We're Moving!

It has been just over a month since I started this blog and I am so glad I did - mainly because it has enabled me to make contact with some very nice and knowledgeable people in the personal finance blogosphere.

Before I wrote my first post on this blog, I promised myself that after the blog attracted a certain number of visitors, I would get a new website. That was vanity.

In hindsight, the promise proved to be a good move as more than a few visitors to this blog have fed back that the comments system isn't as easy to use as they would like. I think our new website will make commenting much much easier.

Please take a look at the new website and let me know what you think. All feedback, positive and constructive, welcomed.

Many thanks
The Money Grower (formerly GMO)

What to Do When Fire Rages?

At this time of economic uncertainty and stockmarket turmoil, I thought about the following. It may not be immediately obvious why I am writing about a SATs paper from years ago but I hope it will become apparent.

Years ago there was a reading SATs paper entitled ‘Fire: Friend or Foe’.

In my opinion, it was one of the more interesting SATs papers. I base this on no more than its contents stuck in my head and inspired me to learn more.

One of the sections of the paper was about how certain forests and bush areas rely on fire to keep them regenerating – burning off the dead wood and allowing new seeds to grow, if you like.

Since reading the paper for the first time, I sort of think of it as a metaphor for major investing cycles. Yeah, I know that’s arty farty but it helps me understand things.

The idea is that certain habitats occasionally get destroyed by fire. Devastating you would think, but actually, not necessarily so.

High Street Slashers: The Real Time Observations of a Shop-a-holic (GUEST POST)

Numbers and graphs are great. I love them. But I do concede that they have their limits. That's why I like to keep it real by walking the floors and talking to knowledgeable people that love the products they are buying.

Company reports have their place and I like to look in the rear view mirror as much as the next person but when I want to hear a real time report from the bad lands of the fashion retailers, I like to hear my friend Tara's take on things - she's got her finger firmly on the pulse.

I'll hand over now.

 

The Rucksack Strikes Back: There's No Accounting for Fashion!

'Never think you've seen the last of anything.'

Eudora Welty, Author

Conventional wisdon has it that very few new ideas are created:- sometimes ideas evolve, sometimes ideas are given a shine up and recycled but precious few are totally new.


Rucksacks, so beloved of European students and Japanese tourists, seem to be making a fashion comeback.

Cool people seem to be wearing rucksacks! More shockingly, the wearers seem to be wearing their rucksacks on BOTH shoulders.

Whoever persuaded the buying public that these duel shouldered darlings are a must have accessory is, in my opinion, a genius. Or maybe the humble rucksack symbolises the 'no frills' reaction to our current economic situation.

Ra-ra skirt or split caps, anyone?

Never say never.

Why I Save and Why You Should Too - Even if you aren't saving for anything.

I was asked recently why I bothered to save and invest and why it was so important to me.

Some people are saving for a specific one-off expenses like a wedding or new car. Others are saving for ongoing expenses like school fees or university funds. Others are focussing on retirement or on buying a plush pad somewhere hot and exotic.

The reasons why people save are as diverse as a bag of pick 'n' mix. Reasons depend on priorities and life stage, amongst other things

My reasons are somewhat less obvious but I will try to explain them as best I can.

If the goal can't be changed, change the focus.

A few days ago, some friends invited me on a day trip to a huge lake in the Peak District.

My pals, rather strangely, enjoy activities like jogging and going to the gym. I've never understood it myself, but each to their own. I like to think my body is finely honed for short bursts of intensive activity but the truth is my pals are just fitter than me.

When I am asked the question, 'Shall we go for a walk?', I usually reply 'Why?' followed quickly by a politish, "No thanks."

I do not enjoy 'walking for pleasure'. Lots of people do it, I know, but it's not my thing. I don't mind walking when there is a purpose like a carboot sale or a treasure hunt or scrambling over rocks to find rockpools. But I can think of more enjoyable ways to raise my heartbeat than 'going for a walk'.

When I was invited, the plan, on arrival at the beauty spot, was:

7th Day Growing Pain - Prove I'm wrong. (Funds and Bundlers)

I invest monthly via a very large UK discount broker. I invest in a variety of unit trust and OEIC funds.

Some of the funds I invest in are specialist and some are not. The money goes out of our bank accounts on the 7th of every month and the new units appear in my account between one and four days later.

