Category Archives: Personal Finance

Market Crash or Market Opportunity?

At the end of every year I take some time to evaluate my portfolio and how I’ve allocated all of my investments.  I always take into account changes that have occurred over the past 365 including sectors or investments that have take off, and others that have hit the downhill slope.

2015 was an interesting year.  After a rough August, things ended fairly flat, and my portfolio overall endured a .4% loss.  Pretty close to how the S&P 500 performed.

Anyone paying attention to the markets so far in 2016 may be feeling a bit rattled at this point.  My personal advice… Don’t Be!  Investing is a long-term game.  2016 may very well be a down year or even the beginning of a multi-year bear market.  Take advantage of the opportunity!

A good friend of mine is an Advisor at Morgan Stanley.  His opinion is that based on his personal analysis of the fundamentals, it’s likely that we’ll see a market retraction this year.  But is that any reason to run for the hills? Heck no! Stay the course and treat the market decline as an opportunity.

Don’t forget about dollar cost averaging!  Aside from compound interest, dollar cost averaging may be one of the most killer investing phenomena to take advantage of.  If you invest money consistently – through the market ups and downs – you will end up with a lower cost basis over time.

Think about it this way, if you continuously save and invest your money in the market, you will inevitable buy more stock when the market goes down and less stock when the market is going up.  That’s the beauty of dollar cost averaging!

Continue reading Market Crash or Market Opportunity?

Why Index Investing IS Sexy

Has anyone heard of Technit360? It’s a cutting edge company on the verge of exploding returns. They’ve developed this new proprietary technology that’s used across all mobile device platforms!

I’ve read too many articles and received too many texts from friends with similar pitches… Whether it’s a cutting edge tech company or a pharmaceutical company on the verge of FDA approval for a lifesaving drug; typically these types of investments never yield the expected returns.

When it comes to my retirement investments, I take a more prudent approach. I’m not one to sacrifice by diligently saving and then gamble on some high risk, high reward investments.  Remember, investing is not gambling.  At the end of the day, I’d rather gradually accumulate wealth and watch my net worth increase over time by using index funds. Let me tell you why index investing is sexy.

Proven Returns with Less Risk

One of my all-time favorite investors, Warren Buffet, said it best when he stated that by “periodically investing in an index fund, the know-nothing investors can actually outperform most investment professionals”.

That’s a lesson that took me a while. I made plenty of financial mistakes in my 20’s. One of which was convincing myself that I was the next great stock picker. What I soon realized is that index investing is sexy as hell.

Continue reading Why Index Investing IS Sexy

Should You Pay Cash or Credit?

With my dreams of winning the Power Ball dashed last night, so are my visions of swimming in a pile of cash… *sigh.

Think about being able to walk around with a fat wad of bills in your pocket and drop greenbacks for everything you buy. It’d be pretty nice huh?

But back to reality, why would you want to use cash in the first place? There are some clear benefits to using cash, but if you’re a financial superhero you should have the wherewithal to take advantage of credit cards.

So why use cash??

Using cash is a great way to curb spending. A Dun and Bradstreet study found that people generally spend 12-18% more when they pay with a credit card. There’s something about human psychology that makes it far too easy to swipe a card and voila! You bought something. For some reason, people are far more reluctant to shell out a few Benjamin’s when they have to pull it out of their wallet to pay.

Plus, if you can’t manage a credit card balance then cash is the way to go. With APRs as high as 20% no one can afford to pay that kind of interest. If you aren’t diligent enough to pay off your credit card balance then USE CASH!

So why use a credit card??

Let’s face it, credit cards are convenient. You practically need them today to pay for anything online, book flights or use Amazon.

Not to mention, credit cards give you a paper trail of your transactions without keeping physical receipts. I use our credit card statements to feed into our budgets each month. It’s an easy way to see where all of our money is going.

The single biggest benefit of using credit cards… BENEFITS! From airline miles to cash back, there are tons of offers out there from credit card companies.

My wife and I choose to limit ourselves to two credit cards for simplicity sake. We used to rack up Alaska Airlines miles until I determined that the Fidelity Amex would be more beneficial.

Basically we get 2% cash back on ANY purchase deposited straight into our Fidelity account. Right now we have it feeding directly into my son’s college 529 plan. It’s unbelievable how quickly it adds up when 2% of everything you buy goes into the account automatically (and we try to put every purchase we can on it). Plus, those contributions grow since they’re auto invested into a long-term target date fund.

