Identity management

Taking a break from the world of stocks for a moment, I think it is important to have a good handle on identity management. In these days, everyone has a ton of accounts - banks, email providers, social media, retirement accounts, college accounts and shopping accounts. No matter what encryption format is used, it is all ultimately crackable. And the point is not to make it hard for the thieves, it is to make it easy on yourself. Try what works best for you, maybe write it in your own diary and hide it under your carpet. Learn Indian or Native American languages such as Navajo or Sanskrit - you get the drift -- old obsolete languages that no one remembers or teaches and write them down and then of course put them in your desktop or front room as there are few chances any one will be able to crack these codes in first place. 

There are a lot of online password protection tools .. where you put in a catch phrase and not password that you might only know .. something deeply personal such as you going to this music band and dancing to this song. Based on this  catch phrase then you can unlock all other passwords for various sites. I do a combination of such things and also use one encryption and phrase password tool like TrueCrypt or many such free and open source solutions. It is not a bad idea to invest in this or pay few dollars every month if that leads to some peace of mind.

I also put tax forms and statements in this. I usually compare Turbo Tax, Tax Slayer, local state government websites which often allow you to file for free, That is another good practice and you get to see various codes and get a picture on how different softwares are working your income and expenses. I then take the one with the maximum refund to file.

Laying groundwork III

Some few things that you need to follow are:

1. When you leave jobs, first secure your 401k->Rollover IRA. Generally contribute some money, what ever you can to your roth/traditional ira or HSA or 529s.

2. You can invest via systematic plan where you put say a $100 per month or lump sum of $1000 at the end of year.

3. Rebalancing is something that you do periodically - either a designated time of a year like an anniversary. If you happen to read something in news, then think that it is a good idea to rebalance then that is also a good time to rebalance your portfolio. So what is rebalancing? I like to keep it simple by putting in 50% stocks and 50% bonds. For some folks, it is 80% stocks and 20% bonds. Now suppose, stocks have a huge run and you are now 60%  stocks and 40% bonds you book some profit in stocks and move that to bonds to bring it back to 50-50.

4. Tax loss harvesting : As said earlier, it is just a tool and not necessarily a core strategy of your investment. It is more like - Hey, I messed up but might as well book some tax losses and get some deductions there by declaring it in taxes. Once I get that money, I might put some money back into same stock and maybe put the rest in some other promising stock. 

5. There are tons of momentum and hot stuff that will come always. New ideas and strategies and new forms of old ideas that are rehashes just like movies coming out every summer. Don't get sucked into any of those. Enjoy the oceans, travel, art, read a book or what not.

6. Dividend investing: That is one old form of investing in which you invest in utility stocks. REITs are also good dividend payers. Always keep some money in this bucket.

7. Buy low ranges and sell high ranges: I kick myself in the back for not buying Apple when it was in the 30s and 40s in the 2008 stock market. It went up like crazy after that. I bought some then and sold them. 

8. How much hold? In buy and hold, typically if you buy something for 100 and see it become 200 and then back to 100, one wonders what is the point of the buy and hold strategy. No one can call 200. So maybe you are lucky to call a 150 or a 180 or at best a 195. What to do when you call 150? Plough down more thinking "your stocks has got some legs" or "she will tank any moment now?". Volatility and gyrations are part and parcel of the market. Hence the play in ranges are good. YOU have to figure out how much time and more importantly mental space one has to devote for such things. Work and family are way higher priority compared to finance - especially stock market trading unless of course you work in wall street. Even in this case, you are so heavily regulated that you can't just act on your own whim.

9. A good idea would be to have a bucket list of stocks. I rejected DOW and some chemical companies because I don't like their business and I would be invested in them via ETFs or mutual funds on which I don't have control over, but on my own I will never invest in them or a GM stock such as Monsanto. I am not a fan of genetically modified foods and think of it as unwise application of science. There are many financial stocks where I have my own discretion. I don't put more in banks now while I have always stayed away from Goldman Sachs etc. I do like insurance sector but stay away from certain names there which are very concentrated stocks.

