Money Chronicle

Tip for SEO optimization for bloggers

noreply@blogger.com (Mr. Bee) — Wed, 06 Jan 2010 18:15:00 +0000

Well, I am certainly not the best one to look for info on this. In fact, I have sort of stop updating this blog due to my higher passion on photography. But for those looking for info, I will share what I can from my short experience here.

If you are blogger, don't worry too much about SEO. Just write great relevant post. Need proof? Well, one of my blog entries return as #1 in Google search depending on search criteria and some are rank relatively high, for a dormant blog. The example is here:

best 529 plans money magazine
How could this happen? My entry rank higher than article on Money Magazine?!?!

I can only thank some reader that actually come to my blog and read the article. I am also sorry if you are hoping that I can provide more info on this. I really love the topic of personal finance. However, I CRAZILY IN LOVE with photography. Along with that, I have full-time work, family and other things in my life, I just feel I couldn't do this. I don't want to put something mediocre out here. If I am going to maintain the blog, I want to make sure it is great info. Again, check out my previous post on some of the great personal finance writers.

Do you follow your passion? (and about the MIA)

noreply@blogger.com (Mr. Bee) — Wed, 30 Sep 2009 13:43:00 +0000

I have been pretty much missing in action in term of my blog here. Obviously for a reason. The reason is related to the question on the title, "Do you follow your passion?"

That is the question that has been popping on my head lately. I started this blog just a few month back because I love the topic of personal finance. I am passionate about paving the way through secured retirement and whenever I can, I will try to talk my colleague at work to work on paving their way to financial freedom. I will talk to them about investments, ignoring all the buzz and noise and focus on their long term goal. Remind them to invest in index fund and balance it with bonds. Inform them about Roth IRA and its advantage compared to IRA for most of the people I know, but yet and them same time suggest them to read through it carefully since everyone has a different tax situation. I am suggest people with kids to look at 529 plans.

BUT, is my passion writing about personal finance topic? There are a lot of great personal finance blogger out there. Some of my favorites are J.D. Roth @ Get Rich Slowly, Free Money Finance, and Five Cent Nickel. For blog focus mainly on investment, I regularly follow Mike Piper @ Oblivious Investor. For Christian personal finance, I actually like Provident Planning, more than Christian PF. But that is simply because of one reason, which I may be bias about. It is regarding faith based investing. I agree more with Paul William @ Provident Planning, while Christian PF regularly featured Jay Peroni from Faith Based Investing, which believe in stock picking. However, beside that, both blogs are great. There are obviously other writers such as ManVsDebt and The Simple Dollar, however personally for me, the topics written by those writers gets boring to me since it is more resolved around how to live frugally and not as much about investing, the topic that I am more interested in. Again, that doesn't mean those blogs are not great, it is just my preference.

I start thinking about this question since I have another great passion of mine, photography. I realized that I can't focus on two side things, writing on personal finance and at the same time pursue my photography passion, along with my work and spending time with my beautiful wife and two young daughters.

What has push me lately to think more about this? I would contribute it to Zack Arias, an Atlanta based photographer. Earlier this year, I found out about his video, posted below.

As a photographer, it give me hope. Everyone starts as a beginner. And lately, Zack has been putting a Call to Action. It is to encourage people to go out there and serve people with cameras. I have been pushed. Zack's uses GOYA previous - Get Off Your Arse. It is one thing I want to pursue. I find a lot more excitement doing my photography and writing for my personal finance blog. So with this, I will bid adieu for this blog. It is better to stop right now while I don't have a lot of readers and this blog is still in infancy, rather than wait to realize this after I have reach certain level of readers on this blog.

Does it mean that I will never update this blog? I won't say never. If I find something great to write, I will. I know a lot of readers have stumbled to my blog while researching 529 plans. For that reasons, I will not close this blog too. However, I will put more focus on my photography, instead of my personal finance blog. I will also update my blogroll to include some blog that I think is great and more align with what I believe would help people more. If I don't add other blogs, it doesn't mean those blog are not great, but I put those that it my opinion would serve people better.

Since I have been focusing on my photography starting from two weeks ago, I have been doing several projects and have opportunity for other projects. So far, all of them has been a free project, not a money making project. But I love it. I find enjoyment out of it. I am learning more and continue to improve my skills.

Of course as a personal finance geek, please don't get yourself into financial trouble just to follow your passion. But make every effort to follow your passion and dream and yet and the same time, keep your finance in order. You may have to put your passion until you are more financial secure. I am in a more financially secure state, no debt, not even a mortgage since we paid off our mortgage.

Now the question is back to you. Do you follow your passion, even if it means that you will have to sacrifice something?

"Living below your means" in practice

noreply@blogger.com (Mr. Bee) — Wed, 16 Sep 2009 15:58:00 +0000

Darn, another personal finance blogger talking about living below your mean? Why? Can't PF blogger move beyond this topic? I don't think any personal finance blogger should ever stop reminding their reader to live below your mean. That is the main principal of building wealth. But I think each personal finance blogger has different suggestion on how to spend less that you make. As I mentioned in my about page, I have a single income family. We have two daughters, 2.5 years and 2.5 months old. I work for the government. Yet, we have been able to pay off our mortgage and has no debt. Obviously, the main reason we reach this point is not because we make a lot of money either through our salary. It is surely not because of our investments since started investing around in 2001 and the stock market hasn't really been that great over the past 8 to 10 years. The main reason is through our frugal living. Here are things that help us reach this point.

First, I will admit we were both lucky to come out of college with no or minimal debt. We do not grow up in U.S. and we both came to U.S. for college. My parents paid for my undergraduate educations, including all living expenses. My wife parents paid for her undergraduate study and she worked her way through her master degree by being research assistant and frugal living. So, we started with a big advantage over a lot of people here.
While we started dating in college and married at end of 2002.During that time, obviously we have our own spending and savings. We actually lived in separately cities coming out of college. When we got married and start living together, we know that there will be a point when we will have kids and the possibilities that my wife would stay at home. Thus we made decision early on that we will live with only one income. The other income will go fully for savings. Think about how much savings you could make with that! We have savings with only my income and in addition to full after tax money from my wife salary, we have tons of potential savings. Remember with investments is TIME IS YOUR FRIEND. Now we are both in our early thirty and we can use the power of compounding to the full extend.
We did not buy more house that we need. We bought our house in early 2005, at the height of the housing market. Do we have any regret to buy during that time? Well, to small extend, I would say may be. The value of our house is probably at the same level now or even less than when we bought it. But we paid off our mortgages in 2007, thus we don't have to worry about it now. While we are looking at new house at a better school district (our school district is not good at all), we still have time as our first daughter will not start going to kindergarten for another three years. Even in the search for our new house, we are very careful not to be tempted by house that is more than what we need. We got listing from our realtor with houses that looks really nice and we really like, but we know we will not even consider looking at those houses because we don't want to purchase a house that more than what we need. Paul Williams from Provident Planning has an article on being content with your home. I think that is one key thing that we try to be: being content and grateful that we are bless with a home that we own.
We own two cars. My car is 10 years old and my wife's car is 9 years old. Even with having two kids, we have not upgraded our compact cars. We know eventually we will need to upgrade our cars. One of the car will be an AWD car, but we will not buy more car that we need. We will make sure we buy cars with good gas mileage and reliability. Paul Williams @ Provident Planning also has another great article on being content with your car.

