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 dodgeandcox.com and morningstar.com

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 Prosper.com 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.

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, well....you 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!

"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).

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!

The Economics of a High School Student

It's that time of year for high school students to finish up and start having summer fun. Even better, some students are out (or are "encouraged" by their parents) there looking for a summer job. The benefits seem good - even though it doesn't pay much, it still gives you some extra spending money, or even save a little for college. In addition, it may instill some responsibility - getting to work on time, dealing with customers, and employers, your first brush with W-4's etc.

But my family was a little different. I didn't ever have a "real" summer job. Neither did my brothers. Nor did they really want me to get a summer job - even if I had one, I probably would have worked at my dad's business as an electric motor repairman - I'm sure I'll talk more about that in the future.

Why wouldn't my frugal, money-saving parents not encourage their high school students to get jobs? The reason is that we were involved in projects and competitions and community service through church and school that they felt were better uses for our time. In their view, school, and the extra-curricular activities along with it, were my "job". For example, in the summer of my junior year, I worked on a Science fair project that I spent over 200 hrs on. A couple of summers I helped out with my church's VBS camp with over 300 little kids. During the school year, I was involved in competitions from Social Studies fairs to Bible quizzing. Other than the benefits personally, when it came time to apply for colleges and scholarships, I had a resume full of academic and community activities - and folks like to give scholarships to students with full resumes.

So as opposed to a couple of summer jobs that I might have made 3000 or 4000 dollars each, I got scholarships worth $40,000, and $70,000 in addition to a number of other smaller scholarships. It's hard to beat "making" that kind of money for a high school student.

LazymanandMoney had a post with 15 things he would tell himself when he was back in high school. You should check it out!

Obopay: The new way to send money

Here's an interesting new way to send money - it's called Obopay and its supposed to be the easy way to send money - through your cell phone. Currently, the main option for sending money to other parts of the US and the world is through traditional money transfer services such as Western Union and Moneygram. While pretty widespread, these services have a drawback in the fact that you have to physically go to a brick-and-mortar agent location in order to send and receive the money. Enter Obopay. Started in only 2005, Obopay would allow you to send and receive money without having to go to an agent location. On Wednesday, Obopay signed a deal with Verizon, and apparantly can be used on any network in the US. By downloading the software onto your phone and putting in your pin, you are supposed to be able to receive and send money to anyone that has a cell phone. How that works for someone that doesn't have the Obopay service, I'm not exactly sure. But it is an intruiging new twist in the realm of money transfers and finance. Also, I'm not exactly sure how it would work in countries where people often don't have credit cards - Western Union's bread and butter. So it may be awhile before Obopay fully catches on, but it certainly seems like something worth watching. When I find out more information I'll be sure to keep you updated.

Lesson 9: A Healthier, Happier Lifestyle

Ahh..... the days of warmed up hot dogs, and ramen noodles! Ok, really, I don't really miss them very much. Lets face it, as a married person, its a lot more worth it for me to take care of myself, if only because I have someone else around that I want to take care of. I eat better, I sleep more, I would say I probably have less stress, and being married gives me a reason to go out and do more things.

Its proven: Married people live longer! Numerous studies have shown that there are a lot of benefits to one's overall well being and quality of life. While there may not be a direct quantifiable financial benefit, there are definitely improvements to everyone's productivity when they are happier and healthier. Overall, there is probably a slight (at least initial) cost to healthier living - more on this tomorrow. But the improvement in well-being is something that money can't buy, nor something that should have a price associated with it. Maybe in a strict dollars and cents calculations you'd come out a little ahead, maybe a little behind - in the end, who cares?

I've seen a number of posts elsewhere where people question whether financially it makes sense to get married. I would say that the question really misses the point of marriage in the first place. Saving, discussing and planning should be part of the marriage, but shouldn't be the reason for it. I'm thankful that in getting married, I have a life partner that I can share the rest of my life with. That is worth more to me than all the money in the world.

10 Lessons Learned from a Year of Marriage

1) Marriage should be built on a lot more than financial expectations (hence the phrase in marriage vows "for better, for worse, for richer, for poorer...")
2) Marriage will not solve money problems - keys to successful money management work whether you are married or not
3) But some of the best memories are from doing activities that require little to no money
4) Its important to talk about financial goals and expectations
5) But FAFSA rules are against getting married
6) Taxes are a lot less
7) But you also spend less in total on housing, food, utilities, etc.
8) You also spend more than you would have to buy nicer things
9) As a male, you take a lot better care of yourself than when you were single
10) You spend a lot less on gas to go visit your fiancee six hours away

Over the next couple of days, I hope to talk about each one of these lessons - so be sure to tune back in!

My Purpose

This site is intended to be primarily about personal finance. While there are many of these out there, hopefully I will be able to contribute my own perspective as I learn about personal finance, as well as create and achieve my financial goals.

Topics that hopefully will be covered will be (in no particular order):

• 401(k) / IRAs / Roth IRAs / Retirement
• Budgeting
• Business / Career
• Credit / Credit Cards
• Education
• Giving Back / Charity / Noble Causes / Philanthropy
• Insurance
• Investing / Investment Strategy
• Real Estate / Homebuying
• Stocks / Mutual Funds
• Taxes
• Wills / Estate Planning

If I've missed something important/interesting or you have an idea for a topic, let me know, and I'll try to add it. I'm really looking forward to trying this out and see where it leads!