How did the stock market do last week (August 22-26, 2016)?

Last week, August 22-26, 2016, was a rough week for the stock market and all indexes, including bonds. All stock market indexes ended the week down and the Fed’s speech from Jackson Hole, Wyoming hinted at raising rates sooner than market expectations. Next week the August jobs report will be released, which should impact the Federal Reserve’s looming rate decision.

Last Week’s Stock and Bond Index Performance (August 22-26, 2016)

  • NASDAQ -0.4% (YTD 4.2%)
  • Dow Jones Industrial Average -0.8% (YTD 5.6%)
  • S&P 500 Index -0.7% (YTD 6.1%)
  • U.S. Aggregate Bond Index -0.1% (YTD 5.4%)



How did my retirement portfolio perform last week (August 22-26, 2016)?

Below is a snapshot of my three biggest retirement portfolio movers in terms of percentage lost last week. Everything in my portfolio was down!

The below funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard REIT Index Fund (VGSLX) -0.9%
  2. Vanguard Target Retirement Fund 2040 (VFORX) -0.6%
  3. Vanguard Small-Cap Value Index Fund (VSIAX) -0.3%

Year-to-date my retirement portfolio is up 8.6%. I am my own portfolio manager. I don’t have help from a certified financial planner. I was a liberal arts major and I do all my own research on investing. My philosophy is to use low-cost index funds and its been working for me for a decade.

Mint.com Budgeting Review

Mint.com is a free budgeting software that assists you in managing your money and getting your personal finances in order. The online software and/or app allows you to log in to one place (Mint.com) to track all your accounts, transactions and expenses.

I personally have been using Mint.com for my family’s budgeting and personal finance management since 2013. In a nutshell the software has saved my family right around $400 a month.

How does Mint.com work?

Once you create an account on Mint.com you simply connect all of your personal accounts such as banking, credit cards, student loans, car loans, and your mortgage. You may also connect to your brokerage or other savings accounts such as retirement, stocks and HSA accounts.

You then add your assets, which for most everyone is their car and house (in addition to your retirement, brokerages and savings accounts). It then pulls each assets value from a reputable third party source; your home property estimate is pulled via Zillow and your cars appraised value from Kelly Blue Book (KBB.com)

You’ll want to be sure to add any account where you have debts/loans and money because the software will then process all of your debts and subtract those from your assets to give you a personal ‘Net Worth’.

What does Mint.com track?

Once you’ve input ALL of your accounts, the software begins to pull all of your transaction history. All of it. This allows you and Mint.com to categorize where all of your spending habits are. Just how much do you spend per month at the grocery store, or dinning out, on coffee, shopping, at Home Depot, at the bars, etc. The results are probably going to be shocking! You will get a monthly average for you as well as nationally to see how you compare. You’re not ready for budget cuts just yet. Sit tight, more on that later.



One thing to note, at first the transactions need a bit of TLC that gets better over time. For example, you may have a restaurant transaction that appears under sporting goods simply because of the merchant account from that restaurant. So you have to re-categorize it now and store that for all future transactions. So you do have to monitor your transactions periodically, as you should anyways.

You also track your income. So you can flag/categorize all your work checks/deposits as ‘Income’ as well as personal checks if you’re self employed and cash checks virtually every other day. This allows you to track and compare all debits (transactions) vs credits (income) to see where you are each month. Obviously you ought to be in the black and spending well less than you make! That’s the ultimate goal we all strive for which leads to building wealth.

What is so great about Mint.com?

The single greatest feature about Mint.com has to be the ‘Net Income’ feature. As just stated in the above section, all of your debits (transactions) and credits (income) are tracked. Once you have that on cruise control you have a laser accurate breakdown of your monthly spending vs what you’re actually making and bringing in. It’s very eye opening.

You may be thinking to yourself that you do fairly well and make decent money, and feel as if your spending is under control. But for some reason your just not making up ground fast enough on your goals, whether that be paying off debt or saving for something really important like a house or retirement. The Net Income graph is what breaks it down for you very easily. What did I spend last month and how much did I earn? You may find out you are spending more, possibly A LOT more than you actually make. This is when you find out where in your monthly budget and spending you have to make cuts. Some may be more drastic than others but they are all for the betterment of your personal finances.

Is Mint.com safe and secure?

Yes, to answer that in its simplest form. I’ve been using Mint.com for years with zero issues thus far. All of your account info is stored in a separate database using multi-layered hardware and software encryption. I shouldn’t have to tell you that nothing is bulletproof, I mean Target has been hacked before so anything is possible in the interwebs.

