Losing Weight and Earning Money
Posted on | December 6, 2008 | 2 Comments
Recently, I have finished participating in a Biggest Loser competition with some of my coworkers. I am happy to report that I came in first place, winning $275. There were six participants on the men’s side. We each had to pay $50 to join. The first place finisher received 75% of the total, and second place got 25%.
In all, I lost about 13 lbs, 5.32% of my body weight. It wasn’t easy, but I found ways to make it fun. Here was my strategy:
- Cut out soda. I began replacing soda with water and G2, a low calorie Gatorade drink. I would order water at restaurants, which would help me save money on my bill. I also would take bottled water to work, eliminating my daily trips to the soda machine. Even though the soda machine also carries bottled water, it is more economical to buy it in multi-packs instead of paying $1.10 per bottle.
- Packed healthy snacks for the work day. I also used to make daily trips to the vending machine for snacks. I would buy a pack of chips or cookies to tide me over until lunch. I started taking apples, granola bars, and 90 calorie pack flavored rice cakes to work. I have found that I enjoy these snacks better than the sugar and preservative-packed options in our vendeteria, anyway. Buy these snacks in multi-packs instead of individual servings also helps me to save some money.
- Bought a Nike+ iPod accessory. I picked a fun, walking route around my house, put on my headphones, and walked for 30 minutes everyday over lunch. I think that this exercise was the main reason I was able to win the competition. The Nike+ accessory kept me motivated and informed me of my distance, time, and calories burned. I could upload my data to the Nike+ website and see all sorts of charts over time and track my performance to goals. The accessorie cost $30. Nike makes a special shoe to but the chip that sends data to the iPod in, but a rigged the sneakers I already had to fit the chip in one shoe’s sole.
- Changed some eating habits. I tried to eat at home more so that I could better control what and how much I ate. I also eliminated my almost daily ice cream intake. It was hard to wean myself from Ben & Jerry’s Chunky Monkey, but I was determined to be the Biggest Loser.
- Dusted off my exercise bike in the basement. It was hard to get motivated to use my exercise bike that I had bought over a year ago. I knew, though, that everyone else would be making changes to their diets and walking more for this competition. I needed something to give me a little bit of edge, something to push myself. So I dusted off this bike and used it for 30 minutes while watching TV at night. I tried to do it every night, but I didn’t like it too much. I am glad I used it, though, because I think it did give allow me to tke the lead.
I am glad that I entered this competition. I have been wanting to get healthier for quite some time now, and I think the prize money was just the motivation I needed. I ended up making an 82% return on my $50 investment, if you don’t count the Nike+ iPod purchase. I feel better about myself, can actually fit into some old clothes, and have received a lot of encouragement from coworkers. Also, investing in my health can cut down on health care costs down the road. All around, it was a very good decision for me to enter this competition, even if I hadn’t won.
Good Time to Invest in Wal-Mart?
Posted on | December 4, 2008 | No Comments
A week before Black Friday, I decided to buy some Wal-Mart stock. With a grim outlook for retail and people planning on spending 50% less this year on Christmas presents, this might at first seem like a really stupid move. Here are the reasons I keep telling myself that it was not:
- Wal-Mart is seen as a deep discount retailer. Everyone knows that they can get low prices at Wal-Mart. They have an Every Day Low Price sales strategy that is heavily advertised in its marketing. Always low prices. Always.
- People will need to buy presents this year, just like every other year. If they have the same number of people for which to buy, and they plan on spending less this year, they must go to a place known for low prices. Like Wal-Mart.
Chase Freedom Rewards Credit Card
Posted on | December 4, 2008 | No Comments
Last month, I received my first rewards check from my Chase Freedom Rewards credit card account. I get 3% cash back for my top three spending categories each month (up to $600), and I get 1% cash back on anything else. I can cash my points in at $50 or $100 to get checks for those amounts. However, if I wait until I reach 200 points to cash in, I get $250. I did just that, and received a $250 check in the mail. I am very happpy that I found this card; I use it for everything now. Of course, I always pay off the balance at the end of the month. One thing I have to watch is that I don’t buy things just to accumulate more points. The strategic use of this card is tied to earning cash back on purchases you would have made anyway. Any extra, nonessential expenditures would serve to undermine a frugal lifestyle.
