Comments on: Four Incredibly Useful Financial Calculations You Can Do In Your Head

By: DR

DR — Mon, 17 Dec 2007 01:49:56 +0000

Jane, great question. The returns reported by funds are net of expenses. You’re correct that a higher expense ratio could be justified by even higher returns. The problem, however, is knowing in advance which funds will do that much better. History tells us that over the long run, high expense funds can’t consistently outperform the indexes. Thus, in the long run, lower expense funds do best. My goal is to keep my expenses for my portfolio below 0.50% on a weighted basis. Some funds cost more, some less, but I want the total cost across all funds to be 50 basis points or less. I hope that helps and good luck!

By: Jane

Jane — Sun, 16 Dec 2007 21:02:26 +0000

I know you’re just using Money’s formulas, but I wonder if you could explain the one about the fund’s expense ratio? The expenses are taken out before the performance is calculated. So, if fund A makes 10% with a 5% fee, I get a 10% return. If fund B makes 8% with a 2% fee, I make 8%. I’d rather have the 10%, even if I have paid more for to get it. Or am I misunderstanding how it works?

By: Will

Will — Sat, 15 Dec 2007 00:23:36 +0000

Thanks DR, changing the design was a bit of a risk. I’m glad you liked it. I love the colors of your site as well. It is very soothing.

By: DR

DR — Fri, 14 Dec 2007 10:45:47 +0000

Wisebread, very much appreciated. By the way, I like the new look of your site. I read it through my feed, so I just noticed the new look today.

By: DR

DR — Fri, 14 Dec 2007 10:38:47 +0000

Math Dude, thanks for keeping me honest. Of course, after dropping the zero you have to add a decimal. And having worked a fair amount of unpaid overtime in the last month, your comment really hits home for me. By the way, if anybody is into math, check out Math Dude’s website (just click on his name after his comment). Very cool!

By: Shauna

Shauna — Fri, 14 Dec 2007 02:37:55 +0000

I really like your perspective on losing retirement money. It’s insane to think of how much money is lost on the most trivial of things.

I�m currently working on post-grad debt, so anything I can find to help me save money is great.

I�m blogging my �adventures,� too; here: http://shauna26.wordpress.com/

By: Will Wisebread

Will Wisebread — Fri, 14 Dec 2007 02:13:38 +0000

Very useful article. I’ve submitted it to Digg and reddit, hope you don’t mind:

http://reddit.com/info/62yik/comments/

http://digg.com/business_finance/Four_useful_financial_calculations_you_can_do_in_your_head

By: Pinyo

Pinyo — Fri, 14 Dec 2007 01:01:24 +0000

These are nice finds. Thanks for sharing.

By: Math Dude

Math Dude — Thu, 13 Dec 2007 22:50:57 +0000

I am surprised that they didn’t mention the rule of 72 — to figure out how long it will take for your investment to double, divide 72 by the interest rate.
Also, 80,000/2; drop the last zero = 4000, not 40. This is another reason why you should not work unpaid overtime. For each hour of unpaid overtime you work, you are reducing your hourly rate.

By: Kevin @ Change Your Tree

Kevin @ Change Your Tree — Thu, 13 Dec 2007 15:11:03 +0000

“How much do I need to earn before taxes to buy stuff that I want?”

That’s probably the most important one.

Sooo many people don’t know how much they are taxed/how much they pay in taxes.

The best ones are the people who tell me, “I didn’t pay any taxes last year, in fact, they sent me a check!”

People are clueless.