Finance of a Russian Girl

November Net Worth

2007-12-04T00:56:00.000+03:00

Nothing outstanding this month, just the usual routine of saving. My net worth rose by 6%, and it’s now $3,737. I haven’t gotten financial aid this month, so I hope to get two-months’ worth in December, and put it away.

Cash makes over one-third of my assets already. Wow. Am I getting a little conservative? The thing is I’m working on saving about $1,600 to be able to open a checking-savings account with a minimum balance of $1,300. Concentrating on this, I started ignoring investments totally. Now, I have to remind myself, that this savings account can surely wait, and I’d better put more money in my index fund. After all, one-third of cash certainly is not my ideal allocation.

Voting

2007-12-03T01:38:00.000+03:00

Today Russian citizens have chosen the parties that will sit in our parliament for the next four years. I voted for the first time in my life. I knew that United Russia, a monstrous party with vague promises, that reeks a little with totalitarianism and a cult of personality, and is headed by our current president, would get the majority of voices. Other parties had lesser chances to obtain seats in the parliament. Still, I believed that my voice could make a difference. I actually like two parties from the opposition, both sharing democratic values. One of them appealed to me the most, so I voted for it.

The rough estimate is already known. United Russia gained over 60%. Three other parties won much less voices, but also made it to the parliament: first, the communists (their position is usually strong, because almost every senior citizen always votes for this party), second, a party aimed at persons aged 55+, and third, a funny party, which has a very charismatic and entertaining leader, but which political positions I can’t figure. My party and the other party that I like have gained about 1% each. Oh, by the way, the total number of parties was eleven.

I’m used to being a member of small groups. For example, I am a student in Moscow – we don’t make up to 1% of the population, I guess. I invest money in mutual funds – less than 1% of the Russian population deal with stock market either. But now I am in a small group again, and the consequence is that I, my values and my aspirations are not represented in the government. OK, I don’t want to think about politics anymore. It’s too frustrating.

My First Investment

2007-11-15T01:47:00.000+03:00

A year ago, on November 12, 2006, I purchased my first mutual fund. At the time, only about 300,000 Russians out of 140 mln population were buyers of stocks and mutual funds. My family and friends were suspicious about stock market, but I was interested in mutual funds and determined to buy one. I’d been contemplating for half a year. It was so difficult to choose the right company and the right fund! But finally, I picked an index fund of the subsidiary of my bank. One day after classes, when I was alone, I braced myself and went to the nearest office, which happened to be five minutes’ walk away from my dormitory. It was Friday, about 7 p.m., and already dark outside. I was nervous and scared. It seemed like I was doing something shameful, as I didn’t want anybody see me and ask me where I was headed. I probably just didn’t want anyone try to discourage me.

People in Moscow usually buy mutual funds in big, expensive offices in downtown. The small office near my dormitory, which is situated very, very far from the center of the city, usually processes loans and savings accounts. So, it turned out I was the first person in the district who had an idea to buy mutual funds there. The manager was able to sell me funds, but she didn’t know exactly how to do it. Luckily, she didn’t send me to another office or ask me to come some other time. The manager couldn’t call the main office to consult, because it had closed at 5 p.m. She used her cell phone to call someone, and then called somebody else. She was the only manager in the office. A man lined up after me and stared at me intensely, wondering why I took so much time. I think I spent there more than half an hour, nearing an hour. But when I came out of the office and breathed in frosty air, I felt a surge of excitement and pride.

It seems incredible that a whole year has passed, and my first investment has grown by 27.92%. Now, looking back, I laugh at myself. Buying funds is not a big deal anymore. It’s now a simple operation like depositing money in a savings account. I’ve even learned to do it online. Now I feel I can be more open about my investments in real life, because I’ve grown more confident about them. I’ve gotten a lot of experience and knowledge during this year.

Inflation Is Rising

2007-11-11T02:54:00.000+03:00

Since 1995 the inflation rate in Russia has been steadily decreasing. Last year it was 9%, down from 100+ % in 1995. I am young, so I don’t really remember the times when the inflation was increasing. I thought in 2007 it would be somewhere about 8% or less.

But this year everything changed. It all began in September and October, when some products suddenly became more expensive, for example milk, plant oil and cheese. I think I must mention that in Russia food is a major factor when estimating the inflation, because it is still the largest expense of an average household. I guess this price hike is a part of a global trend, as this year the price of wheat skyrocketed everywhere, and dairy rose in price in Europe. Anyway, the result is the inflation rate here is already about 9%, so by the end of the year it will probably be above 10%.

