This post is in honor of my partner’s 5th Annual Blogging for LGBT Families.

In many ways my family is as traditional as Ward and June Cleaver’s.

I go to work early in the morning.  My spouse gets our six-year old son up for the day.  She walks him to school in morning and home again, in the afternoon.  I usually arrive back by dinnertime when we all catch up on the events of the day.

The difference, of course, is that our little “Beaver” Theodore has two Moms.

“Breadwinner” perhaps, but less dough

I’m the only woman in my office, and likely in my company, who has the “breadwinner” role.  To start with, my employer has very few women employees.  (“Too hard to find female physicists,” they say.  I say, “try here.”)  My female colleagues who are married with children, also typically carry the primary childcare responsibilities, too.  Even among my male colleagues who are married with children, most have working spouses, and the men have at least some nominal amount of childcare responsibilities.  Therefore when there is a long business trip needed in my office it often falls to myself or one of my childless (childfree?) colleagues.

You might think that these extra opportunities might add up to additional visibility in the grand scheme of one’s career, but I’m not yet living that dream.  Maybe there’s some payoff way down the road, but in the meantime, I end up being the person in the office who spends the most time away from his/her child — not a title I aspire to.

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Tags: blogging for LGBT families day

Yesterday, I received the following note:

Hi Helen –

My name is Lynne Ward and I’m the Executive Director of the Utah Educational Savings Plan (UESP). Your blog was discovered by one of our staff members and of course, we’re all very happy that you chose UESP over any other 529 plan. I am very impressed by the level of analysis you did in making your decision. Our account owners’ due diligence ranges from the man who read Money magazine’s recommendation of UESP while he was laying on a beach in Hawaii  - –  to you, who actually read the Program Description!

Your category of the Program Documentation may be “geeky” as you say, but we try very hard to ensure that it is clear and complete. It is gratifying to know that our hard work results in a better educated investor and new college savers.

Welcome to UESP and if you ever want to communicate with me directly, please e-mail or call me.

Thanks so much,

Lynne

Lynne Ward

Needless to say, I’m terribly impressed by anyone who takes the time to contact a little blog like mine.

Before becoming director of UESP in 2004, Ms. Ward was the Deputy Chief of Staff to the Governor of Utah.  Under her leadership, UESP net assets have increased from $0.8 B to $3.3 B — not bad for a state with a population of 2.7 M.  Put another way, New York, with a population of 19.5 M, has $8.4 B in its investor-directed 529 fund, or about $430/person.  California has a measly $3.3 B/36.9 M residents or $89/person.  In contrast, Utah has $1,222 per capita in its 529.  Of course, some of that dinero comes from out-of-state investors (like me), but it is indicative of a well-run fund.

With regard to the Program Documentation, I’ll say it again:  UESP has the easiest to read program description.  I wish the Federal Government would require a standardized description for 529 investments and fees, much like the disclosure mandated for all credit card applications.  They could do worse than adopt Utah’s documentation as the standard.

I’ll also give some extra bonus points to the UESP web interface.  The process of creating an account with automatic monthly contributions was completely smooth.

Thank you, Ms. Ward — both for your letter and for running such an investor-friendly 529 program.

More importantly, thank you on behalf of my six-year old son who today discovered the world of Tintin.  Whatever he wants to study when he reaches 18, I’ll be ready to open that door (I hope).

Image Credit: debaird at Flickr.

Tags: 529 funds, 529 plan, investing for college, UESP, utah

Business Week has a concise review of which bond funds are exposed to Greek bonds.  You might check to see if yours is listed.  Legg-Mason is apparently doubling-down by both buying Greek debt and shorting the Euro.

Greece’s debt is 113% of its GDP, making it the 8th most indebted nation on earth. The top ten countries are:  Zimbabwe, Japan, Saint Kitts and Nevis, Lebanon, Jamaica, Singapore, Italy, Greece, Sudan, Belgium and Iceland.  Portugal is #19 at 75% and Spain is #45 at 50%.  The USA comes in at #42 at 53%.

