How To Save 10,000 Today or How I Stopped Overpaying Mutual Fund Fees

Later this week I hope to lay out a primer for Mutual Funds, having just gotten off the phone with a Financial Advisor, trying to sell me a Managed Bond Fund, but I have to put that post off. Having a conversation with a salesman trying to sell me funds always pisses me off. They’ve got their rap down and it’s always a challenge to Stop, and Think about what they are saying. They always have the right answer. Despite the FACT that there is no data showing that managed funds have any advantage over simple index funds in the long run (over 15 years) they keep the pitch up. I don’t want to insult my audience but I know statistically that most people own funds that they have no idea:

1. What the funds goals are?

2. What the management fees are?

3. What the turnover is?

4. What the price or quality of the funds holdings?

These are some basic questions and most people can’t answer them. While they are all important, the most important may be question # 2. What are the management fees. Today the average fee is 1.5%. Here is how I’m going to save you $10,000 and you don’t need to know the answer to any of the other questions. I’m going to assume that you are into a lot of different funds (your advisor gave you the safety in diversification rap) and here too you don’t need to know any of the answers to any of the questions, just know that if you have a portfolio of $100,000 and are paying a 1.5% expense ratio, you will have paid $11,681 in fees in 10 years. (If you really want to get sick, try calculating the compounded interest fees for as many years as you plan on saving before you retire.)

Now here’s my plan. SELL IT ALL FROM THE MANAGED ACCOUNTS AND REPURCHASE the same stuff from an Index Fund like Vanguard. While in my opinion Vanguard is the best, most companies have gone into Index funds so if you have an account at Schwab, buy from Schwab if you want, but KNOW THAT THE FEES WILL BE MORE LIKE .1%-.5%. Now run the same compounded interest calculations and guess what, that same $100,000 at even .5% will have only cost $5,127 (or a savings of $6,554 over the 10 year timeframe). If you can find funds with a .1% fee, the cost will just be $1,005, a savings of $10,613 (which is the $10,000 I promised). The beauty of this is you are investing in the same bucket of stocks, just not giving away the fees.

If you ran this out over a much longer time, say 35 years, the amount of money you have paid in fees could represent more than a third of what you made on your investments. Additionally, now most companies have created Index funds that are as diversified as any managed fund. Need growth stocks, there is a fund for that. Looking for value, there’s fund for that. REMEMBER, although the salespersons tell you that a managed fund does better, and it might in the short term, IN THE LONG TERM THERE IS NO PROOF THAT A MANAGED ACCOUNT DOES ANY BETTER THAN AN INDEX FUND. Hey, it’s your money, your call.

Is It Time To Sell (Your Stocks)?

I don't know who originated the saying, but whenever I think of Warren Buffett I think of "Be fearful when others are greedy and greedy when others are fearful." If ever there was an overabundance of greed, it's now. While the Dow is at consistent all time highs each day (today it closed at 15,215) and the Fed is touting stocks as "cheap", I can't stop thinking a correction is due. And that correction is likely to be big. The Fed did add a large disclaimer but I'm serious when I say while there are great signs the recovery is starting to look less anemic, the unemployment rate and addition of less than 200,000 new jobs a month still leads me to believe that we're on the wrong track.

The Democrats are in a defensive stance so no new jobs legislation is on the burner and with Obama looking weaker than usual nothing is likely to happen through the next election. In fact with the poor way the administration is handling BengaziGate and IRSgate things are likely to get worse before they get better. Could the Republicans actually get more house seats in the fall? Either way, nothing of substance is likely to happen through November and with the thieves on Wall Street needing to make some big money, selling short will need to happen. More for them, less for you.

I've gone out on the line but since I leave my posts online indefinitely  we'll know shortly so here's the prediction:

1. The "correction" will happen before the end of June.

2. It will be over 1000 points.

3. The Dow will end the year below 14,000 before it begins to rise again in January.   

What Should I Grow In My Garden?

One of the common questions asked of me is "What do I grow" in my garden? There's no simple answer because I don't grow the same crops every year, but I do have "core" crops that I always grow: lettuce, tomatoes, cucumbers, carrots, onions,  garlic, potatoes and squash. If you look at this list you will see that with the exception of lettuce and onions, most of these crops are "expensive" to purchase, especially if you are purchasing the organic varieties. This may be one key to setting up your garden. If you can buy organic varieties at a reasonable price, why grow it? The best reason might be the special "taste" of fresh picked crops. There is no question that going to your garden and picking any vegetable will taste better than anything you can buy in a store.  

Because of this taste difference, I grow some crops like carrots and garlic  Every time I put out carrots for my guests they comment on "just how great they taste." "That's how a carrot should taste" is one of the most common comments at my dinner table all summer long. I hear the same for my string beans and tomatoes as well. Most store bought fruits and vegetables just can't match the flavor of fresh picked. If you only eat organic fruits and vegetables it's a tough question as to which is more important, price or taste. Most of the time choosing crops that are both better tasting and expensive as well is a good way to choose. Cucumbers fall into both categories, they are both better tasting and very expensive to purchase in a store. Evan non-organic are between a dollar and a dollar and a half for each cucumber and a summer salad with a cucumber is just not a salad.

