While visiting Clark Howard’s website to find out where I could recycle my computer, I saw an alert saying to hurry and buy Series I Savings Bonds and earn 6% interest. Since my PayPal and ING accounts are earning less than 3%, that sounded pretty good. Of course, there’s a catch. The big catch is that 6% is only available if you buy bonds before the end of the month, which is just a few days away. The second is the 6% rate won’t last forever and in fact it won’t even start until November. The last is that if the rate then goes down and you want to sell your bond before its 5 year maturity, then you forfeit 3 months of interest.
Category: Finance
Roth IRA
In January I decided to put my 2007 Roth IRA contribution in Vanguard’s total international fund. The total fund includes some exposure to emerging markets which was a very good thing since Vanguard’s emerging markets fund was up 40% compared to 11% for developed markets. This lifted the total fund up to 14% for the year.
The growth half of the S&P 500 index fund did very well with a 15% return, vs. 7.5% for the 500 index (my small cap value index fund actually lost about 4%). Whereas last year my do-good FTSE Social Index fund had outperformed the growth index, this year it got walloped and FTSE actually lost a little bit of money (-0.5%). So I will lose my social conscience and put that money elsewhere. I didn’t mind when there was a little bit of a spread between the two, but 15.5% is just too much.
Roth Direction
Last year I was debating about whether to put my 2006 Roth IRA contribution into one of three Vanguard funds: Total International Stock Market Index (VGTSX), S&P 500 Growth Index (VIGRX), or the FTSE Social Index (VFTSX). I ruled out the international fund because 2005 had been such a good year and I didn’t think it could hold up. That led me to the latter two and I chose FTSE because it was pretty close to the S&P 500 index, but also had a social conscience. As it turns out FTSE outperformed the growth index, getting an 13% gain vs. 9% for the growth index while the S&P 500 was just under 16%. But the international index blew them all away, with a 26% return in 2006. Meanwhile the small cap value index that I had contributed to the previous two years did pretty well again with a 19% return.
FTSE4good
It’s the beginning of the year so I used this past weekend to figure out how my investments did last year and decide where to put my 2006 installment of my Roth IRA. As you will recall, last December and January I had put the 2004 and 2005 contributions into Vanguard’s Small Cap Value Index. Small Cap stocks had a pretty good run prior to that time and this past year continued to (barely) outpace the Dow and S&P 500 (though medium sized companies did better than all of them in 2005). So I was going to leave that money where it was, but thought it was time to diversify the new contribution into something else.
T
I’ve always thought it was neat that some of the biggest companies in the world were so old, so powerful, and so well respected that their stock symbol was a single letter. AT&T was one of those: T. Ford is another: F. Citicorp is C. Not all big companies are one letter, for instance, General Motors is GM. And anything on the NASDAQ has to have 4 letters regardless, like MSFT, GOOG, and YHOO. (I found one place that said “M” and “I” on the New York Stock Exchange were being reserved if Microsoft or Intel ever decided to leave the NASDAQ). Other tickers are kind of interesting too: 3M is MMM, Southwest Airlines is LUV after its home base, Dallas’ Love Field.
Anyway, in August 2003 I bought some stock in SBC which had formerly been known as Southwestern Bell, (one of the “baby bells” born when AT&T was broken up). The whole reason I bought it was that no one was providing a decent interest rate at the time, but SBC was offering a 5% dividend every year. Power companies pay pretty good dividends too, but I decided against Southern Company. Things have gotten better lately with interest rates. Paypal is paying 3.9% and ING is paying 3.5%. CD’s are over 4%. But at the time nothing could come close to that, plus SBC was even going up in price, so I bought more later that year. The price has stayed about the same since then, but it does keep cranking out a nice quarterly dividend.
Well, SBC just bought its former parent, AT&T, today. Because so many people haven’t heard of SBC, they are going to keep the name AT&T for the whole company. All of the stock traded under T will become shares of SBC, I guess on Monday. But on December 1 this year, my shares will change their symbol to “T”. For Ted, of course.