Friday, September 30, 2016

Quarterly Portfolio Review

The end of a quarter is a good time to review your investments, decide if they are perfoming as you think they should, and make any adjustments you consider necessary.  The thing to remember is that you need to have a plan, you need to remember that markets go up and down, and that you need to make rational decisions, not emotional ones.  Here are some factors to consider:

How Is Your Asset Allocation?

You need to determine what asset allocation is appropriate for you at this stage of your life.  If you aren't sure what that allocation should be, take a look at at the target date funds by Vanguard, Fidelity, or your favorite fund family.  Pick the one closest to your projected retirement year and then look at its composition.  Target date funds are usually superfunds made of other mutual funds, which give you an added layer of fees.  If you are able to spend a few minutes 2-4 times a year reviewing your portfolio, create your own target date fund and just rebalance it yourself.  If the stock market has gone up a lot so that you are way overweighted in stock funds, sell some and buy bonds or whatever other asset you need to round out your allocation and bring it back in line with your goals.

We will be selling some funds to get our asset allocation back into balance.  The stock market has been good to use this quarter.

Has There Been a Substantial Change to an Investment?

You are keeping up with your investments in the financial press and blogs, aren't you?  Has something changed with an investment that could cause it not to be useful to you anymore?  For example, marketplace lender Prosper has just announced that it is shutting down the secondary market for its notes.  If you were counting on being able to use the secondary market to liquidate your account if necessary, now is the time to get out.  Has your actively managed mutual fund just lost its long-term manager?  Did your rental house just flood?  When something big about an asset changes, investors need to consider whether they still want or need the investment.

Since we have other liquid assets, Prosper's change is not a great concern to me; however, it will make me think twice before adding more money to my Prosper account. 

How Are Your Assets Performing?

The general rule is that you own stocks for growth and bonds for income. Generally speaking, as the market goes, so do most stocks.  Different sectors of the market do well at different times and if we could predict which ones would do best in a certain time period, we'd be rich,  Still, the performance of most mutual funds can be compared to one index or another.  If the stock market is up, and your fund is down, do you know why?  Compare your funds to other funds that purport to do the same thing.  How are yours doing? It may be time to get out of one fund and into a similar one.  You are more likely to get burned than to make money constantly shifting from one hot fund to the next but don't stay with poorly performing funds out of inertia.  The research now shows that very few fund managers manage to beat the indexes long term; a low-cost index fund is the best bet for most poeple. 

We still  have a large number of mutual funds which were purchased for us by our ex-financial advisor.  There is a $20 per fund charge to sell the shares, and in general we have the same funds in three different accounts so we haven't been in a hurry to sell them.  We keep an eye on them and as long as they are perfoming close to their benchmark, we leave them alone. However we had four funds that were underpeforming their bencharks and the market as a whole by 5-10%.  We dumped them and will re-invest the proceeds in Vanguard index funds.  

What Are Your Plans for the Near Future?

Are you going to need money for a car?  Does college tuition start next  year?  Is retirement almost here?  Do you need to get more liquid?  Do you need more income?  Should you put money in taxable accounts or in retirement accounts?  

We'll finish with college tuition at Christmas, but high school tuition will start in June.  We just bought two new (to us) cars so we should be set there for a while.  We have mutual funds in a taxable account, but it doesn't look like we are going to need the money any time soon.  Unfortunately, with all the expenses this year, we haven't been able to fund our Roth IRA's.  However, we've decided to move some of that taxable money into our Roth's.  The rules on Roth IRAs will allow us to withdraw that money if necessary, but if not, it grows tax-free and that's a good thing.  

Smart investors make a plan, change it if necessary after logical reflection and then periodically determine if they are on the best path.  When is the last time you reviewed your investment portfolio?

Friday, September 23, 2016

Kickfurther Defaults

As those who read this blog regularly know, I invest some money via Kickfurther, a platform that finances inventory for businesses.  In short, a business creates on offer on Kickfurther that states what inventory they are purchasing with investor's money, along with the rate of return and time frame.

How is a Kickfurther Offer Designed?

Wanda's Wonderful Widgets might want to finance 1000 blue widgets, which cost them $10 each to make, and which they sell for $20.  They believe that once they have the money in hand, it will take two months to make the widgets, and then four months to sell them.  They write an offer asking for $10,000 for six months, with an investor profit of 10% (a typical return, though some companies offer more and some less).  By some process Kickfurther does not publicize, it is determined how much of the revenue, per widget, goes to Kickfurther and how much goes to the vendor.  That split determines the PSR--the percent sold for return.  Let's assume that for these widgets, there is a 70/30 KF/Vendor split.  For every $20 widget sold, Kickfurther gets $14 and Wanda gets $6.  That means that 786 widgets have to be sold to give Kickfurther their $11,000.  The PSR is about 79%.