For me there’s nothing scary in this news, even though I spend a lot on food. This year I finally started eating more healthily, reduced the consumption of processed food, and my class schedule allows me to take more meals at home, rather than eat out. And I recommenced bringing my lunch to school. So I hope my food bill will even be shorter than it used to be. The price of non-food goods seems to be the same. I also know that the majority of my savings earn no less than 7%, and my mutual funds’ performance is way above the inflation. What I’m interested in is if our analogue of Fed rate will be raised. It currently stands at 10%. If it gets raised, the savings account rates will probably rise too. Then I will finally set up a savings account (seriously, keeping money on one’s Visa is a little weird) and lock these attractive rates. I think of this pike as a temporary deviation, after which the downward tendency will resume.

I admit that I’m probably overly optimistic about the future. Actually, I barely remember the crisis of 1998, when Russia went bankrupt and the ruble plummeted. Since then the Russian economy has been rising. So I remember only the relatively good times, and thus I’m inclined to believe that everything will be okay. When I heard the opinion of my acquaintances and media, I understood I am an egoist. While I thought of my financial benefit, the others worried about the future of the whole nation. It was clear that everyone thought about the hyperinflation of the low nineties and the tumult of 1998. My peers, who hardly remember it, were reminded of the hard times by their parents. I heard opinions like “Russia is going bankrupt”, or “It’s a crisis like the one in 1998.” There is no ground for such statements now. It shows that people get used to relative well-being, and it’s scary for them when something unexpected happens. Especially if a history of a particular market economy is so short. We’ll see.

October Net Worth

2007-11-11T02:47:00.000+03:00

This month I put aside the extra money I’d got from a small October work. Like in the previous month the stocks continued to pick up, and the ruble rose a little higher against the dollar. To achieve my goal of 100K rubles I now need $4,050 instead of $4,000. At the end of October I had $3,516.

I think I have too much cash, and I’m eager to put a part of it in my mutual funds. However, I am not disposed to do it right now, because Russian stock market makes new highs every day, and stocks seem expensive. I want to wait for a correction.

An Exhibition

2007-10-25T05:13:00.000+04:00

Recently I went to an exhibition "Personal Finances", organized by several banks, brokerage firms, insurance companies and publishers. I was interested to see what was meant by "personal finances" in that particular case. I wondered if I could learn something new. I must confess I have never seen people in real life who invests their money. Almost nobody will talk to me about handling money for more than ten minutes. All I know comes from books, magazines and the internet. So, I just wanted to see other people who were interested in pf.

Well, this exhibition turned out to be deadly boring. It was aimed at well-to-do middle class Muscovites and was held in a luxurious hotel in the center of the city. The visitors were mostly middle-aged men, several young men and few women. Somehow nobody would notice me and try to sell something to me. Sales managers probably couldn't perceive me as their client. They focused on more prosperous visitors trying to sell them average mutual funds with exorbitant fees, brokerage accounts (oh, trading is so in vogue here) and, strangely enough, tuition in private schools for their kids.

I went to a random presentation, where some pompous man gave a speech about stock market. The presenter told about disadvantages of mutual funds and encouraged everyone to buy stocks directly. He claimed he can easily get 100% ROI per year. This man hinted that successful people who made lots of money on stock market couldn't wear cheap bad suits. Apparently, we had to trust him, because his outfit did look expensive. Ugh. He obviously was a smart professional. But his speech was inaccurate and misleading, some facts were not true. My own experience and common sense sometimes disagreed with his words. I saw that his only goal was to make people set up a brokerage account with his employer and trade intensely, thus feeding the company with fees. I felt uneasy and wondered why the audience didn't laugh at him or challenge him (two men opposed him a couple of times but that was all). Then I realized that the majority of those sitting in at the presentation were listening intensely and actually believed what the presenter was saying. I remember a man in the audience ask "If I invest my money in stocks, will it be safe there? Will I get everything back?" He probably thought stocks to be some kind of bank deposit with extra high 100% APY. The answer he got was unclear and ambiguous.

What did I learn at this exhibition? Well, I believe that the personal finance industry in Russia is beginning to boom. The business seizes every opportunity to benefit from it. Not always their practices are and will be beneficial for their client. There's still little good advice on money matters and little information. People here need basic knowledge, like what a stock and a bond are. But at these presentations no one will muse on dollar-cost averaging, reducing debt, minding fees, long timeframes, indexing vs. active management and so on. There's a talk about 100% and quick big money. So people get easily impressed and start trading stocks actively, not really understanding how it works. They don't watch fees, they estimate the price of a manager's suit.