Is Mint.com free?

Mint.com is a free service with zero charges. They will market to relevant money offers from third parties, which is how they make their money, e.g. a commission from each sign up. For example a low or no interest credit card add may appear for you or a IRA retirement rollover account option. The ads really aren’t as inconvenient as they may sound. They are actually light in quantity and not a deterrent at all.

Would you recommend Mint.com?

Overall I would give Mint.com a 4 out of 5 and I would absolutely refer it to a friend (hey, that’s what I’m doing right here with this blog post!). After all the single greatest endorsement a company can ask for is an unsolicited endorsement, which is exactly what I am doing because I do like and recommend you all use Mint.com for your budgeting and personal finances. It’s worked wonders for me and my family.



Millennials Say No to Credit Cards

Below is a list of some of my favorite money/personal finance articles from this past week. I’ve sifted through boat loads of articles on money, retirement, personal fiance, budgeting, paying off debt, and buying a home.

All of the below articles are highly relevant to the Millennial generation (Gen Y) and their money. Knowledge is power, and you are your single greatest investment, so continue to educate yourself on money and personal finances right here on this very blog so you can one day become financially independent.

This week’s best articles on money and personal finances, specifically for Millennials



How Millennials Became Spooked by Credit Cards

Data from the Federal Reserve indicates that the percentage of Americans under 35 (Millennials) who hold credit card debt has fallen to its lowest level since 1989, when the Fed began collecting data in a standardized way, according to an analysis by The New York Times. (The New York Times)

1 thing all Millennials have to do to retire: Get into stocks

Earlier this year, Stash, an investment app-based company that helps Millennials with their investment choices, commissioned a study to learn a bit more about what Millennials are doing for retirement. Harris, which conducted the study by interviewing 489 Millennials between the ages of 18 and 34 in March, found one striking similarity among Millennials: Nearly four in five (79%) Millennials weren’t currently invested in the stock market. (The Motley Fool)

Charles Schwab’s new target-date mutual funds beat out Fidelity and Vanguard funds in price by two basis points

Charles Schwab Corp. has upped the ante in the push to be the lowest-cost provider of target-date retirement funds, launching a new series of target-dated mutual funds on Thursday that edge out Vanguard Group and Fidelity Investments to claim the title as cheapest on the market to date. (Investment News)

The 401(k) Is Wreaking Havoc on Retirement

Workers with college degrees aren’t only far more likely to hold jobs that offer retirement plans. When offered the plans, they’re also far more likely to sign up and to contribute enough to retire comfortably. (Yahoo! Finance)

Millennials are freaking out about retirement — but not doing much about it

Young workers today probably can’t even think about retiring for 40 or 50 years. Longer lives and the prospect of weaker investment returns mean millennials will probably have to save more money, over a longer period of time, than their parents and grandparents. And the earlier they start saving, the easier it will be to accumulate a nice nest egg.Yet it’s not easy to sacrifice now for something that won’t happen until the 2060s. When millennials are asked, they say retirement is a top priority. In a recent Charles Schwab survey, retirement was by far the first concern of all age groups. (Investment News)

How Volatility Can Work in Your Favor

Going back to the late-1980s, emerging markets have exhibited over 60% higher volatility in monthly returns than the S&P 500. Small cap stocks, as measured by the Russell 2000, have also shown more volatility than the S&P (around 30% higher). (A Wealth of Common Sense)

How to Invest Your Way to $1 Million

Building wealth isn’t just about strategy; it’s about having the right mind-set. Sarah Fallaw, founder of DataPoints, a behavioral finance research firm that analyzes wealth potential, says the four key traits to making money are frugality, confidence, responsibility, and social indifference—that is, the strength to avoid fads. (Money)

Happy reading, my fellow Millennials.

What is dollar-cost averaging?

Dollar-cost averaging is paramount to perform properly, and understand, when it comes to investing for your retirement. The definition of dollar-cost averaging is rather simple. It’s merely investing a fixed amount of money on a regular basis into the market, regardless of the share price.

The last part of that is vital. Invest into the market despite the share price, e.g. do not try and time the market and predict its ups and downs. Anyone who thinks they can is fooling themselves (and you!). You need to just invest. Invest regularly. If the market goes up, keep investing, because the market should continue to rise over the long term. If the market drops, drastically or mildly, continue to invest because you just bought shares on sale! You have to keep at it and continue to invest for your retirement via dollar-cost averaging.

