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Archive for November, 2011

Warren Buffett, Intel, and Me

There has been a lot of press surrounding the announcement that Warren Buffett bought 57 million shares of IBM to become one of the largest investors in the technology giant.  But I am more excited about the 9.3 million shares of Intel that Berkshire Hathaway purchased during the latest quarter.

Why is that you ask?

Because I own shares of Intel!

I think it is immensely exciting to know that the world’s greatest investor and I are thinking alike.  It wasn’t like I followed his lead and purchased the stock after hearing about his investment.  I bought it in August since I felt that the dividend yield of 4% was awfully hard to beat in a crappy stock market.  I don’t see the market doing much over the next few years anyway since the perceptions about the economy are so negative.  We could even be in for another lost decade for all I know, so I felt that getting some dividends and growing my retirement portfolio in that fashion was a good idea.

Not an Original Idea

Unfortunately, I have to confess that investing in Intel stock was not exactly my idea.  Personally, I suck at stock picking.  Rather I compensate for that by buying protective puts on my stocks.  After all, you just never know when the market may take a 20% or greater tumble so I want to have some portfolio insurance in place.

No, I got the idea from my engagement in the personal finance blogging community and reading all of the blogs from the different dividend investors.  I was able to pick out a certain pattern.  Namely, everyone was writing about Intel.  So I figured, why not?!  I ended up purchasing the stock at $20.30 in August and it has done well since that time.

Getting Ideas for Investing

There are plenty of good ideas out for investing out there.  I think the problem comes because there can be too much information for some people to decide.  Should I invest in individual stocks or mutual funds or exchange traded funds?  Should I use bonds or preferred stocks or CDs for income?  How much international exposure should I have?  Is now a good time to invest in real estate?  Should I allocate a portion of my portfolio to precious metals or did I miss it?  What is the best asset allocation to have?  Will there be another recession?  Is there a risk of inflation or deflation?  And on and on and on….

The amount of information can be overwhelming at times.  So people just fail to think about it and put off investing.  They ignore it altogether and wake up one morning ready to retire (or more likely, downsized) and figure out that they haven’t saved enough when all they needed to do was to get started as early as possible and invest consistently over time.

I get many of my ideas for investing from reading.  I read a lot.  I read several different investing blogs and investing sites.  I used to have a subscription to Forbes and would read it cover to cover but I was getting behind in my magazine reading due to my online activities so I decided to let the subscription expire and save the money.  I still get BusinessWeek and read it cover to cover.  I am still about 6 weeks behind.  Most of my ideas come from these sources.  Then I will look to see if the stock has options available.  If so, then I will consider it.  I refuse to invest without protective puts any more.

Since Intel was a rather large stock with which I was familiar, I felt fairly comfortable investing for the dividend.  It seemed like the downside risk of the stock when added with some put options was extremely minimal.  It simply was a matter of acting on the available information.  I must confess that it is nice to have the conformation that Warren Buffett is a fellow investor.

Readers:  Where do you get your investing ideas?  Or is the information overload just too much?

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20 comments - What do you think?  Posted by Cash Flow Mantra - November 25, 2011 at 5:00 am

Categories: Investing   Tags: , , , , ,

For What Are You Thankful?

Tomorrow is Thanksgiving Day here in the United States, and I wanted to take a moment to reflect upon how incredibly fortunate my family and I are.  Sure we have a few issues here and there, but for the most part, we are healthy, have food on the table, and a place to stay.  My father has Alzheimer’s and is going downhill fairly quickly, but I am thankful for his long life and health until recently.  So we will be celebrating our Thanksgiving day with family and enjoying football and lots of food.

Contrast to Honduras

Some of you may know that my college-aged daughter and I recently returned from Honduras where we spent 10 days on a mission trip.  I am always struck by the contrast between this Third World country and the United States.  The poverty and lack of infrastructure is simply amazing.  Here is one view of city:

The mountains are very pretty and the people are nice, but everyday life can be a struggle.  There are so many things that we take for granted like our infrastructure.  The roads there are full of potholes and have mounds of dirt sitting in them in random places.  Manhole covers have been stolen for recycling and the holes have tires in them to warn drivers.

We take security for granted as well.  Many businesses have armed guards posted.  It is shocking to say the least to see shotgun wielding guards at the Dunkin Donuts.  When I first arrived last year, I thought there were a lot of prisons.  It didn’t take long to figure out that razor wire was surrounding most of the buildings in the capital.

I was also surprised to learn that there is no mail service in Honduras.  Most of the roads are unnamed so it is next to impossible to get a package to someone.  Oddly enough, bills for electricity are placed on the door and have to be paid at the banks.  (If the bills get delivered, can’t there be mail but maybe I’m missing something.)

I am also thankful for clean water that I can drink.  Even the locals can’t drink the water    because of the risk for disease.  The poorest Hondurans seem to find some method of getting safe drinking water.  One of the jobs can be seen in the picture at the left.  This delivery method is motorized, but there are several who ride around in bikes delivering bottled water  to the various neighborhoods throughout the city.  I also found the little half liter bags of water that the kids drank quite fascinating.

