November 28, 2012

Today in class we had to finish stage one and start on stage two of our real life project. Since my apartment is actually already furnished, I didn't really have to worry about that. I did have to find, however, the electricity, phone, and internet costs. I found a website (this one) which lets you type in your zip code and find companies that offer services around you. So for the phone bill I found that at&t offered a plan for $24 a month which includes unlimited local calling. For the internet I found that at&t also offered an internet plan for  $19.95 a month. I also found that most of the electricity in San Jose is provided by the Pacific Gas and Electric Co., but their rates differ depending on how much electricity is used. So I searched for the average amount on electricity bills in that city and found that it is about $129 (Source), but I think it might be lower because I'll be living with a room mate and we might not use that much. Also, on that website it said that the average monthly amount spent on food is $116. I also had to think about home savings and I decided that I would save about 25% of my income which is around $800 every month.

November 26, 2012

For my real life project I decided to major in marketing in a university in California, probably University of California Los Angeles or University of California Berkeley. After searching for the starting salary on Google, I found a website which does salary surveys every once in a while, and I found one from September of this year which said that the average starting salary in marketing is $53,400. (SOURCE)
I then Googled for an income tax calculator and I found one here. This calculator included the federal tax rate, the social security tax, and the medicare tax. So for the calculator I had to find the state tax rate, and since I decided that I was going to live in California, I had to Google the income tax for California which ended up being 9.3%. That ended up leaving me with and after-tax salary of $38,032.52. The image of what it looked like is below:

I then divided my after-tax salary by twelve to represent the months in a year and ended up getting a monthly salary of $3,169.38.
Afterwards, I searched the internet to see what were the best places to get marketing jobs and I found this website. I wanted to live in California because that's where I was born and that's where I lived for the first few years of my life, so it's pretty significant to me. The website said that the number one place to get a job was New York City, but then it said that the second and third best places were in San Jose (where I was born) and San Francisco. So I decided that I would live in San Jose.
After searching for quite a while, I found two apartments that seemed like nice places to live in with a room mate. I wanted a room mate because it seems like it would be a lot easier and because when I looked at studio apartments they would be the same or more in price than half of a normal two bedroom apartment. The first apartment I found was this one which would be $1,755 a month ($877.50 each) and included these things:

The second one I found was this one which would be $1,674 a month ($837 each) and included these things:

So, I thought that the second was would be best because it was cheaper and it seemed to have a lot more. So if I were to share this apartment with a room mate I would spend around 26% of my monthly salary which means that every month I would be left with $2,332.38.

November 20, 2012

Today in class we talked about the future and how it would help us a lot if we started investing at this age so that we could be more prepared. It's always better to start saving earlier because you end up getting more money. So Mr. Hallam made us write how much we would have to make every year to sustain our lifestyle and in how many years we would want to be able to retire. I put $50,000 every year to be able to live comfortably and I put that I wanted to be able to retire in 29 years which would make me 45. Then we used the MoneyChimp calculator and discovered how much we would have to save to be able to achieve that. Mine ended up being about $3,000,0000.

I talked to my father about opening a Vanguard investment account, probably for the retirement fund, and he thinks it's a good idea. He said that we will probably be able to do it during Christmas break. He's really glad I decided to open one because he knows the benefits of saving earlier.

This thanksgiving break I spent quite a lot of money because we had two days off and I took advantage of that to spend time with my friends and most of the time we went shopping.

November 16, 2012

Today in class we watched some of the other groups presentations. We watched them do their projects on the Tulip Bubble, the South Sea Company, and the Vanguard Investment Account opening project. They were all really interesting. Especially since the Tulip bubble and the south sea company bubbles happened so long ago and our project, on the US housing bubble, was based on something more recent. The investment account projects were also really great because they were so detailed and they made me want to open an account for myself.

We were also introduced to our new project which is based on real life. We will have to incorporate a lot of aspects like cars, housing, education, and everything we need for the future. So, I think this will help us a lot.