How is a Kickfurther Payback Supposed to Work?

If things go the way they are supposed to, investors look at the offer and believe that it is in their best interest to invest, and do so.  The vendor then gets the money, pays for production or buys the inventory, and starts to sell it.  Once the lead time for production passes, the vendor starts repaying the investors.  The way it is supposed to work is that as the product sells, Kickfurther gets paid.  In the case of our widgets, if Wanda has sold 300 widgets when the first payment comes due, she is suppposed to pay Kickfurther $4,200 (300X$20X70%).  If she only sold 100, she only owes $1400.  Wanda is supposed to pay monthly until she has sold enoough to repay Kickfurther completely.  Obviously, the lower the PSR, the more room Wanda has to discount the product, offer samples or otherwise sell for less than the originally figured price.

What if the Widgets Don't Sell?

What if six months has come and gone and Wanda has only sold 200 widgets?  At that point the investors can vote (on a dollar weighted basis) to either let Wanda continue to sell the widgets, or to end the contract.  If they decide to end the contract, Kickfurther gives Wanda the option of purchasing the remaining inventory for enought to make the investors whole, or of turning the inventory over to Kickfurther, which will then attempt to sell the widgets.  

How Has This Played Out in Real Life?

Kickfurther is a relatively new platform that is learning while it is growing.  Originally vendors were pretty much on the honor system as far repaying backers.  Most who have repaid their backers have done so in a linear fashion--dividing the total amount due by the number of projected payments and paying that amount monthly, or until they wanted to do another offer.  There have been a number of companies who have not paid anything or who have paid so little that it seems hard to believe the sales did not require a larger payment (and in some cases the vendors have admitted to having sales but using the revenue for other expenses).  Kickfurther has said they have tightend up their contracts and, for new offers, will require reporting on inventory sold.  Suffice to say there have been times when backers should have been repaid more quickly, and I suspect some where they were paid with the vendor's money, just to stay on track.

Is Kickfurther Really a Consignment Sales Platform?

Honestly, at this point, I don't think so.  If Kickfurther really wants to enforce the consignment sale contract they need to 
  • Assure that money raised goes to purchase inventory.  There was an offer up this week from a swimwear company that said in the offer that part of the money raised would go to advertising, not inventory.  
  • Integrate into the vendors' sale system and automatically transfer KF's share of the revenue away from the company as payment is received.  Otherwise you are asking investors to make a decison on the credit-worthiness of the company as opposed to the saleability of the merchandise.  
As things stand now, vendors are on the honor system as far as paybacks go.  They have no incentive to stick to the contract if sales are better than expected and every incentive to not use other money to pay off the offer if sales are worse than expected.

  Also, getting action from Kickfurthe requires at 50% vote of the investors.  I have one co-op that is over 140 days late with their first payment and KF has done nothing because 50% of the investors have not voted "no-confidence".  I don't have a problem with the "no confidence" vote if a vendor is selling, paying and way behind schedule.  At that point it becomes a decison for investors: Do you think KF will do a better job of selling this merchandise than what the vendor is?  If you think KF will, then vote "No confidence".  However, when a company is clearly in breach of contract (or even apparently in breach of contract if they have all that merchandise and have been unable to sell it) then KF needs to step in legally while the business and/or its owners can still be found. 

In another case, the company was sold and the new company has refused to pay.  The "no confidence" vote is under 50% .  In that case KF did step in despite the lack of vote, and sued the new company.

I still think the concept of Kickfurther is good; the question is whether the contracts can be designed to be enforceable and whether the offered rates are sufficient to offer a profit to investors.  If you think you'd like to invest via Kickfurther, use this link and you'll get $5.00 towards your first co-op.  

Friday, September 16, 2016

Morality and Investing

About the Book:

Offering time-tested wisdom on the complexities of the investment process, this guide provides advice on how to invest in a morally responsible way. It provides information on how to screen and exclude companies according to a clear set of faith-based criteria: those who support or service the abortion industry, producers and distributors of pornography, and companies involved in embryonic stem cell research. Based on this set of guidelines, as well as the success of the Ave Maria Mutual Funds, the guide demonstrates that high returns are achievable without supporting companies that do not support similar values. Also included is insightful commentary on the current political policies affecting the country’s financial state.

