Financial Plan, Part 3: Investing

Today, as per promised as one of my goals for financial health, I continued researching investment options. At the moment, the only real investment experience I have is with Kiva, a micro-loan organization (and a topic for a future post!) I was planning on purchasing into a mutual fund and showing you all the process, but since the market closes in approximately a half an hour,  I decided to not  rush it.

First things first: I want my first investment to be in a mutual fund because they typically offer good returns with less risk. They’re professionally managed, and offer a diverse portfolio with a single investment.

I had to find one that I could feel good about. Thanks to my good friend, Google, I found a few lists of mutual funds that promised to be environmentally and socially responsible. I picked one, Appleseed, and then turned to Morningstar and Scottrade to find out what I could about it. (No, Morningstar is not the veggie burger manufacturer, though I did think it was the first time my dad mentioned it!)

Here is the information I found from Morningstar:

You have to be a premium member to get any analysis worth anything on Morningstar, it seems. Phooey!

I do like the one bit I can see--fund managers buy into their own account. I don't know a lot about investing, but that seems promising.

I also got this graph, which was constant from all the sites I saw:

I see green, growth, and stars. That's good, right?

Everything I saw seemed promising. I googled APPLX some more, and found a website called The Street which gave APPLX an A+, BUY! rating. Since I honestly don’t really know anything about this and didn’t want to be rash, I called the one person I knew would give me solid advice: my father.

Daddy? I’m trying to purchase into a mutual fund, and wanted your advice before I did anything rash. Morningstar gave me nothing.

Have you looked at its individual holdings?  From my silence, he inferred that my answer was a no, so he directed me to Market Watch.

For those of you that know anything about investing, suspend judgment for a moment!

Do you see the individual holdings tab? Yes, but those are just the top investors, right? Not the ones the company is investing in?

No, Michaela, those are the investments, not the investors. You see why I called him? Noble corp is a gas and oil company. Avon, you know what that is. The makeup company? Yep. Now let’s look up Mabuchi. I have no idea what they are. We clicked it, and it had no information. So, I went back to ever trusty Google, from which I found their website. They are a small motor manufacturer who purports to be environmentally friendly.

So, should I buy it now? Since the market closes soon? At 12.88, and it’s 2,500 minimum buy in… Well, you won’t necessarily get it at that price. You get it at market closing price, which is called NAV or Net Asset Value. 

Hold on, pops. I’m writing this down. But it still looks pretty good, right?

Hold on. Look at the Lipper Rankings. Do you see them? 

Yes. Ok, so right now it has a 9.62% return, which translates to a 7.62% return because they take two percent for fund management. It has a good ranking. Look at the one year: it lost a little less than half a percent, but the other funds in its category lost almost 7.5%. Ok. So that’s good!

Yep. But, look at it compared to the S&P. It’s trailing in pretty much every category. Bless my patient father: What’s the S&P? The S&P is comprised of 500 stocks that are meant to mirror the US economy. But, it’s still ok that it’s not better, right?

Yes, but we want to get you a fund that does at least as well as the S&P. But, does that mean it’s riskier? Higher return on investment, higher risk? Typically, yes. But not necessarily. How do I find one? We’ll talk about it later. I have to get back to work. 

 I still don’t understand half the symbols or indices or graphs . . . but I’m learning!

If you’re an investor, how did you first learn to understand all of the abbreviations and different terms? 

If you don’t invest, are you considering it? 

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Clearing Up the Financial Jumble

Confession: I’m not good with money.

I don’t feel like I have a good grasp of money or finances, or an appropriate attitude towards them. Budgeting is a skill I’ve never learned; when I asked my parents if they budget and why it wasn’t transparent to us kids my dad told me that his “budget is to always make more than I spent.” I’ve spent several years trying to figure out what a healthy attitude towards money is, and I haven’t reached it. This is further complicated (though not badly so) from my perception that everything I have really does not belong to me, and that Jesus talks very specifically about money. Some of his teachings (or my reading of the teachings) have me undulating between seeing money as a useful tool, and wanting to simply give it all away and live meagerly.

“We do need to be born again, since Jesus said that to a guy named Nicodemus. But if you tell me I have to be born again to enter the Kingdom of God, I can tell you that you have to sell everything you have and give it to the poor, because Jesus said that to one guy, too. But I guess that’s why God invented highlighers, so we can highlight the parts we like and ignore the rest.”  Shane Claiborne, The Irresistible Revolution: Living as an Ordinary Radical. 

“No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money.” Luke 16:13 

I also spent time last semester reading:

The discussion group that accompanied the book was helpful, but I feel like I didn’t really change. Ultimately, the conclusion we all came to was that in intentional community, our attitudes towards money would change. If we love people and not ideas, and people are in need, we will help those people with the resources we have.

But here’s my problem: I’m not involved in community with a range of people in different socio-economic statuses. My friends are all pretty similar to myself, and spending money goes hand in hand with our social outings. Hopefully this summer working with a ministry in our downtown will help change some of this. I have a lot to learn about money, its role, and my handling of it. Because I’m in school without a job, I sometimes feel like I don’t control the money I have, but I do.

This week’s Pit Stop (which is occurring on a Tuesday) involves a re-evaluation of my finances, the creation of a budget, and decisions about what and where I will spend. I typically don’t even look at my balances in different accounts, and I opened an investment account months ago and have never used it. Now, let me know:

Do you budget? 

Do you ever struggle about the role of money in your life?