Those above are just some samples of things we do to live below our means. In the future, I will put more examples of how we live below our means.

Other
The latest Carnival of Personal Finance hosted by Mary @ SimplyForties is up. My post on the topic of trust is included. Check it out here: SimplyForties: Carnival of Personal Finance: Live From Monticello!

Avoid Comparison of Your Investments Performance to the Market

noreply@blogger.com (Mr. Bee) — Mon, 14 Sep 2009 16:02:00 +0000

Do you check how your investments performance and compared it to the market? How about comparing it to your peers? Do you take solace when your investments losses is less than what S&P 500 losses last year?

I know personally I compare my investments against how S&P 500 does. But when I sit down to think about it, it really DOES NOT matter what our investments relative performance is.

The goal of investing should not to beat the market. We invest to reach a certain goal, such as for retirement, college educations, etc. If doesn't matter whether we trail the market or beat the market, as long as the investments bring you closer to reaching your goal, that is what matters. If your investment beat the market last year, but overall portfolio values is still down, it is only a small consolation the fact that your losses was less than S&P 500. The fact would still be that you are further away from your goal.

In fact, there are potential perils in comparing your performance against the market.

Temptation to tinker with your investments. If your investments trail the market performance, you may be tempted to start making changes to your investments. You may start questioning whether you need to take more risks and may be taking additional risks. You may start questioning your ability and stop trusting yourself.
Unrealistic optimism and overconfident about your abilities. Being confident is fine, but being overconfident could lead you to underestimate the risks involved with investing. You may start putting extra money to your best performing funds or stocks.
Focus on short term performance and let your investment strategy effected by your emotion due to current environment. Whether you are ahead or trail the market, you may start looking short term and forget about that the goal for investment should be long term. If you are ahead of the market, you may start to think the conditions will continue for foreseeable future. This may lead to the first peril I mentioned above, the temptation to start making unnecessary changes to your strategy.

How often do you compare your performance against the market? Do you see any other potential dangers of relative performance?

* Photo by Mike Johnson - TheBusyBrain.com

Target Retirement Fund - Good or Bad

noreply@blogger.com (Mr. Bee) — Tue, 08 Sep 2009 15:00:00 +0000

Investopedia definition for Target-Date Fund:

A mutual fund in the hybrid category that automatically resets the asset mix (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame that is appropriate for a particular investor. A target-date fund is similar to a life-cycle fund except that a target-date fund is structured to address some date in the future, such as retirement.

Target Date Funds have come under fire recently, such as mentioned on here. I personally think it is unfair. I think the problem lies with investors not doing their homework. One of the most common mistakes by funds investors is not reading the funds prospectus. By the name, most people think they will not understand the information provided in the prospectus, while in fact, prospectus is written mostly in plain English. By not reading the prospectus, many investors do not understand the risks and expectations involved in investing on target date funds and the fact that target date funds DO NOT guaranteed positive returns. I think overall, Target Date Fund is a good choice for people that have no clue about investing. However, those people needs to realize the risks involve with Target Date Fund.

Having sort of trying to defend the target date funds, I don't necessary it is the best options for everyone or even for most people. As I mentioned earlier, a lot of investors are confused by the name and think that they will have enough money during that target date. They think it is guaranteed. But again, those are minor. Another con is that target date funds assumed that everyone with the same target retirement date has the same risks profile. That is far for reality. Your risks tolerance may be different than others risk tolerance funds that have the same target retirement date. And another negative in my mind, the reason that I moved away from Vanguard Target Retirement 2045, is that I don't think most target date funds offer enough diversification. For example, Vanguard Target Retirement 2045 asset allocation is about

72% - Vanguard Total Stock Market Index Fund,
9.2% - Vanguard European
4.9% - Vanguard Pacific
4.1% - Vanguard Emerging Market
10% - Vanguard Total Bond

I don't mind the 10% in bonds, since I think everyone should have some amount in bonds. But on the equity side, about 80% of it is in domestic stock and only 20% in international stock. I personally think the allocation in international stocks should be higher. And I would also prefer more small cap and value in the domestic stock than what Vanguard Total Stock Market Index offers.

Remember, a lot of this is very personal and will be different for everyone. But I think all you need is a little bit of homework and you can come up with better asset allocation option than what target date funds offers. However, if you don't want to do your homework and at the same time doesn't want to pay for professional advices, then instead of simply leaving your money on savings account, then I would consider looking at Target Date Funds. If you simply want several model portfolios, I would suggest looking at Paul Farrell's Lazy Portfolios. However, do not simply copy one of these portfolios simply because of its past performance without understanding its goal, objective and your own risk profile. This should be used as guidelines only.

* Photo by leeroy09481

Obama's Initiative to Increase Personal Savings

noreply@blogger.com (Mr. Bee) — Sat, 05 Sep 2009 23:34:00 +0000

I found this new article on CNN Money - Obama to workers: We'll help you save - interesting. Overall I think it is a good initiative. Let's take a look at the three main ideas from the initiative:

Auto enrollment in retirement plan. While this is not new, the initiative is to reduce the amount of paper work hurdle. The goal is to have more small and medium sized employers to do this. I think this is great. A lot of time, people are just too lazy to find out more about the retirement savings plan. My only reservation is where is the money is going to be put to. Is it going to money market funds? Or is it going to target retirement funds? While I think Target Date Funds would be good for the automatic enrollment, my concern is not every Target Date Funds are created equal. Some are too aggressive and too expensive (high expense ratios). Having said that, I still think it is a good idea.

Getting tax refunds in U.S. savings bonds. I personally don't like this idea. I think most people will be better served by taking the money and invest it properly. Better yet, I think it would be better if you don't get refund at all because you are essential loaning money to the IRS without any interest. But I know a lot of people like to get money back. However, if you know that you will get money back and you know that if you get it back you will spend it right away, then putting it U.S. savings bonds may be a good idea for you.

Converting unused vacation times and sick days to 401k money. The best idea out of the three. I really like it. I still think for most people, they should use their vacation times, unless if you are allowed to roll it over. We need to balance work and life. However, for some people that are entitled to many vacation times due to the amount of years at the organization, to be able to convert this to 401k vacation money is good. I personally would like this to be capped to at most 50% of total vacation times entitled to the worker each year.
Update: One thing I forgot to note is that this is not mandated, but encouraged. And apparently, this is not a new rule either, but rather an emphasis of existing rule. Check out this article from Marketwatch.

* Photo by alancleaver_2000

Investing - A matter of trust

noreply@blogger.com (Mr. Bee) — Thu, 03 Sep 2009 15:00:00 +0000

I am currently reading Straight Talk on Investing: What You Need to Know, written by Jack Brennan, Chairman of The Vanguard Group and previously the CEO and Chairman of The Vanguard Group. So far, I really like this book. In one of the early chapters, Jack Brennan discuss about whom to trust in the act of investing. He listed four things:

Trust Yourself

A lot of people has problem trusting their own judgement about investing. That is why I think a lot of people follow the like of Jim Cramer and follow his stocks recommendation. When they hear someone, such as their friends, make a killing on an investment, they envy it. I was in this situation before I learn the hard way that trading is not investing. When my colleague used to tell me that the stock he is investing right now is doing well, I have a tendency to put my money in the same stock. But it was too late then. And when my other co-worker got into option trading and making profits, I tried it too. Again, I lost money "investing". The problem was that I didn't trust myself. I didn't think that I could make sound investment decisions.

