Wednesday, February 15, 2006

Tonight's Tidbits

I went to the supermarket and was able to sign up for the frequent shoppers' card! Everyone who walked in seemed to be signing up. And no one laughed at me! But they should have-- I signed up and got my card, but then I stuck it in my pocket and forgot to use it when I checked out.


I just got my first paycheck with my new 401k contribution. I cut it back to 10% so I'd have a little more liquid cash in the months leading up to the closing on my condo. Fortunately, this still allows me to max out the matching contributions from my employer, while giving me about $300 more in cash per month. By the end of the year, I hope to be able to catch up and contribute the full $15,000 maximum.


I think I am going to sell GM. An anonymous comment on this post kind of made a lightbulb go off:
The question you should consider is why you are still holding the stock. It doesn't matter what you paid for it, or what you were thinking when you first bought it. You just need to ask "is this the best place I could have this money invested right now?" and act accordingly. It is hard to imagine that GM is your best option.
This was such good advice. I'd been thinking that if I sold my shares now, I'd be taking a guaranteed loss of over $1000, whereas if I hung on a while, there was at least some chance of losing less. But if I think of it in terms of how my remaining $1000 or so dollars in GM is working for me, yeah, the way things are looking now, I could probably find other ways to invest that money that are more likely to earn back some part of the lost $1000.
Just to take the opposite view for a moment, I could look at it as if I was buying $1000 worth of GM right now at a relatively low price. But given the problems they seem to be facing, would it really be a "value stock?" Would Phil Town call it a "wonderful company?" I kind of think not. The rest of my portfolio is doing really well at the moment, so I think I can live with kissing that $1000 goodbye and moving on. The other thing is that as of a few months ago, my gain/loss in GM will be long-term, not short. And since I plan to sell some other securities in a few months that will result in long-term capital gains, it's best if I sell GM in this tax year so I can offset long-term gains with long-term losses, and cut my tax bill a bit.
So, Anonymous, whoever you are, thanks. (Thanks also to the other insightful commenters on that post.)


Dave said...

Last month, I went to a Barnes and Noble where I bought a book with my frequent shopper "member" card. Funny thing is, I was suppose to get a 10% discount on top of the discount that was already on the book. I noticed on my credit card bill that I not only paid normal price for the book, there was a second (debit) transaction that was exactly 10% of the cost of the book! :-(

Maybe your purchases didn't qualify for a discount anyway? :-) Gotta think positive!

Caitlin said...

Good on ya for deciding to dump GM! Since I know squat about investing (I mean, just look at my bloopers!) I felt unqualified to comment...but anonymous put it really well, I will have to remember that

Anonymous said...

It's intereting to me that you'd fund the 401(k) beyond the match. The match really makes up for a multitude of sins. Without the match, a 401(k) is a long-only bet that your personal tax rate will be lower when you withdraw than it is now. THe long-term financial projections for our economy would appear to argue the opposite. Do you fund a roth ira? That's just the opposite bet.


Anonymous said...

For a young person, it seems 401(k) and Roth are both gambles. Who knows what the laws will be in 30 years from now?! Don't be surprised if some time, 15 years from now or later, they find some sneaky way to actually tax Roth withdrawals. And don't be surprised if your Social Security payments end up being indexed based on how much savings you have in your 401(k).

For a young person, think about the concept of diversification of tax consequences. This could mean saving as much as you can in Roth, some in 401(k), and some in regular after-tax investments. And if you've saved well and responsibly your whole life, make peace with the fact that less responsible folks with the same incomes who did not save may end up with higher social security payments than you do.

Depressing? Yeah, kind of. But you are clearly on the path to great wealth regardless of what changes in law the future holds.

Madame X said...

Josh and anon,
yes, I do try to max out both 401k and Roth IRA contributions, at least I have succeeded in doing that the last few years. Aside from the tax implications, I just see it as a discipline thing, a very tangible goal to strive for in saving money that I won't then be tempted to withdraw and spend.
And Anon, thank you very much! Not only for saying I am on the path to wealth, but for calling me young, as I am already old enough to start considering that a compliment, even if you have no idea what I look like!