Mutual Funds vs. Individual Stocks

The vast majority of people should invest in mutual funds. Essentially, a mutual fund is a conglomeration of various stocks, and/or bonds, and cash. It is funded by many investors pooling their money together and rely on the expertise of a professional mutual fund manager who with a team of analysts manage the investments. They determine which stocks will be invested in and when the appropriate time is to buy, sell, or hold a stock.

The mutual fund manager and his or her analysts spend a great deal of time researching various companies and staying up to date on news surrounding them, financial reports, and market trends. These guys are major financial nerds who live and breath numbers.

Another major reason that mutual funds are a good option is the concept of diversification. Most mutual funds will hold at least 30 different stocks all the way up to index funds such as the Vanguard 500 fund which emulates the movement of the 500 companies in the S&P 500. This broad base of stocks spreads risk amongst many different companies so that if an example such as what occurred with Enron, the effect to the fund would be minimal.

When investing in individual stocks, a high degree of risk is present. A company may come out with poor earnings, encounter a major lawsuit, or their industry turns sour, and the stock price plummets. The investor may see any gains made quickly erased. By the same token, positive results may occur for the company and the stock price will sky rocket.

The only reason a person should ever invest in an individual stock is if he or she thinks that he can beat the return on a mutual fund. This implies special knowledge about the company which the rest of the market may not be aware of. It doesn't necessarily refer to insider trading but if he or she knows something about a company, chances are that some of those financial nerds at the mutual fund do too. Remember, those guys do it for a living. They have a vested interest in making good picks.

If a person insists on investing in an individual stock, he or she must be disciplined to spend significant time researching the stock before purchasing as well as while holding the stock. News comes out on a regular basis which can dramatically affect the price of a stock and so it behooves the investor to stay well informed on the health of the company in which their invested.

Mutual funds don't sound especially exciting but over a long term (5-10 years) consistently perform well. Gains of 12% can be expected if looking at a good fund over a long period of time. An investor should research the track record of a fund and select one which lines up with his or her goals (there are many different types of funds such as growth, value, index, aggressive, international, small cap, blue chip, etc.) He or she would likely want to invest money into several types of funds as well which will add further diversification.

Mutual funds provide a solid investment vehicle which offer great returns over a number of years. While great gains can be made with individual stocks, great losses can also be incurred. The risk along with the significant knowledge gap and time the individual has versus professional money managers should give significant pause and nearly always tip the scale in favor of investing in mutual funds.

Young Men & Fire

Young Men & Fire by Norman Maclean

This true story by the author of A River Runs Through It tells the events surrounding the Mann Gulch Fire in 1949. A good portion focuses on the smokejumpers (paratrooping firefighters)13 out of 16 of which perished in the fire.

In those days, the smokejumping program was very new having been introduced within the past 8 to 10 years. The men had to be between the ages of 18 and 30, single, and in superb physical condition. The main tools they carried were a shovel and something called a Pulaski which is a combination ax and hoe built into one. They utilized these tools to dig fire lines, and fell trees ahead of the fire so as to reduce the amount of fuel and prevent it jumping from one tree to the next.

When dropped from the plane onto the ground by the fire, a foreman would be in charge of the crew as they fought the fire. In the instance of the Mann Gulch fire in Montana, the fire started out as a fairly decent sized fire. It then progressed into what is known as a "blowup." This occurred as a result of a combination of factors such as fuel type, moisture, incline of terrain, and wind.

It quickly got out of control and the crew had to run for their lives. Occasionally, in a blowup a vortex of fire will be formed which will sweep across a vast area burning everything in its path. It looks and functions like a tornado. I recently talked with a man who used to be a farmer and he indicated that when they burned fields to prepare them for future seasons a fire vortex would sometimes occur. He said it was an awesome and amazing sight to behold.

During the blowup it was not possible for the majority of the men to outrun the fire and they perished mainly from suffocation due to lack of oxygen. The foreman saw this happening and created a secondary fire to try to create a burned out place which would provide shelter from the main fire. Unfortunately, amidst the confusion of the fire, the men did not understand the foreman and thought he had gone crazy to be lighting a second fire. He did survive but all but 2 others did not.

