Tuesday, December 4, 2007

November Net Worth

Nothing outstanding this month, just the usual routine of saving. My net worth rose by 6%, and it’s now $3,737. I haven’t gotten financial aid this month, so I hope to get two-months’ worth in December, and put it away.

Cash makes over one-third of my assets already. Wow. Am I getting a little conservative? The thing is I’m working on saving about $1,600 to be able to open a checking-savings account with a minimum balance of $1,300. Concentrating on this, I started ignoring investments totally. Now, I have to remind myself, that this savings account can surely wait, and I’d better put more money in my index fund. After all, one-third of cash certainly is not my ideal allocation.

Monday, December 3, 2007


Today Russian citizens have chosen the parties that will sit in our parliament for the next four years. I voted for the first time in my life. I knew that United Russia, a monstrous party with vague promises, that reeks a little with totalitarianism and a cult of personality, and is headed by our current president, would get the majority of voices. Other parties had lesser chances to obtain seats in the parliament. Still, I believed that my voice could make a difference. I actually like two parties from the opposition, both sharing democratic values. One of them appealed to me the most, so I voted for it.

The rough estimate is already known. United Russia gained over 60%. Three other parties won much less voices, but also made it to the parliament: first, the communists (their position is usually strong, because almost every senior citizen always votes for this party), second, a party aimed at persons aged 55+, and third, a funny party, which has a very charismatic and entertaining leader, but which political positions I can’t figure. My party and the other party that I like have gained about 1% each. Oh, by the way, the total number of parties was eleven.

I’m used to being a member of small groups. For example, I am a student in Moscow – we don’t make up to 1% of the population, I guess. I invest money in mutual funds – less than 1% of the Russian population deal with stock market either. But now I am in a small group again, and the consequence is that I, my values and my aspirations are not represented in the government. OK, I don’t want to think about politics anymore. It’s too frustrating.

Thursday, November 15, 2007

My First Investment

A year ago, on November 12, 2006, I purchased my first mutual fund. At the time, only about 300,000 Russians out of 140 mln population were buyers of stocks and mutual funds. My family and friends were suspicious about stock market, but I was interested in mutual funds and determined to buy one. I’d been contemplating for half a year. It was so difficult to choose the right company and the right fund! But finally, I picked an index fund of the subsidiary of my bank. One day after classes, when I was alone, I braced myself and went to the nearest office, which happened to be five minutes’ walk away from my dormitory. It was Friday, about 7 p.m., and already dark outside. I was nervous and scared. It seemed like I was doing something shameful, as I didn’t want anybody see me and ask me where I was headed. I probably just didn’t want anyone try to discourage me.

People in Moscow usually buy mutual funds in big, expensive offices in downtown. The small office near my dormitory, which is situated very, very far from the center of the city, usually processes loans and savings accounts. So, it turned out I was the first person in the district who had an idea to buy mutual funds there. The manager was able to sell me funds, but she didn’t know exactly how to do it. Luckily, she didn’t send me to another office or ask me to come some other time. The manager couldn’t call the main office to consult, because it had closed at 5 p.m. She used her cell phone to call someone, and then called somebody else. She was the only manager in the office. A man lined up after me and stared at me intensely, wondering why I took so much time. I think I spent there more than half an hour, nearing an hour. But when I came out of the office and breathed in frosty air, I felt a surge of excitement and pride.

It seems incredible that a whole year has passed, and my first investment has grown by 27.92%. Now, looking back, I laugh at myself. Buying funds is not a big deal anymore. It’s now a simple operation like depositing money in a savings account. I’ve even learned to do it online. Now I feel I can be more open about my investments in real life, because I’ve grown more confident about them. I’ve gotten a lot of experience and knowledge during this year.

Sunday, November 11, 2007

Inflation Is Rising

Since 1995 the inflation rate in Russia has been steadily decreasing. Last year it was 9%, down from 100+ % in 1995. I am young, so I don’t really remember the times when the inflation was increasing. I thought in 2007 it would be somewhere about 8% or less.

But this year everything changed. It all began in September and October, when some products suddenly became more expensive, for example milk, plant oil and cheese. I think I must mention that in Russia food is a major factor when estimating the inflation, because it is still the largest expense of an average household. I guess this price hike is a part of a global trend, as this year the price of wheat skyrocketed everywhere, and dairy rose in price in Europe. Anyway, the result is the inflation rate here is already about 9%, so by the end of the year it will probably be above 10%.

For me there’s nothing scary in this news, even though I spend a lot on food. This year I finally started eating more healthily, reduced the consumption of processed food, and my class schedule allows me to take more meals at home, rather than eat out. And I recommenced bringing my lunch to school. So I hope my food bill will even be shorter than it used to be. The price of non-food goods seems to be the same. I also know that the majority of my savings earn no less than 7%, and my mutual funds’ performance is way above the inflation. What I’m interested in is if our analogue of Fed rate will be raised. It currently stands at 10%. If it gets raised, the savings account rates will probably rise too. Then I will finally set up a savings account (seriously, keeping money on one’s Visa is a little weird) and lock these attractive rates. I think of this pike as a temporary deviation, after which the downward tendency will resume.

