Monday, February 4, 2008

Reopened Fund: Dodge and Cox Stock

If you've been lusting to get into one of the best actively managed value mutual funds in the business, now is your chance! A lot of folks are staunch index-only investors, however, if you want to walk a little on the "wild side" and pick an actively managed fund, you won't find a more solid example than D&C Stock. It's been in the business since 1965, and its managers have an average tenure of almost 13 years. Dodge and Cox Stock's expense ratio is a mere 40% of the average for large value funds at 0.52% vs 1.30%. Since expenses cut into your returns, a smaller expense ratio gives you a leg up toward outperforming the competition.

While last year D&C Stock had an approximately 25% turnover ratio, the fund regularly has turnover ratios of <12%, indicating an average holding period of over 8 years. This means that the Stock Fund not only doesn't chase performance, it also makes it a good option in taxable accounts, where high turnover ratios have negative tax implications.

Past results are no prediction of future performance, they say, but the Stock Fund's trailing 20-year average return after expenses and fees is over two points higher than the S&P 500 index, with a Beta of .87 and an 3-year R-squared of 85. In plain English that means $48598.38 more in your pocket after 20 years on $10,000 invested, with less risk than an equivalent, no expenses index fund. Pretty remarkable.

Dodge and Cox Stock's investment in large, well established stocks makes this fund an ideal candidate to be included in your "core" investment strategy. Be aware though, that this fund does have a significant stake (nearly 20%) in foreign stocks, so if you do include it in your portfolio make sure that you don't end up with an oversized bid in foreign equities relative to your target weighting.

Name: Dodge and Cox Stock
Ticker: DODGX
Category: Large Value
Min Investment: $2500 [$1000 for IRA's]
Expense Ratio: 0.52%
Load: No Load

You can see the announcement for the fund's reopening, as well as the Balanced Fund here.

Full Disclosure: I currently own shares of DODGX and DODFX. I am not a financial advisor. Please read the fund prospectus and other information before making any investing decisions.

Data taken from and

Send Troubles to the Ditch: Preparing Before They Get There

President Calvin Coolidge once said: "If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you." One of the surest ways of sending troubles into the ditch is setting up roadblocks before they reach you. Underestimating the impact of planning for the future can have huge implications for the direction your life will take. It is amazing to me how many people act as if life will just come on its own and sweep them off to good fortune and fulfilled goals, not realizing the effort it takes to acheive anything more than mediocrity.

Retirement. Education. Marriage. Buying a house. Having children. The majority of us will have a number of life events for which we can be easily plan and prepare - and most are not purely financial. Marriage, while certainly not devoid of financial aspects (one of the largest reasons for divorce is finances), involves at least as much preparation on the emotional, relational, and spiritual levels. At some point, the day of decision on these matters will come - waiting until that day to begin planning is far to late to make a real impact on the outcome.

Take retirement for example - waiting until you are sixty to start preparing for retirement is woefully inadequate to meet the majority of people's needs. The earlier you start to plan and prepare, the more leverage and control you will have over the outcome. There really are only two solutions for under-planning: Postpone or reduce the size of your goals.

Failing to plan for foreseeable life events is a lot like waiting until the day before your vacation to start preparing for the trip. Suddenly, you realize that you need to pack, get tickets, accomodations, transportation. Typically, you'll spend more. You'll forget items. You'll waste time figuring out what you want to do. You'll add stress. And in the end, even if you manage to go, you won't have nearly as fun or relaxing a time as if you had taken the effort to project into the future a bit.

So start packing your bags: figure out what decisions you are going to need to make in the next 5, 10, or 20 years. Next, figure out what kind of tools or skills you'll need. Maybe it will be a budget. Maybe it will be something like setting aside an evening for a family activity each week. Maybe it means taking some extra classes to improve your job skills. Whatever it is, look ahead, start planning, and send those future troubles into the ditch!