A secondary portion of the book analyzes the various components of the fire, what caused it, and some of the science behind fire. Maclean spent around 12 years researching the book, gathering documents, interviewing the 2 remaining survivors and returning to the site of the fire. He was well equipped to tell the story having spent time as a forest fire fighter in his younger years before going on to be a literature professor and writer. The book was masterfully written but slightly meticulous at times. It is the type of story that would make a very dramatic movie if a studio were interested in producing it.

Rocky Mountain Hiking

This past week I went on a hiking trip with Kevin, his dad, and their friend Kurt. We had loads of fun experiencing the great outdoors and enjoying God's beautiful creation as well as doing general manly things. In all the trip was 4 days and 3 nights. 21 miles round trip.

The altitude change (from 800 ft in KC to 10,000 ft the first campsite) on the first day was fairly brutal to all of us with a consequence that we had to help one of the guys carrying his pack about half the way. The second day we re-evaluated our plans and did a bit of backtracking.

Our packs weighed in varying amounts from upwards of 50 pounds to the mid 30s. On the trail, you feel every single pound and promise yourself that next time you'll cut off every spare ounce available.

The views all along the trail were splendid with varying amounts of wildlife including squirrels, chipmunks, birds, flowers, streams, mountains, marmots, ducks, and elk. There was no confirmed sighting of large game such as bears or mountain lions but much discussion and action was taken to try to avoid any unpleasant encounters with these hungry denizens of the forest.

On the second day, we got to experience the continental divide at 12,005 feet which is the determining spot for where rivers/streams flow towards the Atlantic or Pacific ocean. In fact, there are a couple streams which start within a few feet of each other yet ultimately wind up in opposite oceans.

Some of the highlight spots in the trip were the various lakes along the way. My very favorite was Odessa Lake which was at our campsite the first evening.
Vicious mosquitoes were ever present throughout the trip and natural lemon scented bug spray was much used and appreciated.

Meals consisted of a variety of things such as Ramen noodles, rice and beans with chicken, bagels with peanut butter for lunch, oatmeal for breakfast, trail mix, and some of the guys brought freeze dried foods which were of differing edibleness.

Sleeping arrangements consisted of tent dwelling which turned out reasonably well. Sleeping pads are essential on the trail and help provide a bit of cushion from the ground. I think the majority of us got increasing amounts of sleep as the trip went on whether from familiarity with surroundings or pure exhaustion.

Our experiences with the park rangers were sundry. Some were helpful and some seemed very intent on keeping the legalistic rules of the road. One such individual whom we'll call Ranger Rex instructed Phil that he couldn't talk to him because he wasn't in the car. Phil got back in the car, we pulled forward 10 feet and Ranger Rex was satisfied that communications could commence. "Safety regulations, you know."

Once above and beyond the day hiker reach, there was not a large quantity of people. Those that we did meet seemed fairly friendly. It was nice to be out in the back country with few people around. One can really feel at peace and relax in the beautiful creation and worshiper the Maker.


Group Picture Before Hitting the Trail

Odessa Lake

Fern Lake


Bierstadt Lake


Looking at Bierstadt Lake

Rapids


Trail


Rocky Trail


Path to Campsite


Camp Site

Cooking

On the Bridge

Kevin on the Trail

Andrew and Kevin on the Continental Divide


Mountain Flowers


Flowers by Mountain Stream

Duck

For more pictures go to http://www.flickr.com/photos/aallen30605/sets/72157600971841920/

July 4th Fireworks

Here are some pictures of the fireworks surrounding my apartment complex on the 4th of July. Hidden Valley park which is a hop, skip, and a jump away turns into a battle zone on July 4th with constant explosions and smoke hovering in the air. Vigilante style fireworks are blown up in various sorts. Differing levels of safety precautions are adhered to.




And then of course there are the more proper Worlds of Fun fireworks on the viewing horizon.

Marley & Me

Marley & Me by John Grogan

In Marley & Me Grogan discusses his adventures in life with a labrador retriever named Marley. Marley is a crazy dog, full of all kinds of abundant energy. He has trouble obeying commands and consequently fails obedience school. This does not diminish his passion and joy for life. He approaches everything with a an attitude of "ok, what's next, bring it on, I'm ready for the next excitement."