I admit that I’m probably overly optimistic about the future. Actually, I barely remember the crisis of 1998, when Russia went bankrupt and the ruble plummeted. Since then the Russian economy has been rising. So I remember only the relatively good times, and thus I’m inclined to believe that everything will be okay. When I heard the opinion of my acquaintances and media, I understood I am an egoist. While I thought of my financial benefit, the others worried about the future of the whole nation. It was clear that everyone thought about the hyperinflation of the low nineties and the tumult of 1998. My peers, who hardly remember it, were reminded of the hard times by their parents. I heard opinions like “Russia is going bankrupt”, or “It’s a crisis like the one in 1998.” There is no ground for such statements now. It shows that people get used to relative well-being, and it’s scary for them when something unexpected happens. Especially if a history of a particular market economy is so short. We’ll see.

October Net Worth

This month I put aside the extra money I’d got from a small October work. Like in the previous month the stocks continued to pick up, and the ruble rose a little higher against the dollar. To achieve my goal of 100K rubles I now need $4,050 instead of $4,000. At the end of October I had $3,516.

I think I have too much cash, and I’m eager to put a part of it in my mutual funds. However, I am not disposed to do it right now, because Russian stock market makes new highs every day, and stocks seem expensive. I want to wait for a correction.

Thursday, October 25, 2007

An Exhibition

Recently I went to an exhibition "Personal Finances", organized by several banks, brokerage firms, insurance companies and publishers. I was interested to see what was meant by "personal finances" in that particular case. I wondered if I could learn something new. I must confess I have never seen people in real life who invests their money. Almost nobody will talk to me about handling money for more than ten minutes. All I know comes from books, magazines and the internet. So, I just wanted to see other people who were interested in pf.

Well, this exhibition turned out to be deadly boring. It was aimed at well-to-do middle class Muscovites and was held in a luxurious hotel in the center of the city. The visitors were mostly middle-aged men, several young men and few women. Somehow nobody would notice me and try to sell something to me. Sales managers probably couldn't perceive me as their client. They focused on more prosperous visitors trying to sell them average mutual funds with exorbitant fees, brokerage accounts (oh, trading is so in vogue here) and, strangely enough, tuition in private schools for their kids.

I went to a random presentation, where some pompous man gave a speech about stock market. The presenter told about disadvantages of mutual funds and encouraged everyone to buy stocks directly. He claimed he can easily get 100% ROI per year. This man hinted that successful people who made lots of money on stock market couldn't wear cheap bad suits. Apparently, we had to trust him, because his outfit did look expensive. Ugh. He obviously was a smart professional. But his speech was inaccurate and misleading, some facts were not true. My own experience and common sense sometimes disagreed with his words. I saw that his only goal was to make people set up a brokerage account with his employer and trade intensely, thus feeding the company with fees. I felt uneasy and wondered why the audience didn't laugh at him or challenge him (two men opposed him a couple of times but that was all). Then I realized that the majority of those sitting in at the presentation were listening intensely and actually believed what the presenter was saying. I remember a man in the audience ask "If I invest my money in stocks, will it be safe there? Will I get everything back?" He probably thought stocks to be some kind of bank deposit with extra high 100% APY. The answer he got was unclear and ambiguous.

What did I learn at this exhibition? Well, I believe that the personal finance industry in Russia is beginning to boom. The business seizes every opportunity to benefit from it. Not always their practices are and will be beneficial for their client. There's still little good advice on money matters and little information. People here need basic knowledge, like what a stock and a bond are. But at these presentations no one will muse on dollar-cost averaging, reducing debt, minding fees, long timeframes, indexing vs. active management and so on. There's a talk about 100% and quick big money. So people get easily impressed and start trading stocks actively, not really understanding how it works. They don't watch fees, they estimate the price of a manager's suit.

I also learned that I know enough to tell when people try to dupe me. I'm literate enough not to believe everything I'm told. I can make my own decisions. Thank you so very much, pf blogosphere :)

Tuesday, October 16, 2007

My New Card

Till recently I had two debit cards, given to me by my college, but issued by different banks. Both of them are free for me, and both are Visa Electron. (By the way, I was so surprised to learn that this type of Visa cards is not issued in the US, Canada and Australia. It's the most popular debit card here in Russia.) Well, the first one is an excellent card which is very convenient. But I never liked my second card. It has no online banking, the customer service is poor, and the number of available ATMs is limited. But my college puts my stipend on it, it costs nothing, and I need to have a second card in case the first one is rejected at a point of sale. So I kept using it.