In the end, everyone needs to have a financial plan. Maybe credit cards don’t work for your particular situation. But if you have the discipline to use them wisely and pay off the balance every month, then why not take advantage of a free flight or cash back?!


photo cred: Tax Credits

Top 5 Financial Successes in my 20’s

For many, your 20’s can be considered lost years. Aimlessly trying to figure out the overall direction of your life. This is the era where mistakes are made and lessons are learned.

Earlier I detailed the top 5 financial mistakes I made in my 20’s. Let me tell you, it was difficult to whittle the list down to 5. As I wrote that post I reflected on those mistakes, but also realized that I had some great successes in my 20’s as well. It was the decade that I set a foundation for financial success for the future and I’d like to share the top 5 financial successes in my 20’s.

#1. Started Early

Looking back, I wish I would have had my parents open a custodial IRA account for me at 17. My first paychecks from making pizzas would have been much better spent in an IRA than on a knock-off sound system for my 1990 Chevy Corsica… yikes! It pains me to think about my financial priorities as a teenager.

Luckily for me, I took a couple of finance classes in college and realized early on how powerful compound returns are in building net worth. Albert Einstein said it best, “compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it”.

I knew long before I started earning a respectable paycheck that I needed to prioritize saving and investing. Taking advantage of a long-term mindset to build net worth has served me well.

#2. Established a Retirement Plan

I remember my first finance job in college was as a Finance Intern at a chemical distribution company. I’ll use the term “finance” loosely as I was usually tasked with restocking the company fridges and snack drawers when I wasn’t doing data entry.

One thing that stands out was the company’s policy of automatic enrollment in their 401K plan. I remember it because I recall opening my first paycheck and asking, “What’s this money being taken out for a 401K?” Not my proudest moment, but I had to google a 401K to figure out what the heck it was!

That initial 401K was eventually rolled into an IRA and I’ve never looked back. I began reading as much as I could on retirement planning and I mapped out a retirement plan in my early 20’s. Take a look at how my wife and I invest our Roth IRA portfolios for retirement. Continue reading Top 5 Financial Successes in my 20’s

5 Steps to Open an Investment Account

So you’ve decided to start investing… now what? Well, you’d be surprised how simple it is to get started. Just like many things in life, getting started is half the battle.

Let’s take a look at 5 steps to open an investment account so that you can start your journey to financial independence.

#1) Select Your Brokerage Company

Nowadays, there are so many options out there. Brokerage companies are all competing to manage your money and hold your accounts. My best advice is to take 3-4 of the most reputable companies and research them. Take a look at their FAQ page, look at their reviews, and get a general understanding of each company. There are pros and cons of each, and in a future post I’ll be doing a comparison of a couple of the major companies.

I currently use Fidelity for our retirement accounts. However, I’m a big fan of Vanguard as well and I use Capital One for our taxable investment accounts. There are benefits and downfalls of each, but for retirement, I think Fidelity and Vanguard provide a great service. I’ll be using Fidelity as the example for setting up an investment account because it’s what I’m most familiar with, however the steps are very similar to establish an account at any brokerage company.

So for this post… Fidelity it is! Go to and choose ‘open an account’ at the top of the screen.

#2) Determine the Type of Account

Are you starting a portfolio for retirement? If so, then a traditional IRA or Roth IRA will be the type of account for you. Are you saving for your child’s college tuition? Then the 529 account would be a great fit. Are you interested in general investing and just want a no-strings attached account to set up your investment portfolio? Then a standard brokerage account will work. There is even an option to open a “Managed Account” which means that an experienced finance professional will actively manage your investments. My personal opinion is to avoid actively managed accounts, become a financial superhero yourself and save the fees that a financial professional will charge.

Here’s a look at the account options you have at Fidelity. Continue reading 5 Steps to Open an Investment Account

Investing is a Long-Term Game

Did anyone panic when they saw the market downturn on Monday? I know I received quite a few panicked texts throughout the day.  A lot of people frantically checked their investment balances and let worry set in. I didn’t even check my balances. When it comes to long-term investing, small corrections and market dips really don’t matter.

Building wealth and financial security is at the forefront of many people’s lives. There are a number of strategies to build net worth over your lifetime, but what I’ve realized is that the most effective strategies take time.