For example, I have a set percentage of my paycheck that comes out every two weeks and goes into my employer sponsored 401(k) plan. To take dollar-cost averaging one step further, I actually invest into a Vanguard Roth IRA on the weeks I don’t get paid. So I personally buy into the market every single week via dollar-cost averaging.

My wife is independent and has her own business. We max out a Vanguard Roth IRA for her personally by making a set investment each and every month so we meet the contribution limit for a Roth IRA of $5,500.

Find your appropriate asset allocation, and for Millennials I strongly suggest you be aggressive because you have time on your side, and invest at least every month. If you can, invest bi-weekly, if not weekly and continue to invest into the stock market via dollar-cost averaging.

If you have a lump sum to invest into the market, that’s fantastic. Invest it as soon as you can. But don’t consider yourself done once you do that. Your lump sum investment should be done in addition to your dollar-cost averaging investment strategy.



How did the stock market do last week (August 15-19, 2016)?

Last week, August 15-19, 2016, the market set record highs on Monday, but ended the week flat. The Fed also hinted that it is still considering a possible rate hike in September or December.

Last Week’s Stock and Bond Index Performance (August 15-19, 2016)

  • NASDAQ 0.1% (YTD 4.6%)
  • Dow Jones Industrial Average -0.1% (YTD 6.5%)
  • S&P 500 Index 0.0% (YTD 6.8%)
  • U.S. Aggregate Bond Index -0.1% (YTD 5.6%)



How did my retirement portfolio perform last week (August 15-19, 2016)?

Below is a snapshot of my three biggest retirement portfolio movers in terms of percentage gained last week.

The below funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard Small-Cap Value Index Fund (VSIAX) 0.6%
  2. Vanguard Extended Market Index Fund (VEXAX) 0.3%
  3. Vanguard Target Retirement Fund 2040 (VFORX) 0.1%

Year-to-date my retirement portfolio is up 9.1%. I am my own portfolio manager. I don’t have help from a certified financial planner. I was a liberal arts major and I do all my own research on investing. My philosophy is to use low-cost index funds and its been working for me for a decade.

How did the stock market do last week (August 8-12, 2016)?

Last week, August 8-12, 2016, the market set record highs on Thursday due to strong earnings reports from numerous large retailers, as well as higher oil prices. Investors responded well to both of these. On top of that, nearly 70% of the S&P 500 beat earnings estimates.

Last Week’s Stock and Bond Index Performance (August 8-12, 2016)

  • NASDAQ 0.2% (YTD 4.5%)
  • Dow Jones Industrial Average 0.2% (YTD 6.6%)
  • S&P 500 Index 0.1% (YTD 6.9%)
  • U.S. Aggregate Bond Index 0.4% (YTD 5.4%)



How did my retirement portfolio perform last week (August 8-12, 2016)?

Below is a snapshot of my three biggest retirement portfolio movers in terms of percentage gained last week.

The below funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard Target Retirement Fund 2040 (VFORX) 0.8%
  2. Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 0.6%
  3. Vanguard 500 Index Fund (VFIAX) 0.1%

Year-to-date my retirement portfolio is up 9.1%, which means I am beating the market by 2.5% so far this year. I am my own portfolio manager. I don’t have help from a certified financial planner. I was a liberal arts major and I do all my own research on investing. My philosophy is to use low-cost index funds and its been working for me for a decade.

Bonds Aren’t as Wretched an Investment as They Seem

By Jason Zweig / MoneyBeat – Wall Street Journal Blog

Why do so many bond investors feel nostalgic for the days when yields were negative (after inflation)?

With bonds producing near-record-low levels of income worldwide, there’s never been a worse time to invest in government and corporate debt. You earn next to nothing now and, if interest rates finally rise, you will get clobbered later.

That’s the conventional wisdom, and it’s wrong.

With 10-year U.S. Treasury securities yielding just under 1.6%, a $10,000 investment produces a paltry $158 in annual interest income. But, properly measured, the returns on bonds are higher than they have often been in the past. And, for many bond investors, rising rates will turn out to be a blessing, not a curse. Finally, even if yields go lower from here, bonds will still provide valuable insurance against losses in the rest of your portfolio.

With bonds, as with all investments, what counts isn’t how much you earn but how much you keep. That 1.5% return on the 10-year Treasury is nominal — literally, “in name only” — because it doesn’t account for how inflation erodes the purchasing power of your interest income over time. By subtracting any increases in the Consumer Price Index from the nominal yield, you arrive at what’s called the real yield — how much income you keep after inflation.