There is something I think I have noticed and it has been a source of bemusement for a while.

I'm looking to be proved WRONG on this because I sincerely hope I am.

The Perfect Way to Queue Jump?

I like observing human behaviour. Occasionally, I will do little experiments just to test a prediction or see what happens.

These little experiments are in no way scientific because they are done 'on the hop' and not under laboratory conditions.

In this post, I would like to share an observation from this morning.

Come and Ride the Bubblecoaster: Riders at the Back Will Get Wettest! (Part 1 of 2)

Stories of investment 'booms and busts' abound. Sometimes they're called 'bubbles' and the word 'bust' is changed to 'burst' because......... that's what bubbles do. I use the words 'bust' and 'burst' interchangably. 

The word 'mania' can used instead of 'bubble'. They mean the same thing: the price of an asset (or asset class) gathers such upward momentum that people trade the asset for increasingly ridiculous prices relative to the how the asset was previously valued. The price is chased upwards until it reaches a peak and then plunges like a lead balloon.

At the peak of big bubbles, although humans are unaware, spacecraft are rumoured to have been spotted in the sky as alien news reporters are dispatched from outerspace to report on the bizarre behaviour of those involved in the bubble. ;-)

In part one, I would like to take a closer look at the common features of bubbles and, in part 2, I will see how human behaviour contributes, and is affected, by them.

Sometimes It's Hard to Stand By Your Plan: Why I Choose to Live in a Smaller Home Than I Can Afford.

We own our small home. During winter, it's warm and cosy but come summer, its seems stuffy and cramped.

For the moment, we choose to stay put although we could afford a significantly bigger and better place.

Are we making the right decision? You decide.

If Money Grew on Trees.......

we'd all ensure we got our 5-a-day!

Who Is the Best Person To Look After Your Money? I AM BEST

I like neat little tricks for helping me remember things. So I wanted to come up with something I could use to help me make decisions on my journey to achieving independence from my salary.

I considered the following questions:

• Who has the best understanding of my attitudes, aspirations and situation?
• Who cares most about the state of my finances?
• Who has the most to gain or lose from the state of my finances?
• Who will my finances be working for?

And finally, I considered this:

'Who is the best person to manage my financial affairs?'

My answer:

I AM BEST

Is the stock market 'just gambling'?

I've often heard the phrase, 'playing the stock market is just gambling', or versions thereof.

Is it true that buying shares on the stockmarket has similar monetary risks to activities such as a night at the bingo, visiting a bookie, a casino or playing online poker?

Considering that many of us have money invested in the stockmarket through personal investments, windfall shares and other financial instruments, direct and indirect, it would be incredibly disingenius if playing gambling games and investing in the stockmarket were in the same risk class.

There is much information widely available on the internet that shows that the stockmarket offers a better rate of return than other asset classes, never mind gambling, especially over extended periods of time. I'm not going to rehash the statistics here because they vary according to time period taken and are the results of a simulated model. If you want the numbers/ graphs, Google is your friend.

Taking the 10 year view is, for most people - me included, a bit too far into the future to be meaningful. I am therefore going to talk in terms of my experience as a private but reasonably confident investor who believes that, over time, the stockmarket will offer me the best rate of return I can get.

In this post, I am going to explore the case of buying shares on the stockmarket rather than short term trading, dealing in derivatives or shorting stock. Also when I say gambling games, I mean where a company is involved rather than an evening of beer and poker in your mate's back room.

First, lets see how Wikipedia defines gambling:

I love reading investment books......... but am disappointed today.

My bookshelves heave with stockmarket investment books and related subjects such as psychology. My collection is jokingly referred to as 'investoporn'.

When I first started reading, every chapter I read contained a revelation. Nowadays, I tend to get a handful of nuggets from each book I read. I'm happy with that because each book provides lots of revision, some different angles and a few brand new nuggets.

I'm always looking for something new to read and recently came across a book called Warren Buffett Invests Like A Girl by LouAnn Lofton . Ms Lofton, a member of the Motley Fool Team, is lucky enough to have her book heavily promoted by The Motley Fool.

I think The Motley Fool is an excellent website and is usually a great source of financial and investment information.

However, I do have some reservations about this book.

Apprentice - The 2011 Final.

The Lord's Prayer

Helen sure can crack a joke!

Should I pick her service - it's bespoke?

With a phone and yellow pages

Profits delayed for bloomin' ages.