My Comments:

Good Returns: Making Money by Morally Responsible Investing is written by the founder of the Ave Maria family of mutual funds.  The Ave Maria funds practice what they call morally responsible investing--they do not invest in companies that promote abortion or donate to its supporters, sell or promote pornography or which have policies supportive of homosexual or other non-marital sexual unions.  He contrasts "morally responsible investing" with "socially responsible investing" which generally supports left-leaning causes. 

While this is a book about investing and the economy; not about religion, the author, George Schwartz, does quote papal writings on the economy and a little scripture.  He sees free-market capitalism as a moral good and socialism as a moral evil.  The book is definitely pro-Regan, anti-Obama. 

Good Returns: Making Money by Morally Responsible Investing has its good points, and its weaknesses.  The first chapter, on money and morality is excellent.  The next two chapters were about Schwartz himself, and frankly, I wasn't that interested.  He then spends a couple of chapters talking about his investment principals, and about how investors think.  Those chapters were good.  Chapters 6 and 7 are highly political; my husband will love them.  They do serve the purpose of reminding the investor how politics affects the economy, for good and for bad--and how even good intentions, like  providing home ownership for those kept out by traditional lending practices, can have bad effects--like the housing bubble and its subsequent pop.  Chapters 8-11 are, in many ways, commercials for the Ave Maria funds. If you know nothing about investing or financial planning, there is good information there--and even those who read investment books may learn something about investing that they can use, even if they never buy Ave Maria mutual funds.

While most of us want to follow our values, most of us also invest with the idea of making money.  One question that came to my mind after reading this book was "How well do Ave Maria funds do?".  Ave Maria has a Rising Dividend fund which outpeformed the S&P 500.  Morningstar give it four stars and the expense ratio is 0.92%.  Their Growth Fund has also outperformed the S&P 500.  However their Values Fund and World Equity Fund trail their indexes.  Still, I don't think any of them are really bad investments and I do like the idea of investing in companies that share my moral values.  


Friday, September 9, 2016

Is "Debt" a Dirty Word?

In reading many financially oriented blogs, one would get the impression that debt is something awful, something to be avoided at almost any cost.  But is it?  Is debt something that is intrinsically bad or is it simply a tool?

I'm a Girl Scout leader and I teach kids to play with matches.  I always ask them if matches are dangerous and they all generally agree they are.  I then ask them if pencils are dangerous, and they all reply that they are not.  I then ask them if they want me to poke them in the eye with a pencil, and of course, they don't.  At that point I explain that matches and pencils are both tools.  Use them properly and they are useful; use them improperly and they cause pain.

So what about debt?  Is debt a tool or an evil?  Debt is a tool, but it is a tool that is often misused.  The misuse gives you bad results but those results don't make debt a bad thing any more than poking someone in the eye with a pencil makes pencils a bad thing.

Misusing Debt

What does it mean to misuse debt?  It is when you buy something that you don't need and can't afford.  It is when "debt repayment" is a major part of your budget for a long period of time and when it keeps you from saving for the future.  It is when the interest on debt becomes a significant expense. It is when it takes longer to pay for something than it takes to dispose of it.

Using Debt as a Tool

Debt is a way to obtain something now, and pay for it over time.  Sometimes you have no choice.  If you don't have health insurance and end up in the hospital, you will owe the hospital money for some time.  On the other hand, at times we do have choices.  If your uninsured car was just totalled, you need another one--but you don't need a new car.  The cost of your "new" car shouldn't keep you in debt for a long time and you don't want interest to make you pay for the car twice.

On the other hand, if you need new furniture, are buying furniture you can afford, and are offered 2 years same as cash, why not take it?

If you have the choice of cleaning out your savings to buy a car, or financing the same car at less than 2% per annum for three years and you expect the car to last ten years, I dont' think financing it is a bad idea.

While some super savers may be able to afford a home without a mortgage, for most of us, foregoing the mortgage just means more money thrown away on rent.

Like matches, debt is a tool. Like matches, debt can burn you if misused.  Like matches, debt can make life much easier.
Disease Called Debt

Monday, September 5, 2016

Kickfurther Merchant of the Week: Noodle Mon

category chillraft

Today I have the pleasure of interviewing Susan Laudwig, one of the founders of Noodle Mon, a company that had inventory funded by Kickfurther.

As my regular readers know, Kickfurther allows ordinary investors to help companies that sell tangible products buy those products.  Instead of the investors lending money to the companies, the investors purchase the inventory and then return it to the company to sell on consignment.  As the inventory sells, the companies re-pay the investors, with a profit to the investors.  If the products sell more quickly than anticipated, the investors are supposed to be paid more quickly than anticipated.  If the products take longer to manufacture than planned, or if they do not sell as quickly as planned, the companies are only obligated to repay the investors for the products sold, and the investors do not receive additional compensation for the additional time.