The story also follows Grogan as he starts a family and begins to raise them first in Florida then in Pennsylvania. Marley is an integral part of their family and is as loyal as a dog, so to speak, no matter the circumstances. It's a fun read with some nice laughs throughout.

The Way of the Wild Heart

The Way of the Wild Heart by John Eldridge

This book is a continuation of the topics covered in the book Wild at Heart and has good expansion and further development of the themes. Eldridge's basic premise is that there are 6 stages of the full masculine journey in life. That of the boy, cowboy/ranger, warrior, lover, king, and sage. In each stage the boy/man walks through crucial elements in his development as a man.

The boy stage is when he is young and enjoying doing boy stuff like playing outside, exploring, climbing trees, basically having fun and being delighted in by his parents and family.

The cowboy/ranger stage is when the boy moves more into the young manhood stage where he goes out exploring on his on and begins learning the things of the masculine world such as how to fix a car, working with power tools, going on backpacking journeys in the woods either alone or with some of his friends. This could also include such adventures as backpacking across Europe. The main part of this stage is his learning the answer to the question "do I have what it takes/can I handle this?"

The warrior stage is when the man is beginning his quest and mission in life which may include beginning a career such as a teacher, lawyer, doctor, consultant, mechanic, salesman, or becoming a missionary overseas. This is the stage in which he is finding his cause to fight for and the things that are important to him and what he will work towards during his life.

The lover stage sometimes crosses over with the warrior stage. This is when the man is learning to appreciate beauty and how to love. It is not necessarily when he pursues a woman and learns to love in that sense but can also include the awakening to the beautiful things in life such as nature, art, and music. Full development in this stage will include learning to love and be loved by God in an intimate way. Something Eldridge said which makes sense is that it is best for the man to have established himself as a warrior before entering this stage. Many women can be frustrated with the men they marry who don't seem to have a sense of purpose to their lives and Eldridge indicates that it is best for the man to come to the woman from a state of strength and having journeyed through at least parts of the warrior stage.

The king stage is when the man becomes responsible for leading others. This might include being the head of his household, becoming a manager at work, or a coach of a team. During this stage, warriors may be working for the king.

The final stage is that of the sage. This occurs when a man steps down as a king but does not fade into the distance. He will commonly be an adviser to kings and provide the wisdom that comes only through years of living through the various stages. Gandalf from The Lord of the Rings trilogy would fit this category.

During each of the stages, the man will likely experience parts of all the stages but will generally be centered upon one of them. I highly recommend this book as an excellent understanding of the development of a man and what makes a whole and complete man.

Spaghetti Score

We now introduce the Spaghetti Score. This will serve as a means to count the number of times the author eats spaghetti. This tasty bit of Italian cuisine serves as a staple in my diet and I thought it would be entertaining to track how frequently I partake. The rules of the game include spaghetti eaten with or without sauce. Each meal will increment the score by 1.

A counter titled Spaghetti Score will reside in the column to the right and will track number of times spaghetti has been eaten as a meal since June of 2007. As of this writing, the current score is 4. Stay tuned for updates.

Truman Library

This past weekend, I visited the Truman Presidential Museum & Library in Independence, MO. I thought it was well laid out and provided good information on Truman's life prior to becoming president as well as the decisions he was involved with during his presidency. He presided over some major events in history such as the decision to drop the atomic bomb during World War II, the recognition of Israel as a nation, the Korean War, and the founding of the United Nations, among others. Some famous quotes he's known for are "the buck stops here" and "if you can't stand the heat, get out of the kitchen."

Planning a Vacation: Tips and Tricks

Having done a fair amount of travel in Europe and the US, I've picked up a few tricks along the way.

Outline a high level itinerary that you'd like to accomplish and when you would like to do what. While you may not stick to this schedule, I've found it very beneficial in ultimately seeing, doing, and accomplishing much more than just showing up and deciding what to do when you get there. In your research, you may even discover options you didn't previously know were available.