I also learned that I know enough to tell when people try to dupe me. I'm literate enough not to believe everything I'm told. I can make my own decisions. Thank you so very much, pf blogosphere :)

My New Card

2007-10-16T03:33:00.000+04:00

Till recently I had two debit cards, given to me by my college, but issued by different banks. Both of them are free for me, and both are Visa Electron. (By the way, I was so surprised to learn that this type of Visa cards is not issued in the US, Canada and Australia. It's the most popular debit card here in Russia.) Well, the first one is an excellent card which is very convenient. But I never liked my second card. It has no online banking, the customer service is poor, and the number of available ATMs is limited. But my college puts my stipend on it, it costs nothing, and I need to have a second card in case the first one is rejected at a point of sale. So I kept using it.

I've just gotten a new card, which is a debit Visa Classic. It's also free, has convenient online banking, gives me a 5% discount at my grocery store and the location of ATMs is good. The checking account linked to the card will earn me 7.00% APY for one year, insured. Actually, I was wary when I was offered this card. It seemed to me that it was too good to be real (and free). Before signing up I scrutinized closely the terms and conditions, searching for hidden fees or something like this, and reading the reviews on the web. But everything seems clear.

The APY is something I'm very happy about. It's not that much, because the inflation rate this year is going to be about 9%. But earlier I used to earn close to nothing, because none of my other accounts offered me more than 1% per year. (Savings accounts with higher APY work like certificates of deposit and require a high minimum balance, which just doesn't work for me.) In December, when the "7% for a year" offer is closing, I'm going to sign up for a MasterCard with the same features. Thus I will get extra two months of earnings. Maybe using debit cards as savings accounts sounds weird, but it will probably work, at least till the next December.

One nice feature of my new card is that it can be used in online transactions as a perfectly normal Visa Classic. (Electrons can't.) So, I can now shop at Amazon or eBay at last! Honestly, when I found out about this possibility, I felt an immediate desire to splurge. For a long time I was longing to buy some books that I couldn't find anywhere in Moscow, but wasn't able to because I lacked a proper payment method. Now that I have such a means, I still must think twice, because the shipping rates to Russia are something to count with :)

The drawback of this full functionality is a higher risk of fraud. My first two cards are really safe. They have no CCV and cannot be used in internet or phone transactions. That's why even if someone learned my Electrons' numbers, they couldn't do anything harmful. Now I have to be cautious and protect the number, CCV, and expiry date of my new card.

So, my second card goes on holiday. I intend to use it once a month to cash out my stipend, and then I will roll the money on a better card. It seems that I’ve found a good deal.

September Net Worth

2007-10-14T05:07:00.000+04:00

The September was quite favorable for my finances, even though I had to pay dorm fees. The $3K mark was passed rather easily. The main reason for that is I got the stipend and financial aid for July, August and September. By the way, since this September stipends in Russia will be 50% higher than they used to be. A nice bump! Also, the stock market picked up substantially. The ruble rose quite sharply against the dollar, so the change of my net worth in dollars is greater than it is in my currency.

I tweaked my goal bars in the sidebar to make my net worth goals more clear. It now states my short-term goal is $4,000 by February. At my rate of saving it seems rather doable. Why do I pursue exactly this not very impressive number? At the current dollar/ruble ratio $4,000 equals precisely 100,000 rubles. The six-figure line is important for me psychologically, because it's like getting on the next level. I guess after that it will be all the same, 123K, 150K or even 200K. I'll concentrate on tracking my NW in dollars, because small numbers are more convenient. But right now I'm so excited to approach one hundred thousand milestone.:)

I also decided that I want to have $10,000 when I graduate in June 2009. Right now I have about $3,000. I keep in mind that by that time my birthday deposit of about $2,000 will have matured. I think I'll be able to save the other $5,000 in the next two years.

Back-to-School Expenses

2007-09-29T10:34:00.000+04:00

In September I had to pay dorm fees. It's the only money I have to pay to my college. This year the cost of living in the dorms slightly rose, at least for me.

In the past every student used to pay the same fixed amount of money, but this year the dorm fee correlates with one's electricity consumption, which is calculated on the number of electric devices one has in their room. In the beginning of September one was to make a list of devices and hand it in. Nobody knew if any formal checks would be made to verify the list. (I think now that such checks are probable but highly unlikely.) I honestly declared that I used a desktop computer, a printer, a microwave, a mini-stove, a fridge, a teakettle, a hair-drier and an iron. Even after my roommate paid me for the devices we share, I was still a person who seemingly paid more than anybody else. All my acquaintances decided that hair-driers, irons and printers were not worth mentioning, and as laptops were sort of inferior to desktops, they could be forgotten too. Some people were even surprised at my honesty. They told me I could have saved money by omitting several items. But I decided there were other ways of saving money, which would keep my conscience clear. At least now I know that everything I use is absolutely legal, so if any check occurs I'll be okay.