Now I am a lot more confidence on my investment strategy. I invest in passively managed index funds. I have set up an asset allocation that I can be comfortable in. During this recent downturn, I continue to believe in my strategy and has continued to contribute more money in my investments, both in my tax deferred accounts and my taxable accounts. I no longer pay attention to hot tips or try to follow the trend. I actually view the current market as buying opportunity. I don't spend a lot of time doing research on each of my individual investments. If I heard someone makes a lot of money on certain stock, I don't envy them because I have my own investments goals and objectives. And I know it will be hard for that person to keep the performance and continue to beat the market in the long run.

Trust the Financial Market

If you don't think the growth will occur in financial markets over time, then you shouldn't even have money in the market. You should stay with those safe options, such as money in savings or certificate of deposits or may be U.S. Treasury bills.

I believe U.S. economy will continue to grow. And I believe international economy will continue to grow too, especially the emerging market. However, there is risks in investing in stocks. And there will be up and down in the economy, but over the long period of time, the world economy will have an upward trend.

Trust in Time

Time and the power of compounding are investment best friend. Albert Einstein said:

“The most powerful force in the universe is compound interest”

It is best to start early to reap the most benefits of the power of compounding. Jack Brennan emphasizes that you must reinvest all the income and dividends, instead of taking them in cash (which is one reason why I prefer mutual funds instead of ETF since it is much easier to reinvest all the income and dividend with mutual funds. I will try to do a comparison of Mutual Funds vs ETF in the future).

Find a Financial Provider You Can Trust

If you don't know about the financial provider and can't trust them, why put the money with them. If you are going to have a financial provider to handle your investment, you may want to understand how your money is managed. Don't be a victim, such as those that invested with Bernie Madoff. Jack Brennan listed four information that a trustworthy provider of financial services should be able to provide upon request:

A clear and complete explanation of the fees you'll be charged.

A record of the company's past investment performance.

An explanation of how the performance of your own investments will be reported to you.

A clear understanding of how the company will respond to any questions you have.

It is amazing how the things listed above would have helped most people avoid Bernie Madoff or other investment fraud.

Finally...

How about you? Do you trust in yourself, in the markets, in time and in your financial provider? If not, then do some homework then get yourself to the proper investment strategy. And there right moment to start investing is always now.

* Photo by Joe Nangle

Carnival of Personal Finance

noreply@blogger.com (Mr. Bee) — Thu, 03 Sep 2009 14:45:00 +0000

Just a quick note: My article on the conclusion of my 529 plan selection for my second daughter where I put the conclusion that led me to the selection of West Virginia Smart 529 Select is included in Carnival of Personal Finance - History of College Football Edition hosted by StretchyDollar.

You can read the rest of my 529 selection process where I looked at several 529 plans here.

Best Credit Cards For You ...

noreply@blogger.com (Mr. Bee) — Tue, 01 Sep 2009 14:34:00 +0000

If you are looking for a review of credit cards, you are not going to get it here. There are a lot of credit reviews out there. A lot of publications, such as Money Magazine/CNN Money, publish what they thought is the best credit cards out there. If you search through personal finance blogs, you will find a lot of reviews, but beware with those reviews as sometime the best cards may not be on the list. That is because they may only list those where they have affiliate links. Those that they get money from if you sign up for that credit card from their links.

But I will go against the crowd and say that you don't need another credit card. The best credit card is probably the one that is already in your wallet. Yes, when you compare with other credit cards, the offer from the credit cards you have may not be the best out there, but I truly believe it may be the best for your case.

Why do I think that way? Remember, opening a new card will affect your credit scores. One of the criteria for credit score is the length of time the account has been opened. Don't just simply chase "best credit cards" just because they offer slightly better cash back. I have two credit cards, AMEX Blue Cash and Citibank Dividend Platinum Select. I have had those cards since 2000. Fortunately for me, AMEX Blue Cash has been considered as one of the best (at least until recently when they made changes to the rewards). But if you own no-fee credit cards, with or without rewards, don't just sign up for a new card simply because you can get extra 0.5% or more for your cash back. Review how much you spend, how much you will get back and how it will impact your credit score. Credit score is still a mystery to me and I think for many people too.

But if you don't have a credit card or have been totally dissatisfied with your credit card provider, then look at those reviews and select on that fits your spending habit. One warning, for some people, the reward is use as a justification to spend more. If that will happen to you, here is what I would suggest, go with no-reward credit card. Yes, you read is right. Go with no-reward card if you have caught yourself saying or thinking, "Well, at least I am getting 2% of my purchase."

For those that don't use credit card and only use debit card, here is what I would suggest. If you switch to debit card because of previous issue with running up credit card debt, don't even think about opening a credit card again until you know for sure you have change your spending habits. But if you think you have good control of your spending habits, I would suggest go open a new credit cards. I think credit card offers better consumer protection than debit card. (Note: I will discuss why I think this is the case in the future posts) In addition, you may get something extra in return. Again, only if you have good control of your spending habits.

* Photo by Andres Rueda

Investing in foreign equities

noreply@blogger.com (Mr. Bee) — Thu, 27 Aug 2009 16:58:00 +0000

Do you invest in foreign stocks? If you do, what is the percentage of your equities are in foreign stocks? As I mentioned on Managing My Asset Allocation between Different Accounts post, foreign/international stocks account for 40% of my equities part of my portfolio.

Walter Updegrave, editor for Money Magazine, discussed about Dipping your toe into international waters on Money Magazine Ask the Expert column. One of the reason for investing in foreign stocks is diversification. While there is certainly correlation between international stocks and U.S. stocks, it is still different enough. You also get currency diversification by investing in foreign equities. As you can see, the U.S. dollar over the past four or five years has seen declined when compared to currently such as Euro. Thus the money invested in international stocks has seen some rises due to the rise in the value of Euro when compared to U.S. dollar.

Walter Updegrave also pointed out that U.S. stock market accounts for only 30% to 40% of global stock values. That shows huge numbers of opportunity. Also, there are likely more growth on those places, especially in emerging markets. Those economies should have more upside than U.S. economies. Of course it may come with more risks and more volatility, but I think with proper diversification and limited portion of your investments in riskier emerging markets and more toward developed market, you can manage those risks.

How should the money invested in foreign stocks? Well, I am not financial advisors and not qualified to give advises, but I can share with you what I did. I invest mainly in index funds and that includes international equities. I don't invest in just global funds, such as Vanguard Total International Funds. I think to get more growth, some portion should be in emerging market, some in International small cap and value. You can look at my target asset allocation that I posted few days ago.

Another case for index funds

noreply@blogger.com (Mr. Bee) — Wed, 26 Aug 2009 20:41:00 +0000

This time, it is slightly different. It is the case for bond index funds. Here is the snippet from the article Bond Indexes Beat Active Mutual-funds:

A study by Standard & Poor's found that on an asset-weighted basis -- measuring returns by the invested dollar rather than percentage of funds -- index returns beat actively-managed fund returns in all 13 fixed-income categories over one and three years, and in 11 of 13 categories over five year

For me personally, I follow FundAdvice.com recommendation and keep my fixed income securities in short term to intermediate term Treasury bonds and also in Treasury Inflation-Protected Securities (TIPS) as I am not looking at fixed income for growth, but as a way to reduce my portfolio risks.

