Investments and Holding On

A lot of people hold on to bad investments that they know they want to sell simply because people want to recover any losses that might have happened.

I've been skimming through Suze Orman's Young Fabulous and Broke and bumped into some common sense knowledge that not everyone follows. You must learn how to let go of investments that are no longer working. Once in awhile review your stocks and mutual funds and see if you would still buy them today. If you wouldn't buy them today, why are you holding on to them now when you can be making a profit somewhere else? It might be difficult to loose money in the stock market, however, the missed opportunity cost and the potential for further losses is too great so get out of the investments that are no longer working for you today!

Mutual Funds Trading

Unlike stocks, mutual funds do not trade in the middle of the day. The stock market is open 9-4 eastern time and you can only buy and sell mutual funds at the end of the day. Therefore, even if you place an order during the day, it will not be executed until the end of the day. Also, if you want to see the value of your mutual fund, you must wait until the end of the day.

Mutual funds consist of a variety of stocks and it would be too difficult to compute the value of all stocks in a given mutual fund at a specific time as stock prices can change every second.

NetWorth IQ

There are several ways to track your net worth. The most convenient for me, has thus far been Mint.com because it does everything automatically. However, another way to track your net worth is through NetWorth IQ. Here are it's advantages and disadvantages.

Disadvantages:

1. You must manually enter all your data
2. All other people's data is manually entered as well and might not be accurate for comparison
3. You must enter your data every month to see the progress

Advantages:

1. You can track your net worth with a graph
2. You can see the percentage change in each category
3. You can make your net worth public so other people can comment on your progress
4. Making your net worth public might motivate you to get that number up
5. You do not need to give out personal login information
6. You can compare your net worth to others your age, or in your occupation, for example
7. You can also compare each category such as student loan debt, credit card debt, or retirement assets to others in your demographic groups

MorningStar X-Ray of Your Portfolio

If you hold several stocks or mutual funds, chances are you are not aware of the percentage of your portfolio that is in US stocks or in utilities. A great way to know the exact breakdown of what you hold by percentage is to do the MorningStar X-Ray. You can also do this before you buy an additional stock or mutual fund to make sure that you are saturating your portfolio in one type of area (unless that's what you are looking for). It's always best though - to go for diversification.

A New(ly Discovered) Search Engine

Nowadays information is readily available, however, sometimes you just want a snapshot of what you are looking at or a clear 'yes' or 'no' answer. Here is a great search engine WolframAlpha. The search engine will tell you almost about anything with a quick snapshot. This is great for checking out a company if you want to buy the stock (type: Google), finding out the population, weather, and median home price of a city (type: Washington DC), by finding out how much you will pay in interest over a life of the loan (type: loan 10% interest 10 years $10,000), etc.

 

Try it out and look at the Examples page to see what else this search engine can do.

Mutual Funds

I am starting a Roth IRA this year partly because I'd like a nice retirement, but also partly due to the available IRS Retirement Credit.

Since I am new to investing, I'm going to start with mutual funds. I strongly believe in the freedom to buy and sell if I needed to without considering the commission, therefore, I am choosing NTF or no load funds only. You do not pay a commission to buy or sell these funds.

However, after signing up for the Roth IRA on ShareBuilder (where I already have a brokerage account due to a $50 incentive), I was a little lost about choosing the actual mutual funds. I looked at Standard & Poor's, The Street, MorningStar, etc. ShareBuilder advised I look at Lipper's detailed ratings. Choosing from 200 NTF funds from various fund families was no easy task until I bumped into US News Mutual Funds website.

The website easily compares MorningStar, Zack's, Lipper's, Standard & Poor's, and The Street ratings. Also, there is a lot information on each fund including the history of the returns, management, MaxFunds.com scores, etc. Searching for each stock (and remembering to select the right stock from the family in the drop down menu) left me with only 3 funds that I feel are rated the highest by all. I also wanted a semi-consistent return of at least 5%.

I'm not sure about all the details that the websites base their scores on, yet I feel that if several popular websites recommend a fund, it must be doing well. There is no way that even an experienced financial adviser can know everything about the management, the return, the risk, the average return, etc of each of the 200 funds I was considering. Therefore, now I need to choose 2 from IDROX (Real Estate should go up soon, the inconsistent return history is due to the inconsistent real estate market), ACMVX (I wanted to invest in the Republic Services stock, but finding it as the top stock in a highly ranked fund is even better), and PTTDX (great looking fund with mortgage backed securities).

Update: Went with ACMVX and IDROX. PTTDX is government based and invest a lot in low paying US Treasury Bonds as well as Fannie Mae, just didn't feel right.