New Diehards in the Vanguard Forum
[Update on July 19, 2008]: The name of the forum changed to Bogleheads Investment Forum. diehards.org domain name also changed to bogleheads.org.
I have been a member of the Vanguard Diehards forum at Morningstar for a long time. People there help each other with investment related discussions. The forum however has a weakest link — it's hosted by Morningstar which runs a ton of ads on the forum but does not invest anything back to the community. The forum software at Morningstar is the most antiquated I've ever used. I have suggested many times in the past that the community establish its own identity on the web rather than bolting itself onto Morningstar. I pretty much stopped posting on the Morningstar forum because I don't want to produce content for Morningstar.
Finally it took a incessant troll that revealed how badly Morningstar has been treating the community. Some members "had enough" and established a new, independent forum Diehards in the Vanguard [now Bogleheads Investment Forum]. The new forum is ad-free and community based. I have been an early supporter of the new forum. I am the 6th registered user and I suggested a domain name for the new forum. The response to the new forum is overwhelming. Within a week, the new forum has grown to over 400 members and more than 1,800 posts. Many prominent members of the old Vanguard Diehards forum joined the new forum. It makes perfect sense why so many members moved over to the new forum. When you have a choice between supporting a community and supporting a for-profit corporation, the answer is clear: support the community.
Book Review: Smart and Simple Financial Strategies for Busy People
Today I'm reviewing the book Smart and Simple Financial Strategies for Busy People by Jane Bryant Quinn. It's the #1 book on my Recommended Reading List in the Basics category. See my other book reviews. You can browse the book's table of contents through Amazon reader. This book is also available as an unabridged audio book from NetLibrary.
Beginners are often overwhelmed by the seeming complex subject of personal finance. The financial service industry, the media, and the government don't make this easier either. People also often fear of taking the wrong steps. Guess what, they are right. The personal finance area are full of traps. There are more bad products than good ones. This book, by Newsweek columnist Jane Bryant Quinn, helps people wade through the jungle with strategies that are both smart and simple.
Jane Bryant Quinn (Wikipedia bio) is a long time financial writer. She's in her late 60s now. She put her years of experience and research into a short book packed with information anybody needs, without fluff and confusion. This book covers more areas in personal finance than a typical investment book, including topics on saving money, paying off debt, insurance, buying a home, paying for college and investing. I gave this book to my sister when she started her first job. I think it's a perfect gift to anyone starting out in the personal finance world.
Was It a Bubble, Or Was It Just Early?
One of the often used excuse for having ventured into something that didn't materialize is "I wasn't wrong. I was just early." There is some truth to that statement although timing is every bit as important as the action itself. I'm seeing a number of things derided after the late 1990s stock bubble coming back as valid business models. Maybe they fit into this "wasn't wrong, just early" category.
theglobe.com operated an online community. It went IPO in 1998 and the stock rose 600% on the first day. 3 years later it went bust (story on Motley Fool). But now we have MySpace, which isn't that different from theglobe.com. Had theglobe.com hung on longer, maybe we would've never heard about MySpace.
Webvan sold groceries online. It went bankrupt in 2001 (story on CNET). Now we have brick and mortar grocery stores offering online ordering for home delivery. Google search "grocery delivery" returns Safeway, Albertsons, and a number of other stores offering grocery delivery services.
Carnival of Personal Finance #88
Carnival of Personal Finance #88 is now up at Stock Market Beat. I'm so honored that my submission What Happens When a Bank Goes Out of Business was selected as the Post of the Week. Thank you Mr. Trent! Be sure to check out the host's bio — impressive.
Book Review: A Random Walk Down Wall Street
[Updated links to the cheaper paperback edition after it came out.]
Today I'm reviewing the book A Random Walk Down Wall Street by Burton Malkiel. It's on my Recommended Reading List. See my other book reviews on this list.
This is a classic book, first published in 1973. The 9th edition just came out this year. You can browse its table of contents through Amazon Online Reader.
Every investor, whether you believe in market efficiency or not, should read this book at least once. This book does a very good job reconciling between market efficiency and perceived inefficiencies such as bubbles at different times. The author believes in a weak form of efficient market theory. Simply put, the market may not be perfectly efficient at all times, but it's efficient enough to make it very difficult and costly trying to beat it. In the end, an investor is better off holding a market index fund that invests in everything under the sun. It's not worth the cost and effort trying to invest in the undervalued stocks or high-growth mutual funds.
