Advice From Your Elder

Topic: Top Three Things I Learned on Summer Vacation
Key Words: Bayou, Uncle Sam, REITs
Word Count: 889
Next Likely Topic: Nutrition

Sometimes when I miss runs, like I did on Saturday morning, I get too hype to make them up (I hear the Transformers Movie is making people overly hype). That lead to my plan to run on Saturday afternoon and Sunday morning, but thankfully I opted for the stationary bike and some time in the gym instead. Today I am almost over the food poisoning (stomach is still not fully receptive too food), so I thought it was time to test the hamstring; 3 miles via Buffalo Bayou. I made it 4 minutes into the run! I'll say I'm kind of pleased because the pain was slow to come on, and more of a tightness than a bruised feeling; I think that's progress. I was under strict self-orders to shut it down if the pain became constant, so shut it down I did. Come Wednesday or Thursday, it's getting 3 miles one way or the other, but until then, I plan to stretch it frequently and try to exercise it without doing anything too stupid. If I doesn't heal up, I might be running with the Yellow Fever come Saturday instead of my Fall crew.

As promised last time, onward to finance.

When I travel, as I've done a lot lately, I tend to read financial magazines. If I were to start a brand new career path, I would strongly consider financial planning; it's one of the things I geek out on. Not to say that I'm good at it, I'm just fond of it. Here's a few musing, after digesting those magazines, that I think are helpful:

Stop Giving Money To Your Relatives: Here, your relative is your Uncle Sam; stop getting a tax return! (caveat - in some situations, particularly part-time or work while in school, automatic withholding makes that hard). If you get a $1,000 return, you gave the government a free loan. Right now, you can get a one year CD that would pay you 5.15% APY, so you basically gave the government $51.50 for free! This was one of the "Seven Common Money Mistakes" in one of the money magazines I read, and one I fight with people about all the time. You can adjust your withholding (W-4 Form) to have a good chance at coming in at zero come April 15.

The Future Ain't What It Used To Be: There are more and more people saying that stocks, instead of returning their normal 8-10%, will likely only return 6-8% over the next 25 years. That's certainly not been true of late, but it is a possibility. That either means you'll need to work longer, spend less in retirement, die earlier (o:, or make more on your investments. I'm going to try for the later. To do that, I think we'll all need more exposure to foreign stocks. With modern information flow, mutual funds managers in New York can make a killing off of emerging markets in remote places like Bangladesh and Alabama; I think the folks saying stock returns are decreasing are discounting this fact. As I've stated before, I'm a big fan of the DODGX foreign fund; it's been returning about 20% a year for a while now! In addition to more foreign exposure (something our parents didn't have) we need less exposure to bonds (something our parents were told to do). If you're going to live longer, you can stand the markets volatility longer. Also, many bonds currently return less than similar length CDs! That's financially screwed up, and should certainly change over time, but perhaps the hey day of bonds are gone. Companies somewhere, of some size, will continue to grow at 8-10% a year. We all just may have to broaden our horizons, and accept more risk, to find them over the next three decades.

Time to Buy A House or Ten: One article I was reading advocated that young folks should do two things - max out pretax savings (check), and invest in a house (ooohhhh, ouch). I have no intentions of buying a house, but real estate has, at times, made people money; what to do? As I've stated before, I think a house, as an investment, is financial folly; but a house because you like your neighbors, not because you plan to install granite and sale it for a mint in ten years. Instead, I'm going to look into what are basically real estate mutual funds; REITs (Real Estate Investment Trusts). What I like about these are they are much more diversified than your one house, and they are generally taking a beating since we are in the midst of a housing slump. Though you can't time the bottom of the housing bubble, sometime in the near future will probably be a great time to buy the better of the beaten up REITs, and thus, finally get a piece of the real estate market everyone wants me to get. And since most of my housing expenses are split with Leon, maybe I can get him to split that too!