Things to consider when selecting 529 College Savings Plan

noreply@blogger.com (Mr. Bee) — Tue, 25 Aug 2009 12:54:00 +0000

Since I just went through 529 College Savings Plan selection for my second daughter where I ended up selecting West Virginia Smart 529 Select, I will share several things and the process that I went through. Note that I only discuss investment plan, not pre-paid or guaranteed saving plans.

Tax Consideration
Each state offers different tax break for 529 plan. I live in Pennsylvania where I get tax deduction no matter which state 529 plan I selected. In most states, you will only get tax break if you invest in your state 529 plan. Even though there may be better plan other than your state 529 plan, the tax break offer by your state may make your state 529 plan more desirable for you. Savingforcollege.com is obviously one easy way to find out the information on this.

Of course you won't be eligible for some plans simply because of residency requirement, such as Pennsylvania GSP plan which is open only to PA residents.

Review "Best 529 Plans"
There are several publications that listed their best 529 plans. This is a quick way to limit the number of other plans you may want to review. There are so many options out there that it will be a waste of your time to review each plan to see the advantages and disadvantages. I listed several "Best 529 Plans" articles here.

As a fan of Vanguard, I actually limited myself somewhat to 529 plans offering Vanguard funds (with the exception of West Virginia Smart 529 Select with its DFA funds). To find out list 529 plans offering Vanguard funds, you click here.

Funds Family
Does funds family matter to you? It does for me. I focus mainly on Vanguard and DFA. I am not saying that other options are bad. In fact there are many other good ones, such as those offering TIAA-CREF, T. Rowe Price, and others. However, I want either Vanguard or DFA due to my familiarity with those funds.

Funds selection
How flexible is the funds selection? Do you have enough options? Do you think you can create enough diversification with the options available? Plans such as Nevada 529 College Savings plan are great since you have a lot of options, but there are minimum for each options, which make it hard to create proper diversification when your account value is low. One thing to remember too, there is no reason to match your the asset allocation with your 529 asset allocation. Your asset allocation for your retirement have different time horizon when compared to education savings. In most cases, you may need the college education funds for only 4 to 5 years (ignoring graduate degree, since I think the kid should pay for that themselves) and the time to invest is around 18 years.

Fees and expense ratios
While I listed this last, I consider this as one of the most important considerations. Check the fees and expense ratios for each plan. For example, while Illinois Bright Start College-Savings Plan has a really low expense ratio, it has annual maintenance fees. Thus if you are going to have a low balance, that fees will be a bigger part of your investment. If you have higher balance, then the plan could easily become one of the cheapest.

Other considerations
There are certainly other things to consider when researching 529 plans. One example, in Pennsylvania, the contribution by PA resident toward PA 529 plans are excluded for state financial aid consideration.

Comparison Tool
One website that I found very helpful in doing comparison can be found on Vanguard. Vanguard has 529 Savings Plans comparison tool. The tool is powered by Archimedes Systems, thus the website URL is at archimedes.com. Of course as I mentioned earlier, check out Savingforcollege.com. Not only you can find detail about each plan there, there are a lot of helpful tools and articles there too.

2009 Best 529 College-Savings Plans by Several Publications

noreply@blogger.com (Mr. Bee) — Mon, 24 Aug 2009 17:59:00 +0000

Update: Added more links

Recently, I just went through research of 529 plans for my second daughter. I ended up with selecting West Virginia Smart 529 Select plan. I used several online resources and direct links to each plans that I reviewed. I looked at the fees, details, funds offering, and other information for each plans. The best source to do research for 529 plan is probably www.savingforcollege.com.

I also looked at top 529 plans selection by several publications. Here are several links to "Best 529 Plans" articles that I found.

Kiplinger - Best 529 College-Savings Plans
The best 529 college-savings plans according to Kiplinger are:

For low fees: Illinois Bright Start College Savings Program (Note: From all the plans I review, I agree with this. It is actually the runner-up for me personally)
For overall investment mix: Alaska's T Rowe Price College Savings Plan
For conservative investors: Michigan Education Savings Program
For fund choices: College Savings Plan of Nebraska
For adviser-sold plan: Virginia CollegeAmerica plan

The Best and Worst 529 College-Savings Plans
This article from MorningStar.com listed the best and worst 529 plans. The best 529 college-savings plans according to morningstar.com are:

Ohio CollegeAdvantage
Indiana CollegeChoice 529 Direct Savings Plan
Utah Educational Savings Plan Trust
Virginia Education Savings Trust
Virginia CollegeAmerica 529 Savings Plan (Broker-sold)

The worst 529 college-savings plans according to morningstart.com are:

Nebraska State Farm College Savings Plan (Broker-sold)
New Jersey Best 529 College Savings Plan
Montana Pacific Life Funds 529 College Savings Plan
Ohio Putnam CollegeAdvantage (Broker-sold)
Nebraska AIM College Savings Plan (Broker-sold)

You can see a lot of broker-sold 529 plans are rated low, which I think come down to the fees.

Consumer Reports - Some of the best and worst 529 plans
Consumer Reports also has a list of best and worst 529 plans. The best 529 plans according to Consumer Reports are:

Georgia Path2College 529 Plan
College Savings Iowa
Illinois Bright Start College Savings Program
Mississippi Affordable College Savings Program
Colorado Direct Portfolio College Savings

The worst 529 plans according to Consumer Reports are:

Wisconsin Tomorrow's Scholar
Arkansas John Hancock Freedom 529
New Jersey Franklin Templeton 529 College Saving
Columbia New York Advisor 529 Plan
Nevada Columbia 529 Plan

Money Magazine - Best low-risk 529 plans
Money Magazine list is slightly different, since it is focused mainly on "low-risk 529 plans".

Illinois Bright Start College Savings Program
Ohio CollegeAdvantage Savings Plan
Utah Educational Savings Plan

Managing My Asset Allocation between Different Accounts

noreply@blogger.com (Mr. Bee) — Sat, 22 Aug 2009 19:37:00 +0000

In term of asset allocation, the ideal thing is to have your asset allocation from your different accounts to reflect the true asset allocation. But it is a hard thing to do when you have to deal with 401k, 403b or 457 accounts that have limited selection. This discussion is trigger by the article on FundAdvice.com - When your 401(k) plan doesn't have everything you need.

We have four different accounts where we invest our money

Joint Vanguard Taxable account
His Vanguard Roth IRA account
Her Vanguard Roth IRA account
His 457b Retirement account

I decided that I am going to look at each account separately and handle it that way. It is not ideal solution, but I think I still can get good diversification without over complicating my asset allocation. I modified slightly from FundAdvice.com suggested Vanguard Portfolio. Here is my target asset allocation for each account:

Joint Vanguard Taxable Account

Fund	Asset Class	Percentage
Vanguard Tax Managed G&I	LCB	15%
Vanguard Value Index	LCV	15%
Vanguard Tax Managed Small Cap Index	SCB	15%
Vanguard Small Cap Value Index	SCV	15%
Vanguard Tax Managed International	Intl LCB	10%
Vanguard International Value Index	Intl LCV	10%
Vanguard FTSE All-World ex-US Small-Cap Index Fund	Intl SCB	10%
Vanguard Emerging Markets Stock Index	EM	10%

For our joint taxable account, we invest in 60% US and 40% International. Yes, for some people, this is quite a lot of international equities. FundAdvice.com suggestion is actually 50-50 US-International. I feel comfortable with 60-40 US-International split. Again, remember that I am not financial expert and I do not even consult with financial professional for this asset allocation.