Japan is a surprising #2.  Its debt is almost 200% of GDP.  Perhaps it is no surprise, in light of what is happening on the other side of the world, that the IMF is calling for Japan to reduce its debt.  Japan will soon be reeling from the combined impact of more retirees, lower tax revenues, and decades of stimulus spending.

Will sovereign debt crises be the dominant economic story for the next decade?  They say the teenage years are the most difficult.

Image credit: noticelj on Flickr.

Carnivals: This post was included in this week’s Carnival of Personal Finance hosted at A Gai Shan Life.

Tags: bond funds, Greek bonds, Greek debt crisis, soverign debt

I am a firm believer in mutual funds and the power of diversification, but every now and then I find it useful to question my assumptions.  I wrote recently about “creating your own personal mutual fund,” questioning whether the decline in trading costs might motivate more investors to trade in large numbers of individual stocks, instead of mutual funds.

If I was to buy an individual stock, what would I buy?  There is a lot of chatter these days, that there is no more alpha in the market — that stock prices reflect the true value of the stock — that there aren’t any hidden nuggets out there.  While I’m not entirely sure I buy that premise, I do believe that the smaller the company, the fewer eyes are watching it.

Market Cap: Companies with less than about $1.5B in market capitalization tend to have zero to four analysts tracking them.  Companies that are too small can have liquidity issues and are more volatile.  So I chose companies with a market capitalization between $0.5 – $1.5B.

Steady Growth: I wanted to see some steady revenue growth, >3% for the last three years.

Price/Book: Normally, I would search on Price/Earnings, but the recent market turmoil, I thought Price/Book would be a better metric, so I searched for P/B < 3.

I entered the search in Morningstar and found about 150 stocks that met the criteria.  What surprised me was the number of stocks that are trading for less than book value.  Here is the list of stocks with P/B <1.

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Tags: BRS, IBA, LEAP, POR, PZE, small cap stocks, SPWRB

Susan asked:

“How does the Utah 529 plan compare to the Ohio CollegeAdvantage 529? I’m having a hard time choosing between the 2″

This is such a good question, I thought the answer deserved its own post.  So here it is.

Overall ratings: Both plans are rated well by both Morningstar and Saving for College.

Program Management Structure: Utah and Ohio are different than most 529 plans in that the programs are managed by state organizations, the Utah Educational Savings Plan Trust and the Ohio Tuition Trust Authority, respectively.  Most other states hire a financial company to do the administration.  By keeping control over the program, these states keep a tighter grip on the investment reins.

Program Management Fees: Both states offer 529 plans with low management fees.  Ohio charges 0.17-0.19% for an administration fee, in addition to the underlying expenses of the investment, which vary from 0.05 – 0.89%.  Utah’s program charges 0.22% for most of its investment options, on top of the underlying expenses of 0.025 – 0.132% .  The fees for the underlying funds are lower for Utah because it sticks to Vanguard funds; Ohio offers investments through a wider range of companies, so its top end expenses reach a bit higher, but there are plenty of good low-expense options within the Ohio Plan.

Investment Options: Both programs offer plenty of investment options.  Ohio offers 23 investment options, including four age-based options.  Utah offers 12, of which five are age-based.  Both of them offer equity- and bond-based investments.  You will likely find an appealing option in either program.

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Tags: 529 funds, asset allocation, investing for college, ohio, saving for college, utah

One of the best reasons to buy a mutual fund, instead of individual stocks, is that a mutual fund spreads the risk over many companies.  Individual stocks are relatively volatile, but holding many stocks averages out the daily noise, and as the group gets larger it tends to track the overall market.

How many stocks does a mutual fund hold? The smallest number of holdings are in focus funds that carry 20 to, perhaps, 50 positions.  These funds aspire to find real winners and don’t want to be held back by losers.   (Of course, it doesn’t always work out that way.)  Many mutual funds hold a hundred or more investments.  Funds that mimic broad indexes such as the S&P 500 hold (surprise!) 500 positions, and in the extreme, funds mimicking the Wilshire 5000 — the broadest measure of the American market — hold positions in 5000 stocks.