When first arriving in a city get out and walk. Anywhere. This will help to establish a framework and base from which to work while you're there. If you're into running/jogging, get up in the morning and go for a run to take in some of the sites and get a lay of the land. Essential to the walking/running is a good pair of comfortable shoes.

As far as transportation when you get there, if you'll be doing a good bit of sightseeing, walking can be the best option. You won't be tethered to a car and in all European cities that I've visited, I was easily able to see everything I wanted by using the trusty old feet. Public transportation such as bus and train can also be very beneficial when visiting a larger city. Most large cities have some type of route finder online for their public transit which you can utilize in getting an idea of where things go.

Also key if you'll be traveling on foot is obtaining a good map. I found the pocket sized pop-up maps (found in any bookstore or airport) to provide good directions in most cities I visited and very handy from a portability standpoint. Be sure to review the map prior to going on vacation so that you have an idea of where things are located and how to plan your schedule. This helps save time when you're there for actually seeing and doing things.

One site which has some great information on pretty much any somewhat major city is Frommers.com. They have everything such as suggested walking routes, top attractions, basic city information, dining recommendations, and more. It gives lots of good information to work from and plan out a basic itinerary.

Other good websites are Expedia.com, Travelocity.com, and Tripadviser.com. These will provide a wealth of information as to good hotels in an area (including other visitor's comments) as well as assisting in comparing prices for flights and hotels.

Wikipedia.org provides good high level information about a city/country and a taste of their culture. Always nice to read up a little on things prior to going.

If you're interested in seeing popular museums, exhibits, or shows, it is wise to book in advance due to long lines waiting for tickets or potential sellouts.

A key to getting good prices is to book far ahead of time. As the vacation date approaches, transportation and lodging fills up and prices rise substantially.

From a financial standpoint, it is highly advisable to save up for the trip ahead of time rather than paying for it on credit cards. This will avoid lingering debt and allow you to enjoy the trip without the specter of a credit card bill hanging over your head. DaveRamsey.com provides excellent information on staying out of debt and saving up for purchases such as a vacation.

If you'll be traveling internationally, be sure to contact your bank to let them know you'll be using your debit or ATM card overseas. If you don't do this, your card could be blocked from usage and you really don't want to have to deal with this in another country. You may also want to pick up a small amount of cash for when you first arrive in the country. This can be done either at your local bank or at an ATM when you arrive.

Using ATMs will obtain the best exchange rate. Using exchange stores in airports will usually obtain the worst exchange rate so only use this if absolutely necessary. Check with your bank to see if they have any international relationships set up for free ATM transactions. Otherwise, you'll pay a hefty commission as well as possibly a 1% to 3% exchange fee.

If you do not already have a passport, be certain to apply for it well in advance of your trip as this can sometimes take a decent amount of time. Leave a copy with a friend or family member and put one in your luggage in case it is lost while on the trip. This will help the embassy in speeding the process of getting you a new one.

Keep a close eye on valuables at all times as pickpockets can abound in popular tourist spots. I always carried my passport and wallet in my front pockets and made sure to maintain contact with them, frequently, to help keep people honest. If you will be carrying a purse or camera, I recommend one which you can strap from one shoulder to the hip of the opposite side. Also, keep a hand on your purse or camera at all times. This helps to provide additional security by making it more difficult for someone to grab and run.

Most of all enjoy your vacation and be sure to have fun. Happy vacationing!

Burr Oak Woods

Today I went hiking at Burr Oak Woods with my friend Scott and his friend Sergu. It was really nice out with the trees in full green array. There is also a bird sanctuary which had birds such as yellow finches, blue jays, cardinals, and even some wild turkeys. The visitor center had a really nice display with information on the various local wildlife as well as some fish, frogs, snakes, and turtles in aquariums.

Free Root Beer Float

June 7 is Free Root Beer Float Night at SONIC®. Just show up between 8 p.m. and midnight, push the red button and order a free 10-oz. Root Beer Float. There's no catch. Tell your friends and family and don't miss this sweet deal. See here for official details

Kansas City Corporate Challenge

Last evening, I ran the mile for the KCCC. I finished in a time of 5:04, 8th overall in my age group, and 2nd in my division. I was very pleased with the result though sub 5 would have been nice. My quarters were very even at 74, 75, 77, 77. There are some races where you're thinking wow I feel pretty good this is kind of fun. Results viewable here.