His or Her Roth IRA

Fund	Asset Class	Percentage
Vanguard 500 Index	LCB	8.40%%
Vanguard Value Index	LCV	8.40%
Vanguard Small Cap Index	SCB	8.40%
Vanguard Small Cap Value Index	SCV	8.40%
Vanguard Developed Market Index	Intl LCB	7%
Vanguard International Value Index	Intl LCV	7%
Vanguard FTSE All-World ex-US Small-Cap Index Fund	Intl SCB	7%
Vanguard Emerging Markets Stock Index	EM	7%
Vanguard Short Term Treasury	Bond	9%
Vanguard Intermediate Term Treasury	Bond	15%
Vanguard TIPS	Bond	6%

Similar to Joint Taxable Account, we have 60-40 US-International split on the equity portion. And fixed income portion of our allocation total to 30%. This may seems high for someone in early 30s, but since we don't have any bonds outside our Roth IRA, from our total investments, our bonds allocation is actually rather small, around 15%.

His 457b Account

Fund	Asset Class	Percentage
Stock Index Fund	LCB	30%
Extended Market Fund	MCB & SCB	18%
EAFE Equity Index Fund	Intl LCB	32%
Aggregate Bond Index Fund	Bond	20%

For my 457b account, as expected, the option is limited. There are other options available, but I feel this allocations is the best for me. I could have increase my extended market fund and decrease my stock index fund, thus moving toward my preference of small cap and value fund. However, I don't feel comfortable with that option for this account and funds selection. Also, you will notice 60-40 US-International split for the equity portion.

Cut your spending

noreply@blogger.com (Mr. Bee) — Fri, 21 Aug 2009 16:13:00 +0000

CNN Money listed 63 ideas to cut your spending by $500 a month. Below are the list of ideas that I think should be easy enough for everyone to do and some that I should do myself.

Step off the gas

I think I am a sensible driver. But from time to time, I still do rapid acceleration and braking. I need to be more sensible. My commute to work is only about 2 miles. I could potentially ride my bike, which I tried to do awhile ago. Unfortunately, I forgot to close my garage door one night and my bike was stolen since I didn't lock it. So know I don't have bike. Even if I have bike, my route to work is not necessary the safest route for bike rider or even pedestrian. I need to cross a bridge where there are a lot of holes on the pedestrian section. And my city is not bike friendly.

It also suggests to check the tire pressure regularly. I do that and I own a simple tire inflator that I can use when needed. I keep my trunk empty regularly, except for my wife car where we regularly carry strollers for the kids since we never know if we need it.

Another thing that I am trying to do is to keep track of gas mileage overtime by using Fuelly.

Work out for less

I no longer have gym membership and I found out that I work out more regularly without gym membership. I don't even have any machine at home. There are a lot of exercises that you can do at home without any or minimal equipments.

For cardio, I would recommend Craig Ballantyne Bodyweight Cardio Circuit. You can find out more information on Craig Ballantyne's Youtube Video here or you can visit some info from fitnessblackbook.com article about the bodyweight circuit here. The great thing about this is that it requires less than 30 minutes of your time.

Or you can spend some money and buy some work out DVD. I have tried Billy Blank's Bootcamp series. You can get the DVD set for less than $50. Or for slightly more money, you can tried P90X. I have heard good thing from friends that have tried P90X.

There are more resources online for workout ideas that you can do at home. Of course if your goal is to build more muscle mass, you may want to consider going to gym. And remember, I am not a fitness expert and you may want to check with your physician/doctor before starting any exercise routine.

Remember, by working out, you are potentially cutting your health care expenses too!

Stop overpaying for college savings

That is what I did by doing my exercise recently when selecting 529 plans for my second daughter. I ended up with West Virginia Smart 529 Select plan. You can read all the articles about my research on 529 plans here.

Invest for less

I am a big fan of Vanguard. I used to buy individual stocks, but it is hard to do regular investment with individual stocks since you will be paying commissions. I have since open account with Vanguard and invest certain amount monthly. Vanguard funds are known to have the lowest fees around. You can go with ETF, but as I mentioned, it is hard to do regular monthly investment due to trade commissions.

Zap your energy costs

We installed programmable thermostat two years ago and I think it is one of the best decisions. Our natural gas and electric bill (depending on the season) dropped by about 10%. (Note: Remember to recycle the mercury thermostat properly. We brought ours to our state Department of Environment Protection office) . And we dress appropriately at home according to season. We don't mind putting on sweater at home during winter time.

Almost all our light bulbs are CFLs, including bathroom globe light bulbs. They cost more, but last longer and used less electricity.

Stake out vampire appliances

This is where I really need to pay attention too. I left a lot of electronic devices plugged in even when I am not using it. I need to start paying more attention to this.

Read bargain books

We barely buy new books anymore. I use paperbackswap as my main source for reading materials. And we also have membership to library where we get most of the books for our daughters to read. My first daughter loves to go to the library and she loves to read books. That is great for 2.5 years old. I hope she will continue to love to read books.

Tip judiciously

I agree with the article here, when does 20% become the norm? I thought it used to be 15%, but I noticed that I felt as if I need to give 20% now. I will start adjusting and only give 20% when it is an exceptional service. Otherwise, I will limit it to around 15%.

There are other ideas in the article that may be easier for you to implement. The savings may seem small, but it will add up.

529 Plan Selection for My Second Daughter

noreply@blogger.com (Mr. Bee) — Fri, 21 Aug 2009 13:14:00 +0000

It has been a few weeks that I have been researching 529 plans for my second daughter. Of course I have not been doing the research everyday. I have been quite busy lately to do it faster than I have planned. Anyway, if you want to look back at all the plans that I have reviewed so far, click here.

So far, I have looked into more detail the following 529 plans:

Illinois Bright Start
Ohio CollegeAdvantage
Nebraska College Savings Plan
Nevada Vanguard 529 College Savings Plan
West Virginia Smart529Select
Pennsylvania 529 College Savings Investment Plan

Of course there are more good 529 plans, but I am sort of limiting myself to 529 plans that offer Vanguard Funds, with the exception of DFA (Dimensional Fund Advisors) offered by West Virginia Smart 529 Select plan. If you have not heard about DFA and why I like DFA, check out this article The Best Mutual Funds: DFA or Vanguard? from FundAdvice.com.

I mentioned after the review of PA 529 Plans that my top three after the review I have done are:

West Virginia Smart 529 Select
Pennsylvania 529 College Savings Investment Plan
Illinois Bright Start

I was contemplating of sticking to Pennsylvania 529 plan to keep it simple since I will be able to maintain only one account for both of my daughters 529 plans. But when compared to Illinois Bright Start, I really like the low expense ratios, even with $10 annual maintenance fees. My plan is to put in $500 initially and then add $100/month. After a year, the account balance should be around $1600 and the $10 annual maintenance fee charged by Illinois Bright Start will be around 0.625%. That would bring the first year expense ratios for Illinois Bright Start to be around 0.85% for me. This would be higher when compared to Pennsylvania plan.