I've just gotten a new card, which is a debit Visa Classic. It's also free, has convenient online banking, gives me a 5% discount at my grocery store and the location of ATMs is good. The checking account linked to the card will earn me 7.00% APY for one year, insured. Actually, I was wary when I was offered this card. It seemed to me that it was too good to be real (and free). Before signing up I scrutinized closely the terms and conditions, searching for hidden fees or something like this, and reading the reviews on the web. But everything seems clear.

The APY is something I'm very happy about. It's not that much, because the inflation rate this year is going to be about 9%. But earlier I used to earn close to nothing, because none of my other accounts offered me more than 1% per year. (Savings accounts with higher APY work like certificates of deposit and require a high minimum balance, which just doesn't work for me.) In December, when the "7% for a year" offer is closing, I'm going to sign up for a MasterCard with the same features. Thus I will get extra two months of earnings. Maybe using debit cards as savings accounts sounds weird, but it will probably work, at least till the next December.

One nice feature of my new card is that it can be used in online transactions as a perfectly normal Visa Classic. (Electrons can't.) So, I can now shop at Amazon or eBay at last! Honestly, when I found out about this possibility, I felt an immediate desire to splurge. For a long time I was longing to buy some books that I couldn't find anywhere in Moscow, but wasn't able to because I lacked a proper payment method. Now that I have such a means, I still must think twice, because the shipping rates to Russia are something to count with :)

The drawback of this full functionality is a higher risk of fraud. My first two cards are really safe. They have no CCV and cannot be used in internet or phone transactions. That's why even if someone learned my Electrons' numbers, they couldn't do anything harmful. Now I have to be cautious and protect the number, CCV, and expiry date of my new card.

So, my second card goes on holiday. I intend to use it once a month to cash out my stipend, and then I will roll the money on a better card. It seems that I’ve found a good deal.

Sunday, October 14, 2007

September Net Worth

The September was quite favorable for my finances, even though I had to pay dorm fees. The $3K mark was passed rather easily. The main reason for that is I got the stipend and financial aid for July, August and September. By the way, since this September stipends in Russia will be 50% higher than they used to be. A nice bump! Also, the stock market picked up substantially. The ruble rose quite sharply against the dollar, so the change of my net worth in dollars is greater than it is in my currency.

I tweaked my goal bars in the sidebar to make my net worth goals more clear. It now states my short-term goal is $4,000 by February. At my rate of saving it seems rather doable. Why do I pursue exactly this not very impressive number? At the current dollar/ruble ratio $4,000 equals precisely 100,000 rubles. The six-figure line is important for me psychologically, because it's like getting on the next level. I guess after that it will be all the same, 123K, 150K or even 200K. I'll concentrate on tracking my NW in dollars, because small numbers are more convenient. But right now I'm so excited to approach one hundred thousand milestone.:)

I also decided that I want to have $10,000 when I graduate in June 2009. Right now I have about $3,000. I keep in mind that by that time my birthday deposit of about $2,000 will have matured. I think I'll be able to save the other $5,000 in the next two years.

Saturday, September 29, 2007

Back-to-School Expenses

In September I had to pay dorm fees. It's the only money I have to pay to my college. This year the cost of living in the dorms slightly rose, at least for me.

In the past every student used to pay the same fixed amount of money, but this year the dorm fee correlates with one's electricity consumption, which is calculated on the number of electric devices one has in their room. In the beginning of September one was to make a list of devices and hand it in. Nobody knew if any formal checks would be made to verify the list. (I think now that such checks are probable but highly unlikely.) I honestly declared that I used a desktop computer, a printer, a microwave, a mini-stove, a fridge, a teakettle, a hair-drier and an iron. Even after my roommate paid me for the devices we share, I was still a person who seemingly paid more than anybody else. All my acquaintances decided that hair-driers, irons and printers were not worth mentioning, and as laptops were sort of inferior to desktops, they could be forgotten too. Some people were even surprised at my honesty. They told me I could have saved money by omitting several items. But I decided there were other ways of saving money, which would keep my conscience clear. At least now I know that everything I use is absolutely legal, so if any check occurs I'll be okay.

And, by the way, do you know how much I paid? It was only $246 for the whole year. I really find this sum very affordable, especially when I remind myself that I'm getting an education for free, and I'm paying only a fraction of the actual cost of living in the dorms. If I had come up with a blank list, I would have saved about $130. I personally think it's not worth the lying and tricking.

Sunday, September 16, 2007

August Net Worth

Oops. In August my net worth has slightly decreased for the first time since I started tracking it. That happened because I didn't contribute anything. The only thing I did was relocate my money by buying more mutual funds in the middle of August. The stock market took a dip, and it hurt my net worth.

I look forward to the end of September with great anticipation. I have a little money to contribute, and I'll probably hit the $3K goal. Of course, I can't be absolutely sure, because everything financial is so unpredictable right now. Stocks are volatile, dollar/ruble ratio is constantly changing. We'll see.