Comments on: October 2008 Score Card — Part I: Net Worth http://www.thesunsfinancialdiary.com/about-me/october-2008-score-card-%e2%80%94-part-i-net-worth/ Fri, 03 Feb 2012 17:42:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: kittyhttp://www.thesunsfinancialdiary.com/about-me/october-2008-score-card-%e2%80%94-part-i-net-worth/#comment-46615 kitty Wed, 12 Nov 2008 19:34:02 +0000 http://www.thesunsfinancialdiary.com/?p=3196#comment-46615 You reference to I-bonds vs FDIC-insured bank made it sound that I-bonds are any less safe. While there are other reasons to chose CDs vs I-bonds, but safety is not one of these reasons. Treasury bills and government bonds are actually safer than CDs: they have full tax power of the US government behind them (as well as printing power...). As a broker in class once explained if the government is broke and has only a limited amount of money left it's going to pay its treasury bills and treasury bonds first, FDIC insured CDs second.Also, I am curious why you income average into I bonds rather than chose the 6-month period when the fixed portion appears attractive and just put the allowed amount. If you are not sure, you can make two or three deposits in a year. It's not like 5K a year is such a big deal, anyway. Certainly sometimes it is difficult to predict where the rate is going - although you can watch inflation - but at least it was totally obvious that it wouldn't go below 0%. So why put any money at all in I bonds when the fixed portion was 0%, especially since there was no chance it would go down in fall and some chance it would go up? The way I do it is buy when the fixed portion is attractive and not buy when it is not. I bought all of my I-bonds for the year last April. Not only was the fixed portion back then looked good, there was also no reason to think it would go much higher. At the time the allowed amount was 10K (5K through treasury direct and 5K through bank). A week after I had bought they reduced the max amount you can invest during the year to 5K total. I would never buy an I bond when the fixed portion is at 0% -- the only way this would beat a CD is if you have high inflation and low interest rates which is not likely to happen too often. I haven't decided yet if I'll buy any early next year -- I'll certainly wait till close to the end of the period and see what the inflation is doing, what the rate on TIPs is, etc.BTW - I also lost a small fortune in stock values. But at least I had 40% of money in stable value, bonds and CDs last year.I just added a couple of municipal bonds to the mix. Because of credit crunch some of the yields were hard to resist. I got 10K worth AA and AAA bonds with yield-to-maturity of 5.3%. This is tax free, both federal and state, so to me it's almost the same as 8% taxable. No, this is not insured, so there is some risk, but the risk is small. Also, if I don't hold to maturity - which is a long way away - the value may change. I have a CD that matures in a week; I plan to keep some money on a CD and use some to buy more municipal bonds. I am also looking at some corporate bonds, but am still not sure as it is a bit riskier. You reference to I-bonds vs FDIC-insured bank made it sound that I-bonds are any less safe. While there are other reasons to chose CDs vs I-bonds, but safety is not one of these reasons. Treasury bills and government bonds are actually safer than CDs: they have full tax power of the US government behind them (as well as printing power…). As a broker in class once explained if the government is broke and has only a limited amount of money left it’s going to pay its treasury bills and treasury bonds first, FDIC insured CDs second.

Also, I am curious why you income average into I bonds rather than chose the 6-month period when the fixed portion appears attractive and just put the allowed amount. If you are not sure, you can make two or three deposits in a year. It’s not like 5K a year is such a big deal, anyway. Certainly sometimes it is difficult to predict where the rate is going – although you can watch inflation – but at least it was totally obvious that it wouldn’t go below 0%. So why put any money at all in I bonds when the fixed portion was 0%, especially since there was no chance it would go down in fall and some chance it would go up? The way I do it is buy when the fixed portion is attractive and not buy when it is not. I bought all of my I-bonds for the year last April. Not only was the fixed portion back then looked good, there was also no reason to think it would go much higher. At the time the allowed amount was 10K (5K through treasury direct and 5K through bank). A week after I had bought they reduced the max amount you can invest during the year to 5K total. I would never buy an I bond when the fixed portion is at 0% — the only way this would beat a CD is if you have high inflation and low interest rates which is not likely to happen too often. I haven’t decided yet if I’ll buy any early next year — I’ll certainly wait till close to the end of the period and see what the inflation is doing, what the rate on TIPs is, etc.