Now, after two years, the account value should be around $2,800 (I am simply ignoring changes since I can't predict the market). The $10 annual fee make the total expense ratios for Illinois Bright Start to be around 0.58% (about 0.36% from annual fee plus around 0.22% for funds expense ratios). So after the second year, considering the expense ratios for both Pennsylvania and Illinois 529 plans do not change, Illinois Bright Start offers a better expense ratios.

However, I kept being tempted by DFA Funds offer from West Virginia. This is a great way to invest in DFA funds. Otherwise, to invest in DFA funds, I would need to go through advisors or brokers, which will charge around 1% annual fees in addition to fund expenses. The expense ratios for West Virginia Smart 529 Select is LOWER than Pennsylvania 529 plans! So I decided to cross out Pennsylvania 529 Plan after the comparison against Illinois Bright Start and West Virginia Smart 529 Select plans.

I was left to choose between Illinois Bright Start and West Virginia Smart 529 Select. So yesterday, I decided to take the plunge and open the account at West Virginia Smart 529 Select. I decided that the extra fees in the long run for West Virginia Smart 529 Select is worth it. So I went with my plan and put $500 in the initial investment.

Again, remember that I am not a financial professional and each person has different circumstances. But I think everyone should do some kind of research toward options available before deciding on the 529 plans. Don't simply go with your state 529 plans. In most cases, your state 529 plans may be the best option if you consider the tax benefit, since a lot of states offer state tax benefits only if you go with your own state 529 plans. But still, you want to look at the funds, expense ratios and other factors. I hope my learning helps other do the same thing.

529 Option: PA 529 Plans

noreply@blogger.com (Mr. Bee) — Thu, 20 Aug 2009 13:00:00 +0000

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

I am continuing on my look at 529 options for my second daughter. For the other 529 plans that I am considering or at least looked at, click here.

As a resident of Pennsylvania, I don't necessary have to stick with PA 529 plans to get state tax deduction. PA is one of the few states that give tax deduction regardless of which 529 plans I choose. However, there are several advantages of investing in PA 529 plans, and one of those is the investments I have in PA 529 plans are excluded for state financial aid purposes.

PA 529 plans have been re-branded several times in the last two years. Prior to September 2007, the plan was known as TAP 529. In Sept 2007, the plans were rebranded as nowU. However, when I log on to the site a week ago to check for my first daughter investments, I noticed that they no longer call it nowU. It is simply call Pennsylvania Treasury 529 College Savings Program. The new website is now www.makecollegepossible.com.

PA 529 plans offer two different options:

Guaranteed Savings Plan (GSP).
In this plan, the investor will be buying tuition credit based on current price. Below is what is written on the website for PA GSP.

The GSP provides the advantages of 529 plans and guarantees that your savings will keep up with the rising cost of college tuition. The GSP is unique because you save for tomorrow's college expenses at today's lower rates

This is relatively good option and I was very tempted on this option. However, there is one thing that bother me. Who guaranteed the performance? I think the plan actually take the money and invest it and hoping that the investment will be able to beat tuition rate increases. And this is what you can find on the footnote:

The guarantee is that, when used for qualified higher education expenses, your contributions will grow at the rate of tuition inflation at a Tuition Level that you choose. If the applicable GSP Credit Rate at the time a contribution is made has a premium, however, your rate of growth will be lower than the actual rate of tuition inflation at your Tuition Level by approximately the rate of the premium. Premiums do not, however, alter the way in which the dollar value of your account is determined. When used for qualified higher education expenses, each GSP Credit will still have the full value of the actual per credit tuition cost. The guarantee is an obligation of the Pennsylvania GSP Fund only. The guarantee is not backed by the full faith and credit of the Commonwealth of Pennsylvania, and is not an obligation of the Commonwealth of Pennsylvania, the Pennsylvania Treasury Department, Upromise Investments, Inc., Upromise Investment Advisors, LLC, or any other party. The GSP is not insured by the Federal Deposit Insurance Corporation or any other government agency.

Now, as you can see, this is not federally insured by FDIC or any other government agency, including the Commonwealth of Pennsylvania. What happen if they can't cover the redemption request? I remembered reading awhile back that they were not fully funded. ~~I tried to find more info on this but I have not found reliable new information yet. If I find it, I will add it to this post later.~~ (see update)

I personally prefer to know for sure where my money is invested, even if I may not be able to beat the increase in tuition rates. Thus the reason I prefer PA 529 Investment plan, where I have my first daughter 529 plan.

Update: I should have done my research. But as I have guessed, as of June 30, 2009, the present value of liabilities is $1,317,919,467 and the present value of assets is $1,095,022,856. That is a whopping $222,896,612 short. And I have read that PA GSP will be charging premiums for many college tuition levels. There ain't no such thing as a free lunch folks. PA GSP sounds great, until you actually dig deeper and found out it is not really "guaranteed" by the Commonwealth of PA or Fed.

Investment Plan
This plan offers Vanguard funds and managed by uPromise. You can invest in three age-based options (Aggressive, Moderate or Conservative) or 10 different individual options. The age-based options itself is actually investing in the 10 different individual options, except the fact that it will move you from one option to another option once your child get to certain age group. For my first daughter, we invest in aggressive age-based options.

Here are several observations I have with this plan:

The expense ratios and fees for each funds offered by PA 529 Investment Plan are surely not the cheapest available. The fees range from 0.70% to 0.75%. From all 529 plans that I have reviewed so far, in term of 529 plans that offer Vanguard funds, I think Illinois Bright Start offers the combination of fees and options. I should have done more research for my first daughter 529 plan last time. I think last time I was swayed by the fact that by choosing PA 529 plan, the assets in the plan are excluded for state financial aid purposes. But since my first daughter 529 plan is already in PA plan, I don't want the hassle of migrating to a different plan.
In most cases, the equity part of investments are invested in Total Stock Market. Example, for Aggressive Growth Portfolio, the allocation is 85% Total Stock Market Index Fund and 15% Total International Stock Index Fund. I have mentioned previously, such as in my review of West Virginia Smart529Select plan, I would prefer more international allocations and higher weight toward small cap and value funds.
One thing that I like is that it is easy to start with PA 529 Investment Plan since there is no fees except asset based management fees and you can start as little as $25, so there is no reason why you could not start investment in your child's college funds. In comparison, Illinois Bright Start, which I really like, charge $10 annual maintenance fees for index strategy portfolio.

I think I will stop looking at other 529 plans after this one. I want to make selection fast. The option that I have looked into so far has been all offering Vanguard funds with the exception of West Virginia 529 plan. Right now, my top three in no particular order are:

Illinois Bright Start - low expense ratios
PA 529 Investment Plan
West Virginia Smart529Select - DFA Funds

My wife is an investing wimp

noreply@blogger.com (Mr. Bee) — Sun, 16 Aug 2009 12:11:00 +0000

When I stumbled into the article My wife is an investing wimp on CNN Money, I can certainly relate to that. I am sure a lot of people can relate to this too, as the article mentioned. My wife is a lot more conservative in investing when compared to myself. As I mentioned earlier, I started my investing experience with investments in individual stocks. Those are very risky and event though I consider myself as not risk averse, I still understand the risk involve with investment in stocks. Thus the percentage of my money in equities is really small, may be around 15-20%. Not because I don't want to invest more, but that is the compromise to the level where my wife feel comfortable. But now I am investing mostly in index stocks and balance it nicely with bond funds, the percentage of our money in equities has increased. All our money not in emergency funds (we have about one year in emergency funds), we put it in our investments, which currently at around 80 to 85% in equities.