Of course if you want to talk about risk when traveling to Honduras, you have to discuss the airport.  I have learned that the international airport in the capital city of Tegucigalpa is one of the (if not THE) most dangerous and scary landings for pilots, and thus for the passengers as well.

If you don’t believe me, check out this video of a plane coming in for a landing.  I want to know what is up with the people on the mountain?!

Life Insurance

After that landing video, you understand why it is that I make sure that all my insurance coverage is up to date.  I want to make sure that if anything happens to me either during the landing or while on the ground in Honduras that my family is well cared for.  I always like to joke that I am worth more dead than alive, but for the next several years, it is a true statement.

Now life insurance isn’t the only insurance that I carry.  Being in the United States and having many things and responsibilities means that I also carry disability insurance to protect income in the event of illness or injury and home owner’s insurance to protect property.  Other types of insurance that should be considered are a liability umbrella policy and even professional liability insurance if you are in a higher risk profession.

Taking Stuff for Granted

I am incredibly thankful for being born into a wonderful country with plenty of opportunities for those who work hard.   I am thankful for my health and my family.  I am thankful for the safety and security and ease of travel in the United States.  There may be problems in our country right now, but things could always be worse and I don’t want to take anything for granted.

So this Thanksgiving Day, for what are you thankful?

 

36 comments - What do you think?  Posted by Cash Flow Mantra - November 23, 2011 at 5:00 am

Categories: Basic   Tags: , , , ,

How to Save Big Money on Black Friday

I am not a shopper so I will be staying home on Black Friday.  I did go out a few years back and experienced a once in a lifetime event just to say that I did it.  I am done.  But I have gotten to observe my brother-in-law who is real good at shopping and saving money so I would like to share some of my observations on how to save a lot of money on Black Friday and relate them to our everyday personal finances.

Tips for Saving Money on Black Friday

  • Have a plan

My brother-in-law intends to get all of his Christmas shopping done in one day so it is imperative to have a well thought out plan prior to beginning the day.  On Wednesday and Thanksgiving Day before the big shopping event, he sits down with his shopping list and all of the ads from the various stores to compare prices and times for the sales.  He then figures out the best price for the items he seeks and the times that the stores open and makes out a schedule for getting to the various stores.

Making a financial plan is imperative as well.  Have you taken the time to sit down and write down your financial goals?  Have you taken the time to make a plan for getting out of debt?  Writing down goals is a great way to think about what you want to accomplish and come up with the necessary steps to get the job done.  I always find that I get more done when I write the tasks down and even assign a timeline to them.  I did this last Friday on a day off and got to cross about 10 things off the list.  The progress is encouraging as well.

  • Focus on the Big Things

He may not be able to get to everything at the perfect sale time, so he starts with those items that offer the greatest savings.  A 50% savings on a $200 item is worth more than a free $20 item.  He saves the smaller items for later in the morning when the savings may not be as great.  Placing a priority on limited quantity items which are in high demand ensures that he will get the most savings during the early hours of the sales.  You can always buy socks later in the day.

When trying to save money in a budget, focus on the big things.  If your largest monthly expense is housing, is there any way to save money there?  Saving $300 a month on housing is like finding the equivalent of more than 50 lattes.  How about transportation?  Moving from 2 cars to 1 or from 1 to public transportation might make for a significant savings rather than skipping a movie once a month.

  • Enlist the Assistance of Others

If you have been reading this blog, you may know that I have 6 kids.  Not all of them are old enough to go shopping in the early morning hours of Black Friday, but several have gone with in the past and would actually stand in line with instructions to purchase certain items.  As mentioned, I only went one time a couple years back and ended up fighting over a flat screen television at Wal-Mart (actually, the first three that I touched were yanked from my hands but I finally got one and didn’t yank it from anybody).  I don’t care for shopping, but the kids actually enjoy heading out and getting involved.

In our finances, we may not be able to do it all and may need the assistance of others to manage and execute certain aspects of our plan.  Some of the best money that I spend each year is to have my accountant do my taxes.  I must save myself about 80 hours of frustration by outsourcing that task.  It takes me about 12 hours to fill out his information booklet and get the numbers and receipt copies to him.  Then a few weeks later, he returns a roughly 80 page booklet.  To me, it is worth every penny.

Summing It Up

So if you want to try to save big money this Friday, have a complete plan for your day, focus on the biggest savings, and find someone with a lot of teenagers who like shopping.  I will be sleeping in and waiting to shop for Christmas until December 24th.

Readers:  Do you shop on Black Friday and like it?  Tell me about your best Black Friday deal!  Please share in the comments below.

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24 comments - What do you think?  Posted by Cash Flow Mantra - November 21, 2011 at 5:00 am

Categories: Spending, Saving   Tags: , , ,

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