The Writers Coin

Today I want to highlight a post I wrote earlier in the year that, in retrospect, was just plain crazy. It was titled My 401(k) Rollover was Perfect. If you’re lazy, I’ll spare you: it was about how “perfect” my 401(k) rollover went when I went from my last job to my current job. Why did I think it was so perfect? I gloated that, while the S&P was “down 4%” I was “up 8%” because of the time I had been out of the market rolling over my 401(k). Essentially, I was taking credit for all the paperwork and bureaucracy involved in switching providers.

Real smart. Shall we go to the chart?

You see that red dot WAY at the top? That’s where I patted myself on the back. Appropriately enough though, here is the image I used for that congratulatory post:

Which is appropriate because my statement now reads something to the effect of -42%. Awesome! Was this the karma gods frowning upon my gloating or is this the market gods going through a little temper tantrum?

I don’t care, all I know is that I’m not retiring for a VERY long time. So screw you market gods! As for the karma gods…I shall sacrifice a cow in your honor tonight (I’ll get it with mushrooms and swiss cheese on a sesame-seed bun). Hopefully that will make up for my stupid, stupid, stupid decision to call myself “perfect.”

Other things I said in that post that were ridiculous? How about this doozy: “I accidentally timed the market to perfection.”

Ouch! How stupid was that one? At least I sort of made up for it with this jewel: “The lesson to learn here is an old one but good one: you can’t time the market.”

So if I wrote something that stupid relatively recently, how can anyone trust anything else that’s on this site? That’s part of the fun! If you can find the other 17 instances of stupidity, email them to me, and then send me a cooler picture than the one of a yellow SUV doing a cartwheel, you get a prize.

Nothing.

So far I have done nothing. I’m still impressed with how cool I’ve been throughout the whole thing, especially with all the unrealized losses I have. Granted, I’m young and only started investing a few years ago—so I’m not losing nearly as much as other people are—but it still doesn’t feel good. One of the things that has kept me so level headed is everyone else. When everyone else talks about the markets and how they’re doing and what to do and the panic surrounding the whole thing, I just want to get up and leave the room. I hate talking about things when everyone and their mother is yelling about it. I don’t know what it is, but I have an aversion to talk about whatever is the “it topic” of the moment.

When I was in school and there was a test, people would always walk into the class and start talking about the material. After studying for hours the day before, the last thing I wanted to hear was all of that regurgitated back to me minutes before the test. I hated it. That’s kind of how I feel about all this, even though that’s what I like to read/write about for this site. It’s kind of like when you really love a band that no one knows about and then they go mainstream and everyone knows about them. You kind of stop caring as much because they aren’t your little secret anymore.

Anyway, back to the lecture at hand—the markets. I haven’t done anything. I haven’t taken my money out of the market, I haven’t changed my allocation, I haven’t even bought anything new (except via my 401k). But that’s the one thing I’m looking into: buying more.

I invest exclusively in my Roth IRA, and since I’ve already contributed to the limit for this year, I have to wait until next year to put more money in. This might be a good thing, I don’t know. But I really am getting the itch to dump a good amount of money into the market right now. The inevitable recovery, no matter when it happens, will be a great boon to those that realize this.

But if I had some cash on hand and a little room in my Roth, I would probably buy some more huge chunks of my Vanguard Index funds (US large cap, mid cap, and international stocks) and then watch their REIT index fund like a hawk. I meant to put money in there for a long time though right now I’m glad I didn’t, it has tumbled pretty hard—now may be the right time.

But I have to be honest, there is a certain sense of freedom knowing I can’t do anything until Jan 1. I can plot out a million ideas and things, but I can’t put them into action until then (unless I were to invest in a taxed account). It’s kind of like the trick of waiting a few days before buying something big (like a Wii or an iPhone)—usually it’ll fade away and you’ll have saved your money. Usually.

Hopefully by Jan 1 I’ve burned through all the bad ideas and only the good ones will be left. Then I’ll pounce back into action.

