Cold spell
Wow. I had to clear cobwebs off of the screen to get at the posting tool. Sorry it took so long to get a new post up. We’ve been busy with various things and running this way and that.
This past weekend, Jen and I celebrated our 2nd anniversary. Granted we’ve been together significantly longer than that, but people rarely ask “how long have you been together?” It’s always “how long have you been married.” Apparently, you can spend you’re entire adult life with someone and then 1 year after you make it legally binding you’re still fair game to be written off as newlyweds.
To celebrate our second year of being legally bound to each other we went on a clothes shopping bender to the outlet stores in Lancaster. Thirty minutes away isn’t far enough. We will be going back very soon, I would imagine. We only went over budget by 33% but hey… we saved a ton.
We also went out to dinner at an upscale, although I wouldn’t call it fancy, restaurant. The staff is well dressed and courteous as were the other patrons. The prices were acceptably higher than the family place we sometimes visit, and the food was excellent. We ordered a “Caesar Salad for two” which gets prepared table-side. How does one “prepare” a salad you ask? They make the dressing in the salad bowl, to your taste, right next to the table. It was ridiculously good. “Best Caesar salad I’ve ever had” I said as Jen points out, “They do that at the Ritz, too.” So there we are, a touch of Boston (albeit one I never experienced but I’ll take Jen’s word for it) in the East Nowhere, PA.
We started investing this week. It would seem like an odd time to jump into the stock market, what with every news report signaling doom and gloom thanks to mortgage fraud and lazy banks. I am happy to report that our initial investment of $96 has grown a whopping $2.40 since Tuesday. We’re following a plan, two one extent or another, detailed in this MSN Money article. It leans heavily on the ideas of diversification (having your money spread out so no one bad day at the races tanks your savings) and dollar-cost-averaging. Dollar-cost-averaging means taking a longer term view on investing and continually adding to your investment on a regular basis like a savings account. The averaging bit comes into play when you look at the prices at which you buy each bit of stock. For example, say you buy 1 share at $10 one week, the then a second share at $15 the next week. Well those two shares cost you $12.50 each (the average) and thats the measure by which you compare your gains.
We’ve only bought 1 share of one index fund (more on what that is later) but in future months we’ll add additional index funds at a rate of one a month until we have 5. Then we’ll contribute $100 each month two which ever of the 5 is the cheapest at the time. Doing this for the next several years can (legalize for “should, but don’t bet the farm on it bucko”) grow significantly faster than a savings account.
So what’s an index fund? Well, there are thousands of stocks out there and you’d go batty trying to track even a fraction of them all individually. So, there are indexes which track large groups of them and people watch those. When you hear about the DOW Jones Industrial average (or the DOW), the Standard & Poor’s 500, the Wilshire 5000, or the NASDAQ, they’re talking about those indexes. Index funds are similar to mutual funds in that lots of people pool their cash in order to buy stock they normally can’t afford themselves. The difference is, that instead of having 1 or 2 people manage the fund and decide what stock to buy/sell, Index funds try to match the Index they are based on. Now, they can’t afford to copy an Index dollar for dollar, so they scale it down and try to match closely percent for percent. Say Microsoft stock made up 10% of the S&P 500. An index fund which tracked the S&P would then try to have Microsoft stock make up 10% of its value as well.
So far, we bought 1 and a fraction of 1 share of a fund that tries to match the DOW. Next month we’ll add another index. And so on and so forth until we’re bazillionaires.
At $100 a month that could take some time.
Rob