As mentioned in the article, communication in key. But beyond communication, here are several things that helps in my case (which may not necessary work for you, but may give you some ideas):

Having enough in emergency funds. In my case, I have to raise the emergency funds level enough to cover our expenses for a year or more. Having that amount of money in our savings account give her more confident that we can survive downturn when necessary.
In addition, I have to be more conservative in our retirement tax deductible account. The target allocations of equities vs bonds on our retirement accounts is based on 100-age. This is very conservative in a lot of people opinions, but the investment in our taxable account is 100% equities. This lead to another point. Bonds and REITs are not as tax efficient, thus by not having those investments in our taxable account, we managed our investment more efficiently from tax perspective.
I gave my wife more knowledge about each of our investments. She understand the risk better and are more comfortable with the investments. Be careful here, do not make it as if those investments are less riskier than it is. She knows a lot of our investments are risky, but she also knows that we have a lot of investments in TIPS, short term, intermediate term treasury bonds that should reduce our risks. Also, while I used love following individual stock price, do research on it and take risks with my money, including investments in options, I no longer invest in those. That fact increase her confidence in our investments.
Since I managed our money, I prepare a presentation slides, in this case using Google Docs, every 6 months with detail of our investments, our net worth, performance and plan for the following 6 months. It wasn't a long presentation at all. I can actually cover the whole topic in less than 10 minutes. I share the Google Docs presentation and spreadsheet to her so that she can look at it herself too.

But overall, the major thing that helps in our case is not investing in individual stocks. She felt as if we were gambling with our money when we invest in stocks. While we make some money, we lose a lot too. In addition, I was spending too much time following stock market and doing research. With our current investments strategy, I don't have to do more research daily or weekly. I just need to rebalance our portfolio and review our strategy every 6 months to a year.

Another reason I don't like actively managed funds

noreply@blogger.com (Mr. Bee) — Wed, 12 Aug 2009 20:03:00 +0000

The longtime manager of FBR Focus, a Kiplinger 25 fund, is leaving to start his own fund.

I found this article on Kiplinger that was published a few days back, so I know it is a little bit late. Anyway, Kiplinger article Future of Top Fund Suddenly Out of Focus shows another reason why I choose not to go with actively managed fund.

With actively managed funds, the changes in the fund manager will probably lead to changes in the fund investment style. While they may try to use similar strategy, there are still instinct part of the fund managers that I think make them unique or different. With passively managed index fund, I know the strategy clearly, follow the index as closely as possible. The changes in fund managers should have little or no impact to the fund investment strategy at all.

Now with FBR Focus, if I own the fund and for whatever reason the new fund manager is not good or at least I think is not good, I will probably decide to redeem the fund. And if I have this in taxable account, this could potentially mean capital gains now. I would prefer to delay paying the capital gain tax as long as possible.

A Time to Rebalance Portfolio

noreply@blogger.com (Mr. Bee) — Wed, 12 Aug 2009 18:06:00 +0000

I was reading WSJ article A Time to Let Go Of Overvalued Stock and it got me thinking. While I don't have individual stocks, the recent run up on the stock market has thrown my asset allocation out of whack!!! I don't think I should rebalance my portfolio every time we have market run up, but with my equity vs bonds ratio is close to 4% different that my target allocation, I decided to rebalance my portfolio. Earlier in the year, I actually have been doing rebalancing regularly, not through exchange, but by investing my Roth IRA contributions toward funds that have been lagging. But since I have reached my contribution limit for my Roth IRA for this year, I can no longer "rebalance" through purchase of those funds that have lag the other funds, thus I have to do it through exchange.

I know I probably don't have any readers that follow my blog yet, but in case if you stumble on this blog, how often do you rebalance your portfolio? If you do it once a year, do you stay the course when your asset allocations seems to be way off your target allocations, either due to market crash or market run up? I would like to hear people opinions on this.

529 Option: West Virginia Smart529Select

noreply@blogger.com (Mr. Bee) — Fri, 07 Aug 2009 15:12:00 +0000

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

I am continuing on my 529 series. Today I will look at WV Smart529Select. Remember that I am looking at this as a potential investor with PA residency, where I can get tax break no matter which state 529 plan I opt with. For my view on other plans, click here.

West Virginia Smart529Select has been the one that I am really interested in and thinking of choosing before I decided that I really need to look at other options. It will always get extra point for me simply because of DFA Funds available, which is usually only available through brokers or financial advisers. Important note before I continue, West Virginia offers several 529 plan, including one called Smart529! The one that I think offer the better choice for most people is the Smart529Select plan. Thus if you are interested on it, please make sure you go to the right web site.

I have provided some details about this plan on my first post on the series. As I have mentioned earlier, you can invest in DFA Funds through WV Smart529Select. DFA Funds is passively managed, similar to Vanguard Index funds. However, DFA does not necessary follow index such as S&P. It has its own indexing strategy that let it managed its funds more efficiently. One such example, if S&P changes the companies in its index, Vanguard S&P 500 would then sells those stocks and buy new stocks. Those transactions mean transaction fees, such trade commissions. With DFA, it doesn't have to sell it right away if not necessary, since it does not follow specific index. That is just a simple example (as I understand it. Reminder, I am not a financial guru, just a simple IT professional that loves the topic of personal finance). One thing that I need to make clear, DFA funds could be riskier due to its higher weighting toward small cap and value. That is actually one reason I like Smart529Select. It allows me to take more risk with the investment.

For those that is more risk averse, unfortunately WV Smart529Select only has one track for age-based option, which is pretty much the aggresive track, while other states, such as PA nowU 529 Direct Investment plan offers three age-based options, aggresive, moderate and conservative options.

Here are the key considerations:

Age-based options only offers aggresive track, which is actually even riskier that other states aggresive options due to higher weighting toward value and small cap.
The total expense ratios ranges from 0.65% - 0.77%. While it is not the cheapest, considering in many cases, to get access to DFA, you will have to pay 1% fees for advisors, I consider this low expense ratios.
There is $25 annual fees, which you can avoid if you meet certain requirement. If you are West Virginia resident, there is no annual fees. If not, one easy way is to enroll in automatic investment program for $50 or more/month. I am planning to put in $100/month, so this is not a problem for me. You can also avoid annual fees if you have $25,000 account balance. It is hard to reach that point right away. Also remember that if your state offer state income deduction, in many cases, you will have $13,000 limit per beneficiary/year, however, you can gift up to 5 years limit in advance, as long as you do not add anymore additional funds for the next 5 years.

This option was my top choice before I start doing my research. After my research so far, it is still my top choice, but the Illinois Bright Start option is not far behind. I won't be surprised if I decided to go with Illinois Bright Start instead of this one.