Q:  Can you tell us a little bit about yourself and your company.  Where are you located?  When did it start?

A:  Noodle Mon was started the in 2011 by Steve and Susan Laudwig, it is located in Osage Beach, Missouri @ the beautiful Lake of the Ozarks.  Steve had been in manufacturing for 30 years and had sold his company.  Susan Laudwig had been an entrepreneur for 15 years and had recently sold her marketing company.  They both had wanted to live at the lake and had wanted to start a business so that they could live full time at the lake.  Steve felt he could manufacture a better water toy than was offered on the market and Susan could provide the sales and marketing to take the product to the market so the CHILLraft was born!

The company was named Noodle Mon after an tale of a Jamaican Captain that was chartering a boat full of young & fun college kids boating to Party Cove.  A random guy had ended up on the boat ride back and was being overly obnoxious.  The girls had requested the Captain drop this guy off at the next dock as they wanted him removed from the boat.  However, the Captain, pulled the boat right over in the main channel and asked the guy to get off the boat, leaving him swimming.  As the boat pulled away, the young girls were upset that the Captain had just left him in the main channel.  The Captain said, "What?  I gave him a Noodle Mon.”

Q:  This picture shows kids standing on a CHILLraft.  Did the photographer get them just before they landed in the water or are these mats that stable?  How many people can use one raft at a time?

A:  Kids and some coordinated adults can run and stand on the CHILLraft all day long and it isn’t hard.  They hold over 1000 lbs so they can support a lot of weight.  These mats are stable in the water but if you are running down them, you are likely to eventually fall or jump in the water as they are in constant movement.

Q:  If a raft is used every weekend, but cared for properly, how long will it last?  What is proper care?

A:  The raft can last 5-7 years if taken care of properly.  The main thing is keeping it in the shade when not in use.  It has UV protection but the sun can dry out the foam over time.  Also, don't jump on the raft from a boat or dock.  You can run on it or step down onto it, but bigger kids and adults that jump from another object onto the center can risk ripping it.  However, the CHILLrafts come with lifetime repair and rips can be fixed.

Q:  Can you pull a CHILLraft behind a boat with a passenger on the raft?

A:  No.  CHILLrafts are not meant to be towed.  The inflatables work much better than foam for that.

Q:  Your website has a form potential customers can fill out and get information about dealers near them.  In general, can most people find a dealer near them? 

A:  We do not have dealers in all the states.  We are in 15 states but we do offer free shipping some of the year for those customers who do not have dealers close to them.

Q:  How did you first hear about Kickfurther and why did you choose to use them?

A: I found them via an internet search and they had good reviews.

Q: You are right on target, having paid back about 2/3 of the offer.  So far, what has been your impression of Kickfurther?  Do you think you will use them again?

A:  No, I will not be using them again as long as their payback plan is the same.  Also, they never set up my payback schedule correctly which made all my investors question us and why we weren’t providing that information.  I prefer just equal payments rather than paying as you sell your product as that can be an accounting nightmare since some units are sold at retail price and others sold wholesale.  Also, customer payment terms and what funds were used for what shipments just makes it difficult to pay the way Kickfurther wants us pay.

Q: Have you tried Kickfurther from the investor side?  Knowing what you know, would you recommend it to family and friends looking to invest money?  Why or why not?

A:  I have not tried it from an investor side.  I would recommend it to investors that are able to have riskier investments for decent returns.

Q:  Do you have a giveaway for us?

A:  We will offer two winners $40.00 coupons  from our sister company, The Water Soul Nautical Apparel Company.

Thank you!  That will allow them to buy some of these cute items;

Boating Tank Top - WaterGirl Keep Calm Lightweight RacerbackWaterGirl Distressed Red Anchor Ball Cap
Seaside Zippered Large Anchor ToteMen's Boating T-Shirt- NautiGuy Beer & Boats

You can learn more about Noodle Mon  and Watersoul on their website or by liking them on facebook.  You can also follow them on Twitter.

If you would like to help companies like Susan's, and possibly earn a profit for yourself, use this link and you get $5.00 toward your first investment. If you have a company that needs help purchasing inventory, use this link to learn about Kickfurther and whether it is for you.

a Rafflecopter giveaway
Disease Called Debt

Friday, September 2, 2016

Why I'm Not Making (Much) Money Blogging

I've been blogging longer than most people.  I've had my book blog, This That and the Other Thing since 2005.  I've been writing here since March, 2015.  Over the years I've gotten lots of review copies of books (some of which I'm sure I could have easily sold), some products for review including mixing bowls, dog toys, a breast pump  holder and a stuffed animal.  I've earned about $250 from Adsense, and gotten about $10 worth of credit in my Kickfuther account because of referral links.  If I was counting on blogging to pay the bills, I'd be sorely disappointed.  However, for me, blogging is a hobby.