And, by the way, do you know how much I paid? It was only $246 for the whole year. I really find this sum very affordable, especially when I remind myself that I'm getting an education for free, and I'm paying only a fraction of the actual cost of living in the dorms. If I had come up with a blank list, I would have saved about $130. I personally think it's not worth the lying and tricking.

August Net Worth

2007-09-16T01:01:00.000+04:00

Oops. In August my net worth has slightly decreased for the first time since I started tracking it. That happened because I didn't contribute anything. The only thing I did was relocate my money by buying more mutual funds in the middle of August. The stock market took a dip, and it hurt my net worth.

I look forward to the end of September with great anticipation. I have a little money to contribute, and I'll probably hit the $3K goal. Of course, I can't be absolutely sure, because everything financial is so unpredictable right now. Stocks are volatile, dollar/ruble ratio is constantly changing. We'll see.

My Funds and the Current Turmoil

2007-08-24T00:55:00.000+04:00

When I started buying mutual funds, I really didn't know much about stock market. But from the very beginning I decided that I wanted to invest for a long time, so I naturally chose "buy and hold" strategy. I promised myself that I would not sell my funds in the near future, even if there was a big correction.

During these months I saw that Russian stock market mostly reacted to local news. It also correlated with the price of oil a little, and, to a lesser extent, it was sensitive to the other emerging markets' performance. There were ups and downs, but the whole financial outlook was rather positive. This August our market suddenly became aware of other countries' markets. It tumbled down because European indices took a dip, then it closely followed the DJIA performance, after that Asian indices plummeted, so our market took a huge dip, too, and then turned back to the US. It doesn't care at all about the local data. Our market and my funds are just following the rest of the world.

Of course, I don't know what will happen next. I can't predict the consequences of the mortgage crisis, and I also can't say how it will influence the economy of my country. I still stick to my funds. When Russian indices were 10% lower than their recent historic high, I bought some more. We'll see how it will turn out.

Identity Issues, part 1: Passport

2007-08-18T01:35:00.000+04:00

In Russia, there is no analogue for the US Social Security Number. We do have Individual Taxpayer Identification Number, which is given when a person pays taxes for the first time. Many people, however, don't know their ITIN, because most often they don't need to. Driver licenses can be used as ID only in limited cases. So, the most important document here is a passport. I use mine in every formal procedure – when I buy mutual funds in my bank, buy train or plain tickets or get a package in a post office. I'm used to carry it around, because even when I pay with a card in a store, I'm sometimes asked to show my passport for verification.

What drives me mad is the necessity to get a new passport at some stage of life. It seems that the only reason for this is updating the picture, but a new passport also gets a new number. A person must get a new document when he or she turns 20 (my case) or 45, within a month after the birth date, at his or her permanent address (Hometown for me). Luckily, my birthday is in the middle of summer, and I could easily spend several weeks in Hometown while my new passport was being issued. So, after a couple of weeks of waiting, I got my second ever passport, with a new picture and a new number.

A month ago I bought a plane ticket to Moscow. It was rather cheap because of the special offer at the time. The problem was I bought it before my 20th birthday, using the old passport data. An airlines representative claimed the ticket invalid and suggested I should sell the ticket back (getting only 30% of its price) and buy another using the new passport data (the special offer expired). Isn't that ridiculous? After a bit of fighting they eventually agreed just to change the data in the ticket. When I'm in Moscow, I'll probably have to go to my bank and ask them to change my info in their database. And then there is my asset management company, which also uses passport number and such for identification.

Honestly, I would rather just glue a new picture over the old one. I'm so glad that my birth certificate and ITIN need not be changed. It feels so odd, being the same unique person, but having to prove who I am just because some number in some document has changed.

A Birthday Present

2007-08-04T21:22:00.000+04:00

In my life I've gotten a wide range of birthday presents. Sometimes it was a book, sometimes clothes, sometimes just cash. What all these presents have in common is although they are very nice, they are depreciating. I've read some stories on pf blogs, in which someone's children were given bonds or other assets. Such stories amused me, because I never knew anyone who gave their children appreciating presents.