How many stocks are needed to diversify? Putting your retirement nestegg in one stock is risky.  (Just ask former employees of Lucent or Enron.)  Spreading out to two is better, five, ten, fifty holdings reduces risk further.  You start covering broader sectors of the economy: durables, consumer goods, technology, financials, and so forth.  But surely at some point, adding one more stock doesn’t significantly reduce your risk.  What is that magic number?

Morningstar’s on-line training states that the magic number is eighteen.   Surz and Price calculate that it takes sixty stocks to reduce the non-systematic variance (a measure of risk) by 88%.  So the real number is probably somewhere between 20 and 100.

What do you mean by “a personal mutual fund” and what would be the advantage? Well, technically “personal mutual fund” is a bit of an oxymoron, because a mutual fund, by definition, is a fund owned mutually by a group of people.  But, what I meant to suggest is that you could own a large number of stocks directly, instead of through a mutual fund.  I can think of a few advantages to the DIY approach:

• You don’t have to pay the fund’s expense ratio, which can range from 0.09% for the least expensive index fund to more than 1.5% for many managed mutual funds.  If you have $100,000 invested, expense ratios take $90-1,500 out of your pocket — each year.  Multiply by ten years or more, and that’ll pay for a lot of margaritas on your retirement beach.
• You can control how the capital gains are realized.  Mutual funds are required to distribute capital gains each year, which can lead to a nasty taxable surprise each December.
• You can take advantage of the larger tax deductions for charitable donations of appreciated stocks.  Since mutual funds distribute capital gains annually, your basis continues to rise.  When you donate shares of a mutual fund your basis is almost equal to the book value.  If you instead donate a stock that has appreciated 10x (lucky you), you can deduct the full 10x value, and never have to pay tax on the 9x gain.

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Tags: diversification, Fidelity, low cost stock transactions, mutual funds, Schwab, Vanguard

Last month, my shredder gave up the ghost.  I made the mistake of trying to shred two credit cards — not at the same time, just consecutively.  That was enough to make it seize, never to shred again.

I’m generally very easy on machinery.  I respect their limitations.  And I’m basically cheap and try not to break stuff.

If a shredder is rated for eight pages, I tend to shove no more than three at a time.  Even at three pages, the shredder motor’s hum lowers into a growl, expressing its discontent at being force-fed.

The pile of shreddables was begining to tower at my desk, so I knew I had to break down and buy a replacement.  Staples advertised a $35 eight-page shredder($15 off regular price of $50). I saw similar items online at Amazon for $5 dollars less, but I wanted to inspect the unit before buying to make sure it looked sturdy enough.

I stopped by a Staples on my way home from work.  The shredder looked relatively durable, so I bought it.  At home, it macerated the pile in no time.  It seems to be fine for the average household.

Next time, I’ll leave the credit cards to the scissors (or maybe blowtorch… hmmm).

Full disclosure: No position in any company mentioned.  I am a member of the Amazon Associates program and get a small referral fee from all purchases made at Amazon.com via links on this site.  You are under no obligation to purchase through them.  I did not receive any compensation for reviewing this product.

Tags: recommended shredder for home, shredder, Staples eight page shredder, what's the best shredder?

What do you wish for your child?  To grow up healthy, certainly.  Smart, hopefully.  Funny, kind, thoughtful, strong, brave, clean, and reverant — fantastic.  But we also want our children to be smart with their money.  To not be the next victim of a Madoff.  Or a mortgage scam.  Or a get-rich-quick scheme from a Nigerian email.

We want them to be independent and strong.  Professionally.  Emotionally.  Financially.

Where do they learn how to handle money?  Schools teach arithmetic.  Some teach accounting.  But where do you learn the importance of delayed gratification?  The value of saving today so that you have some tomorrow?  That money is a means but not an end?

In his latest book, Piggybanking — Preparing Your Financial Life for Kids and Your Kids for a Financial Life, Jeff Opdyke guides parents — and prospective parents — through the financial decisions you’ll make at each stage of raising children.