BTW – I also lost a small fortune in stock values. But at least I had 40% of money in stable value, bonds and CDs last year.

I just added a couple of municipal bonds to the mix. Because of credit crunch some of the yields were hard to resist. I got 10K worth AA and AAA bonds with yield-to-maturity of 5.3%. This is tax free, both federal and state, so to me it’s almost the same as 8% taxable. No, this is not insured, so there is some risk, but the risk is small. Also, if I don’t hold to maturity – which is a long way away – the value may change. I have a CD that matures in a week; I plan to keep some money on a CD and use some to buy more municipal bonds. I am also looking at some corporate bonds, but am still not sure as it is a bit riskier.

]]> By: Sunhttp://www.thesunsfinancialdiary.com/about-me/october-2008-score-card-%e2%80%94-part-i-net-worth/#comment-46598 Sun Wed, 12 Nov 2008 13:56:20 +0000 http://www.thesunsfinancialdiary.com/?p=3196#comment-46598 Cynical: Yes, a large part of my credit card balance comes from a 0% APR balance transfer which will end next February. For all other balances on the cards, I pay them off in full every month.Trevor: Hopefully November won't be as bad as October :) That said, I am not really worried about my investment at this time and I am not making any radical changes. I am a long way from retirement so I am going to take this as an opportunity to investment and hope for a better return years later. Cynical: Yes, a large part of my credit card balance comes from a 0% APR balance transfer which will end next February. For all other balances on the cards, I pay them off in full every month.

Trevor: Hopefully November won’t be as bad as October :) That said, I am not really worried about my investment at this time and I am not making any radical changes. I am a long way from retirement so I am going to take this as an opportunity to investment and hope for a better return years later.

]]> By: Trevorhttp://www.thesunsfinancialdiary.com/about-me/october-2008-score-card-%e2%80%94-part-i-net-worth/#comment-46586 Trevor Wed, 12 Nov 2008 04:56:31 +0000 http://www.thesunsfinancialdiary.com/?p=3196#comment-46586 Wow- October was bad, wasn't it? I lost a bunch of money in stocks. Only being 23 years old, I invest in extremely aggressive stocks (hardly any bonds) and have really taken at hit this past month. Sad thing is, I learned how to invest at the very TOP of the market! :(Great blog; I enjoy your work. Keep it up.PS. And the graphs are great! Wow- October was bad, wasn’t it? I lost a bunch of money in stocks. Only being 23 years old, I invest in extremely aggressive stocks (hardly any bonds) and have really taken at hit this past month. Sad thing is, I learned how to invest at the very TOP of the market! :(

Great blog; I enjoy your work. Keep it up.

PS. And the graphs are great!

]]> By: Cynical Sicklehttp://www.thesunsfinancialdiary.com/about-me/october-2008-score-card-%e2%80%94-part-i-net-worth/#comment-46574 Cynical Sickle Tue, 11 Nov 2008 22:56:25 +0000 http://www.thesunsfinancialdiary.com/?p=3196#comment-46574 Why do you carry a balance on your credit cards? Unless you're taking advantage of some 0% APR offers, even at 9.99% it's hard to get that rate of return on your investments in this market and any cash on the sidelines is getting less than half of that. So why not pay off the credit cards with your cash, carry 0 balance, and save that % that the banks/credit card companies are making off you? Why do you carry a balance on your credit cards? Unless you’re taking advantage of some 0% APR offers, even at 9.99% it’s hard to get that rate of return on your investments in this market and any cash on the sidelines is getting less than half of that. So why not pay off the credit cards with your cash, carry 0 balance, and save that % that the banks/credit card companies are making off you?

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