November 9, 2012

Today in class, we finished researching our project for the Housing Bubble. We also divided the slides between us. We found a page full of psychological effects on people, so we incorporated all of that in our powerpoint. We also got our expenses checked, and mine ended up being around $12,000 in total for the whole year because I added my part of the rent. For our project we also divided the slides into causes which included the bad lending practices, homeowner mania, and  the dotcom bubble, the psychological and toxic asset effects, and prevention.

This weekend I didn't spend very much because the only time I left the house was to dance in the dance show and I didn't really need to spend money for that. But then over the diwali day off, I spent a lot more because I had to buy my little sister a birthday present and I spent a lot of money for the worst dinner of my life when I went out with my friends.

November 7, 2012

Today in class we learned that we shouldn't pay sales commissions for funds because you lose a lot of money from it. In a taxable or non-taxable account, the lower the expense ratio, the higher the probability of high performance. This is because funds which have succeeded in the past usually don't usually succeed in the future. And you usually end up having to pay a lot in the end. Also, you should never touch funds with load fees, so if you compare different funds and one of them has load fees and the other doesn't, it would be better to go with the one with none. To check the expenses of funds, the best website to use would be morningstar.com. In class, we compared fidelity, Franklin, JP Morgan, and Vanguard for their small cap, large cap, and balanced funds. A website that affirms these things is http://www.cbsnews.com/8301-505123_162-37640470/the-best-predictor-of-future-fund-performance/ .


I read Tamara's Latest Blog Post and I realised that I had missed out the fact that "The other plus side to the low expense ratio is usually they come with low risk and made on average 1% more than high expense ratio funds." in my blog post. 

November 5, 2012

Today in class we learned about small cap stock indexes, mid cap stock indexes, and large cap stock indexes. Small cap stock indexes are comprised of small companies, mid cap stock indexes are an index of middle sized companies, and large cap stock indexes are made up of large companies who are part of the S&P 500. Also cap stands for capitalization. There are also many different types of funds. Value funds find and buy cheap stocks for their fund which aren't doing very well and with low recent returns. They do this because they see potential. Growth funds usually buy stock from companies with fast growing profits. Value funds usually outperform growth funds by getting better returns. Balanced funds are basically made up of 60% stocks and 40% bonds; they also rebalance every year. Target retirement funds are similar to balanced funds except that they change over time by gradually increasing their bond percentage over time. They also invest in the US stock market, the international stock market, and the bond market. Another type of fund that exists is the commodity fund which invests in commodities such as grain, oil, gas, and gold. Real estate income trust funds own certain buildings like malls or blocks. We also learned that the cheaper the active fund, the higher the probability for it's success.

I went to Patti's blog post for November 1 and found the savings blog she found really interesting. I've always really liked websites that show DIY crafts you can do and this blog shows you how to do it affordable which is really cool. I also think it's really great that the owner of this blog is willing to share her story and tips for other people who are trying to save.

November 1, 2012

Today in class we took a quiz on what we learned last class. We had to answer questions about the two reasons why people don't get very much money when they invest. The first reason is human behaviour; they let their emotions dictate their decisions, and the second is fees. We also had to remember the percentages of what the market made and what the average investor made in the US stock market and the bond market. The US 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%. With the data it seems that investors aren't reaching the full potential of what they can earn. Thankfully, I got all the answers right. Also, we discussed Mr. Hallam's article about how people working here need to start saving because they don't have social security and apparently it caused a lot of anger.

For our project, we're doing the US Housing Bubble option. We were having a bit of trouble finding the emotional ways it affected people; it seems like all that is on the internet is how it affected the real estate market or the economy. We knew that obviously people got upset, but we wanted to get actual stories from individuals. I found this website which is called How Did the Housing Bubble Hit all of America?  and although it doesn't show the emotional effects, it shows more unemployment which probably affected families and made things harder for them. So, we can probably use information like that to infer people's feelings.

I read Patti's blog post from October 30th and I found the quote from Warren Buffet she posted to be very interesting. It was "Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." It means that anyone can invest, but you just can't let your emotions make decisions for you.