Current Savings Rates: Feb 04, 2008

About 8 months ago I posted about some of the online high-yield rates being offered. Since then, FNBO Direct's promotional 6.00% rate ended, and perhaps more importantly, the Federal Reserve has dropped the key federal funds rate (the rate that banks charge each other) from 5.25% to 3.0%.

In response, many of the online banks have lowered the savings rates that they are offering. I have decided that it is time to update what many of the popular rates are out there, starting with the highest and going down. The yields shown are for a minimum deposit of <$1000, in an institution that is FDIC insured - peer-to-peer lending operations such as and LendingClub are not included. (All numbers are APY) This obviously isn't a complete list - if you find a great deal, be sure to let me know!

E*TRADE's Complete Savings Account:
Rate: 4.40%
(Also currently offered is an extra $25 when you sign up)

FNBO Direct Online Savings Account:
Rate: 4.30%
(This is the account that I currently have - I've been extremely pleased with the ease of use.)

Washington Mutual Online Savings:
Rate: 4.25%
(caveat - with a WaMu checking account, otherwise, .25%)

Citi Ultimate Money Account
Rate: 4.25% (caveat - must make at least two online bill payments each calendar month) otherwise, it looks like you'd get 3.50%

HSBC Direct Online Savings:
Rate: 3.55%

ING Direct Orange Savings
Rate: 3.40% APY (Also contact me, and I'll send you a link so that when you sign up with >$250, you get $25, and I get $10)

*All institutions are FDIC Insured up to the maximum allowed. Be sure to read the terms and conditions before signing up with any of the institutions named. Rates are subject to change without notice.

Saturday, February 2, 2008

Review: H&R Block's TaxCut

Today I finished my taxes, and I thought I would give a review of the software I used: H&R Block's TaxCut (for year 2007 of course) Premium Federal + State. I'm sure that it is available from a number of places, including the H&R TaxCut Website, but I bought it from Walmart for $34.96 +tax, which is cheaper than buying off the website. I did not buy the e-file option because I can mail it in for much cheaper, and don't feel like the additional support is likely to add a great deal of value for me. In comparison, TurboTax from Walmart was approximately $69 in order to have all the forms in the software that I would use.

I have used TaxCut for the past 3 years, and this year thought that the product was much improved. While I don't have the most complicated of taxes returns to complete, I did have interest income, capital gains and stock transactions to report. In addition, I had plenty of deductions to take as well as a Hope Credit. Previously I had to fill out the actual forms on a couple of items because the questions they asked didn't quite cover the situation - I remember specifically student payments being an issue, as well as my mortgage since it isn't through a banking institution. However, this year it was much easier to fill out all the information, and the process seemed to flow very nicely.

Installing the program was a little tricky, only because my computer acted up, and not because of the software itself. Once it was installed, it took me approximately 2 1/2 hrs to complete both my state and federal returns, check it over, and print it out. A nice feature that I didn't remember before was it reminded me deduct any payments for state taxes that were part of my 2006 taxes, but were payed in 2007. For me, I had underpaid on my state taxes, so the $308 check that I sent when I sent in my state return I could deduct. That translates into roughly $75 savings. This year I didn't use any of the tutorials, but previously I have found them to be adequately helpful or better.

Overall, TaxCut is easy to install and use and with the price is one of the best values for your money if you can't use a free online service such as TaxSlayer.

Recommendation: Highly Recommended

Fine Print: I am not in any way affiliated with H&R Block or TaxCut, nor am I in any way compensated for this review. Additionally, I am not a tax professional, so nothing in this review should be taken as tax advice. For your specific situation you should talk with a tax professional.

Friday, February 1, 2008

Give Yourself a Raise! - You Deserve It!