Net Worth Update - November 2008
Posted on | December 3, 2008 | No Comments
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I am happy to see that my net worth is positive for the month, even with the current, unstable economic conditions. I have decided to add my escrow accounts as a liability category. I have the money now, but I plan on spending it in the future. I am essentially turning non-monthly expenses into monthly expenses for budgeting purposes. Therefore, I will be counting this money as already being spent. That way, I won’t see a big, artificial decrease in my net worth when these expenses come due.
My credit card balance is way up because of preparing for Christmas. I always pay this bill off when it comes due, though. I don’t want to incur any interest charges.
My emergency fund increased by $119 last month. I was hoping this would be more. One reason it isn’t is because I decided to put money in my brokerage. You can see that number is up.
Lastly, I hate that my 401k is still diving every month, even though I continue to contribute. I must remind myself that I have a long way to go, and I am setting myself up well for when the market goes back up.
Statical Process Control to Identify Market Trends (Part 3)
Posted on | November 7, 2008 | 1 Comment
Continuing my discussion on statistical process control and market trends, this post will highlight one final way to identify special cause variations. As previously discussed, special cause variations identify unlikely conditions which require some scrutiny to understand. By indicating which changes are significant, less time is wasted on those that are not.
The following chart illustrates this third case of special cause variation.
The red circle surrounds a run of 5 descending data points. When a run liked this is seen with the last point being below the mean, it is a sign of a significant trend. Likewise, a run of five ascending points with the last one being above the mean would also identify significance.
The example shown suggests that the process is consistently decreasing and settling into a state of under-performance. One may want to sell at the sight of a run like this, especially if it persists into the future.
So, what does a significant variation mean once it is identified? A study of underlying circumstances must be considered before attempting to answer this question. A negative special cause variation may not necessarily mean that it is time to dump the holding. After all, we want to buy low and sell high.
The nosedive in October can be explained by the current economic crisis that the nation is experiencing. The value of the position in this example is unlikely; it falls outside the control limits. If you believe that this special cause is only temporary, you may be inclined to buy while the position is undervalued. However, if you believe that it will be take a long time for the economy to grow to its previous state, you may want to sell. This special cause variation could signal a fundamental shift in our process control chart, signaling a large alteration of the mean’s future position.
Net Worth Update - October 2008
Posted on | November 2, 2008 | No Comments
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This month, I saw the largest decrease in my net worth since I started tracking it in May 2008. I was so excited when I broke the $40k mark, but now I am at back below where I began. It’s pretty obvious what happened, though. I guess -4.03% isn’t a bad loss while going through the worst financial crisis since the great depression.
My emergency fund, however, has seen healthy growth in October. I decided to up my monthly contribution of my “pay yourself first” strategy.
My big loser in terms of value was my 401k. I currently contribute 10% of my salary to it, and my company’s match only applies to the first 6%. I’m thinking about lowering my contribution and opening my own investment vehicle to have more control over where my retirement funds are invested.
More Fun With Statistics and Market Trends
Posted on | October 30, 2008 | 1 Comment
Yesterday, I introduced the theory that a tool called statistical process control might be used to analyze market trends. By identifying special cause variations that lay outside 2 standard deviations from the mean, you could establish whether a market fluctuation was worth your attention. This way, one does not agonize over small, common cause changes that are inherrent in any process.
I continue that discussion today by introducing other indicators of special cause variation. One such indicator is a consecutive run of data points above or below the mean. One would expect the data points to appear above the average just as often as they would appear below the average. A continuous run on one side of the mean signals an anomaly. The number of points needed can be debated, but I think 5 is a good number for this illustration. Again, let’s look at the SPY control chart provided.
We can see that the data points in the red area indicate a run of special cause variation from Mar 2007 to Dec 2007. Something was causing the price to be above the average for an extended period of time. If that cause were sustainable, perhaps the run indicated a time to purchase or hold stock. If the cause were not sustainable, it might indicate a time to sell.
You can also identify a run of data points below the mean from June through Oct 2008. One might conclude that because it is unlikely for points to continuously reside below the mean, it might be an indicator to buy. The rationale is that the pattern should return to within the control limits. One could also make the case that it is time to sell. So many points unexpectedly appearing below the mean could indicate that the holding has dropped to a lower consistent performance. The goal of SPC is only to identify serious deviations; it is up to the user to find the cause and act accordingly.
