Category: Finance

In April of 1992, as a still fairly new employee at the DOT, I started contributing to the state version of a 401k: a deferred compensation plan. I started pretty small and put my money in Fidelity Magellan. This was my first exposure to investing in the stock market. I have been contributing ever since, slow and steady. By January of 2000 I calculated that my savings had doubled in value and I had more in gains than I had invested. But by September 2002 that gain had been completely wiped out and my savings were worth *less* than what I had put into the account.

The amount of my contributions varied over time so it was hard to calculate an average rate of return to see how I was doing. I finally figured out a way by guessing an interest rate and applying that to every quarterly balance in my spreadsheet. If the total of all those quarters of interest and my contributions adds up to what I actually have in the account, then that’s my number, otherwise I just guess higher or lower until I zero in.

My original estimate when calculating the hundreds of thousands I would have saved up by retirement was 7% which reflects the historic stock market return of 10% minus 3% for the historic inflation rate. I have been investing now for 13 lucky years. And I finally have the answer for the average annual rate of return during that entire period: 1.75%.

This past week I opened a Roth IRA with Vanguard. One thing that bothers me about my current deferred compensation plan at work is that when I start withdrawing the money I will have to pay taxes on it at the full rate (currently 25%) whereas if the money were not in a retirement account and I used after-tax money the gains, at least, would only be taxed at 15% for long-term capital gains. The Roth allows you to pay *no* taxes on the gains.

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Today I bought my first Exchange Traded Fund (ETF). These are like mutual funds which invest in a bunch of different companies, but ETF’s are sold on the market like a stock with their prices changing throughout the day. For the most part ETF’s reflect some kind of index like the S&P 500 or, in the case of the one I bought, the Nasdaq 100. They are similar to closed-end mutual funds where an investment company would gather a bunch of money and buy a portfolio of stocks and then sell shares on a market. The problem with closed end funds is they usually sold at a discount to the value of the assets in the portfolio because the people running the fund would take out expenses each year and over a long enough period of time the fund would be worth nothing. The price and value could get out of sync by 10% or more.

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After Jeb’s success with ads on mac.fiveforks.com I thought I would try it out on the only page on my website that seems to get any traffic, the Dejumbler page. Of course as soon as I put an ad on there traffic dropped off sharply and I wonder if Ask Jeeves knocked me down in the rankings when they saw a Google ad? All my referrals come from Ask Jeeves which for some reason ranks the Dejumble page very high when you enter “unscramble” in its search engine.

Anyway, after 4 days I’ve had one click-through which was me seeing if it would really work and I guess they knew that because I didn’t make any money on that one. That’s out of 90 page views. Since you only get paid once you’ve reached $100 it could be a long wait.

What bugs me about the whole thing is that I could tell Google what kind of ads they should put on my page: puzzles, Scrabble, games, crosswords, etc. But instead they are reading the text on my page and putting stuff in there about programming and coding. I couldn’t see a way to give Google any hints on what to advertise.