Yesterday I got my paycheck with my new "raise": I just signed up for the Employee Stock Purchase Plan (ESPP). This is a benefit that some companies offer where you can buy company stock at a discount. In my case it is a 10% discount. The only way that you can do this however, is by having the company take a percentage of what I make directly out of my paycheck, up to a maximum of 15%. So you can see, since the company allows me to use 15% of my paycheck to purchase stock at a 10% discount, essentially I am giving myself a 1.5% raise! (Caveat: This assumes that the stock price remains the same - if the stock price rises, I would make more than this, if it goes down, get the picture.) For a person making $50,000, 1.5% translates into $750 - not bad!
It took me awhile to do this however, because I don't (who does?) have a spare 15% in my paycheck to be taken out and not run short. So I have had to reserve money in a separate account dedicated to funding my ESPP. As money is taken out of my paycheck to buy the stock, I replentish my checking accounts from the reserve. Twice a year I will liquidate the stock in the ESPP account and replace the money in the reserve to start the process again! Doing this twice a year would mean I need to have an account with approximately $3750 to take advantage of the ESPP.
A lot of companies offer benefits like an ESPP, and even more offer company matches on 401(k) contributions. Consider it giving yourself a raise to take advantage of this free money. By fully utilizing a company match on your 401(k) contributions of 50% up to 6% of your salary, you essentially have given yourself a 3% raise (in addition to any taxes that you would defer.) Make sure you fully know what type of benefits your company offers, and then use them! A spare $750 or $1000 adds up to real money before you know it!

Wednesday, June 27, 2007

"It's the Most Wonderful Time of the Year!"

No, its not Christmas in June, but almost - yesterday I got my annual merit pay increase! Woohoo! Not that I didn't know it was coming - I have been looking forward to it for awhile, but didn't know how much it was going to be - I predicted a 3.25% and it came in just a tad higher at 3.52%. Not bad. All other parts of my compensation stayed the same.

Actually, this time of year makes it a great time to go through your W-4's and make sure you're having the right amount deducted. In fact, this is what I did last year (not only because of the pay raise, but also because of getting married) and I will do it again this year. This year I will have to increase the amount that is withheld from my paycheck. Since the first part of last year I was single, the amount that was withheld was quite a lot higher than it needed to be, so I changed the allowances in my W-4 so that I underpaid on the last half of the year. All told, by adjusting the withholding, I netted a measly $200 refund from the government (which made me ecstatic - no free loans to the government)! This year though, it meant that the first half of the year I have been slightly underpaying my predicted taxes - so that's where at least a portion of my raise is going to be siphoned off to.

Here's my process: First, I use MSN's tax estimator. This is pretty easy since I have quite predictable income and for the most part expenses. Then I take the difference between what I've already paid (should be on your pay stub) and what the estimator says I will owe, and divide that by the number of pay periods left in the year. This is what I fill out in the "Additional Withholding" when I submit my W-4. Just as a note, you are allowed to change the W-4 as often as you need to in order to have the right amount taken out of your paycheck. This system ensures that I don't pay Uncle Sam any more than I have to interest free.

Some people are so bold as to claim enough withholding allowances to not have to have income taxes witheld for 10 months out of the year, and then have the full amount withheld from the last two months. This would effectively allow them to bank the amount normally withheld for several months gaining interest. For example, if a person had an estimated tax bill of $4800, and instead of having $400 witheld from his paycheck every month, deposited it in an account bearing 5.00% APY for 10 months, and then had $2400 taken out of his paycheck the last two months, he would net about $103 from interest. This is an intruiging idea, but seems a little too close for comfort for just $100 or so (depending on your actual tax bill).

Tuesday, June 26, 2007

The Carnivals Are Up!

Just wanted to be sure and let everyone know where some of the carnivals are this week. This was my first time of being involved in a carnival, and I was fortunate enough to get selected in two of them:

RetireYoungandWealthy is hosting the 15th Carnival of Money Stories with a great variety of posts on all aspects of personal finance. You can find the article submitted by your's truly here.

TheDigeratiLife put together the Carnival of Personal Finance: Epic Journey Edition with a nod to Homer's Odyssey. With 91 different articles, it may take as long as Ulysses' journey to read them all, but its a great collection of topics. Great job! My article was a brief one on Obopay.

Well that's all on the carnivals. Hopefully I'll be able to submit more in the future - maybe I'll even host one!