August 29, 2012

Apparently women are better investors than men, which is odd because I thought that it would be the other way around. In my family, my mother manages the finances because, according to my father, she somehow always manages to make good decisions while he messes them all up. I guess it would have to do with the fact that men are very prideful and don't ask questions, also women are generally more meticulous in everything they do, so they are less likely to take risks or make a decision without being well-informed. It might just be "woman's intuition".

Looking at my personal expenses, I realized that I don't actually spend that much money. During the week, I don't really buy food or anything because I bring my own to school. During the weekend, I spend money when I go out with my friends on food and random things. Usually, during the weekend I spend less than $50. Also, my mother makes me save money every three months, so usually I think about how much money I have left before I spend it. Having to write down everything I buy also affects how much I spend.

I read the Couch Potato Crush Hedge Funds article and found out that hedge funds aren't usually successful and the people who invest in them don't usually make very much money. The Couch Potato portfolio, on the other hand, has been generating a lot of profit and has beaten the average hedge fund for the past ten years.

August 27, 2012

                There are two different types of investing camps: passive and active. There are two types of active investor camps: actively managed mutual funds and individuals who buy their own stock. Some people go to financial advisors who then invest their money in a bunch of actively managed mutual funds who then buy and sell stocks for said fund. The funds have costs associated with them, usually like a sales fee or commission.  The second type of active investor is the individual who buys his own stock. His stocks are usually less diversified and they compete with full time professional traders. Passive investors own virtually every stock on the market and passive funds usually charge significantly less than active funds.

                I personally think that in the long term it would be better to invest in passive funds rather than active ones because there is less risk because active funds aren’t always successful. My dad agreed with me. He said that he once invested in an active fund and immediately regretted it because it wasn’t a very good one. When I researched this topic, I found that people involved with passive funds think its better and the ones who are involved with active funds think that's better. The only difference is that investing in active funds is riskier since active management tries to beat the market and they aren’t usually able to do it.

August 23, 2012

                  There are two ways the stock market gives profits: share price increases so that you can sell it for more than what you paid for, and through the dividend payouts. When a company is doing successfully, the stock price increases. Profit and company growth are what makes it successful. Long term, there’s a direct correlation between a company’s profits and its share price. Growth investors buy high sell and sell high, value investors buy cheap and sell high. Value investors usually end up getting more profit over time. Emotions are what make stock prices move short term. Profit makes them move long term. 

August 21, 2012

                My father told me that when Apple stocks were extremely cheap, my mother wanted to buy them, but then she decided not to because she didn’t think the company was going anywhere. Now she really regrets it because it’s incredibly successful. My parents have bought a few houses in the United States, and one of them is in Colorado Springs. This summer, during the forest fires, my parents were scared that we would lose it, but it ended up okay.  In class we learned that it’s safer to buy complexes because then you always have a tenant and you always are getting profit. If you were to buy a house, there is a chance that you wouldn’t have someone renting it out, thus getting you no profit. Also we learned that the number one rule of finance is to not let credit card companies make money from you.

August 16, 2012

                Apparently most people follow market patterns when they invest money. If the market rises they usually start investing more money into it, and when it goes down, they usually invest less money. The problem with this is that they lose money because they usually sell at a price lower than what they originally bought it for. So, the smart thing to do would be to take advantage of when the market is doing very badly so that you can buy a lot more for very cheap. Later on, when the market is doing a lot better, you will be able to sell it for a lot more than what you bought it for and you will be able to make a profit. Unfortunately, because of this, a lot of people don’t get the maximum profit out of their investments. It would be wisest to just keep investing the same amount of money into a company each month. When you invest a lot of money when the market is doing well, then you are taking a big risk because it is very unlikely that you will be able to sell that later on for a lot more.

                Some people take advantage of the bad real estate market to buy lots of homes because then they can rent it out to people who will pretty much pay their mortgage and later on, after a few years, there’s a chance that the market will get better and they will be able to sell the house for a lot more.

August 14, 2012

                      I was quite shocked to learn that you can spend a lot of your money on whatever you like and still be able to end up with a high amount saved up. A part of that depends on when you start saving. When you start saving small amounts early, it can eventually accumulate to a large amount of money and you can do it while being able to buy what you want. Also, using the Compound Interest Calendar I learned that the interest rate affects your future value dramatically. When it is higher you earn a lot more and even a small two percent difference in the interest rate can drastically alter what you end up with. An example of this would be if you had an annual addition of $10,000 with 40 years to grow and an 8% interest rate you would earn a total of $2,797,810.40. If you were to only change the interest rate and make it 10%, you would earn $4,868,518.11 which is around two million dollars more. When I talked to my dad about this he was incredibly proud of me and was ecstatic that I was taking a class that would help me in the future when I’m more independent.

                We also talked about when it’s the right time for parents to teach their kids about money. I personally feel pretty blessed because my mother has been trying to get us into the habit of slowly saving up money. Every three months she makes my sisters and I put in about $600 dollars in our own personal bank accounts. I think this system has made me be more careful with my money since it forces me to ask myself if I really need something before I buy it.