How Thinking Long Term Can Help You Manage Your Money

This past weekend I spent several hours going through long forgotten papers. Like an old friend I haven’t spoke to in years, the paperwork brought back memories. The papers relating to finances were particularly interesting.

For example, I found the sales receipt for a new 1965 Mustang my grandfather purchased for my step-mother when she graduated from high school. Total cost: $2,200.

Mustang Receipt

Nothing communicates the power of inflation like a 50 year old receipt for a Ford Mustang.

I also found the receipt for an Acura TL I bought for $31,000 in 1999. I financed the purchase over 5 years at 7.5%. Idiot! Fortunately, I sold the car two years later and paid off the debt. My most recent car, purchased in 2011, was used, cost less, and I paid cash.

All of this got me to thinking about how we look at money. We see money from the daily perspective as we go about our lives spending and saving. We see money from a monthly perspective when we think about our budget, 401k contributions, and our income. We even think about money from a yearly perspective, such as our annual salary. But rarely do we think about money from the perspective of decades.

In the podcast today, I discuss why taking this long-term view is so important. The podcast also covers your questions about everything from Robo Advisors to dividend investing to blogging.

I also provide an update to my own investing. I’m in second place in a stock market game involving a number of other personal finance bloggers. You can check out the standings here. A big thanks to Motif Investing for sponsoring the competition.

As for my individual stocks, I’m lagging the S&P 500 a bit this year, although up considerably since 2012 when I began tracking my performance:

Stock Performance View

So let’s get to the podcast:

Topics: Money Management

3 Responses to “How Thinking Long Term Can Help You Manage Your Money”

  1. Anthony LaMantia,
    I am very much in the same situation as you, in regards to switching from Active MF to Passive Index MF. Over the past year, I have slowly switched my accounts from T Rowe and Fidelity to Vanguard. And even prior to the switch, I exchanged my actively managed fund for passive index within each company. I first did the exchange into index, just to see how I would feel about it. After I became more comfortable, I slowly started moving retirement assets in to Vanguard. Actually, I am still in the process. I have another 50% of my assets to transfer.

    We (Wife and I) also had Fidelity Contra Fund in a Roth account about 15 yrs. Making that switch into the Spartan S&P and Spartan Total Market was not easy. We had it for so long, that Contra-Fund felt like part of the family. Every year contribution into the Contra-Fund was just what we did. So, when Contra-Fund fell out of the 2014 Kiplinger’s 25 MF recommendations, I was shocked. That started our search into a replacement mutual fund.

    Best of Luck with your move.

  2. Anthony LaMantia

    Hi Rob,

    I would like your thoughts on something. After reading this article about thinking long term and Swensen’s article on low cost index investing, I started reviewing my investments to consider swapping some higher cost funds with indexes. What would be a good measure of when a comparable index is better than a mutual fund that is performing well. For example, Swensen advises the Spartan Total Mkt index. I have another Fidelity fund, Contra fund, that has a 1 1/2 percentage better performance over 10 years, but I don’t think they reduced the 10 year performance stats by the fees, etc. At what point is preferring a mutual fund smarter?
    Thank you for all your doing!
    Anthony

    • Rob Berger

      Anthony, great question. The Fidelity Contra Fund has done very well, and has a relatively low expense ratio (at least by actively managed fund standards). Frankly, this fund might outperform the S&P 500 over the next decade or more, there’s no way to know. Personally, I think the odds of the fund outperforming the S&P 500 is not great, particularly as the fund grows in assets (currently over $111 billion). But given its relatively low expense ratio, it’s still a good option.

Leave a Reply