10. Institutional investing is a good sign. Much more than the beta and P/E I like to see how much % of stocks are owned by institutional investors. Not having family owned or human controlled and relying more on institutions is generally a welcome sign for me. You might have your own such principles and convictions. List them out as above and add them and this will form the basis of your investment.

An average investor in the US will easily come to the tune of a million or more - counting your home and possibly a rental, your 401k over life time and IRAs and medical accounts. A million is not a small amount and if invested wisely, you are looking at comfortable secure retirement. At the very least, you need to attain a good degree of financial independence. FI is good and cool and gives you the freedom to help others, pursue what you truly like, pursue arts, power to say no which I think is one good thing about money.

Laying groundwork II

In continuing the haphazard and dis-organized nature of posts in the initial part of this story, I would continue here on the basic strategies of investing. In the last post, we looked into basic accounts and not to get caught up on semantics and rather to open a few accounts with your local brokerages as long as the commission is low. Fees and commissions being low are very good. However, they are also diversions and you don't want to miss the forest for the trees by looking into just fees and commissions and in general the price aspect of the trading and investing.

Trading of stocks have some basic philosophies and each camp have their own drum beats. How many stocks to keep and hold? Detached and unemotional way or some emotion is good? Buy and hold is a very common approach. But hold a turd for how long? Those of us in the 2008 financial crisis know this by holding the finance stocks which have still not recovered in the subsequent bull run till 2015. Some banks and finance stocks are decently up. But one might not necessarily agree with their way of doing business. I generally take a balanced view of things and not extreme views when it comes to business. Basic differentiation is a right of every business but to just outright keep competition at bay by using unfair practices is kind of under belly of capitalism. A bad practice of capitalism. 

Some of the major philosophies are those of:

1. Buy and hold: Long term investors prefer this where they buy say a stock of a local utility company and hold it for the next 10 or 15 years. Up or down, they swing with it. Buffet writings echo this and have some concentrated stock portfolio but they also got this stocks at lower rates, get good dividends while not paying dividends  to their own company's investors. At the time of this writing, Berkshire H investors don't have dividends. Also, they have access to some instruments and preferred dividends which the common investors like you and me don't have. So all in all, while this is one cornerstone of philosophy, let  this not be the over-riding factor.

2. Buy low and sell high: Easy to say and difficult to implement as it is tough to predict market timings. But this combined with the momentum trading is a good way to ride when the market are high.

3. Momentum trading: You keep a stock in sight such as Apple. It is in news and people constantly know what is going on. Has a good amount of liquidity and trading volume in the exchanges. So you buy them when it is said a 100 then sell it as soon as it hits 105 and then again buy when it comes down or just buy it back at 110 and then sell it off on 115. The downside is sometimes it also goes to 90 or 85. Then what do you do?

4. All in Active trading: For folks who have access to no commission trading due to large account balances, they just keep booking smaller profits  ... kind of like surfing ... or as they say in NFL, keep taking the smaller scores by rushing 10 yards at a time. Once in a while, you will get the good stock with a definitive edge and then you ride it.

Most people do a combination of all this. Big people mistakes too. Berkshire did such mistake with COP shares. What do you do once you realize there is a mistake. Swallow pride, book losses, and harvest the losses by reporting them as tax loss? Tax loss harvesting is pretty much point where you have given up on your own convictions about the particular stock that you are holding. One could of course buy the same stock at lower price and hold it. But like a complicated interstate freeway system, you also have an option to renew this money and invest it in fresh, new stocks and then see it go further. 

Point is do not get tied up to any of the above or any  other philosophy out there. In the finance world, the king is the cash. The bank which is pretty much printing the cash is the king. So have plenty of cash handy. Remaining everything is just commodity. Whether you, your company, your idea or project or product or service or group or inventory of commodities and a massive group of resources are nothing but commodities. In a way, having some unemotional bond towards your investment is a good strategy to co-opt. Patience is a good ally.

