I have been quite happy with my Apple purchase (AAPL 50 shares at $85.15). I have almost may $500 after only 2 months. I'm a little worried about the new iPhone coming out in June. It may be a blockbuster, but it might also fall flat on it's face.
Let's compare for a second what Apple did when it entered the MP3 player market space with the iPod vs. what it is trying to do by entering the mobile phone market place with the iPhone.
Before the iPod, the whole MP3 market space was a fragmented mess. The players were weak and poorly designed. I remember my Nomad from Creative Labs. The nice gray hue coupled with the poor interface didn't make for much of a player (and it was one of the best). Futhermore, name for me one decent place to download legal music (and Napster doesn't count). Along comes the iPod (and iTunes) with its elegant design and ease of use. Instant hit that made the word iPod synonymous with MP3 music player.
Now with the iPhone, Apple hopes to accomplish the same market dominance. However, there is a big difference...the mobile phone market space isn't fragmented and some can consider quite mature. New phones (and nifty ones at that) are coming out all the time. The iPhone might be a cut above the rest, but that won't last long. Samsung and Motorola are coming out with new models some say are even better than the iPhone. Also, unless Apple has a phone pipeline of new iPhones planned, people will love their offering and then turn to the next latest and greatest phone from a competitor all within a few months. Remember when everyone had to have the Razor? Would you even consider going to a particular carrier for the Razor now?
For that reason, I'm probably going to sell Apple when it has a pop to the $100 mark (currently at $95).
Saturday, April 7, 2007
International REITS
Since my last posting I haven't taken any action on CMG. I've certainly been tracking it, but its price has hovered in the low to mid 60's and I'm thinking it it just too expensive. Also, I'm a little afraid to be burned again. Krispy Kreme (KKD) was riding high when I bought it at $47...the ensuing scandal had me sell it at $7.50.
This past Friday Business Week has an article on International REITS. I currently own a few shared of FIREX (Fidelity's International REIT) in my IRA account. I never thought it was the best one available, but I don't have much choice since my company forces us to hold our IRAs at Fidelity.
Business Week Article (registration required)
The article was very interesting. I thought a point they neglected to mention was currency rates and the detrimental risk of a rising dollar. They also didn't mention the high expense ratios...around %1.50 for all the funds except the SPDR DJ Wilshire International REIT (RWX). I think they ETF might be a good diversification fund. It is cheap (%0.60 expense ratio) and it has similar holding to the top REIT funds mentioned.
I have already transfered some funds to my brokerage account and will seriously look into buying some on Monday.
This past Friday Business Week has an article on International REITS. I currently own a few shared of FIREX (Fidelity's International REIT) in my IRA account. I never thought it was the best one available, but I don't have much choice since my company forces us to hold our IRAs at Fidelity.
Business Week Article (registration required)
The article was very interesting. I thought a point they neglected to mention was currency rates and the detrimental risk of a rising dollar. They also didn't mention the high expense ratios...around %1.50 for all the funds except the SPDR DJ Wilshire International REIT (RWX). I think they ETF might be a good diversification fund. It is cheap (%0.60 expense ratio) and it has similar holding to the top REIT funds mentioned.
I have already transfered some funds to my brokerage account and will seriously look into buying some on Monday.
Sunday, March 4, 2007
New Investment Idea: Chipotle (CMG)
After last week's massacre I'm not sure why I'm even thinking about further investments. Last week I list about 10K...mostly in the foreign markets.
Anyways, I was reading a Business Week article about Chipotle CMG and it got me thinking...this is like Krispy Kreme in its early stages. Now, I got severely burnt on KKD having bought it at $49 and sold it at $5. However, that was right before the whole Krispy Kreme scandal came out.
Chipotle has just begun to rise (well, it did triple already) and I'm thinking it might be a great 1-2 year investment. If you've ever eaten there you'll know what I mean.
I'll start doing more research and see it 1) I have the extra cash and 2) it is the good investment I'm leaning towards.
Anyways, I was reading a Business Week article about Chipotle CMG and it got me thinking...this is like Krispy Kreme in its early stages. Now, I got severely burnt on KKD having bought it at $49 and sold it at $5. However, that was right before the whole Krispy Kreme scandal came out.
Chipotle has just begun to rise (well, it did triple already) and I'm thinking it might be a great 1-2 year investment. If you've ever eaten there you'll know what I mean.
I'll start doing more research and see it 1) I have the extra cash and 2) it is the good investment I'm leaning towards.
Saturday, February 10, 2007
The Tax Man Cometh
I just received my final tax forms from my company, mutual fund holdings, etc. I use TaxCut and have found over the years that it has gotten better and better (at least the interface has gotten prettier). As usual I imported last years return and started filling in all the 1099's and W-2s. One difference this year is that I'm no longer single (got married last summer). Now, I was expecting back around $6,000 based upon the fact that I over paid Social Security due to a job switch in October (basically, you stop paying social security once you hit $94,200. However, if you switch jobs the new company usually considers you starting from zero...won't get it back until tax time). When I finished the last entry I looked up in that little right corner box and saw those devilish red colored numbers saying I owed $654 to the federal government!