The value of time may be the single most powerful tool in building a healthy investment balance and attaining financial independence.

How many of you have had a friend or colleague explain some new strategy to make money fast; like a multi-level marketing scheme or a new cutting edge stock that was guaranteed to have triple digit returns? I can’t count the number of times that I’ve carried on these conversations, and in each case, the money making endeavor never seems to come to fruition.

When I first started my path to financial independence and began investing in the market, I quickly realized that investing for short-term gains is a losing proposition. I was confident that I’d be an incredible stock picker. But what I found out is that pursuing wealth with a short-term mindset will have the unintended effect of ruining your rate of return and your ability to build net worth.  This is exactly why I invest in index funds for my retirement accounts.

I think Warren Buffet said it best when he stated, “if you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.” Continue reading Investing is a Long-Term Game

Financial Predictions and Goals for my 30’s

Recently I covered some of the biggest financial mistakes that I made in my 20’s. Looking back at your mistakes and evaluating the progress you’ve made is a great way to ensure that you not only continually improve your financial situation, but improve as a person as well. It’s equally if not more important to look forward. What do you expect to accomplish in the next 1, 5 and 10 years? What type of financial plan do you have in place? I started thinking about the next decade (as I’ll be turning 30 very soon) and trying to envision not only where I’ll be financially but what my career and lifestyle will be in my 30’s.


The past decade has been a great starting point for me to begin accumulating net worth and benefiting from the long term effect of compound returns. Financial independence was something that I focused on early in my 20’s but it was a slow process. Although I’ve always maintained a healthy savings rate (as a % of income), my salary and investment balances were low. It wasn’t until we started to see some great market upswings starting in 2010 that I began to see the tangible effect of compound returns. By the end of 2014 I realized that saving early and often is the only way to accumulate substantial net worth at a young age. Not counting home equity or other personal assets, our investment and savings accounts have grown well into the six figures. Looking back, there are plenty of things that we could have improved to better position us financially, but I think that we’ve made some great progress toward our goals. So now as I enter my 30’s, I have high expectations for where we will be financially by the end of the decade.

In order to be conservative, I assume a 5% average annual rate of return on our investments over the next 10 years and that our contributions or gross savings will not change (although I plan to increase my income as well as my savings rate). With these assumptions I project that our investments should total approximately $750K – $1M before I enter my 40’s. I think as long as we continue to invest in a balanced and diversified portfolio, we should be able to hit that goal. Ultimately, I truly believe that if we’re diligent during our 30’s, we may be able to amass even more net worth, especially if we take into account home equity and other personal assets.

Goal #1: $1M in investments and liquid accounts before I turn 40. Continue reading Financial Predictions and Goals for my 30’s

How I Evaluate and Select Index Funds

16836490731_78fc86d8e3_kIn a world where there are investment options galore, where do you even begin?! When it comes to retirement accounts, I’m a passionate advocate of index funds. Index funds are a large pool of stocks or bonds that are managed to track a specific index. They are typically low cost and provide a quick way to diversify your portfolio. I like to think of index investing as putting your retirement accounts on autopilot. Many people may say that index investing is boring or unsexy, but I will tell you that I have felt incredibly sexy watching my retirement portfolio consistently grow over the past decade.

The first place to start is to determine your target asset allocation. In other words, how much of your portfolio do you want invested in stocks and bonds, and what types of stocks and bonds do you want to own to ensure diversification? Take a look at my prior post on diversifying and balancing a portfolio. It details the exact asset allocation that I use for my wife and my retirement accounts. Now that you have an idea of what types of investments you need in your portfolio, let’s review a few key pieces of information that I evaluate when looking at a specific index fund. We’ll focus on one of my favorite index funds today, Fidelity’s Spartan 500 Index fund (FUSVX).

Expense Ratio:

Unless you’re investing in individual stocks (which I would caution against), every mutual fund, index fund, ETF, etc. will charge you fees for investing your money. Basically the fund manager is managing an overall fund and charges each investor who buys shares of the fund. So how do you determine exactly how much you’re paying? The answer is the expense ratio. Each fund will state an expense ratio which tells you what percentage of your average investment balance you will pay in investment expenses. Notice the expense ratio that’s circled for FUSVX.

This expense ratio indicates that I’m paying .07% to own shares of this particular fund. In other words, I pay about $.70 for every $1,000 invested.

Continue reading How I Evaluate and Select Index Funds