October 30, 2012

Today in class we learned about the market in the past 20 years. We saw a graph which showed the average percent returned for the markets and the individual investors. The stock market made 9.14% while individual investors in the stock market made 3.83%. The bond market made 6.89% while individual investors in the bond market made 1.81%. This makes it seem like the individual investors aren't really reaching their full potential. Why is there such a great difference between how much the market made and how individual investors made. There are two reasons why they aren't exactly investing their money very well. One reason is the fees they have to pay when their money into things like actively managed funds. The second reason is human behavior; people tend to allow their emotions to make  decisions for them so sometimes, for example, they will buy stocks when they are more expensive instead of buying them when they are cheap. By doing that they make it difficult to make a good profit out of it.

I thought to my father briefly about this and he wasn't really that surprised that there was such a big gap, but that was because he had already known about it. He thought it was really sad, however, that the average person doesn't really get very much money because of bad investments. He says he would be one of those people because he is absolutely horrible at dealing with finances. He also figures that if they invest wisely, they can definitely earn more. But since he's bad with finances, instead of him worrying about them, he makes my mother take care of them.

During the October break I spent a lot of money because I hung out with my friends quite a bit. So, I ended up spending like over $100.

October 16, 2012

Today we got assigned a new project. My group consists of Tamara, Charles, and I. We could choose from opening an investment account, the tulip bulb craze, the dot com bubble, the US housing bubble, and the south sea bubble. We chose to do the US Housing Bubble project. We have to find the causes, history, the psychological effect, and how we can prevent it in the future. So far we have found the causes which also kind of relate to the history. Some of the causes were that too many people with too little money were owning lots of homes, mortgage fraud, people were invested in high price real estate, there were bad money lending practices going on, and the interest rate was low. So basically, loans were being given out way too freely to people without enough money to buy homes, so people were in debt. People were also rushing out to buy lots of homes, especially high priced ones which weren't very good investments. The home ownership increased from 64% in 1994 to 69.2% in 2004. I think we still need to research more so that we can get more facts and go more in depth into the causes. We also need to get the psychological effect on people, and how to prevent it in the future.

We also discussed opening an investment account with Vanguard and Mr. Hallam mentioned that you could open one by investing $1000. I was curious to see if my parents would actually give me the money to start investing right now so I asked my father.  He said that he thought that it's better than spending it on other things. Then he told me to wait a minute while he did a bit of research and then he told me that it would be a good idea. He said that they had many different investment options available, and that if I wanted to open one I would have to do all the research on my own and he would only help me if it was absolutely necessary so that I could learn to do things myself. Also, he thinks it's a good idea because it will save money that I can use in the future after I graduate from college and it will help me learn more about investing and saving my money. I would also be able to use that money later on to pay for a house or at least a down payment.

I think this fall break I will probably spend more money than I usually do because I will be spending all of it here in Singapore, so I will be going out with my friends a lot. Also, I'm getting the new iPhone during the break, so that will be another expense. This week I spent quite a bit because I bought a Polaroid camera for $180 and a birthday present for my friend which was $52.

October 12, 2012

Today in class we presented our Car Opportunity Cost project. I think we did very well, except that apparently our last few slides which talked about the opportunity cost weren't very clear. I think we included all the variables we were supposed to for the new, used, and leased car like the oil, brake, and filter changes, the gas price, and the insurance cost. Tanya also made the intro and conclusion interesting by using herself as an example of a college student who needs to get a car, but doesn't know anything about them. So, I think that made the presentation more interesting and relatable. We also looked at the mean comments on finance articles on Global and Mail. Some of them were written by ignorant people, and instead of writing a respectful critique, they were just writing rude comments. So we would thumb those comments down or write replies to them.

October 4, 2012

Today in class we had to work on our car opportunity cost project. We had already finished most of it, but we still had to get the insurance cost. So we searched for a lot and eventually settled for Geico insurance. Using their official website we found out that it would cost $648 every year and $3,240 for five years. Before they found out, we had to input our personal data, however, so we basically made things up and just got the price. I think now the only thing we really have left to do is make a powerpoint so that we can present it to the class on Wednesday.

This weekend I didn't leave the house to work on my art project so I didn't spend any money. I still have to find out what my phone bill is and I still have to add in more groceries to my spendings.

October 2, 2012

Today, for our project, we found that the cost of an oil and filter change is around $27, so for five years it would be about $404.50. We used this website to get our information. We had a bit of trouble with this because there were so many options depending on the type of engine; for example, it would cost double the usual amount if your car used synthetic oil. Since our knowledge on cars is very limited we weren't sure what to choose, so we picked the regular oil change after searching it some more. At first we thought that the oil and filter changes would be included in the warranty for the car because that's what Tamara's mom had said, but when we looked at the Ford website it said it didn't, so the oil and filter changes for both the used and new cars are the same. Mr. Hallam told us that one of his friends, Gerald, leases cars just because he doesn't want to pay for the oil and filter changes. This is ridiculous because you only have to change the oil and filter about three times a year which is only like $81. When we researched the average cost for leasing a Ford Taurus, which was the car we had picked, it was about $6000 dollars per year. After five years it would accumulate into about $30,000. It would be smarter to just buy a car because you could buy a car for less than that. I think leasing would only be for the people who worry about their appearances and feel the need to do so by upgrading their car every couple of years, but can't afford to buy new ones.