Investment Playground.NET

After my son was born three weeks ago - a thought occurred to me. Life is only now beginning. And I’m referring to the financial definition of “life”. Sure I’ve had tons of expenses up to today, but now is when money all of a sudden seems to disappear. I’ve had student loans, car loans, rent, and whatever else - but tack on college fund ($100 p month), diapers ($125 p month), doctor visits ($20 copay once p month), and once they get older - swim lessons (ridiculous amount per hour), tennis lessons (don’t get me started), and so on and so forth. So - all my hard earned money is only now getting thrown out the window.

Saving for investment takes the priority over any expense you can have. I made a decision within a few days after my son was born - a decision that was long overdue. I have to stop saving massive amounts, and start investing those funds. The reason is because returns grow exponentially over time. Every day you do not invest is a day you lose on huge compounded returns.

I bought stock into the T. Rowe Price Africa and Middle East Fund. It’s an emerging market fund, so risks are a little high, but nonetheless I’ve done my analysis and I’m comfortable with management and my money. I’m thrilled that I am finally securing some returns. My first real major investments were trading stocks. I’ve made several hundred dollars per year - but nothing crazy. Shortly thereafter, I bought an investment property. $182,000 with a value I estimated to be about $200k. And now, I’m continuing my stock investments and beginning my fund investments.

By making a few good stock picks, you may be raking in a few hundred dollars once in a while. Fast money, high stakes, great trades. We all know the game. But are you really building wealth? No - you’re not. A couple fast trades off of quick stock drops might buy you a few extra toys, but not wealth. I trade stocks because I enjoy it and because I love valuation analysis (label DORK here). I’m buying mutual funds to build wealth. Here are the numbers.

Saving a palsy $50 today will become $373 in twenty years by earning 10% (basically throwing it into an index fund and forgetting about it). And imagine with $5000… $37,254. That’s a one time expense for you and a 645% return (try that in stock-picking). Funds generally require about $2500 minimum. This may be a lot for some people, which is why I love T. Rowe Price’s Automatic Asset Builder plan. Minimum $50 per month, and you just keep growing your assets slow and steadily. I haven’t found anyone else that waives the $2500 minimum. But eventually you’ll get your $2500 and start to look at Vanguard, Fidelity, and American Funds. If you invest $100 per month into a fund earning 10%, you’ll have accrued $21k in ten years, only $12k of that is actually what you put in. And if you’re a bit younger and looking for higher risk higher reward (i.e. global stocks and emerging markets), a 20% return earns you $39k. $40,000 just for putting away $100 per month. At that point even if you stop putting money in and just let your returns build up more and more - you’ll have a million dollars by retirement. A million LIQUID dollars just for focusing on $100 per month for ten years in a good stable fund. Of course, all investments carry risk - but the longer your outlook - the better advantaged you are as your risk lessens.

Regardless of how much you have - start plowing it into some finely selected funds right away. If you’re a recent college grad - how much I want to just grab you by the shoulders and scream at you - DO THIS. It’s hard to think about the future when it’s more fun to think about today - but a little careful planning now could set you on the path to financial freedom tomorrow.

Building a personal net worth statement is fundamentally important - regardless of if you’re a high swinging investor or a passive-fund-kinda-guy. It’s easy for us to look at our bank statements every month, agree that they look right, and then move on. Investments take time - and the only way to truly track your investments is to closely monitor them over a long period of time. Corporations are constantly assessing and reassessing their balance sheets (assets and liabilities) as part of their overall long term strategies. Individuals should treat their own homes and wallets as mini corporations, with just as much rigor and analysis.

You should be using Excel to create your net worth statement for ease of calculations and ratio analysis. Feel free to email me and I’ll send you a template. What we’re going to do next is list out all our money, and then all our things that are worth money, and then all our loans.

1. Start with a section called Liquid Assets or Short-Term Assets. Under here – start a subgroup called Cash Accounts or something similar. List out all your cash bank accounts - checking, savings, emergency fund. Remember to include your spouse’s accounts - generally you want to calculate your family’s net worth.
2. Next, also under Liquid Assets, you’ll want a subgroup called Possessions or something similar. Here, you’ll want to list out what you own. A word of caution - don’t waste the time trying to inventory your entire house - its not the focal point of your net worth statement. What possessions do you own, other than vehicles and homes, that carry value? In my statement - I have only two lines here - Jewelry and Furniture. The latter is really negotiable. But my wife’s jewelry collection does indeed carry value. And its important to count this as part of your own worth. Forget about clothes and toys and books - when it comes down to selling them they carry very little value. Enter the total value as of TODAY - not the purchase price. Basically - if you had to sell everything you had in a jam - how much could you get for it?
3.  And now you’ll want to itemize your liquid investments. This means investments that you can sell right away. Not everyone creates an investments section on their net worth statement. Seeing as how I and my readers probably do so or at least plan to do so, this section carries the added benefit of being able to track investment portfolio performance. Itemize each single investment of yours - HPQ Stock value, TRAMX Fund value, etc. Enter the value as of today.
4. You’re now complete with your Liquid Assets section. So start a header called Illiquid or Hard Assets. Again - I separate this based on hard assets and illiquid investments. Hard assets refer to your vehicles, homes, and boats, and don’t forget to include all the hotels you own and the private island by Mauritius. (Disclosure: I’m lying). And your illiquid investments are basically your 401k and IRA accounts, or anything tied up for a long time.
5. Now you’re ready to total them all up. Get creative - what do you really want to know about your assets? I added five new lines here:

   TOTAL LIQUID ASSETS

   TOTAL ILLIQUID ASSETS

   TOTAL ASSETS ex home

   TOTAL ASSETS

   Total Investments

   The first line tells me what I’ll have if I need to liquidate in a hurry. The second tells me how smart my investments are. You don’t need to use my template - but definitely try and add value the best way you can.