Laying groundwork

The world of finance is really confusing from outside. But really it is just human beings like you and me on the inside. They have their own flaws, notions, ideas, homogeneity, cohesion and apply to the basic nature or the general human nature. Really, it is one window or view of the state of the human society. In a way, it is just an amazing picture of the kind of things that happen in the world. It is definitely a worldly thing, a materialistic thing but then rather than dig deeply into philosophical aspect of thing, let me tell that there is nothing spiritualistic or philanthropic about such things. In the grand scheme of things, money buys time and is an essential thing is today's society. But one has to be just careful to consider the costs of acquiring and investing said money. Hence, we would discard the illegal investments even if they were to return us higher return of investments :D.

As previously said, at this point of time, we will also not pursue much on Forex and Derivatives. Both are instruments for the very very big investors with more than a billion to invest and with heavy amount of disposable liquidity like governments and agencies. So sticking to just stocks and bonds, debts, the main instruments that are available are your friendly credit unions, CDs and savings accounts, investing in real estate thru your home and rentals, stocks, bonds thru brokerages and mutual fund companies. It is imperative to have some sort of accounts with the Vanguards, Schwab or TD Ameritrades. Many offer to trade their own ETFs or mutual funds for free. Have some accounts opened under your name for the IRAs - Traditional and Roth; 401ks, Simple IRAs, Rollover IRAs as soon as you leave your job to the next one, 529s, HSAs and general taxable accounts. Now all the big hitters or rather the funds that you think will appreciate well such as REITs, stocks etc will stay in tax-advantaged accounts such as IRAs while the slow growers stay in taxable account. That way you are not holding off a big bill come tax time.

So don't overthink such things, just open some accounts. Practice with some play money and maybe put 5000 USD in couple of them and buy basic, brand name stocks from DOW Jones Index. This will give you a feel about the funds. It is just like driving your car and getting a grip. You need the first car drive to be smooth and you take in simple places and in a predictable fashion. Explore your own mentality and feelings and emotional level, risk feel etc. Don't take this as a be all end all. You change. The market will change you. Time always changes human beings. There will be a lot of learnings ahead telling no active management or active trading and just stick to index funds. Now, everyone start putting in index funds, the market will become inefficient by definition. Maybe, come up with your own index. Along the way, you might not agree with some companies - don't agree with them on environmental policies, their strategies and goals, their growth practices and the way they are, the stories and associations you have with them. For instance, if you are in the computer industry, many folks like Linux and dislike a Microsoft or Apple. No matter what or how much return is, one might not invest in them. Which is fine. Invest what you are comfortable with. Your principles and you matter. Money is just an extension. Similarly it is perfectly fine for individuals who slug it out in the private sector and not have the security and buffer or pension from those in the public sector to crave some security and instead want to put money in cash or just CDs. Totally fine and this is what the point of this blog is. It is not just another money blog. It is not another finance blog. Those info will be always available in government sites and whole tons of other blogs. This is about finance philosophy and how that drives what we invest and where we invest and what stocks we invest and what strategies we follow. 

My approach for the accounts are rather have a sprawling set of them than having one shop for all your investing needs. Some names that are quite common in the trading world are the Tradeking, zecco, TD Ameritrade, ETrade. I have been exploring the Level 3 which helps you buy fractional shares of brand names companies. Similarly, there is no harm in opening multiple types of accounts especially at the time of this writing when we have 0% savings rate for about 5 years running now. For most part, the online savings etc. give minimal APY in the US where the liquidity is available in plenty for the businesses.

Some Basics ...

There are tons of info on the types of accounts out there. So I will simply blaze thru them fast assuming you have read some of those, visited some websites, wikis such as those related to Vanguard, Fidelity, Boggle heads and about 10 big books speaking 10 different philosophies each of which are cornerstone of a major market like the US ones. Dont get too bothered on the semantics like NYSE or NASDAQ or any such stock exchanges - they are just places - electronic or offline where money changes hands. I will also steer away from Futures - I think they are pretty close to the gambling tendencies such as betting and contemplating rather than making an informed guess. Fundamentally there is a component where the outcome is manipulated or follow inconsistencies beyond what would constitute as investing or banking one's hard-earned money. Options are fair game and can be used as a risk management or hedging tool. But right now, I am steering away  from Options too as I think they also have a betting component. There is a certain detached action associated with investing in such instruments or derivatives or similar kind investments. They also come in various forms presented to the naive investor in the form of Inverse ETFs or similar stuff. 