This time my parents surprised me. They gave me €1,500 (about $2,000) put in a savings account. I think Russian high-yield savings accounts are somewhat similar to US certificates of deposit, because one can't take the money before a certain day. If one cashes it out early, he or she gets no interest. On the other hand, some accounts (like mine) allow depositing extra money. The terms are great, mine is a 2-year account with 7% non-taxed APY. As it was opened half a year ago, it matures in a year and a half, when I'll be graduating.

I would gladly add this money to my accounts, and then my net worth would boost to an amazing amount of $5,000! But the account is in my mother's name, because it was supposed to be a secret, so technically it isn't mine. I can't even check the account balance. So I probably wait a year and a half when this money will be legally mine. It will be a great graduation gift.

Jule Net Worth

2007-08-02T22:56:00.000+04:00

This Jule I have nothing to brag about. My net worth almost didn't change. It's not surprising, as I didn't contribute anything to my savings, and my stocks, after a period of high volatility, have reached the level of the end of June. This is my first flat month since I've started investing and tracking my net worth, but I'm not upset very much. I knew my summer's finances would be boring.

Also this month I was very much absorbed by my offline life, but now I'm going to drag myself back to the blogging world.

8 Random Facts about Me

2007-07-13T23:58:00.000+04:00

I was tagged by SF Money Musings and Millionaire Mommy Next Door for the latest meme!

Well, here are eight facts about me:

1. Extracurriculars
When I was in school, I took ballet. It was hard, but I really enjoyed dancing. I think I danced on my points rather well.:) However, it started to be very time-consuming, I realized I didn't want to become a ballet dancer and quit. I entertain my friends by performing ballet movements now and then. Oh, by the way, it seems to me that I earned my first money from dancing. There were some events, people bought tickets, we danced and got money. The amounts were ridiculously low, but still.

2. Foreign languages
At five I decided to start learning English on my own. I remember that my first words were "a cat", "a rat" and "a bat". I explained to my friend in kindergarten that the object from which she used to drink tea was actually "a cup" – I must admit, I was a bit of a show-off. Oh, I even learned the word "a dandelion"! When I came to the words "a tame quail" and the sentences like "The cock's beak is not so sharp as the eagle's" I felt a little overwhelmed and thought English language to be too difficult. So, I made a pause. In my school everyone was to learn French from the first grade. At 12 we started to take a second foreign language, and that's how I continued to learn English.

3. Personal transport
I have never driven a car. My family have never had one, even though I'm sure my parents could afford it. I've always lived in places with well-developed public transport networks, and I'm perfectly able to dispense with a car. However, sometimes I think that I should get a driving license just in case. Maybe I'll need it someday.

4. Cooking
I can cook a lot of meals in a microwave oven, not only thaw or heat up something. I can cook rice, pasta and chicken fillets in it. Once I even microwaved an egg. You shouldn't try boil an egg in shell (it will explode), so I cracked the egg into a glass full of water and microwaved it. The egg was cooked into a shapeless something, but it tasted OK and was fit for salads.

5. Food fastidiousness
My food preferences change with time. For example, I used to dislike eggplants and cauliflower, but when I started college I suddenly found out that eggplants and cauliflower are delicious. Maybe I have grown up? I am still wary of dates. I had to eat them in kindergarten, but I hated them. Now everyone I know adores this fruit and can't believe I don't. To be fair, I don't even remember the taste of dates, so I might give them another chance.

6. Writing by hand
I have bad handwriting. Other people are always being polite by saying it's OK, but sometimes even I can hardly decipher it. Fortunately, I live in the era of computers, so chances are I won't suffer from my bad handwriting in future very much. I really like typing more than writing by hand. The problem is, I still have to make notes in class and then use them to prepare for exams:)

7. Pets
My favorite pets are parakeets (budgies). I had a green one for nine long years, since I was 8. He used to wake me up in the mornings and entertain my family with cheerful songs. I was very attached to him.

8. Media addiction
I don't watch TV. When I started college, I didn't have a TV in my room. I soon figured out that I could live without watching TV programs. The Internet is another story. When it's down, I feel uncomfortable.

Well, I took part in this meme rather late, so the majority of those who I know have already been tagged. I intended to tag Millionaire Mommy Next Door, but while I was writing she was tagged by someone else, revealed 8 facts about herself and tagged me:)

I will tag 3 Things About Money.

Back into a Parallel Universe

2007-07-09T23:08:00.000+04:00

So, I'm back to Hometown. I've grown so accustomed to living in Moscow that now it feels like I am in another world. It's said very often, that Moscow isn't Russia, because it's very different from other Russian cities. The capital and its people has money. Life is more expensive than in the rest of the country, but the wages keep up with the prices. In an average Russian city life is so much different.