Also expensive and good tasting are tomatoes  I could spend a whole post talking about tomatoes alone. I grow at least 4 varieties, from small grape strains to great eating tomatoes and a few for types for my famous tomato sauces. Unlike most sauce makers, I don't grow or use plum tomatoes. I like sweet or sweet/hot sauce and mostly use midsize tomatoes that I could either just slice and eat or make sauce with. Most are heirloom varieties but some of the new hybrids are too tempting to not try. I like to switch and try at least one new variety a year. 

Not all choices have to be expensive store bought crops. One of my favorite inexpensive core crops is lettuce. I grow at least 6 types of lettuce and an equal amount of Japanese Greens. Nothing is better to start a meal then a mixed salad. The Japanese Greens adds a multitude of additional flavors, from nutty to zippy. Depending upon the main course, I might add a little Arugula (which I also grow) to the mix. (Johnny's Seeds, which is where most of these links go sells Arugula in "seed disks" which make it very easy to plant). 

In addition to my core crops I add broccoli and brussel sprouts most years. Both can be harvested late in the summer and fall. For early crops I add peas and string beans. Last year besides my usual squash, I tried an italian variety  trombone zucchini, which now have become a standard annual crop.

A few red flags should be discussed. If you are not growing from seed (which is the best way to go), never buy from a discount source. Never buy from Walmart, Lowes, Home Depot or any of the other discount outlets that go into the gardening business 3 months of the year. They don't take care of their plants and sell deceased  uncared for plants. Plants from these sources can have everything from funguses to bug infestations. Purchase only from all year suppliers and only the best possible stock. 

Lastly, try at least a few "never planted before" crops each year. This year besides planting potatoes, I planted Jerusalem Artichoke, a potato like crop.  I also try and increase my fruit varieties, this year planting 4 more dwarf apple trees, 2 new varieties of strawberries, 2 new blueberry bushes and 1 new grape. It's not too late to plant, so go ahead a have a great planting season. You'll be a happy camper this fall. 

Drip Irrigation- The Right Thing To Do This Dry, Hot Summer

It has been weeks since the last rains here in upstate New York. It looks like it's going to be a long hot summer with little rain to speak of. Even if you get the rain you need where you live, now is the time to switch to drip irrigation for your gardens. I have been adding 100-200 feet of new drip irrigation to my garden each year, making watering less and less of a chore. While the lack of rain is one good reason to make the switch, some other good reasons include a.) the plants like it, b.) it saves 80% of our most precious natural resource (water), and c.) it's the right thing to do. 

If money is an issue, know that the price of drip hoses have dropped significantly. You don't have to but professional, using 5/8th inch hoses, 1/2" will do and with connectors and regulators you can have a professional setup for about $.10- $.12 a foot. 

Add a water timer and meter and you can simply turn a dial and you will be set for the day. 

If you have a large garden like I do you might need a multi-hose connection. If you use quick connects on all your attachments you can quickly move the water timer to each leg of your garden. 

The combination of all these tools will make you a very environmentally friendly gardener. It will free up a lot of time and will save all of us a lot of water. Your plants will love it, your garden will love it and the world will love it. For those of you who get a lot of pleasure hand watering (and I'm included), you can still hand water certain parts or certain plants to get that enjoyment. I have 4 raised beds I still stand over of hand water and suck up the love. Have a great summer. 

Where Have I Been?

I had built up a pretty good following of my posts until late February. While I have no intention on being too personal, in this case I have to explain my sudden absence from the posting seen. What no one knows is that for the last year I haven't felt too great. Every day I got a slight fever and had nightly sweats. None of my doctors could figure it out and none were very concerned. Finally after a year of this I decided to move forward and see someone new to get fresh look and a third  opinion. I was told that the correct doctor to see was an infectious disease guy. My daughter, an ER doctor recommended a specialist in Albany, NY and I saw him in early March. 

What a ID guy does is do a ridiculous amount of tests, scans, and x-rays. A few months earlier my gastroenterologist had done a CAT scan of my pancreas and seen something he suggested  I follow up on. Net, net, the chest X-ray showed what looked like lung cancer. After seeing a thoracic surgeon at Albany Med and having two surgeries I was diagnosed and confirmed with Stage 4 metastatic lung cancer. It had also spread to my spine. I was told that there was no fix but we could stop it from spreading with radiation (which I finished a week ago) and chemotherapy once every 21 day (for the rest of my life). 

So that's the deal. I won't talk or post about it again but anyone who has followed my posts deserved to know why I disappeared late February. Understand that I plan on being around for a long time. I have a great life and plan on living it to the fullest. When you get sick you surround yourself with friends and family and I have an abundance of both. I'm a very lucky guy. My older sister passed away 3 years ago from pancreatic cancer (at age 60) and the most important thing I took away from that is a reminder to live my life to the fullest. I plan on doing just that. You might want to do the same.