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. 

What Does the New York State Gun Law have in Common with Bill O’Reilly’s Position on Gun Registration?

Let me start out by stating that I live in upstate New York and as is typical here, I own a gun. My son owns two and will probably purchase a third this year. Here in rural New York I assume most people own a gun. Most hunt, but many also own guns as a hobby and as a home protection device. As a non-NRA member I always read first and judge later. I am a non-NRA member because I don’t want to belong to an organization that is part of the problem and not the solution.

When President Obama was elected the first “warnings” from the NRA was “that they are going to take away our guns.” Never happened but did pump up the sale of guns and memberships to the NRA. Understand, the more the NRA can scare you, the more money they make. It’s an economic thing. When Governor Cuomo signed the new New York Gun Law gun sales throughout the country skyrocketed. They want to keep you scared. Scared=Money.

My guess is is that none of those gun purchaser’s read the law. (I sometimes think many couldn’t have read anything). At the end of this post is a elongated summary of that new law, but the short form is simple. It redefines what an assault rifle is and makes the sale and ownership of such weapons illegal. It severely restricts the mentally ill from owning all guns and it requires all gun owners have a background check and to register their guns. (It also requires a background check on all ammunition purchasers).

Currently in New York if you drive a car you are required to register your car and have it inspected. All roads have a speed limit. Everyone understands the logic of these laws. Cars can and do kill. They are dangerous. If your child was killed by a car you might want to add more protective laws to protect other children (like DUI or DWI laws).

You can not yell “Fire” in a theater. It is an exception to the First Amendment. A logical one. No one questions it but if you believe that the second amendment is different, you should stop reading this post now. We are simply not on the same page. If you believe that anyone should have the right to own any kind of gun, no matter how dangerous, you simply don’t understand what “We the People” mean. We give up some rights for the protection and benefit of us all.

Now that the Tea Partiers (or any other’s who believe that there should be no restrictions on anything) have clicked away I can continue with the importance of reading the actual law. If you actually read the law (which can be found HERE, with a summary at the end of this post) you will find little to be frightened of. In fact, the logic of each point will hopefully make New York safer and reduce crime.

Let’s look at each summarized bullet point;

1. The NY Safe Act of 2013 bans semi-automatic rifles, shotguns and pistols purchased after Jan. 15, 2013 that have one prohibited feature – such as a pistol grip, a folding stock or a flash suppressor. This is the state’s new definition of an assault weapon. The ban does not cover pistol grip shotguns. Is there anyone who doesn’t understand that these features are only for killing cops? No one needs a rifle that folds up or suppresses the shooting flash.

2. For semi-automatic guns bought before Jan. 15, 2013 owners must be register with the New York State Police by April 15, 2014. We need to register our cars. We need to register our guns. (Are those finding a problem with registration protesting auto registration)?

3. The registration will trigger a background check through New York’s National Instant Criminal Background Check system. Problem with that?

4. If you own a gun that fits the new law and do not want to register it you have a year to sell your semi-automatic to an out-of-state dealer. After a year, you can only transfer it to spouse, domestic partner or a child. Again, Am I crazy or does this just seem logical.

5. Exemptions exist for relics and curio weapons that may meet the new definition of an assault weapon. Too liberal?

6. You have a year to get rid of any magazines that can hold more than 10 rounds (typically the 30-round magazines grandfathered in under the 1994 state law that previously defined assault weapons and gun restrictions). Under the new law, you can still use 10-round magazines, though legally you can only load a maximum of seven bullets at a time. I’m sure it’s fun to shoot off 30 rounds but this is where we have to sacrifice a little for the common good.

7. Handgun owners must have a pistol permit and re-certify the information in the permit to the New York State Police every five years. The information includes address, date of birth, firearm descriptions and other personal information. Local officials will still hold the authority to decide who gets a pistol permit. Let’s face it. Don’t we all want to know who owns what guns and these are the weapons most used in crimes. Is it too much to have accurate information about the owner?

