Category Archives: Investing

Individual Stocks vs. Index Funds: A Long Term View

Posted on May 2, 2013 | 2 Comments

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investment choicesFor the past year or so I’ve been dabbling in investing in dividend stocks. At this point I have investments in three individual dividend stocks that I plan to hold for the long term because they’re solid companies with a long history of dividend growth. I also had planned to continue investing in more dividend stocks as extra money becomes available to build my dividend stock portfolio into a well diversified investment machine. I even had the notion that at some point I would have enough diversity in my dividend stock portfolio that I could stop investing in index funds.

Well, I’ve been reconsidering my plan lately. Not because I’m no longer excited by dividend stocks, but because I realize that my plan is incomplete, and therefore a pretty crappy plan.

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Posted in Dividend Aristocrats, Investing, Investment Strategy

Can You Reach Early Financial Independence if You’re Not an Entrepreneur?

Posted on February 6, 2013 | 16 Comments

GenY Finance Website: Are you looking for ways to reduce your expenses and ~save money, lower fees and costs~ at the same time? There are companies out there that can offer you significant savings. See their website For more information

financial independenceWe all want to have enough money that we can live comfortable lives without having to work every day at a job we don’t enjoy. Many people however, have resigned themselves to the notion that they will only be able to reach that point after 40 years of suffering through that miserable job. Then there are the others who read books or take to the internet to learn from people who have managed to achieve financial freedom much earlier. And one thing becomes quickly apparent: a huge portion of those people are entrepreneurs.

One of the best ways to reach financial independence early is to start your own business, be it a plumbing company, a bakery, a monetized blog, or something as ambitious as a software company. But what if you’re interested in getting ahead financially, but don’t have an entrepreneurial spirit? Is there no hope for you? I should say not! Let’s take a look at how hard it really is to reach financial independence. Let’s pick a nice round number, $1 million dollars, to represent financial independence. In reality, your number may be lower or it may be higher, but many people still set $1 million as their goal, so let’s go with that. What would it take to build up $1 million in 10 years? 20 years? 30 years? 40 years? Looking at the required monthly savings at a few different growth rates, it’s really not as scary as you might think.

Monthly Savings Required
Years to $1 million 6% 8% 10%
10 $6072 $5430 $4842
20 $2154 $1687 $1306
30 $991 $667 $439
40 $500 $285 $157

Ok, maybe the 10 year numbers are scary, but are any of the others really so bad? In fact, saving $1 million in 40 years is downright easy! Anyone working a regular 9-5 job should be able to save $1 million in 40 years. But of course, the whole point was to reach financial independence as quickly as possible, and 40 years isn’t very fast. So is it feasible to achieve the higher savings rates required for a quicker path to financial independence if you’re working a regular office job? According to Wikipedia, the 2012 median household income was $45,018. To reach $1 million in 20 years at a modest 8% growth rate, you would have to save $20,244 each year, or about 45% of the median household income. It may require some sacrifice, but with careful budgeting, finding little bits of extra money on the side, and taking steps to minimize your taxes, it can be done. Or you could aim for 30 years, which would require only $8004 of yearly savings at an 8% growth rate, or about 18% of the median household income. Now that’s doable for just about anyone!

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Posted in Business, Investing, Retirement

Why I’m Not Dollar Cost Averaging

Posted on January 30, 2013 | 8 Comments

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lump sum v dollar cost averagingI read a really interesting post over at Darwin’s Money today about dollar cost averaging. Darwin presents some really compelling data about why investing a lump sum is better than spreading your investment across several years, or dollar cost averaging.

What is dollar cost averaging? It’s the technique of buying a fixed dollar amount of a particular investment on a regular schedule, be it weekly, monthly, yearly, or anything in between. The idea behind dollar cost averaging is that it lessens the risk that you’ll invest a lot of money at the wrong time. One of the basic tenets of investing is not to try and time the market, you will probably fail. So dollar cost averaging seems like a great way to avoid timing the market.

What’s wrong with dollar cost averaging? If you look at a very short, specific period of time, say the week before the market crashes, dollar cost averaging may seem like a much better idea than lump sum investing. After all, you’d be pretty angry if you had invested $100,000 and then a week later the stock market imploded. But over time, the market tends to go up, so if you look at the big picture, you want to have as much money invested as early as possible to benefit from the increases over time. Darwin pulled some data together showing the difference between an investment of $120,000 over the past 10 years. In his dollar cost averaging scenario, the money was invested in $1000 chunks each month for 10 years. In his lump sum scenario, all $120,000 was invested on day 1, 10 years ago. The results are staggering. In the dollar cost averaging scenario, the investment grew to $194,000. But in the lump sum scenario, the investment grew to $339,000! Though there may be periods of decline, on average the stock market increases, so having all of the money invested from the start allows you to take advantage of all those increases.

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Posted in Investing

2013 Goals

Posted on January 2, 2013 | 15 Comments

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new yearsJust like that another year is gone and it’s time to make some new year’s resolutions. For the next month gyms all across the country will be overcrowded with people who made the resolution to get back in shape. By mid-February things will revert back to normal as over-zealous resolutionaries (best made up word so far this year!) lose their enthusiasm and return to their sedentary lifestyles. One of the nice things about having a blog is that by writing out my goals for the new year and keeping a link to them right at the top of my blog, I can’t pretend they don’t exist once my fervor has waned.

I did a pretty good job with my goals in 2012, and hopefully I can be just as successful this year. Last year my goals were mainly financial goals, with one health/fitness goal that turned out to be too difficult to measure accurately. With that in mind, I tried to expand my goals a little to cover a few more aspects of my life and make sure they’re measurable.