Should I throw Jim a bone,

He who kissed the blarney stone?

Teaching money to the youth,

huddled in a computer booth.

AA - Apathethics Anonymous?

About eleven years ago, I signed on with the AA. I don't think I've had to call them out in the last 5 years but every May, as regular as clockwork, I get a letter telling me how much my new, increased premium is going to be. It was going to be £207 for this year.

Two hundred quid plus sounded a bit steep and breeching the £200 barrier seemed to jump start me into action.

I had a quick look on the AA website and also RAC and Green Flag.

The letter told me (twice) what a valued customer I was so I thought I'd see if that were true.

Since I'm much better at being assertive and masterful over the phone than in person, I decided to ring them up and see what was what.

After a few security questions and polite greetings, I gathered I was talking to an operative who I will call Mark, which isn't his real name but he was a very nice chap.

The trouble with compound interest - a theory

Many people who have a passing interest in finance are aware that compounding is great for growing your pile (or tailspinning you into debt) but why don't more people act on this startling phenomenon?

I have a theory - and it is only a theory but here goes.

The thing with compounding is that it takes an awfully long time before it starts to really do it's thing.

Just like its cousin, simple interest, it limps along for the first few years, before it starts to take steps, followed by strides and finally great big gorgeous leaps - leaving its simple cousin eating dust.

Quite simply, I think people get bored because the waiting is akin to watching paint dry.

Did endowment mortgages deserve to die in disgrace?

This morning, I was looking through some documents and came across some papers relating to my mortgage.

I have an endowment backed mortgage which is an interest-only loan backed by an endowment policy. Buying an endowment mortgage turned out to be a big mistake, but at the time, I knew no better.

I know for a fact my endowment will not cover the mortgage when the mortgage becomes due in a few years time. Luckily, I have known this for a while and, years ago, switched a good chunk of the mortgage from interest-only to repayment. It won't matter if there is a shortfall.

A mortgage is a long term loan secured against your house.

There are essentially two ways of repaying your loan:

The funniest present ever: a seemingly insulting mug.

Although I have another few days left, the children broke up today. Amongst the presents I received, there was one rather unusual one.

In an unguarded moment, I once let slip a childhood story to a girl in my class. It was soon shared around the class. Too late for me - the cat was out of the bag.

One summer from my youth, the film BMX bandits came out. It starred a very young and frizzy haired Nicole Kidman. For those of you who aren't familiar with it, it's about some Australian kids who defeat some adult wrong-doers using not much more than their courage, wile and BMXs. In hindsight, it was a truly rubbish film. Absolute tut. But at the time, it captured the zeitgeist. There is one iconic scene where the main characters, whilst running away from some baddies, go down a water chute at a swimming pool WITH their BMX's. Truly the stuff of childhood dreams.

Investing is a picnic: the difference between shares and investment funds.

I like visualisations and analogies. You've probably gathered that from my other posts. So here is another one.

Imagine you are going on a gourmet picnic with your friends. You have agreed to limit your food budget to £5 each.

Come lunchtime, you have two options:

1) everyone brings and eats their own thing.

2) everyone sticks their £5 in the kitty. Someone who claims to be a culinary genius goes and shops for picnic food, shares out the goodies and plates it up. You get one plate.

***

Option 1 is similar to investing in individual shares.

PROS:

• You choose the items - you get to enjoy all the nutrious and delicious goodness if your item is particularly tasty.

CONS:

• You may have picked up a mouldy pork pie. In that case, you get to nibble on the un-mouldy bits, or, at worst, miss out.
• The number of items you can buy with your £5 is limited - you have to buy the whole box of your favourite Super Nutty Choco-Crunch chocolate biscuits, even though you may only be able to eat three before nausea sets in.

Option 2 is more like investing in investment funds.

PROS:

• Convenience: you don't have to spend hours at the market.
• Your culinary genius may produce a whizz bang gourmet delight.
• You get a wide exposure to lots of different foods, some which you wouldn't have thought of for yourself.
• It doesn't matter if your piece of pork pie is mouldy - there is plenty of other stuff on your plate.

CONS:

• Your culinary genius may turn out to be more greasy caff than posh nosh.
• If you like a particular item on your plate, you can't get seconds - you get what you're given on your plate.

I know that this is not an exact analogy but I think it's a decent start.

Bon appetit!