8. The law required background checks now for ammunition sales through New York’s NICS.
9. All online sales must go through a dealer with a federal firearms license who also is required to do a background check on ammo sales. One more place to separate the good guys from the bad guys.

10. You can sell a gun at a garage sale or another type of private sale so long as the buyer passes a background check before the transaction takes place. The buyer is now required to get NICS clearance for gun transactions. The seller must keep the paperwork and can charge $10 to the buyer for the task. Failure to obtain the background check is a misdemeanor. The background check for private sales does not apply to transfers among spouses, domestic partners and children. Again, this is required for car sales, shouldn't it be required for gun sales?

11.  You must secure guns in your home if you live with a convicted felon, someone with mental health issue or someone under an order of protection. Failure to do so is a misdemeanor. Sorry but how many lives will this save.

12. Gun ownership is restrictioned for mental health patients and expands Kendra’s Law, a policy that allows a judge to order treatment for people who typically have very severe mental health problems, such as schizophrenia. The changes expand the court-ordered treatment plan from six months to a year. The law now requires an evaluation of state prisoners who exhibit behavioral problems at the end of their imprisonment to see if they meet the criteria for Kendra’s Law. And the law extends the original sunset in Kendra’s Law from June 30, 2015 to June 30, 2017.
The law requires mental health providers to report patients who pose a serious risk to self or others to local county mental health officials. The county then can report the concerns to the state’s Division of Criminal Justice Services. DCJS then has the authority to suspend any pistol permit and can require the person to surrender all firearms to law enforcement.
The different facets of the law allow DCJS and the Office of Mental Health to “disqualify” mentally ill people from having a pistol permit or possessing firearms. The state also intends to add a disqualifying notification, without including detailed health information, into the background check database to stop gun sales. Disqualified people can petition the commissioner of mental health for a reversal of the designation. Can anyone have a problem with this?

13. There are a host of harsher penalties for those who break the laws when it comes to illegal gun buys, using guns in a crime, brandishing a gun on school grounds, or shooting a child or first responder. Here’s a summary:

*Makes killing a first responder responding to an emergency a first-degree murder charge.
*Creates a mandatory five-year minimum prison sentence for anyone who uses a loaded firearm during a drug sale or violent felony.
*Creates a mandatory three-and-a-half year minimum prison sentence for using an unloaded gun during any drug sale or violent felony.
*Increases penalties for “straw purchasers,” people who can easily pass a background check who buy guns for others. The crime goes from a misdemeanor to a Class D felony.
*Makes it a felony to possess a gun on school grounds or a school bus.
*Ups punishment for people, often gang members, who use community or shared guns to commit crimes. Can anyone have a problem with this?

That’s it. No matter what you heard. This is the law. Once again, don’t believe me. The actually legislation is HERE. No one is coming for your guns. Don’t believe me, would you believe Bill O’Reilly? Bill O’Reilly surprised everyone by saying on many shows that the “only way to get the guns out of the hands of the criminals is to federalize gun registration”. His concept is simple. Register guns and make having one a federal crime with a 10 year mandatory sentence. He too put it in terms of registering a car.

Before you go crazy about the new New York Gun Law, read it and understand that we may only have this one chance. Once we have some distance from all these school shootings the tide will subside. Its now or never. Now that it’s done in New York we have a big lab. I believe if we look back in New York we will find that the registration requirement will turn this tide.

The Legacy of Liberalism or Why Paint Don’t Stink

While I earn the bulk of my income from owning a retail real estate firm in Cairo, New York, I also have invested in multifamily apartments as my main retirement income investments. As the real estate market has come back from the collapse of prices in 2008, it still has not come back anywhere like the stock market has (now close to a 5 year high). Construction is up, new housing starts are up, and as I stated in my last post I’m optimistic about the economy. Having more free time has allowed me to do some things that I usually don’t get to do (and maybe shouldn’t). One of my winter goals was to paint the very large parlor floor entrance and three story hallways in my ten unit historic landmark located on Willett Street in Albany, New York. The key here is historic.