I kept going over in my head what could have I done wrong! An extra zero here, a double entry there? The next day I figured it all out by entering both my wife and myself as single. Lo and behold I got back around $5,500 and my wife got back $500. My missing 6 grand.
What happened was since my wife and I earn close to the same salaries our combined income pushed us into the next tax bracket. She was in the 28% bracket and I was in the 33% bracket. Combining us together essentially made all of her income taxed at the 33% level. I always heard about the marriage penalty, and now I had it slap me in the face.
Here is the federal tax schedule:
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
I jokingly said to my wife that she was costing me 6 grand a year...she coyly smiled and said to just wait because she has her eye on a few new designer handbags! Gulp!
I kept going over in my head what could have I done wrong! An extra zero here, a double entry there? The next day I figured it all out by entering both my wife and myself as single. Lo and behold I got back around $5,500 and my wife got back $500. My missing 6 grand.
What happened was since my wife and I earn close to the same salaries our combined income pushed us into the next tax bracket. She was in the 28% bracket and I was in the 33% bracket. Combining us together essentially made all of her income taxed at the 33% level. I always heard about the marriage penalty, and now I had it slap me in the face.
Here is the federal tax schedule:
http://www.irs.gov/formspubs/article/0,,id=150856,00.html
I jokingly said to my wife that she was costing me 6 grand a year...she coyly smiled and said to just wait because she has her eye on a few new designer handbags! Gulp!
Sunday, January 21, 2007
New Investments
A few days ago I got my bonus (and taxes wiped out most of it), so I decided to invest in a few new securities (and added to an old one).
Apple (AAPL)
Russell Micro-Cap (IWC)
TRowe Price International Discovery Fund (PRIDX)
I got Apple at $85.16. It shot all the way to $97, but dropped down to $89. I bought this as a highly speculative investment. I figured that if CNN and Time was concerned about a company releasing a new phone than the stock would certainly get a pop when the announcement happened. I was right, but now have held it longer than I should have. Blame my company's policy of hold all securities for at least 30 days. I'm still trying to decided should I sell or keep it.
I also invested in the Russell Micro-Cap (companies valued under $40 million) as a medium speculative investment...also as a diversification method. The expense ratio (amount they charge you per year) is pretty low and this is a group of stocks I wasn't invested in. We'll see how it goes.
Finally, I put more money into the International Discovery fund. This fund invests in foreign small cap stocks. I've been reading tons of articles about how the time of foreign stocks might be over, but they said the same thing for REITS (real estate investment trusts) 2 years ago! Again, this is an area I'm not too exposed to. What I don't like is the expense ratio: 1.26%. I would invest in Vanguard's Explorer Fund (not run by Vanguard, by the way) with its super low expense ratio, but it is closed to new investors. Too bad. Maybe it'll open back up.
On a side note, I'm currently invested in Vanguards Total International Stock Index fund. Great fund because it is cheap and exposes you to most of the world. However, it is really a fund of funds. Basically, it invests in three other Vanguard funds: Emerging Markets, European, and Pacific Stock Index funds. However, there is an interesting rule. Funds of funds can't take the foreign tax credit (paying foreign taxes are tax deductible). To fix this, Vanguard is launching early this year a International fund based upon the FTSE Index. The new fund will differ from the Total International by directly investing in foreign stocks (can take the foreign tax credit) and will now have 5% invested in Canada. Once it comes out I think I'll move my Total International holdings over.
Here is some more info on the new fund:
http://www.marketwatch.com/news/story/new-vanguard-international-fund-breaks/story.aspx?guid=%7B5AB5474A-3678-48E0-A343-993C62730136%7D
Apple (AAPL)
Russell Micro-Cap (IWC)
TRowe Price International Discovery Fund (PRIDX)
I got Apple at $85.16. It shot all the way to $97, but dropped down to $89. I bought this as a highly speculative investment. I figured that if CNN and Time was concerned about a company releasing a new phone than the stock would certainly get a pop when the announcement happened. I was right, but now have held it longer than I should have. Blame my company's policy of hold all securities for at least 30 days. I'm still trying to decided should I sell or keep it.
I also invested in the Russell Micro-Cap (companies valued under $40 million) as a medium speculative investment...also as a diversification method. The expense ratio (amount they charge you per year) is pretty low and this is a group of stocks I wasn't invested in. We'll see how it goes.