Bottom line: I look at the debt model. I loan a company, a product or a project some money and expect timely interest payments and full payment on principle after certain years. Similar to what your local credit unions does. Now, add an ownership component and you have stocks. So basically I will focus on stocks and bonds, mutual funds and ETFs. I used to actively trade once upon a time. There is simply not too much for a retail investor to make in this route. Yeah, I did have about 20% + returns at times but I think one is better off this is a strategy that is applied when there is large-scale amount in picture. Also, most big managers or hedge fund folks that capture imagination of 20s and 30s are essentially people who are making money off the fees rather than hitting a homerun. The money in most developed market like US is saturated and you have recent IPOs who might have a real world evaluation of 20s but are propelled by big players to keep them in 60s by actively buying off pools of shares. Of course, some MBA from Harvard will try to put a noun and spin on it so that it is not known as manipulation. Those stuff aside, without getting overwhelmed by lot of stuff from the finance bling bling world, the  most important things to consider are the writings of Warren Buffet in his annual letter. The archives are there in the Berkshire website for free download. A bunch of books like the "Random walk down the wall street" or some study showing that the monkeys make better fund managers. Must read for any one, beginner or veteran needing a constant reinforcement in their beliefs is the writings of John Boggle of Vanguard. I will go over their philosophies and differences in subsequent posts.

About and stuff ...

Pretty much everything about this site, the legal stuff, disclosures and disclaimers, any affiliates or legalities, any thing is derived from its sister blog: https://creditcardsteroids.wordpress.com

I wanted to combine all this into one blog but from a reader perspective it makes sense to just break them down rather than have one large blog, just like any other blog out there and have multiple tabs or links in them. It is much neater design to have separate blogs. It would lead to some more time management at my end. Some more sporadic or rather sprawling collection of contents but I guess it would be all inter linked and loosely coupled so in a way, it would be like small boxes of peaches of different varieties and one tries different stuff. All the views here are my own and more in line with my own thinking related to the investment world and more on the world of finance itself. For credits cards , I have the other blogs and if anything else catches my interest in future, I would take them in here or a different blog. I definitely want to dabble in Music or some other Art form. Art is cool and gives a different perspective to Math and Science and a well-developed balanced brain requires all three of them in varying measures throughout life.

Personal Capital - Few Thoughts

Recently, I was exploring some tools similar to Mint, YNAB or any software which helps me give varied views of my financial landscape. The thing is I like to rotate them and put them in various sites for fear that if one site has all the data and for what-so-ever reasons the site security gets compromised, then you are in for a ride. That is one of the primary reasons why I created multiple accounts with the likes of mints/yoddlee or something that is preferably away from the big companies.

A new site which caught my eye is Person Capital. It is a San Fran based start-up and the site is pretty impressive and very easy to understand and operate. There are no unnecessary clutter and "tools" on the website. It is pretty neat and elegant design. I liked the speed of the site and the overall value it provides in terms of reminder emails as well as fresh articles in their blogroll.

Further, any such site will have their value measured by the database of third-party banks with which they integrate and how fast they do that. I hate PayPal for this particular reason that their integration features are from the last century. In that respect, Personal Capital integrated with many banks and financial institutions with elan and ease. I threw obscure credit unions, big banks, investment accounts, insurance companies, mortgage accounts and even an odd international bank to boot with not many local branches. So, having passed all the test, I have referred it to a few of my friend and colleagues, who gladly signed up for their services. In case, anyone here is interested, here is the link: http://refer.personalcapital.com/share/k3w6m
It is a slight departure from the usual credit card centric theme of this blog but oh well, it is just an odd post before I get my other blog running related to the money matters.