Books on Buying a Home

Though I'm not necessarily looking to purchase a home in the immediate future, it is something that is on the conceivable horizon so I wanted to get acquainted with some of the intricacies to know when purchasing a home.

Guide to Buying Your First Home by Century 21 Editors and Patrick Hogan

This first book has more of an overall view towards buying a house and the various steps involved. They discuss Townhome/condo vs. Single Family dwelling, financing, what to look for in a Realtor, some of the fees to expect, title insurance, title search, legal information, inspections, home insurance, earnest money, escrow and a host of other items pertinent to buying a home.

Tips & Traps when Buying a Home by Robert Irwin

This book was also good from the sense of insider things to know on how to get the best bang for your buck and what to be aware of as possible problems. One useful piece of information provided in the book was a sample list of things to look for when walking through houses similar to what an inspector might look for if inspecting the house. He also provides advice on negotiating and ways to structure offers.

Overall I came away with the sense that there are so many things involved with a house that it is well worth hiring a real estate agent to walk you through the process. While people may be able to sell a home without using an agent, my thought is that they are probably going to help you on the selling side in increasing traffic to the home as well as advise on the many aspects of the transaction.

A useful tool online that I've heard of for estimating home prices is Zillow.com

Stealing Your Life: The Ultimate Identity Theft Prevention Plan

Stealing Your Life: The Ultimate Identity Theft Prevention Plan by Frank Abagnale

This book can help you to learn everything you want to know about protecting your personal information. Abagnale, a former counterfeiter and now consultant to the FBI and many large financial institutions around the world, gives an inside look at the various types of identity theft and how to reduce the likelihood of it.

He goes into technology oriented identity theft schemes such as pharming and phising as well as discussing more low tech methods such as dumpster diving. It's highly recommended that you shred any personally identifiable information prior to throwing it away. Looking through a person's garbage though it might seem disgusting but is an actual method some thieves use to steal a person's identity. Abagnale also advises mailing bills from an official Post Office box rather than raising your mailbox flag which also alerts a potential thief that there might be information worth stealing inside. Another tip is to always choose to opt out when a financial institution sends you a privacy policy. This helps prevent the spread of your personal information and the potential for it to be stolen.

Surprisingly, personal information such as social security numbers is still used on some driver's licenses or as employee ids. One should avoid this when possible due to the windows an SSN can open for a thief. Abagnale also recommends limiting your usage of checks due to the large number of hands and eyes that will handle it throughout the processing. A dishonest person along the way can grab this information and either sell it or use it himself.

Abagnale indicates that the most important thing one can do in guarding against identity theft is to pull your credit report from the three major credit reporting institutions. (Experian, TransUnion, and Equifax) This can be done for free at annualcreditreport.com.

To help insure against identity theft, one may consider an insurer such as Zander Insurance Group's identity theft insurance.

One minor downside of the book is the author's promoting of his own products or products he endorses throughout the book. While they may be good resources to help in fighting identity theft, it seemed at times to be a sales pitch rather than an informational resource.

Overall, I learned several tips and had reinforced the need to be conscious of giving out personal information and guarding it from prying eyes.

Getting to Yes: Negotiating Agreement Without Giving In

Getting to Yes: Negotiating Agreement Without Giving In by Roger Fisher and William Ury

This is a classic text used in many university classes on negotiation. The authors help explain how to use principled negotiation rather than the traditional positional negotiation that many use. One story illustrates that illustrates this is of two children arguing over an orange then decide to compromise and split it in two. It turns out that one wanted to eat the fruit and the other wanted the peel to bake with. Principled negotiation would have born out the actual desires of each with the result of both getting exactly what they wanted. As people negotiate any variety of things, they should consider the motivations of the other party and what they might want out of it. Getting to the root want/need is key in truly understanding the other party and can help avoid adversarial positions. If approaching the negotiation as a sort of joint effort rather than this for that, a more positive outcome may result.