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Posted in Business, Check-In, Fitness, Health, Investing, Life, Motivation

2012 Goal Update

Posted on December 21, 2012 | 7 Comments

Geny Finance Journey Savings Are you a small business owner That needs to find significant savings and cost reductions? See this website for more information.

finance goalsIt’s not quite the end of the year yet, but I thought I’d take a moment to look back on my goals for 2012 and see how I did. When I started up this blog back in May, I set several goals for myself. They were stretch goals – I would need to be close to perfect with my finances to meet them. But what’s the point in setting goals you know you’re going to reach, anyway? The whole idea of setting goals is to give you something that’s just out of reach to shoot for.

I set four financial goals and one health goal for myself:

finance goals

Down Payment Fund – Reach $10k by the end of the year
Other Taxable Investments – Reach $13k by the end of the year
Dividend Income – Earn $400 over the course of the year across all taxable accounts
Retirement – Max out IRA and invest in a REIT

health goals

Weight Loss – Get my body fat percentage down to 25%

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Posted in Investing, Retirement, Saving

Understanding Capital Gains Distributions

Posted on December 19, 2012 | 4 Comments

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understanding capital gains distributionsIt’s that time of year when those of you holding mutual funds may see a capital gains distribution. If you’re new to investing, like me, you might be wondering what this distribution is, why you’re receiving it, and what the implications are.

Let’s start out with the most important thing: although it ostensibly looks like you’re receiving money, capital gains distributions generally aren’t good for shareholders. Let’s take a closer look at what’s really happening when you receive a capital gains distribution.

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Posted in Investing, Taxes

A Sneak Peek into Your 30s

Posted on December 13, 2012 | 8 Comments

Geny Finance Journey Savings Are you a small business owner That needs to find significant savings and cost reductions? See this website for more information.

sneak peekHi, Gen Y Finance Journey Readers! I’m Jana and I run a personal finance blog, Daily Money Shot, where I talk about money (but not the boring parts). I’m also a freelance writer and founder of the blogger mentoring program, Bloggers Helping Bloggers. I’m thrilled to be guest posting here and when you’re done reading what I have to say, come say hi on Twitter or Facebook!

Back in September, a post was published on Gen Y Finance Journey, Six Things I Hope I Know in My Thirties. I loved this post and, since I’m well into my 30s, I figured I could respond to a few of her points and questions with my own experience. So here we go.

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Posted in Family, Houses, Investing, Life

What Would You Do With $10,000?

Posted on December 8, 2012 | 10 Comments

How to Reduce Expenses Please go to this website So you can learn more about reducing costs at your small business.

I received an email yesterday from Ally Bank asking me what I would do with $10,000. I clicked through to find an infographic summarizing the data collected from 1022 people over the age of 18 in the continental United States. What I found was rather interesting, but what truly peaked my interest was the way in which Ally presented the data.

Ally Asks: What Would You Do With $10,000? [INFOGRAPHIC]. Check out this story and more at Straight Talk, the official blog of Ally Bank.

The choices were save, invest, pay off debt, or spend the money. About a third said they would save it, while another fifth said they’d invest it, and yet another fifth said they would use it to pay down debt. I found it pretty surprising that over 50% of respondents said they would either save or invest it. I have to hope that those people don’t have high interest debts they need to pay off, but I’m skeptical that less than half of the respondents have no credit card debt.

Then I looked closer and marveled at the fact that they didn’t list the percentage of people who would spend the money. If you add up the percentages, you’re left with 28% of the respondents saying they’d spend the money. That makes it the second most popular answer, yet it’s swept under the rug, as if Ally is hoping you won’t notice it.

Why? Clearly Ally has an agenda: they want you to save more money and they want you to save it with them. Is the idea that by down-playing the proportion of people who said they’d spend the money and highlighting more responsible choices, they hope you’ll look more favorably on the responsible choices so when you get a windfall at some point you’ll be more likely to save with them? Or are they trying to make you feel guilty by showing you that the majority of people would do something responsible with the money, so you should too?

What do you think?

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Posted in Debt, Investing, Saving

Financial Lessons From My Mother

Posted on December 6, 2012 | 10 Comments

GenY Finance Website: Are you looking for ways to reduce your expenses and ~save money, lower fees and costs~ at the same time? There are companies out there that can offer you significant savings. See their website For more information

financial advice from mom

This is neither me nor my mother. But we both have brown hair, so close enough!

Our parents have a lot to teach us, if we’d just listen to them. You spend most of your teenage years thinking your parents are the least cool people on the planet, so surely anything they say isn’t worth listening to. Then you go to college and bask in the freedom of not having to hear your parents constantly giving you advice. It’s a great time. Finally you join the real world where you slowly but surely realize that all that advice your parents had been giving you over the years was for your own good. Thankfully, your snotty teenage self did absorb some of the things your parents had told you, even though you ignored it at the time.

Looking back, there are several things I learned from my parents that have proved to be invaluable. Today, I’d like to talk about things I learned from my mother.

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Posted in Cars, Frugality, Investing, Life

What is Yield on Cost and Should You Care About it?

Posted on December 4, 2012 | 12 Comments

GenY Finance Website: Are you looking for ways to reduce your expenses and ~save money, lower fees and costs~ at the same time? There are companies out there that can offer you significant savings. See their website For more information

Yield on Cost (YOC) is a popular metric among dividend investors. YOC is calculated by dividing the current yearly dividend by the price you paid per share and multiplying by 100. So if I purchased a stock 10 years ago for $20/share and this year the stock pays $1.50 in dividends per share, my YOC would be 7.5%.

Many dividend investors have a goal of holding a stock until the YOC reaches a certain level, as if there’s some bragging rights associated with having a YOC greater than 10%, or whatever threshold sounds impressive to you.

I find YOC to be a completely arbitrary figure that has no relevance whatsoever when it comes to assessing your portfolio or your self worth.

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Posted in Investing