What I'm Doing Wrong

I've read lots of posts from other people about how to make money blogging and I've realized what I'm doing wrong.

  • My Posts Aren't Search Engine Optimized.  Instead of using various tools to discern which keywords are "hot" right now and then writing posts based on those keywords, making sure to use those keywords in the first and last paragraph and in at least one subheading, I write about what I want to.
  • I Don't Use "Pin-Friendly" Images.  My images are size "medium" on blogger; they are not cropped to be long and thin, like images shown to do well on Pinterest. I haven't gone to Canva and created my "look" that is just like most other people's with a translucent square that goes over my image and holds some writing about it.  I haven't invested the time in learning how to make images like that, and I don't pay anyone to make them for me.  That must be why my posts are never re-pinned and why I never get traffic from Pintrest.
  • I Don't "Get" Twittter.  I have an account.  Bloglovin tweets for me when I publish a new post.  I tweet about my posts sometimes.  However I don't see any traffic coming from Twitter.  I don't follow other people because I've never seen the point.
  • I Don't Spend Enough Money.  According to many things I've read, I'm not spending enough money to make money blogging.  Here are the things I'm not buying:
    • Web hosting.  If you want to make money blogging, you have to self-host, at least according to the things I've read.  Most of the time that helpful advice includes an affiliate link that will give the advice-giver money if I follow the advice to spend at least $4.00 per month on web hosting.
    • A Premium WordPress Theme.  Not only can I not make money if I don't self-host, I have to pay for a premium WordPress theme as well.  I can buy the popular Genesis theme for only $59.95.
    • Social Media Software.  There are product out there that allow you to automate the promotion of your blog on social media and those products cost money--or you could hire a virtual assistant to handle social media chores for you.
    • Premium Photos.  I use Pixabay for most of my photos, just like thousands of other people, so they aren't unique.  Of course I didn't pay for them either...
    • Classes on How to Make Money Blogging.  I'm showing my age, but once upon a time you could pick up the newspaper and peruse the want ads.  There were often ads about how to make money at home stuffing envelopes.  All you had to do to get started was to buy a starter kit for $X.XX.  What was the starter kit?  It was a mimeographed (see I told you I was showing my age) sheet telling you to take out an ad in the paper offering to teach people how to make money stuffing envelopes.  When someone responds, you stuff these directions in an envelope and send it back to them.  It seems the modern equivalent is a course in how to make money blogging that tells you to create a sell a course on making money blogging.
    • Mail Chimp.  While you can get a Mailchimp account for free, and use it until you have over $2,000 subscribers, I'll bet the $10/month version is much better.  Since I don't collect my readers' email addresses unless they enter a giveaway, and I don't do anything with them, that must be a big reason I'm not getting rich blogging.

Why Am I Not Doing It Right?

You might ask why, if I know what I'm doing wrong, I don't choose to do it right.  
  1. I don't want to spend the money and I'm not convinced it is worth it.  If I moved this blog to  a self-hosted WordPress site that cost me $4.00/month I would spend almost all the money I am now making on this blog.  By itself, would that move pay off?
  2. I  don't want to spend hours on each post.  As I said earlier, this is a hobby.  Doing keyword reasearch, creating Pin-worth graphics and promoting posts on social medial takes time.  I have a job already.
  3. I don't want to create a product to sell  The bottom line seems to be that in order to make big money  (like job-replacing money) blogging, you have to create and sell something that you use the blog to promote.  The blog is the hook but it doesn't get them in the boat--the content that you sell is what makes the real money.  

How Am I Doing?

This, That and the Other Thing gets about 3,000 hits per month, and most of my posts that are more than a week old have 20-50 views.  Racing Towards Retirement also gets about 3,000 views a month; however, most posts get over 100 views.  Some get as many as 700-800.  

As far as money-making, I used to get periodic sales from Amazon on my book blog, but since my state decided to try to tax internet vendors Amazon kicked its residents out of the affilliate program.  

I run a lot of articles on Kickfurther and they usually include my affilliate link.  I've made about $10 from that.  I haven't sold any ad space but I do get a few dollars per month from Adsense.  I still have more books than I can read. 

My blog has helped me land some freelance customers.  I've done alright with that but not enough to quit my day job. 

For now, I think I'll remain a hobby blogger.
Disease Called Debt