From Greg Mankiw's blog

noreply@blogger.com (Mr. Bee) — Thu, 30 Jul 2009 14:15:00 +0000

Greg Mankiw's blog posts from today are really good. One contains facts and the other is pretty funny. Both are actually simply referring to another articles elsewhere.

Income Tax Fact of the Day

Mankiw posted excerpt from The Tax Foundation article titled Tax Burden of Top 1% Now Exceeds That of Bottom 95%. The article shows that based on IRS data in 2007, top 1% of taxpayers paid slightly more than 40% of total income taxes collected by federal governments. To be more exact, 40.4%!!! For even more comparison, in 1987, the top 1% paid 28.4% of total income tax collected by federal governments. And there are talks from the capitol of additional taxes on the rich to pay for healthcare???? Let me clarify this, I am not rich. I don't even make six digit income. I am middle class citizen, but I don't think it is fair to tax the rich even more. Read the article from The Tax Foundation for more detail.

"They priced it way too high"

This is a very funny video from "The Daily Show with Jon Stewart". Enjoy it.

The Daily Show With Jon Stewart

Mon - Thurs 11p / 10c

Home Crisis Investigation

www.thedailyshow.com

Daily Show
Full Episodes

Political Humor

Joke of the Day

Note: I will continue with my 529 research soon.

529 Option: Nevada Vanguard 529 College Savings Plan

noreply@blogger.com (Mr. Bee) — Tue, 21 Jul 2009 13:32:00 +0000

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is the part 4 of the 529 option series. In this post, I will share with you my thoughts on Nevada 529 College Savings plan managed by Vanguard. My hope is by the end of the series, I will choose one option for the younger daughter. Here are the link to part 1, part 2, and part 3.

As with other states that I have mentioned so far, Nevada offers multiple different 529 plans, but there are two that I would consider, uPromise College Funds, which offers Vanguard Funds, or Vanguard 529 College Savings Plan, managed by Vanguard and obviously offers Vanguard Funds. Based on what I see, Vanguard 529 College Savings Plan offers lower expense ratios as long as you don't go with age-based option. If you go with age-based options, uPromise College Funds will offer better options. Since I am willing to manage my own portfolio and rebalance it as necessary, I would prefer Vanguard 529 College Savings Plan, managed by Vanguard.

Here are several important considerations for Vanguard 529 College Savings Plan:

If you go with age-based options, there are additional 0.44% fees in addition to underlying funds' expenses.
You can build your own portfolio with multiple different Vanguard Funds available, such as 500 Index, Small Cap Index, Value Index, Total International, TIPS, Total Bond, etc. I really like the option available and the fees are the same with whatever those funds charges. However, one major issue, next:
The minimum investment for each of those funds are the same as if you invest in Vanguard taxable or IRA funds. If I want to create a portfolio with those funds I listed above (six funds), I would need at least $18,000 to start with, since each funds has a minimum requirement of $3,000. I don't think I have that much money to start with right away.
One great advantage, since it is managed by Vanguard, I can keep my finance rather simple since I will be using the same account log in ID with my other Vanguard investments (taxable and Roth IRA accounts).

While I like the option, the minimum requirements to create the portfolio I like really hinder my option to create my desired assets allocation. I will have to settle with other funds balanced funds available from Vanguard 529 College Savings Plan, such as Vanguard STAR Portfolio or Vanguard Aggressive Growth Portolio (80% Total Stock and 20% Total International), until a few years later when I have enough to create my desired assets allocation. I would personally rate this option as 4/5. I like the fact that it is managed by Vanguard, with its low expense ratio and the number of funds available, however the minimum requirement for a 529 plan drop the rating for me a notch.

529 Option: Nebraska College Savings Plan

noreply@blogger.com (Mr. Bee) — Fri, 17 Jul 2009 14:00:00 +0000

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is part three of my 529 option series. In this post, I will share with you my thoughts on Nebraska College Savings 529 plan. My hope is by the end of the series, I will choose one option for the younger daughter. Here are the link to part 1 and part 2.

When I visited Nebraska College Savings Plan website, I was very impressed with the flexibility in the funds selection. The range of Vanguard funds available is one of the best for 529 plans. With Nebraska 529, I can put together portfolio that is similar to FundAdvice.com Vanguard Portfolio with the following Vanguard Funds:

Vanguard Institutional Index
Vanguard Value Index
Vanguard Small Cap Index
Vanguard Small Cap Value Index
Vanguard Total International Stock
Vanguard Short-term Bond
Vanguard Intermediate-term Bond
Vanguard TIPS

The differences compared to FundAdvice.com Vanguard Portfolio are no REITs (I wouldn't use Goldman Sachs Real Estate Securities with expense ratio around 1.11%), no further breakdown of International equities and some corporate bonds in short-term and intermediate term bonds.

From the surface, it seems like a great option for me that prefer leaning toward small cap and value equities. However, the management fees sort of chase me away. While each of the funds I listed above has low expense ratios, Nebraska College Savings Plan charge $5/quarter maintenance fee ($20/year) and 0.60% management fees! As I would be starting with low amount of money, that would end up to be a really high fees for the first few years. I always believe in the low cost index fund and the management and maintenance fees sort of offset the low cost, low fees Vanguard funds. For now, I would rate this 3.5 or 4 out of 5. This is sort of strange considering I was OK with the higher fees for the option to invest in West Virginia DFA options. May be I like WV DFA option since I couldn't invest in those funds without going to broker or adviser, yet I could do it through West Virginia 529 plan.

If you like Vanguard and want more investment options where you can pick and choose from more funds, this should be high on your list. This would have rated really high on my list if not for the fees.

529 Option: Ohio CollegeAdvantage

noreply@blogger.com (Mr. Bee) — Thu, 16 Jul 2009 14:00:00 +0000

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is the second part of the 529 option series. In this post, I will share with you my thoughts on Ohio CollegeAdvantage 529 plan. My hope is by the end of the series, I will choose one option for the younger daughter. See part 1 here.

Ohio CollegeAdvantage 529 plan is another good 529 plan. It has a really low fees if you opt for Vanguard investment. I can go with Vanguard Aggressive Age-Based Portfolio and for age 5 or younger, the portfolio consists of:
- 80% - Vanguard Total Stock Market Index
- 20% - Vanguard Developed Market Index

This is similar to Pennsylvania Vanguard Aggressive Age-Based option, however it has more international equity when compared to Pennsylvania (85-15 domestic-international proportion for PA). However, I wish they would have use Total International Stock Index since it includes Emerging market, albeit small proportion.

One big advantage for Ohio when compared to other that I have listed so far is my ability to choose the equity option myself. Thus I can build a portfolio with my preferred assets allocation. It would be something like this (Note: I will have to put more thought into the asset allocations if I go with Ohio):
- Age 0-3:

40% - Vanguard 500
30% - Vanguard Extended Market
30% - Vanguard Developed Market

- Age 4-6:

30% - Vanguard 500
25% - Vanguard Extended Market
25% - Vanguard Developed Market
10% - Vanguard TIPS
10% - Vanguard Income Portfolio (Note: Overlap with Vanguard TIPS, which is fine since I would prefer more TIPS instead of corporate bonds included in Total Bond Market)

The flexibility and relatively similar fees with Illinois Bright Start push Ohio CollegeAdvantage ahead of Illinois Bright Start, at least for me.