6. Now you can create your LIABILITIES section. I won’t expound as much as I did in the Assets, but list out your Short Term Liabilities, which essentially are all your credit cards (hopefully few), followed by your Long Term Liabilities (home, car, and student loans).
7. Your total net worth equals your total assets minus total liabilities.

There’s no point to working at all if you can’t increase your net worth. We work too hard and spend too much time if all we’re going to do is somehow magically spend it. For every dollar that you earn and can avoid spending, it should contribute to growing your net worth. Perhaps in a high interest account, or perhaps in a winning investment. I urge everyone to have a personal net worth statement - without having one mapped out on a quarterly or monthly basis - money seems to just slip through our fingers.

Want to get started? Email me for a template!

Let me tell you why I started this blog to begin with…

I am a scatterbrain. I’m a creative scatterbrain. I have the world’s greatest ideas and a ton of motivation. I started to invest in the market at the age of 11 (nothing to brag about because I lost everything an 11 year old had at the time). As a child and eventual teenager - I opened businesses and made part time money on the side. I loved eBay when it came out. But the problem is that my interest in eBay faded, as did the interest in my lemonade stands.

The only way to make your investments succeed is by following through on them. The only way that any plan in life will succeed is by perseverance and determination until one of two things happen - success or failure.

So I began to notice my areas for improvement. I find great stocks to invest in - and I don’t follow through on my research (leading to poor choices). I have many great entrepreneurial ideas. But usually one great thought is replaced by another great thought. Therefore - nothing surfaces. Nothing amounts to success. Then I discovered blogging.

Essentially - my blog serves three purposes. 1) As a list. I list and will continue to list my investment ideas. Keeping track of them in my head isn’t easy. 2) As an attack plan. I’ll monitor my progress by writing about it. 3) As a teaching tool. My enthusiasm isn’t some selfish act where all I want to do is make money. I do this because it’s fun. And I like teaching others as well - because it’s fun to me.

So as of today - this blog will take on a new approach. I will go back to the basics - and use this blog as a tool for my investments and entrepreneurial ventures. I know I’ll succeed if I follow a detailed and organized methodology of investing. The only thing I don’t necessarily know is when.

Join me on my path of solving scatterbrainness - and let’s make millions doing it. My name is Ali - and I’m an investor.

Although this site is indeed about investing - I’d like to take a minute and explain my absence as well as save you some money.

AVOID GODADDY AT ALL COSTS

Awful. They’ve used the old “sex sells” technique to sell domain registration and website hosting, among other service options. Their domain management is okay - however don’t count on them for anything else.

1. I’ve tried to give my readers - you - a nice new interface and build my blog up over years to come. So having flexibility of website design makes sense - therefore you must have your own hosting account. But at the cost of not being able to post anything new in three weeks - not worth it!
2. GoDaddy’s 24/7 customer support is a bunch of arrogant college kids who don’t do much “support” at all.
3. My site - http://www.investmentplayground.net - has been down the MAJORITY of the last 3 weeks.
4. I estimate I’ve made probably about 12 service calls in three weeks (just about every other day) - each one lasting between 30 and 90 minutes. I’ve never been on the phone with them less than thirty minutes. Which totals an average of 12 hours lost. I could’ve spent that time writing for you all instead!
5. Their support representatives give contrasting information. Half of my time is spent undoing what the last guy told me to do.
6. They are very quick to point out third party software and that they don’t want to speak to me afterwards. I called asking, “How do I upload files to my site so the wordpress software will work?” The response - “Sorry we don’t provide support for that.” “But how do I upload?” “Well I can’t tell you that because you’re using Wordpress software.” “But you told me to download Wordpress software yesterday!” “Yes that’s fine for you to use Wordpress software but we can’t help you with it.” “So how do I upload files??” “You’ll have to find it on the Internet.” “Can I talk to a supervisor?” — and so on. Wait time isn’t pleasant either.

The solution - I’m going to do what it is I love doing - WRITE. I will continue to use wordpress and http://www.investmentplayground.net to teach the world about making investing fun. If within a reasonable amount of time there’s enough demand to commercialize - then we’ll cross that bridge once we get there. I’m not in this for money - I just want to invest and teach you how to do the same. It really saddens me when you see some new blogspot blog pop up with one post in it and fifteen ads! Come on people - making money is hard work - as is blogging.

But we’re back - and investing just got easier.