I'm amazed at the prices here. A bus ticket costs around 20-40c. Apartments in good districts cost much less than $100K. The price of a cup of tea in a side street café is $0.39! A reasonable cab fare is somewhere between $3 and $5.

As far as I know, an average net income in Hometown is $400 per month or $4800 per year. I still can't find where to buy business or personal finance magazines here. I guesstimate that only several hundred people in this 600,000 city have put their money in stocks or mutual funds.

On the other hand, people seem to be more kind here. I think they are less sophisticated and more open. It's so peaceful and quiet in Hometown, that I'm beginning to forget about big city frenzy.

That's what I do every time I go to or from Moscow - I switch between two so different worlds.

It's Like a National Holiday

2007-07-06T14:54:00.001+04:00

Yesterday was a big day for my country, because the city of Sochi was chosen to host the Olympic Winter Games in 2014. Frankly speaking, I wasn't very much interested in this 2014 campaign. However, when I heard the decision of the Olympic committee, I felt really proud and happy. It seemed like everyone in Russia was bursting with joy, and I don't remember the last time when I saw so many people smiling and laughing!

And now the personal finance aspect of this event. Real estate in this Black sea resort has been rising for several years, since the first speculations about Sochi-2014 emerged. In 2002, a one-bedroom apartment in the center of the city cost $15,000-20,000, in 2007 it costs about $180,000-200,000! Now, when Sochi has become the official host of the 2014 Olympic games, the prices are expected to rise even more. Well, in 2002 real estate in Sochi was a great investment. I say, the net worth of an average homeowner skyrocketed there!

Choosing My Mutual Funds

2007-07-05T00:33:00.000+04:00

The other day I was reading a Russian personal finance magazine. There was a review of mutual funds, and my two funds were named the best based on their performance in the last 6 months! I've been investing in them for 7 months. This report was a very pleasant surprise indeed, but I understand that 6 months is a very short period to draw any conclusions. What's important is that I have an inner feeling that I have made a right choice.

When I started investing, I was so naïve, so overwhelmed by a variety of available funds, I just couldn't choose the right one. Looking back, I'm glad I didn't make any of major errors that beginners are said to make usually.

Some basic things that I think I did right
1. I didn't base my choice only on past performance. There was one fund at that time that boasted about its 1-year 90% return (after fees, before taxes). Well, even considering that 2006 was a year of surprisingly high returns on Russian stock market, 90% was overwhelming, and thus very, very appealing. Luckily, I didn't yield to temptation. If I had put my money in this super fund 6 months ago, I would have been in the negative territory now.

2. I wasn't influenced by advertisements. There were a lot of aggressively advertised mutual funds, but I took an effort to look for more options and compare different funds. Some of those advertised funds turned out to be not so great at all.

3. I wanted to get good returns, of course, but I was not driven by greed. If I had been obsessed with the idea of getting the best return, I would have failed, because no one can predict the future performance, and no fund can be the best forever. So I decided to find funds which would give me good returns, run by a reliable company with good service.

The company
I found my ideal investment management company. It happened to be a subsidiary of my bank. I liked it because it offered a good index fund. It also turned out to be very convenient. The thing is, I couldn't just make a few clicks on a site, send a check or use a credit card - done. I had to visit the office of a company every time I wanted to make an investment, and this company had an office within a five-minute walk from my dorm which was open even on weekends! A bit later I found out it offered free Internet banking, so now I can invest using the Internet, though I haven't tried it yet. Also, due to the fact that this company is affiliated with my bank, I don't pay any fees for transferring money to my funds. It is big and super reliable - something you really want to double-check in Russia.

The funds
Choosing the right fund out of hundreds can be headache. I decided to choose my funds according to their strategies. That's how I ended up with an index fund and a fund, focused on an industry sector.

Fund #1
I think that six months ago index funds were not a popular kind of investments. I didn't see them advertised, they weren't included in popular surveys and reports because they were considered to be a special kind of mutual funds. I learned about index funds by spotting the offers at investment management companies' sites. What I did next was get more information about them and compare figures. It was a revelation for me that the majority of actively managed funds performed worse or close to indexes. So I thought - why not an index fund?

Fund #2
About a month after making my first payment to the fund #1, I decided to consider a mutual fund which invests in electric power industry. The reason is it is now the hottest industry sector in Russia. There was a single huge enterprise owned by the Russian government, but now it's being divided into many smaller enterprises which are going public. There's a lot of IPO's and buyings by strategic investors that eventually lead to the increase of the industry stocks.