In my next post, I will discuss yet another way to identify special cause variations is a control chart.
Statistical Process Control for Identifying Market Trends
Posted on | October 28, 2008 | No Comments
Recently, the market has become largely unstable. We see the Dow descend 800 points one and watch it climb 700 points the next. People are fixated with this dynamic investing environment with daily fluctuations becoming a hot topic for discussions with friends and coworkers. However, what do these ups and downs mean? Are they that significant that the average investor should even track them?
I have attempted to view the market with a tool that I became familiar with in my MBA Operations class: Statistical Process Control (SPC). This tool attempts to help managers identify serious problems in business processes by periodically viewing fundamental key performance indicator (KPI) metrics. For instance, the number of items produced per day may be an indicator of a company’s health. The number of items produced every day will vary, but SPC attempts to spotlight when the process varies too much. This indicates that action should be taken by a manager find the problem. SPC will help a manager to focus on real problems instead of looking for nonexistent causes of normal variation.
Below is an SPC control chart of the SPY ETF that seeks to correspond with the S&P 500 Index.
The chart indicates that the average price of this holding was 138 over the past 20 months. Using a statistical normal curve, we would expect 95% of all price values to be within 2 standard deviations of the mean. This gives us an upper control limit of 154 and a lower control limit of 121. 95 percent of all market fluctuations should be found within the gray area of the above chart. Any points that lie outside of this area are known as special cause variations. Something extraordinary and unlikely (like a global recession, perhaps) had to happen to make the data point fall outside the control limits. These special cause variations require investigation and can helpt o identify problems before they become worse. In this way, the chart acts as a leading indicator, as opposed to a lagging indicator that identifies problems well after they have occured.
Applying this logic to the stock market, perhaps a special cause variation would be a trigger for buying or selling. The special cause variation in September 2008 was a precursor to the special cause variation in October 2008. Clearly the problem was not identified and fixed. If one sold their investments in September, they would have missed the huge drop in October.
There are other ways to identify special cause variations other than looking for points outside the control limit. I will further discuss how to identify these in future posts.
Tags: common > Investing > manage > special cause > statistics > stock market > stocks > trend
Rate Cuts Expected Again
Posted on | October 27, 2008 | No Comments
The Federal Reserve is expected to lower interest rates again on Wednesday, October 29. I, for one, am not looking forward to this. I guess it is for the greater good of the country, but the last time interest rates were cut, my ING savings account went from paying 3.00% to 2.75% APY. So, not only are my securities investments losing money in this slow economy, but my savings accounts aren’t making as much, either. AP is reporting that rates may be cut to their lowest value in 4 years. From the chart below, it looks like ING was offering 2.00% APY 4 years ago.
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CD rates will also decrease with this rate cut. Just a few weeks ago, I opened a 5.00% APY 12-month CD at Washington Mutual. I am glad I made the move because a rate like that cannot be found now. I am thinking that now is the time to lock in current rates with another CD before the Fed cuts rates again. This will fit in with the laddering strategy I am planning on starting with my emergency fund.
Where to Put My Money
Posted on | October 26, 2008 | 1 Comment
With the downturn in the economy, I am torn with what to do with my money. It seems like a great time to invest in the stock market. As Warren Buffet says, “be fearful when others are greedy, and be greedy only when others are fearful.” It only takes the first 5 minutes of any news program to determine that Americans are fearful now. I have a friend at work who shares Buffet’s sentiments. He says that now is the time to invest, but, unfortunately, he already had all he could afford tied up in the stock market.
I have established a short term goal of building my emergency fund up. I even lowered my 401k contribution to put the difference towards this cause. However, that is totally contradictory to Buffet’s advice. I should be putting money into the market instead of taking it out. So, I am tempted to take a large chunk of this emergency fund I have established and place it in stocks.
I have made two stock purchases through my Sharebuilder brokerage account in September, justifying my actions with Buffet’s mantra. However, I have since seen significant losses in these decisions. It’s only been a month, and I am in for the long haul. However, I think it will take a very long time for my purchases to recover.
So, my decision for now is to stick to my original goal. If I take my emergency fund and place it in the market, it could lose value and I wouldn’t have the money for any emergencies that might materialize. Perhaps I’ll make a few strategic stock purchases in the next few weeks, but my emergency fund will remain as my number one goal.
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