Finally, I put more money into the International Discovery fund. This fund invests in foreign small cap stocks. I've been reading tons of articles about how the time of foreign stocks might be over, but they said the same thing for REITS (real estate investment trusts) 2 years ago! Again, this is an area I'm not too exposed to. What I don't like is the expense ratio: 1.26%. I would invest in Vanguard's Explorer Fund (not run by Vanguard, by the way) with its super low expense ratio, but it is closed to new investors. Too bad. Maybe it'll open back up.
On a side note, I'm currently invested in Vanguards Total International Stock Index fund. Great fund because it is cheap and exposes you to most of the world. However, it is really a fund of funds. Basically, it invests in three other Vanguard funds: Emerging Markets, European, and Pacific Stock Index funds. However, there is an interesting rule. Funds of funds can't take the foreign tax credit (paying foreign taxes are tax deductible). To fix this, Vanguard is launching early this year a International fund based upon the FTSE Index. The new fund will differ from the Total International by directly investing in foreign stocks (can take the foreign tax credit) and will now have 5% invested in Canada. Once it comes out I think I'll move my Total International holdings over.
Here is some more info on the new fund:
http://www.marketwatch.com/news/story/new-vanguard-international-fund-breaks/story.aspx?guid=%7B5AB5474A-3678-48E0-A343-993C62730136%7D
Sunday, January 7, 2007
Roth 401K vs. Regular 401K
Recently I've been thinking about my 401K options at work. I have the option of either investing in a Roth 401K (pay taxes now on the invested amount, but all the gains are tax-free when taken out) or the Regular 401K (tax-free now, but you'll pay the taxes at your tax bracket when the money is dispersed).
As a slight detour, my company doesn't match your contribution, so I did a quick back of the envelope calculation to see if it is worth investing in a 401K at all. Let's say you're in the 35% tax bracket and can invest $20,000 a year into your 401K (I know it is only $15,500 for 2007, but this is just a quick calculation) and are expecting an 8% rate of return. Over the course of 20 years you'll end up with $1,008,458 (a cool million) in your 401K. When you take it out you'll have $655,498 after takes (let's go with 35% even though it might be lower in retirement).
Ok, now what if you forgo the 401K. Each year you'll have $13,000 to invest after taxes (35% of $20,000). After 20 years at 8% per year you'll end up with$655,498. Assuming you're investing in stocks and the 15% capital gains tax is still around, you'll end up with $598,173.
So over 20 years you make $57,000 more by using the taxed deferred nature of the 401K. Not bad!
Going back to the discussion at hand, is the Roth 401K better? Since a company can only match into the Regular 401K, you should certainly contribute to the regular 401K to get that matching. Free money and all.
I read an interesting article about the entire subject: http://scolaro.com/McGoughMemo2006.pdf
He makes some very interesting points, especially about the possibility that the laws might change as they did for Social Security. Based upon his calculations it is better to invest in the Roth 401K (if you're in the higher tax bracket)...his final point being it is risky since who knows what the government will do.
Right now I'm still only investing in the regular 401K, but I'm seriously thinking about switching over to the Roth 401K.
P.S. The fund choices I have at my company are incredible. You have the standard index funds (all low cost) plus some interesting alternative investments: 4 hedge funds, 5 international funds (Emerging Markets, Global), 1 REIT Fund, and 1 Global Bond Fund.
As a slight detour, my company doesn't match your contribution, so I did a quick back of the envelope calculation to see if it is worth investing in a 401K at all. Let's say you're in the 35% tax bracket and can invest $20,000 a year into your 401K (I know it is only $15,500 for 2007, but this is just a quick calculation) and are expecting an 8% rate of return. Over the course of 20 years you'll end up with $1,008,458 (a cool million) in your 401K. When you take it out you'll have $655,498 after takes (let's go with 35% even though it might be lower in retirement).
Ok, now what if you forgo the 401K. Each year you'll have $13,000 to invest after taxes (35% of $20,000). After 20 years at 8% per year you'll end up with$655,498. Assuming you're investing in stocks and the 15% capital gains tax is still around, you'll end up with $598,173.
So over 20 years you make $57,000 more by using the taxed deferred nature of the 401K. Not bad!
Going back to the discussion at hand, is the Roth 401K better? Since a company can only match into the Regular 401K, you should certainly contribute to the regular 401K to get that matching. Free money and all.
I read an interesting article about the entire subject: http://scolaro.com/McGoughMemo2006.pdf
He makes some very interesting points, especially about the possibility that the laws might change as they did for Social Security. Based upon his calculations it is better to invest in the Roth 401K (if you're in the higher tax bracket)...his final point being it is risky since who knows what the government will do.
Right now I'm still only investing in the regular 401K, but I'm seriously thinking about switching over to the Roth 401K.
P.S. The fund choices I have at my company are incredible. You have the standard index funds (all low cost) plus some interesting alternative investments: 4 hedge funds, 5 international funds (Emerging Markets, Global), 1 REIT Fund, and 1 Global Bond Fund.
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