So...
What I did was simply find an investment management company that was ideal for me, choose two of its funds with strategies I liked and start investing. So far it worked for me. I like the returns and the convenience of investment, provided by my investment company. And it turns out that, according to the magazine, it's the best placement I could have made 6 months ago - something I couldn't imagine half a year ago:)

June Net Worth

2007-07-03T13:36:00.000+04:00

In June my net worth increased 12.2% to $2,814. Thanks to my final exams I didn't have much time for shopping and eating out, so I managed to save quite a bit. I also got my June stipend (I had thought I wouldn't get stipend in summer) and financial aid ($58 given by the college now and then). All that money went straight to my savings. My stocks have finally started to pick up.
So I have to save only $186 to reach $3K. I'm pretty sure I'll hit this milestone in September.

Connection Failed...

2007-06-29T19:44:00.000+04:00

The internet connection in my room has been cut. Sigh. In fact, internet in my dorm isn't free, even though it is provided by my college local network. It costs about $35 per month per room. I share the bill with my roommate. Last time I paid for it on May 27. So, one month passed, I didn't pay, they cut me. OK, I think I'll manage to live without internet for three days. I'll be in Hometown on July 1st, and I'll have internet access there.

It's amazing how I'm dependent on the internet. I have to learn again how to do some simple things without it. For example, today I needed to go to a place I had never been to before. The only thing I knew was the address. In good old days I would launch the russian analogue of Google.Maps, named yandex.maps, punch in the address, get the picture and directions, save it in my PDA and go out. Today I had to rummage through my things to find a real, solid, paper map of Moscow. Luckily I have one!

Then I wanted to see a movie. How could I figure out what was on and where? What people do in such situations, if they don't have internet - phone to the cinemas or what? I decided to take a lucky shot and just went to my favorite multiplex, hoping that the movie - it was Ratatouille, by the way - would be running there. It was indeed, and I had to wait only one hour.

The movie was great! I'm now enjoying free wi-fi, provided by the cinema, and trying to publish this post (blogging through a PDA isn't that easy!). There's a guy here who has been sitting here with his laptop for more than two hours. Maybe he's saving on internet bills? :)

An Indian Restaurant

2007-06-26T23:57:00.000+04:00

Yes, yesterday I was not so frugal, because I went to a restaurant. We'd been planning this dinner with my friends for a long time, and finally we were free and could make it. So my week of frugal living couldn't be an excuse to skip it. And besides I really wanted to go, because I had never tried an Indian meal before. I was really curious.

We were three: N., (my roommate), T., (a girl from the room next to ours) and me. While we were waiting for our orders, I got a possibility to talk about personal finance. I don't remember how it happened, but we started to talk about retirement. T. said when she retired she would very likely be poor and miserable, because "our country doesn't care about the old people." I asked what she knew about her future retirement. I figured out she didn't even know how Russian retirement system works. For example, she thought that a person gets some money after retirement only if he or she has spent years working for the government, while working at privately held enterprises doesn't count at all. That's complete rubbish. So I spent several minutes explaining the system to her, talking about saving, encouraging her to take care about her money. She didn't seem to be very much excited or even interested in the subject. It really amazes me. She just knows that she will be poor and the government won't give her much money, and I can't change her opinion, because she doesn't want to hear about all the possibilities she has. Maybe she thinks she is too young to think about such things, I don't know.

So I stopped talking and concentrated on my order. I had a butter chicken, potatoes and a garlic naan. It was so delicious, I really did like Indian cuisine! I felt like I really was in India, because there were a lot of Indians in that restaurant and there was a singer performing songs in Hindi. Even though I left $17 there, I don't regret that dinner. :)

The Word Is Frugal

2007-06-23T16:48:00.000+04:00

My finals are almost finished. Actually, I have already passed all exams, but I still have one paper to hand in, so I don't consider myself really free. I passed the exams in due time and got good grades, so it seems I'm eligible for the stipend in the next term. There are rumors that stipends are getting a little bigger as of this September. We'll see!

Luckily I don't feel like I need to splurge on things, as I feared I would. Quite the opposite, I try to save as much as possible before leaving Moscow. I have about one week left before going back to Hometown, so I decided that this week would be my "week of frugal living". I wanted to cut back on grocery expenses. I recently whined that I go to the grocery store too often and I can't help it. However, this week I did decide to try buying a lot and cooking in a bulk. I'm sure reading inspirational pf blogs helped a lot.