While the property is located on what I consider the most desirable location in Albany, most of my fellow landlords have completely renovated their apartments. For financial reasons I can’t compete with that. I don’t have the capital in this marketplace. In order to compete I’ve had to accept a discounted rent roll. In my desire to raise the rent roll I have been slowly making at least one improvement to at least 20% of the apartments each year. In addition I have tried to be a very hands on landlord. As any Realtor will tell you, you (or your building or apartment) only get to make great first impression once. That’s what I’m going for. A new first impression.

For those who have read my November 30th post of last year, you know that I’m a Green Landlord. Add the need to renovate and paint in keeping with the historic color palette of 1878, and the task becomes more difficult than expected. My last big issue became the fact that all of my research on historic paint colors are about exterior colors. There is no shortage of websites from paint companies as well as other sources to find appropriate colors. Interior colors is a whole other thing. After hours days of research I finally found that as I looked into paint manufacturing I was able to find the historic colors I needed.

In my case, the hardest problem to solve after finding the “right” colors was how to deal with the need to find the right primer, one that would not take off or “bubble” the existing wall paper when priming. Remember, I needed the paint to be both low or no VOC (Volatile Organic Compounds). All of my research suggested that no latex primer would work. The suggestions were to use either oil based or alkyd based primers. If you have ever used these types of paints you know that they really “stink.” My building, with high income tenants simply would not be very happy coming home to hallways that smell like chemicals. As we have become more and more litigious as a society, I worry about having a tenant get the flu and blame me, as the landlord. This is not beyond belief. (Remember the woman getting a million dollar settlement from McDonalds for a coffee that she spilled on her lap because she claimed it was “too hot.”)

The solution turned out to be simpler than I thought. After having no luck finding a primer that was both environmentally friendly and odorless I typed “odorless oil based primer” into Google and surprisingly multiple primers came up. I had never heard of any oil based paint that was “odorless,” but just adding that word in the search made all the difference in the world. I settled on Kilz Odorless Primer and it has worked out fantastically. I was able to tint it so I was able to one coat the finish paint. My tenants were thrilled that they could watch me paint and no one could smell anything.

You’ve got to be wondering “what does any of this have to do with liberalism.” Here, your age might help. As I grew up when all paint was oil based a smelled like the toxic chemicals it was made of, this odorless, low VOC paint is a miracle of evolution. Even if you’re younger you grew up with the latex version of the poisonous, smelly paints (the smell are the VOC’s). Now, for the first time in history you can paint with 99.9% toxin free paint. I should mention it’s not just about paint. There is now low VOC or VOC free glues and adhesives. In fact half of the building supplies are now either completely safe or much safer than they have ever been. This is not by accident. This is the payoff of 25 years of environmental progress.

Now is the time for the liberal left to join the fiscally conservative right to help save both the planet and our pocket books. For all those conservatives who have considered these environmental laws as government interference, you are viewing this issue from the incorrect perspective. All those toxins caused health issues that we all pay for. If keeping health costs down is desirable, join the fiscally conservative side of this issue. The more safe products we make, the healthier our lakes, rivers and streams will be, the healthier we will be, the lower our health care costs will be. This basic concept is true of every environmental law we have passed from removing the lead in gasoline to getting rid of the CFC’s in refrigeration.  When both were legislated, the warning from the polluters were that these laws would make these products too expensive. These warning have been going on for over 25 years and have never proven to be true.

We all agree that we can’t go on spending the way we do. Let’s look for areas where the data shows that we have solutions that should work for both sides. I would challenge anyone to show me an example of any environmental law that either cost too much and closed a business that didn’t have a health benefit that offset the cost. Now is the time to close the budget gaps by investing in cleaner products that reduce health costs. It just makes cents.