Money Talk #3 – Investing

The woman’s Money Talk group met in Joshua Tree last weekend and everybody was present. We feasted on smoked salmon, lentil soup, still-warm cornbread, homemade almond cookies, and fresh apples.

Previous to the meeting, it had been decided to read another financial book – one that had been written up in the LA Times. It is called The Little Book of Commonsense Investing. The book is written by a man named Jon C. Bogle, who for his age (he attended Princeton in 1948) is surprisingly with it. He is the founder of Vanguard Group and the granddaddy of the index fund. This book is a great combo of newness (published 2007) and oldness (he’s inspired by Thomas Paine).

And Mr. Bogle, like Mr. Paine, believes that if he “could only explain things to enough people, carefully enough, thoroughly enough, thoughtfully enough – why, eventually everyone would see, and then everything would be fixed.” This book is Mr. Bogle’s attempt at a world-saving explanation and he doesn’t do a half bad job. He encapsulates his own philosophy rather well. And while some might shout, “Isn’t there a conflict of interests? He just wants us to buy HIS stuff,” Mr Bogle points out that he is simply sharing the philosophy he used to build his own empire – a philosophy that has marked him as one of Time magazine’s Top 100 most powerful and influential people in the world and one of Fortune magazine’s four “Investment Giants” of the twentieth century. So yeah, he has some street creds.

The basic premise is this: over the last century the stock market has grown 9%. If you just buy stocks based on S & P 500 (an index), you will always do as well as the market. This is a conservative and safe philosophy. Mr Bogle says not to waste money on middlemen or to buy mutual funds. As far as he’s concerned, anybody who juggles stocks all the time is losing money most of the time, and the only people who are making out are the people in the middle getting commissions on every exchange.

In eight words: Buy index funds and then leave them alone.

That’s what he says anyway.

And since a couple women has already started reading the book – that’s what we started to talk about. I swear, we six women are like the five blind men feeling the elephant. In order for all this investing business to make sense, we each have to bring our own fragmentary conceptions to the table and figure it out the whole picture as a group. It’s working so far.

Next month’s meeting will be on investing again. That time, everybody will bring information about one potentially interesting index fund to invest in.

So far, we understand mutual funds to be a bunch of stock in all different companies (often grouped by theme: blue chip, technology, socially-conscious); the fund manager chooses which stocks to hold, when to sell, and when to buy. Mr. Bogle says that fund managers rarely come out ahead, and even when you do you hardly see any gain, because percentages have been paid out in comission.

Index funds are a group of stocks, simply picked to reflect the S & P 500 (500 of the most influential group of funds – the ones that “represent” the whole of the stock market).

After we clarified those definitions for the group, we went on to debrief every woman individually. Most of us has a good money story to relate. (Women are not numbered in the same order as in previous meeting notes.)

Woman #1 – shared that her father, who is reasonably wealthy, assured his adult kids that his estate was in good condition to pass on. However, when Woman #1 inquired a little more deeply it was discovered that there was no living trust, and that everything was in a will – which meant that there would be large probate fees on the inherited properties. Even though Woman #1 had the reputation of not knowing anything about money in her family, her father agreed to go and double check with his accountant. It was discovered that there were serious issues with the will and everything was speedily rectified. Good job to Woman #1 for not keeping her mouth shut.

Woman # 2 – reported that she had been researching retirement more deeply. She was pleased to discover that if she worked one more year that she could retire for $2,000/month, which has long been her retirement goal. On the other hand if she sticks it out another five years, she could retire for $3,600/month. So now Woman #2 can rest easy knowing that she is within the parameters of her retirement funds. And it’s a balancing act to know how much your LIFE TIME is worth. We all agreed in the group that we were saddened by people we had seen who worked and worked and worked to get that little extra retirement, only to retire and die shortly afterwards. We were all in agreement that it was important to retire while still in good health.

Woman #3 – is in a similar position, but intends to work for the next five years. She continues to put aside $2000/month and intends to have another $100,000 saved up ibefore she retires. She is happy in her present job.

Woman #4 -  is living on her husband’s income and so had very little to report by way of savings and investments, except that they are working on living within their means and not touching the savings. She is working on inputting all household financial information into one Quicken account so that she and her husband can determine their total net worth, like Jane Dough does on a monthly basis over at Boston Gal’s Open Wallet.

Woman #5 – spoke mostly about her health insurance because a bout of serious illness has prevented her from working regularly. She has HMO and all of her treatments have been well-covered, including her monthly meds. As a group we discussed how important it was to have at least catastrophic health care. It was mentioned that Blue Shield might have a catastrophic plan for a reasonable monthly price.

Woman #6 -  celebrated paying off her husband and owning her house outright. Being able to own a home with no debt is one of the advantages of living way out in the desert boondocks. Also, Woman #6 has investigated living wills. A paralegal named Pat Smith in Yucca Valley will do her living trust for a flat fee of $575. (Call to get an individual quote.) She also reported that a grant that she had written came through!

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