Index Funds Put the Fun in Fundamental Stock Investing

Next to Cat Fancy, I think The Economist is the best magazine on the stands. (Or "newspaper," as "Sir" would have it-- read the letters page sometime!) It's better-researched than anything, well-written, and even funny. And I think my mail carrier is reading my copy!

Usually I get it on Saturday, but this week's didn't arrive until Monday. The carrier had a mischievious grin on, too. I think he must have been jonesing on the Special Report all about asset management in this week's issue. It describes the radical changes in the mutual fund industry, explains hedge funds, demystifies some of the arcane jargon ("alpha" versus "beta"). Smart, smart, smart.

It also confirms what Bogleheads, those oddly-named devotees of John Bogle & Vanguard's indexing options, already know. Mutual funds are a loser's game, because you're paying for a fund manager who gets paid based on last year's performance, which may not be replicable. Even if the manager does well, taxes & fees will each up your profits. It's kind of scam, really.

Index funds just try to replicate the market. I have a core of my investments in Vanguard index funds, and then a (smaller) discretionary fund which I use for individual investing. Not at all sexy-- not at all something to boast about down at the club (if I were in the club!). But long term, it works.

And I feel smarter having read The Economist. Seriously, a couple of hours with this magazine is better than a week's worth of people yelling at you on CNBC.

Keeping It Real (and Legal)

Having read-- and argued with-- and learned from-- Tim Ferris' Four Hour work Week, I now have a much better sense of what the possibilities are with monetizing my cat.

And as I learned from the Cash Machine anti-PF book, I think must set up a structure. We often overlook this in thinking of entrepreneurship. We think, "it's not about paperwork, but hard work; not LLCs, but sweat and sore knees."

But I want to be a more thoughtful CATpitalist. One who knows from the start that he can grow. After all, you can't lay a foundation for a ranch house and put a skyscraper on it. And I want CATpitalism to stretch to the skies.

So I am investigating various legal structures-- before I talk to a lawyer at $800 a minute! These NOLO legal books-- written by lawyers, and intended as legal advice (though more limited than an in-person lawyer)-- have helped me think about this a LOT. My basic options:

• Sole Proprietorship. Which is what it is now, just money added to my taxes. If I want to sell the business, I can't. And all the profits go straight to my personal taxes.
• Partnership. My cat and I share! Moving along...
  
• Limited Liability Corporation. Your personal assets don't get nailed should your business go bankrupt. Whew! Profits still passed on to your personal taxes. Owned by its members.
• Corporation. Both types are owned by their shareholders-- with a board of directors making decision. Shareholders have no personal liability.
  
• C-Corporation. The standard, with profits able to be held at the corporate level to reduce overall taxes. Also, it has arcane "capital incentives..." Ooo, impressive...
  
• S-Corporation. This is a mutt: half-LLC (for taxes), half C-Corp (for structure). Has no more than 100 shareholders. Too much passive income, like rent money coming in, can get you in hot water with the tax-dogs.
  

And remember: I am not legal advice! I'm learning this stuff as I go along. And I may hold serve as a Sole-P for a while yet. Need to read the tea leaves...

Get POOR Fast

How NOT to Monetize Your Cat: a Case Study.

Down the street lives Purrty Petey. He has a human named Anton he keeps with him, who's jumps from job to job, scheme to scheme.

The human tries to make money every which way. Rather than get DVDs from the library, he buys them, burns them for his collection, and then resells them used on eBay. Rather than invest in bonds or an index fund, he speculates on collectibles and eBay. (Mouldering Beanie Babies infest his rented storage unit.)

Worst of all, rather than invest in learning new skills for higher pay, he spends tons of time and money on Get Rich Quick schemes. You know them-- promising huge returns on real estate, Forex trading, options, or some "foolproof" product, they have infomercials and hotel conferences. Anton's been to a dozen of these things. He goes for the $1995! $995! $500! "free" seminar, but then they upsell books, CDs, home training courses and networking.

Dozens of these courses litter his apartment. Purry Petey uses them for litter. He has to. Anton's too busy chasing some other fake dream.

Worst of all, Purry Petey tries to tell him. He tears up the couch, he pukes in the undies drawer. (Once he was asleep in it, and Anton closed it on him. For a week after, he was a guilty "commando.") Anton won't sit down with himself long enough to see how he's wasting his time-- his life-- on some other empty promise. He could be monetizing his cat, building side streams of income, taking small steps to financial & feline freedom, but he doesn't read this blog.

Alas!

HSBC Online Is Going Modern Catty

After setting up my account with HSBC Online, I mailed in a check. Just over a week later, I received the password in the mail. They're obsessed with security, see-- what with the advent of keylogging malware and whatnot, it makes the most sense to stay secure.

So, in my email, my login ID. In my snail mail, my password. Both huge strings of numbers. Makes sense. Perhaps in response to old news about security threats, they also have a unique "security key" that you type in on a Flash keyboard with your mouse, which is used at every login. So I'm satisfied. Now I have a VERY secure account I can link to brick-&-mortar accounts, a (relatively) high interest rate, and a place to funnel Adsense/Affiliate/Other money. Perfect!

And my own online security ritual? I have two browsers installed. One I use for browsing, personal emailing, etc etc. The other I use only for business and personal finance. It is set up to remember NONE of my passwords, and to completely wipe its history, cookies, and pretty much everything every time I quit. That way Zooey can't realign my 401(k), and Mr. MacMuffin can't spam his relatives with ads for Cutco knives.

I also run virus scans regularly, using Leopard Cache Cleaner. I work on a Mac, which has no real viruses, but I don't want to infect friends. Besides, nobody likes the smug, especially that guy in those Mac commercials. Probably he never fixes his permissions or runs his maintenance scripts, and then his kernel pops and he has to spend three unpleasant hours getting poked at by a Mac Genius before meeting his boorish but lovable PC pal for an evening of girl drinks and sniping.

(P.S. My passwords are NOT cat-related. Suprised?)

Find of the day: Modern Cat. I'm a little too rustic & bumpkiny for this stuff, and Zooey's a little too outdoorsy, but perhaps those of us with the chic flair thing going on will find cat-products of value and interest.

CATpitalism Plan, Part I.

As Zooey and I figure out new ways to monetize my cat/her self, I want to take a moment to list some of the ways we're first think of doing it.

This will outline our plans-- broadly-- and give you some ideas if you too want to monetize your cat.

1. First, establish this blog so we can reach fellow cat-n-money-lovers. Done!
2. Set up Google Adwords. Done!
   
3. Build traffic. Get the word out.
4. Set up a separate bank account for these online actions. I want to make some money here, but I want it to be separate from my day job and my other accounts. I don't want to come home and find Zooey hopped up on catnip. So I'm looking into some on-line banking accounts to choose one for my transactions here. That way I can see how much I'm making, and how much I'm spending.
5. Figure out non-ad related ways of making money with Zooey. Not factory work, but working with her marketable skills. We'll do a skills assessment later in the week.
   

After all, most of the Internet now seems based on ad revenue. What else can we do? I think it just takes some creativity to figure out...

(I'll update the CATpitalism Plan now and then so you can see how I'm doing, and how I've adjusted it.)