Edward Jones

Not sure what I think of these guys. I built a relationship with a new 'advisor' who keeps calling. However , they have a violent takeover mentality. They want to be on every street corner, which makes me think they have enormous overhead, which means me, the investor is paying for it. He says I can get 7-12 percent with them, and also get life insurance.

Anybody know anything?

"The Matrix has you..."

To those out there working in the system:

Imagine a world that has been pulled over your eyes to blind you from the truth. You are not in control of your own life. Your mind is trapped in the idea of stability, security, and accountability.

Now imagine that in reality, you are plugged into this system merely as a source of energy--a battery--for the use of a much larger organization. You are expendable, replaceable, disposable.

But, what if you were to wake up? What if you were able to unplug? Maybe you could do much more. You could take control of your own life (as much as God allows).

This isn't just a sci-fi story. This is real.

To all of us working "the job" ... the "career" : Free your mind.

It's difficult, and it takes faith. No one makes the first jump. Once you start to believe in yourself, it will be difficult to go back. In fact, you cannot be reinserted into the system. You will reject it.

Ignorance may be bliss, but it is still ignorance.

Of course, you may choose to enter into the system once in a while to get certain things done, but at least you can now see the bigger picture.

I'm not trying to tell you that you can dodge job offers. When you're ready, you won't have to...

The Economist

Taylor and Gentlemen,

I have been 'coaching' English (I don't call it teaching anymore because I feel like I'm learning more from him) to Master Song, as you know. We have been using The Economist as our study material, as he is a professional investor. While studying this magazine, I realized that it's really a wonderful and super valuable tool to have in our toolshed. When I started discussing newsstand prices he mentioned that you can read it for free online. Cool! I forgot what era we live in. So, I'm going to make plug for The Economist and encourage all of us to read it often. It can also very much be the source of good discussions.

Hope this helps.

http://www.economist.com/

ps. Do we have a link resource list anywhere on this thing? We should be building that up, but only adding things that we all agree are valuable. Like Pooprider, for example. Everyone needs more poop in their life.

Virtual Estate - Dot Com Collection

In light of my recent domain registration habits, I decided to look into what makes a good domain name.

I came across this article:

10 Tips for Investing in Domain Names

I wouldn't say that your time is well-sent sitting around and thinking about the right domain name to buy, but assuming that you have some plans for a business or a fancy blog... then it might be worth holding on to a domain name.

Most domains won't make you a lot of money, but in the case of owning a business that has a specific name, not owning the domain could cost you a lot of money.

The thing about domain names is that they are relatively cheap, and they can potentially have very high returns. On the other hand, you can basically lose whatever you put into it very easily.

The article covers many good points about domain name investing. These points can also be translated into real estate investments.

I just thought that it was neat to see the crossover. I'm sure there is something intelligent to say about it, but instead I'm going to go look at my domain name collection*.

*Note: this does not say investments :(

Apples and Compound Interest

Much to my amazement, Wayne Taylor (#1) admitted to forgetting the laws of compound interest. And to think I came so close to investing with him whilst he was still fumbling around in the dark. While, I still fear he may need some straightening out, so I'ma make it real simple.

Example:
Wayne Taylor (#1) has a hundred apples.
Peter Taylor (#2) wants those apples.

Peter tells wayne that he will pay him 10% a year (compounding) for use of his apples.



Y=Year
E=Apples earned at 10%
T=Total amount of apples

Y ...E... T
1 ...10... 110
2 ...11 ...121
3 ...12 ...133
4 ...13 ...146
5 ...15 ...162

So after 5 years, what does Wayne have?

Wrong.

He has a crate of ROTTING APPLES! 162 to be exact. But he would only have 150 rotten apples had it not been compounded. However, as an uneducated investor, he never looked into what Peter was doing with his apples.

Peter baked PIES!
The first year, he made 10 pies.
Second year, he used his profit and made 20 pies.
Third, he made 40 pies.
Fourth, 80 pies.
Fifth, he made 160 pies!!!!!!!

At the end of five years, Peter had a thriving pie business, and paid Wayne back in rotten fruit that was unsuitable for pies.

And That's how compound interest works from BOTH sides!!!






Peter Taylor - Eats apple pie like it ain't no thaaaaaaaang

Compounding Interest - The Difference Between Savings Accounts and Loans

Today my time with Master Song was most interesting. As you could tell from reading the very scholastic post here, you'll see that I was inspired to dig into the important topic of compound interest. Now that I've started that thread I wanted to move on and present to you what he did to me. It was a shameful experience but I love those experiences because they are memorable and one actually learns through being shamed. Wow! New idea! Shame children during school to help them learn better! Ok. Maybe not.

The question that shamed me and got me on this was this (and try to think about it before reading the answer. Be sure you have a position):

If Bank A would lend you $100 at 5% and their savings account was only offering you 4%, but bank B would give you 7% in their high interest savings account, would you borrow the $100 from Bank A to put it into Bank B? Why, or why not?

