,000 in U.S. Stock Index." Here, Mr. Hallam gives us the low-down on why he did this. It's quite simple really. Mr. Hallam's portfolio is split like this: 41.3% Canadian bond index, 30.4% International stock index, and 28.3% US stock index. As you can tell, his US stock index is falling a bit behind the others. However, this is purposeful. Since Mr. Hallam is 42 years old, he has 42% of of his index invested in bonds (generally safer than stocks). So the other 58% had to be evenly distributed between US and international stock indexes. Mr. Hallam likes to skim off the index that is doing the best and add onto the index that is doing the worst, so that is probably why he invested $21,000 into his US stock index. Mr. Hallam also talked about keeping low transaction costs. I believe he means that he doesn't want to buy/sell his stocks to too often because he loses part of that money through transaction fees.
Since for my new investment account I'm going to need to be investing US$500 annually, I need to start saving that money. But how? As of right now, I'm sort of working two part time jobs. I make $20 on Saturday reffing a SACAC soccer game, and I make $20 a day, two days a week working at a baseball clinic. So add that to my $50 allowance and I'll be earning $110 a week. I usually spend about $50 a week anyways, so lets say I have $60 to save up all year. Sixty dollars a week will earn $240 a month, and $2,880 a year. Even though this is in Singapore dollars, it is still far above $500, so I'll be set to invest every year. It never hurts to invest a little more either!
I just had a look at Mr. Hallam's latest article, "Millionaire Teacher Invests $21,000 in U.S. Stock Index." Here, Mr. Hallam gives us the low-down on why he did this. It's quite simple really. Mr. Hallam's portfolio is split like this: 41.3% Canadian bond index, 30.4% International stock index, and 28.3% US stock index. As you can tell, his US stock index is falling a bit behind the others. However, this is purposeful. Since Mr. Hallam is 42 years old, he has 42% of of his index invested in bonds (generally safer than stocks). So the other 58% had to be evenly distributed between US and international stock indexes. Mr. Hallam likes to skim off the index that is doing the best and add onto the index that is doing the worst, so that is probably why he invested $21,000 into his US stock index. Mr. Hallam also talked about keeping low transaction costs. I believe he means that he doesn't want to buy/sell his stocks to too often because he loses part of that money through transaction fees.
Since for my new investment account I'm going to need to be investing US$500 annually, I need to start saving that money. But how? As of right now, I'm sort of working two part time jobs. I make $20 on Saturday reffing a SACAC soccer game, and I make $20 a day, two days a week working at a baseball clinic. So add that to my $50 allowance and I'll be earning $110 a week. I usually spend about $50 a week anyways, so lets say I have $60 to save up all year. Sixty dollars a week will earn $240 a month, and $2,880 a year. Even though this is in Singapore dollars, it is still far above $500, so I'll be set to invest every year. It never hurts to invest a little more either!
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