With the CPI up at a 1% annual rate,  you are earning a real yield of 0.5%.

You shouldn’t jump for joy at that. But don’t let anybody tell you the return on bonds is so much lower than in the past that they aren’t worth owning at all anymore.

Let’s think back to 2011, when nominal 10-year Treasury yields were just under 2.8% — nearly double today’s rate. But inflation ran at 3% in 2011, so the real yield was negative. U.S. bonds have had negative real yields in almost one out of six years since 1800, according to Harvard University economist Carmen Reinhart.

Why, then, do so many bond investors feel nostalgic for the days when yields were negative after inflation, while they feel cheated by today’s marginally positive real income?

Blame the “money illusion.”

The term was coined by Irving Fisher, an economist at Yale University, in his 1928 book of the same name. Fisher defined it as “the failure to perceive that the dollar, or any other unit of money, expands or shrinks in value.”

In the money illusion, nominal figures jump out more vividly than real numbers.

Would you rather receive a 2% yearly raise when inflation is running at 4% annually, or a 2% pay cut when inflation is nonexistent? Either way, you keep only 98 cents on the dollar after adjusting for its purchasing power. But the 2% raise, even though it is less than the increase in the cost of living, makes you feel better; that nominal gain distracts you from the real loss.

A nominal pay cut feels like a direct insult or injury, while calculating the real rate takes an extra mental step.

In a classic experiment, people were asked who would be happier: someone who got a 2% yearly raise when inflation was zero or someone who got a 5% raise when inflation was 4%.

In real terms, the first person is 2% better off, while the second earns only 1% more than before. Nevertheless, two-thirds of those surveyed said the person with the 5% raise would be happier and less likely to accept a job offer from a competing firm.

The 5% is simply a bigger number than the 2%. So it feels like a greater reward, even though inflation eats up more of it.

Bear that in mind when you find yourself pining for the good old days of higher bond yields. Many of those days were worse than today.

And what if interest rates rise?

The Barclays U.S. Aggregate Bond Index, a measure of the fixed-income market, would immediately go down in price by about 5.5% for each one-percentage-point rise in rates.

But when rates rise, you can reinvest your income steadily over time in new bonds with higher yields. So long as inflation remains moderate, the ability to reinvest at newly higher rates will ultimately raise your yield, not lower it.

Still, many long-term bonds would lose 20% or more in only a one-point rate rise. “Investors should be prepared for increased volatility and greater losses than they’re accustomed to,” says Gemma Wright-Casparius, a fixed-income portfolio manager at Vanguard Group. “People think they’re immune from that, but they’re not.”

Fortunately, only about 6% of the $85 billion that has flowed into taxable-bond funds this year has gone into long-term portfolios, estimates the research firm Morningstar. Such risky funds are only for folks who find roller coasters relaxing.

The generation-long bull market in bonds is probably drawing to a close. But high-quality bonds are still the safest way to counteract the risk of holding stocks, as this year’s returns for both assets have shown. Even at today’s emaciated yields, bonds are still worth owning.

By Jason Zweig / MoneyBeat – Wall Street Journal Blog

Put a Dent in Your Student Debt: 9 Summer Saving Ideas

By Amanda Wood / SoFi

In between mixing the tastiest margarita and chilling out on the perfect pool float, make a go of a student loan strategy that even the laziest summer schedule can handle.

Accelerating student loan payoff: a primer

Before we get into the tips, it helps to understand the two main levers that speed up loan payoff: prepaying (paying more than the monthly minimum) and reducing your interest rate through refinancing. By doing either of these things, you can pay off student loans soonerand save money on interest. Do both, and you’ll soak up even more benefits.

Move to bi-weekly payments. Paying one-half of your loan payment every other week instead of a full payment once per month is a commonly used mortgage strategy, but it works just as well for student loans. Bi-weekly payments add up to one extra monthly payment each year. For example, let’s say you have a $50,000 student loan at a 6% interest rate and 10-year term. Making the monthly minimum payment of $555.10 would cost you $16,612.30 in interest over the life of the loan. Split that into bi-weekly payments of $277.55, and your total interest goes down by almost $2,000—savings that can go a long way to funding the ultimate summer trip.

Read the full article ‘Put a Dent in Your Student Debt: 9 Summer Saving Ideas’ by Amanda Wood of SoFi