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Tags: financial literacy, Piggybanking, teaching children charity, teaching children financial responsibility

I’ve recently written a few posts about investing in 529 accounts.  The main conclusions so far are:

• 529 funds charge a program management fee in addition to the underlying investment expenses,
• the higher fees offset, and in some cases can negate, the savings from reduced taxes,
• the programs for states that offer tax-deductions for contributions tend to charge a higher program management fee, and
• comparing investment options is difficult because 529 funds are not publicly traded and there is not a standard reporting format or annual date for the fund’s performance calculation.

Managed funds tend to have a higher expense ratio than index funds.  Unless I can convince myself that a managed fund is worth the additional expense, index funds are a safer bet.

I’ve looked for, but not found a good managed 529 fund.  There may be one out there — if you know of one, please drop me a line.  Therefore, I’m left to choose from index funds.  This narrows down the choice, practically speaking,  to Fidelity or Vanguard, and through which state’s program?

Vanguard. Vanguard has terrific index funds with low expense ratios.  Almost half the states’ 529 programs offer Vanguard funds, but each state charges different program management fees.  We’ll look at a couple of options.

Vanguard direct. The Vanguard website directs you to the Vanguard funds as offered through the State of Nevada program.  If you purchase shares of Vanguard’s S&P 500 Index fund through the Nevada program, you will pay an expense ratio of 0.05% plus a program management fee of 0.39%.  According to a footnote at the bottom of the page, “Vanguard and Upromise have agreed to a specific formula for the allocation of the Program management fee.”  Upromise is a division of the SLM Corporation (“Sallie Mae”), which is better known for offering student loans.

Vanguard funds through Utah. The Utah program offers the same Vanguard funds but charges about half the program management fee, 0.22% vs. Nevada’s 0.39%.

Vanguard funds through Ohio. Ohio offers a similar set of Vanguard funds for a program management fee of 0.19% — about the same as Utah.

Vanguard funds through Pennsylvania. Just for fun, let’s look at one bad option.  Pennsylvania charges you 0.70% for the same Vanguard funds.

It may sound petty to whine about a 1/2 percent here or there, but over time it can really add up.   The table below shows the value of a $10,000 investment in a 529 plan for a newborn child using each of the states’ plans listed above by the time the child leaves for college, assuming a 6% annual return on investment.  You can see that Oscar from Ohio will have 9% more money than Penny from Pennsylvania, if Penny and Oscar each invest in their homestate’s plan.

Fidelity. Fidelity also has perfectly good index funds, charging low expense ratios.  At the Fidelity Website, Fidelity directs you to choose from one of its five state programs: Arizona, California, Massachusetts , Delaware, or New Hampshire.  All the Fidelity programs offer essentially the same investment options for the same program management fee of 0.15%.  The table below shows that an investment made through one of the Fidelity programs is equivalent to an investment made with Vanguard through either Utah or Ohio.

Summary: For low cost 529 index investing, good options include:

• Vanguard through Utah or Ohio, or
• Fidelity through Arizona, California, Massachusetts, Delaware or New Hampshire.

Disclaimer: The above analysis does not constitute an endorsement of Vanguard or Fidelity Funds, or their parent companies.  Read the program literature thoroughly before investing.  Investing in mutual funds involves risk and you can lose principal.

Disclosure: No investment in any company.

Image Credit: Nick Garrod at Flickr.

Carnivals: This post was included at this week’s Carnival of Personal Finance hosted at the Well-Heeled Blog.

Tags: 529 funds, Fidelity 529 funds, Vanguard 529 funds

Ironman over at Political Calculations just turned a post of mine into one of his famous calculators.

My post, The True Cost of a Thirty Year Mortgage, compared the cost and advantages of a fifteen-year term mortgage vs. taking out a thirty-year mortgage and paying it off in fifteen.

Ironman’s calculator makes it easier for you to run your own numbers and see whether this option makes sense for you.

He’s written a bunch of other great calculators, including:

• Estimating the Natural Rate of Unemployment
• Converting Amazon Ranks to Book Sales
• Should you quit your job?
• Is Your Personal Grooming Adequate?

Check out his collection of on-line tools.  You’ll surely find something of interest.

Image Credit: TMView on Flickr

Tags: 15-year vs. 30-year mortgage, financial tools on the web, mortgage