What Happens When a Bank Goes Out of Business
Last week I wondered in a comment to a post on The Simple Dollar about what the FDIC insurance claims process is really like when a bank fails. If a bank fails, do you get paid right away, or do you have to wait until everything is sorted out? For how long? How do you prove how much you had in your account if the bank’s computer is screwed up because the bank failed?
As if I jinxed it, there was news report about a bank failure in Pittsburgh on the same day. It was the first bank failure in the country since June 2004, no less. Here's an excerpt from the news report on Pittsburgh Post-Gazette:
Carnival of Personal Finance #87
Carnival of Personal Finance #87 is up today, but I just finished reading all the articles in the last carnival yesterday! How do I keep up? Anyway, my entry was Tax Deduction Denied, about my run-in with the AMT. I haven't read all the articles in this carnival yet. These are some of the entries that interest me:
- Don't Lose Your ATM Card! at Mapgirl's Fiscal Challenge – Most ATM cards today have the MasterCard or Visa logo. They can be used by anybody without a PIN.
- No Employer 401K Match? Still Contribute at My Retirement Blog – Yes, especially if you don't plan to work for the employer for long. But definitely fund a Roth IRA first.
- The Difference Between THEM and US When It Comes To Money at My Two Dollars – A cash gift went straight to retirement funds. Way to go!
- Pets take a bite out of your wallet at Blunt Money – I don't have pets but it's good to know cats cost less than dogs.
Enjoy!
Carnival of Personal Finance #86
Sorry about the belated post about Carnival of Personal Finance #86, hosted at The Simple Dollar. My entry was Prosper.com Or Junk Bond Fund? which pondered on the similarity between lending on Prosper and buying a junk bond fund.
The carnival is harder to keep up now because there are so many good entries. I just finished reading all of them. These posts are my favorites in this carnival:
- Mail-In Rebates, Psychology, And An Interesting Analogy at Money, Matter, and More Musings – my hay days of "rebate stripping" business are over
- Ten Reasons I Love My Flexible Spending Account at Single Ma’s Fabulous Financials – same here, I use my FSA every year.
- Retirement Savings Contributions Credit at A Penny Saved – I don't qualify but someone else might.
- My So-Called Personal Financial Life at No Credit Needed Blog – Mine's pretty simple too. I hardly do any "investment research" because I already have everything in the total market index fund.
Upgraded to New Blogger with Custom Domain
This blog, The Finance Buff, is hosted by Google's Blogger service. It used to have the address http://financebuff.blogspot.com. Since Blogger came out of Beta, it offered a feature that allows me to map a custom domain name while keeping the blog hosted by Blogger for free. I really like it because it gives me the best of all worlds: I get my own domain name, all links to the old address still work, and I don't have to pay for hosting.
Fixing the template after upgrading to the "New Blogger" took some work, but it was manageable. One key benefit is the addition of labels, or categories, which group related posts together. Having a separate RSS feed for comments is also nice. I can keep up with the comments now without having those e-mailed to me all the time.
For custom domain, I registered domain name thefinancebuff.com at 1&1 for $5.99. The price is right at 1&1, cheaper than GoDaddy, and it also includes private registration. I then followed the instructions from Blogger for 1and1 but it didn't work. After some tinkering, I got thefinancebuff.com working but www.thefinancebuff.com didn't work. Searching Google showed other people also had the same problem. They either got the URL without "www" working but it didn't work with "www" (example 1: martinezumc.org) or the other way around, URL with "www" worked but URL without "www" didn't (example 2: www.mytechnews.net [fixed now]). Later, blogger Blog Bloke got it working both ways for a domain registered at GoDaddy, but my domain was registered at 1and1 and the DNS controls are different there.
Tax Deduction Denied
I started doing my taxes last weekend. I'm not ready to file yet, but I just wanted to see where I stand. When I compared my first run with my 2005 tax return, I noticed that although my income was higher in 2006, my total itemized deduction was a few thousand dollars less than that on the 2005 return. How come? I knew I missed something. When I took a closer look, I realized I forgot to put in the property tax I paid in 2006. "How could I have missed such a big chunk of deduction?" I beat myself on the forehead. I dug up the property tax bill and put the number in. But the bottom line number, the amount I owe, didn't change at all. That's insane, isn't it? I found myself a big deduction but my tax bill didn't budge.
What happened? Software error? No. I found myself joining millions of other taxpayers in the dreaded AMT Club. AMT stands for Alternative Minimum Tax. This is a club that you don't want to join but the IRS will throw you in there involuntarily. When you are in this AMT Club, you are legally discriminated against. Many traditional tax deductions are no longer a deduction. These include:
- state and local income tax
- property tax
- exemptions for yourself, your spouse, and your dependents
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