Or How a Routine is Helpful

As a part of my continual effort to educate myself more and more on all things finance-related, I do a daily read of certain sites: Yahoo Finance, MSN Money, USA Today Money and some other random ones. Sometimes I’ll go to a company’s Yahoo! stock ticker and see what stories they have listed. Sometimes they’re related specifically to the company and sometimes they aren’t. I think I was looking at Bank of America’s (BAC) news feed when I saw a story link titled “The Worst Investment I’ve Ever Seen” by the bombastic folks over at The Motley Fool. The article is about an index fund that tracks the S&P 500 but charges a ridiculous amount for it compared to what Vanguard (or any other index fund) would charge.

It is the rare case where the title of the article isn’t exaggerating. It got me thinking about the battle with my old 401(k) provider. So I decided to check up on my current 401(k) account just to see how it was doing (I do this way too much as it is). I was very careful when I picked my investments but I wanted to see if there was anything else I should be doing and to see if I was doing well or not.

What I Found

My 401(k) portfolio is made up of three parts: an international index fund, a large-cap index fund, and what I thought was a mid-cap index fund. But when I logged on I noticed that my mid-cap fund wasn’t really an index fund and the expenses I was paying on it were horrific. How did this happen? I did a little research and it turns out that we just don’t have any other options in our plan if I want to have a mid-cap or small cap fund in my portfolio. Which sucks. I didn’t have a good feeling about it but decided to email the finance department either way.

Here’s What Happened

After going back and forth two or three times and doing a little more research, I got an email back saying that I was right: there weren’t adequate mid/small cap options in our plan and that the whole menu of options was going to be reevaluated (and the fund I recommended (Spartan Extended Index Fund (FSEVX))) would probably be included after the overhaul. They even apologized for it taking so long!

I had to walk over there to thank them and tell them the story of how the Principal yelled at me at my old job.

Anyway, in the near future I hope to be paying a 0.07% ratio instead of the outrageous 1.44% I’m paying right now. I know some people will scoff and tell me to get out of that investment now, but it gives me the exposure I want and now I know it’ll be replaced soon so I’m OK with it. Over 30 years, however, that would seriously eat at my investment.

While it isn’t the best idea to be obsessive about your investments, it certainly pays off to double check on the decisions you’ve made in the past and to ask questions when you find something is off. I very easily could’ve just assumed no changes could be made to our plan but then I would’ve been stuff paying awful expense ratios. Instead I took action and it paid off (or will pay off). Be proactive!

I’m curious what other people’s experiences have been with their 401(k) provider…

When I started reading about retirement accounts like the 401(k) and the Roth IRA for the first time, I immediately became paranoid. Even though I was in my mid twenties, I was already nervous about retirement — it’s just the way I am. I mean, what would happen if I get to age 75 and don’t have enough money to live? Who would take care of me? So right away I made saving for retirement a priority. Ever since, I’ve contributed the full amount to my Roth and I’ve gradually bumped my 401(k) contribution from 4% all the way up to 8% (I’m saving for a down payment so that’s why it isn’t higher).

But that’s a good thing, right? And what does a bungee jumper have to do with retirement? I’ll tell you why: saving for retirement is a smart, responsible thing to do — but you can’t let that get in the way of living your life today. There are things you won’t be able to do when you retire (physically, for the most part) that you may want to do at some point in your life. So guess what? That means doing it now. Things like bungee jumping.

Earlier this year M and I went skiing together. It was a great trip and we had a lot of fun. But when we were planning for it I was a little skeptical. Do we really need to go skiing? Paying for a hotel, the mountain pass, the ski rental, travel expenses, etc. — all that stuff adds up. Money I could’ve easily put into my Roth IRA account. Eventually I came around and I’m really glad I did, but it was a good reminder that, while saving for tomorrow is a good thing, you can’t forget about today. Now we have a picture of the two of us in full ski regalia with snow falling all around us. A picture we can look at when we’re old and wrinkly and reminisce, “Ahh, that was a good trip.”

Frugal Dad recently wrote about stopping to smell the roses, and that’s how I was reminded of this whole retirement vs. living thing. I’ve written about it too — but when you’re so worried about the long-term stuff and trying to be a responsible person, it’s easy to forget. So skiing and bungee jumping are good reminders.

Have you ever not done something because you were more concerned about the future than the present?