...think...

...think a little more...

...my answer was 'Yes. That's something I would do."...

...think...

Ok. So you know I was shamed so my answer was obviously wrong.

Why, though? Why not do that? The answer is found in the way that the compounding works. Apparently (and I hope to run some scenarios in a follow up post when it isn't 1:15am) savings accounts are compounded quarterly or annually. I always thought since they pay you monthly that they are compounded monthly. How wrong I was apparently. Loans, on the other hand, are compounded monthly.

So, the theory is that if you borrowed at 5% and you are paying interest monthly, that you'll end up paying more than the 7% (Perhaps much more?) at Bank B.

For investors, this is really nasty important. These leveraging guys out there... They may be even more off-base than I originally thought.

Did I ever tell you I had a guy who tried to get me to leverage 25K to just put in some random mutual fund with hopes that it might make 7-10% 'over the long haul'? haha.

Well, that would have been better than my random stock purchases. :(

By the way... Master Song strongly approves of our blog idea as a way of increasing our knowledge base. He thinks that within 5 years we might be ready to start, hehe.

We live. We learn.
And if we don't learn, we don't invest.

T1 out.

What I forgot from Math Class - Compound Interest

Will wonders never cease? Today, more than 14 years after studying math, I finally had to reflect on what I studied. The compound interest formula (CIF from heron in). The reason for this post will be connected to a subsequent post, likely to be named 'Understanding the Backbone of Savings and Loan formulae".

It, as I recall, was my only fond memory from Math. I recall that it 'just made sense'. Well, I forget the actual formula but today I realized it's paramount to review. So, we're gonna do a little Math, kids. This might seem like elementary to you brainiacs at BLIP, but for those under-developed mathletes like myself, read on and get schooled:

Thanks to Wikipedia (which we all know is true and never erroneous) I relearned how important the frequency is in the CIF. I also learned that the frequency must be disclosed to the people involved. That I didn't know.

But let's work the forumula! That's where you can start pluggin' stuff in and having deep feelings of regret over past errors in taking loans, and, if I recall correctly, also where you can realize how much money you WOULD have had....if only you studied harder in Math..

FV = PV(1 + i)n

(I don't know how to make that 'n' superscript, nor how to make that 'i' squiggly and cool like they did at wiki.)

So what does it all mean?

FV = future value (investors drool here)
PV = Present value (investors pull hair out here)
i = fixed interest rate
n = period

By going here you will be able to see variations on the formula like if you want to figure out how much PV you need to get X amount of FV. But that's not FV so who cares?

I decided to do a copy and paste from Wiki because it's cool to see someone else do the work:

Translating different compounding periods

Each time unpaid interest is compounded and added to the principal, the resulting principal is grossed up to equal P(1+i%).

A) You are told the interest rate is 8% per year, compounded quarterly. What is the equivalent effective annual rate?

The 8% is a nominal rate [jargon defined on Wiki elsewhere]. It implies an effective quarterly interest rate of 8%/4 = 2%. Start with $100. At the end of one year it will have accumulated to:
$100 (1+ .02) (1+ .02) (1+ .02) (1+ .02) = $108.24
We know that $100 invested at 8.24% will give you $108.24 at year end. So the equivalent rate is 8.24%. Using a financial calculator or a table is simpler still. Using the Future Value of a currency function, input

• PV = 100
• n = 4
• i = .02
• solve for FV = 108.24

So it does seem that the default for this formula is annual. The example above says 'quarterly' and then you see the /4 cutting the year into 4. So.. I did the math above and it seems to work. That's the one cool thing about Math is that when it works it feels kind of magical. But I'd still rather let someone else do Math and make money and play my guitar.

Let's make a real-life example! Yay!

I bought about $4000 of a failing stock because I didn't know what I was doing. It's value has since dropped to under $2000. So, let's see what I would have had in a simple savings account if I kept it there instead of trying to be a bigshot investor before my knowledge and awareness was at an appropriate level.

PV (back then) = $4000
n= 12 (let's say 12 quarterly cycles have passed even though I didn't buy them all in one shot, close enough for fun)
i = .075% (let's just say that it was an average of 3% compounded quarterly)(and don't forget that little nasty zero because it messed me up. I wrote .75 and I thought I would have been Warren Buffet!)


FV = PV(1 + i)n

FV = 4000(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)(1+.075)

Ok! Drum rollllll!

$9527!

JUMPIN' JEHOSOPHAT BATMAN... I wish I never made this post!

Crap.

Poop.

Let see now

Reality PV (like TV) = $2000
Virtual PV (what i would have had) = $9527
Net loss on this puppy: = -$7527

Well, boys, I think I'm a bit depressed now. I'm quittin' BLIP and putting my money in a high-interest savings account. See you at the top, suckers!