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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Financial Plan, Parte Dos

Afternoon,

I’ve tackled one of the goals set forth in my last post: creation of a budget.

This will probably change, as the month of May I won’t be in school! Woop! I will be living in a house for intentional Christian community located about a mile off of campus, and will be paying rent and purchasing all my own food. I have to talk to the parentals about finances and see if I’m going to be completely fiscally independent this summer, or if they’ll be helping out and in what capacity.

This budget makes more sense for the school year, so I’ll have to see in what ways to modify it this summer when I won’t be on any type of meal plan.

I think this is realistic for a month when I’m in school. After talking to my parents, I’ll be changing this! After looking through my spending habits, I decided that $150/ month is realistic. Out of this, food accounts for about the most: $65 between restaurants, coffee, and groceries. I allotted $40 for my compassion international young woman, Archana. Miscellaneous refers to exactly that: toiletries, clothing, books, gifts, etc.

This budget makes sense for me. I’m not out on my own yet–I’m at school with a meal plan, no rent, parents who pay for insurance and gas on my car. I am very blessed in this sense. Practicing making a budget now, however, while I have limited expenses and limited income will help make it simpler when I do have that control.

I’ll let you know about the evolution of the budget, as I’m sure it will for May/June-August.

Next on my list? The other goal from last time . . . investment options!

Do your budgets ever vary?