So, I spent about $20 in a grocery store on June 20th and cooked a substantial amount of food. The next day I even took my lunch with me, something that I haven't done for a long time! Now I try to pass the whole week on this food. The only thing I still have to buy often is a bottle of my favorite mineral water. I know that tap water would cost me nothing, but I can't make myself drink 3 pints of Moscow tap water, even filtered, because I hate the taste. Yesterday I read that tap water in New York is as tasty and pure as bottled water. I wish I were so lucky.

By the way, I remember when I learned the word "frugal". Seriously. It was somewhere in September 2005, when I was reading a book for my English class. The book was Three Men In A Boat by Jerome K. Jerome, and the line was "Then we run our little boat into some quiet nook, and the tent is pitched, and the frugal supper cooked and eaten." At that time I really didn't know such a simple word! I even thought that the word "frugal" is not really often used. I certainly didn't read pf blogs then! ;-)

How Often to Check Funds' Performance?

2007-06-18T10:22:00.000+04:00

When I first started investing in mutual funds about 7 months ago, I was somewhat obsessed with performance. I would come home, switch my computer and then go directly to my investment management company's site to check how much I had. I just loved to download new data and build charts - daily! Maybe it's just investing was so new to me, and I was fascinated by the ups and downs? I think I did so about half a year, until I felt weary at last. Now I check my funds just once in a while.

I guess my daily obsession was really useless. I don't trade daily and I don't intend to sell my stocks in near future. Perhaps I should just stick to regular monthly investing, and not even bother about the current price. On the other hand, if I watch my funds and I see them taking a dip, it can be a good time to buy some more. So, how often do you do you check your funds' performance?

How I Have Chosen My Grocery Store

2007-06-16T00:59:00.000+04:00

It can seem that being a student on a tight budget I must buy groceries in the store with the lowest possible prices. But I don't, because I still value convenience and time a little more than low prices.

I figured out that the students who live in my dorm usually shop in about 4-5 nearby grocery stores. Among them there are two stores where prices are a little lower than in other stores. However, I just can't make myself to shop there. First, they don't take cards. (I hate paying with cash and I don't usually carry any.) Second, there are too much people there! When I used to shop there the aisles were always blocked with the carts of other shoppers and I always had to line at the cash register. Maybe if I stuck to shopping in these cheap stores, the money I saved would add up into something nice. But I think personal finance is not just about the lowest price, but about finding the right balance between what you want and how much does it cost. Well, the stores that I've chosen are convenient and have reasonable prices, that are much lower than in stores in the downtown. So I am satisfied with them.

Speaking of saving on groceries, I think I could spend more if I shopped less often. I can never reduce shopping to once a week. I don't have a car, so I have to carry all these heavy bags back to the dorm. I can't grab much things, so after two or three days I have to shop again. I remember when I was a first year, it was considered so money-savvy among my friends to go shopping in Aushan, a mall in the nearby suburb, 5 minutes by metro, 30 minutes by bus, 1 minute by walk, and buy a week's worth of food. Now I feel too old and too lazy for such an adventure :)

I Don't Feel Like Building an Emergency Fund

2007-06-10T19:37:00.000+04:00

I don't have a proper emergency fund, and, to tell the truth, I'm not willing to set up one. I'm inclined to put almost all my money in mutual funds, and I don't usually have much money in my savings account.

I will try to explain why. First of all, I must evaluate what is one month's worth of living expenses for me. Besides the money that I sock away, I have about $300-400 to spend every month. So, if I followed the rule of three to six months, I would have to keep at least $900 ($300 * 3 months) in an emergency fund. I don't want to do this because the interest rate of my savings account is much less than the inflation rate. I once said that Russian banks give generous interest, sometimes up to 8 percent. But to get the APY like this one has to deposit a big sum as a required minimum, and the money must be kept on deposit for a minimum length of time, like one year. If one wants to take the money earlier, the accumulated interest will be lost.

So, if I put the money in the high-yield savings account, my money would be tied in case of emergency. I would have to forgo interest to get it. If I kept the money in my current low-yield but flexible account, it would be lessened by inflation. A loss either way.

Putting money into the mutual funds doesn't seem to be a bad decision, really. True, the stock market can go up and can go down. But I'm almost sure that over a long period my mutual funds will outperform bank deposits. And I can cash out this money at any time. I will only have to pay 13 percent in income tax, so I will get my 87 percent of capital gains. The only problem is that I won't get the cash immediately. My investment management company says that it will take up to 15 days to transfer the money back on my checking account. That's why I always keep about one month's worth of expenses in the savings account and put the rest in the mutual funds.