Blue Like Jazz

Blue Like Jazz by Donald Miller

This book is Miller's account of walking through life in his twenties and moving from Texas up to Portland, Oregon. He comes to a greater understanding of his faith through various experiences including friends he meets at Reed College, known to be one of the most liberal schools anywhere. His writing breaks out of the mold of the traditional Christian style of writing and looks at things from a post modern type of viewpoint. He's not afraid to dig down and explore why do we actually believe in what we believe rather than simply accepting because it's something we've grown up with. He has a way of making beautiful word pictures just like the title Blue Like Jazz. I enjoyed his honesty and authenticity of admitting struggles and failures and recognizing that he's a broken person as we all are. I recommend it as a perspective towards Christianity outside of the standard recipe for Christian literature. You can also check out the website at www.bluelikejazz.com

Gas Prices

Well, gas prices have reached astronomical levels approaching highs last seen around the time of Hurricane Katrina. In an effort to help readers of the Wisdom of Dre find the cheapest gas available, we offer
this website. Simply plug in your zip code and it will tell you the lowest gas prices in your area. Prices are usually updated every day or two.

Emergency Fund

What is an Emergency Fund and why exactly do you need one? Pure, plain, and simple Murphy's Law states "if something can go wrong, it probably will." One may hope emergencies will not occur but they are a part of life and one would do well to plan for them. It is sometimes referred to as a rainy day fund and serves the function of providing a source one can draw upon in financial emergencies.

Experts vary on the recommended amount of an emergency fund but a general consensus is 3 to 6 months of living expenses. The expense part is specified because salary includes tax with holdings, automatic deductions placed in a retirement account, or other items not included if a job loss occurs. To determine monthly expenses, track your expenses during an average month and then save for the emergency fund accordingly.

The financial expert, Dave Ramsey, recommends saving up a $1,000 emergency fund first to make it more manageable. 3 to 6 months of expenses can seem an overwhelming amount of money to save but with a $1,000 safety net, one will have the ability to pay for an emergency such as an alternator going out on a car without feeling pressured to incur debt.

Once the $1,000 is saved, it is highly advisable to pay down debt as quickly as possible to further secure your financial life and make things easier if ever losing a job. If a job loss is looming on the horizon, one may choose to go ahead and quickly muster the 3 to 6 month fund.

You want to be able to pay for the essentials such as food, housing, clothing, and transportation. If you become unemployed, you may need 3 to 6 months to search for a new job. Having the emergency fund allows you breathing room and the ability to search for a job without the stress of dealing with financial issues. Unemployment benefits may be applied for but it is best to have your own emergency fund in place as these benefits will eventually run out and may not be enough to cover basic living expenses.

Be sure not to dip your hand in the emergency fund cookie jar. It is intended for EMERGENCIES. A vacation is not an emergency, Christmas is not an emergency (last time I checked it always happens on December 25th), that new shirt/dress/shoes at the store are not an emergency. An emergency means an event such as unexpected medical bills, auto accident, job loss, or a water heater going out.

As far as where to store your emergency fund, you'll want to keep it in something very liquid (meaning you can get to it quickly). This should be something such as a savings account at a bank or money market account. Keeping it in one of these accounts will allow you to earn a bit of interest as well as separating it from funds actively available in a checking account.

Remember, emergencies will happen. Will you be prepared?

See www.daveramsey.com for more solid financial advice.

Lightning

Last evening on my flight from Atlanta to Kansas City, I got to watch a thunderstorm in the distance. It was mostly cloud to cloud lightning but was very cool. Kind of like fireworks but better from a natural sense. I guess you could consider them to be God's fireworks.

Word of the Day

argot: a specialized idiomatic vocabulary peculiar to a particular class or group of people, esp. that of an underworld group, devised for private communication and identification. -Dictionary.com An argot might something specific to a particular profession such as lawyers discussing briefs, affidavits, or summary judgement. It might also refer to a hobby group like runners talking about doing speed work, their PR (personal record), or split times. A somewhat related word is lexicon but I'll let you look that one up.