Category: Investing

Is Camping The Ultimate Frugal Vacation? (Plus Five Tips For Starting Camping Without Going Broke)


How to save big on vacations, from the Chief Mom Officer Blog.

If you decide to go camping, here are some items I’d recommend (click on each for a full description):

Many decide a hammock is more comfortable than a tent, plus it is lighter for backpacking (plus no ground pad required):

A collapsible dish washing set is really convenient:

 

This little wood-burning stove is a great way to heat up some water for tea or coffee without wasting a lot of propane:

This is a neat little lantern that you can recharge with the sun, and also use to recharge your phone:

You’ll find you’ll have lots of wet stuff to hang, so a clothesline that can handle a lot of clothes is handy:

Because you’ll want to make smores, and those sticks you find in the woods are questionable:

I always like a propane or kerosene lantern, but LEDs are really convenient:

This is just crazy-cheap for a tent, but would be good for a first tent until you decide if you really like camping or not:

Once you decide you do, these tents will be lighter and have better poles and seams:

Chief Mom Officer

As I write this, the CMO clan just got back from camping in Connecticut near to Rhode Island. We first started camping right after my husband got sick and almost died five years ago. When he was young, his family of six would go camping every summer in Rhode Island, but my family had never been camping when I was young. In fact my own mother still can’t understand why I enjoy camping. Every year she talks to me about how I need to buy a camper, or perhaps camp somewhere with air conditioning, or maybe go on a vacation somewhere more fun (because camping outside couldn’t possibly be fun).

IMG_0370 Not having fun at Block Island, a day trip from the camp site

And sure, camping has its downsides. Bugs. Rain. Cold. Heat. Noisy campsites with inconsiderate neighbors. I have been known to once proclaim, in a bad camping…

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Hedging Strategies to Protect Yourself Against a Market Drop


With the big run-up in stocks this year and many people expecting a pull-back or an outright bear market, perhaps you’re getting nervous and looking for ways to protect the gains you’ve made.  Hedging refers to taking positions that will reduce your loss should the market drop while still allowing for gains should the markets continue to perform well.  Today I thought I’d discuss some hedging strategies for those who are looking for a little protection.  Understand, however, that any hedging strategy you employ will reduce gains in the future.

In speaking about hedging we’ll assume that the investor is primarily long to start with, meaning that the investor will make money if the stocks he/she owns go up in price.  (When you buy a stock, bond, or mutual fund, you are “long.”  When you sell short or buy an option that goes up in price when a stock goes down, you’re “short.”)  Most people are long most of the time and this makes sense because the market’s long-term tendency is always up.  Being short for a long period of time would be like entering a turbulent river and expecting to travel mostly upstream.  Hedging a short position can also be done just by doing the compliment of the trades I describe.  For example, buying a call option instead of a put option.  (If you are not familiar with options, check out Options Trading: QuickStart Guide – The Simplified Beginner’s Guide To Options Trading or a similar book.)

One often associates hedging with risk, largely because of the term, “hedge fund” applied to the high risk/high return funds purchased by wealthy individuals.  These funds get their names because they can take long or short positions, but often these funds are not hedging.  Instead they are using large amounts of leverage to make large gains from relatively small movements in the markets.  This causes a substantial risk of losing money.  True hedging actually reduces risk.

To hedge is to take up positions that are designed to offset long positions, such that the investor will be less susceptible to losses due to falls in the market.  For those who play roulette, you would be hedging a bet of $100 on red by putting $50 on black as well.  You would be reducing the amount you would win if red were rolled since you would lose the bet on black, but you would also be reducing your loss should black be rolled since your small win on the black bet would reduce the loss on the red bet.   If an investor is perfectly hedged, he/she will not lose money no matter what the market does.  But by taking up these positions, one also limits or eliminates the possibility for making gains while the hedges are in effect.  The following are ways to hedge a long position:

Selling shares of the same stock short-  This is also called “selling short-against-the-box” and forms a perfect hedge provided that equal numbers of the shares are sold short as are held.  No matter the movements in the stock, no money will be gained or lost.  (Note that if the stock price goes up an investor would need to add cash to the account or pay margin fees, since this would result in  negative cash balances in the account).  Selling short-against-the-box has little purpose other than delaying gains from one year into the next for taxes.

Selling shares of other complimentary companies short-  In this strategy, the investor sells short shares of a company that he/she expects to decline if shares of the company he/she owns fall in price.  For example, if he owns McDonald’s, he might sell shares of Wendy’s short, figuring that is the market turns against fast food companies shares of both companies will fall.

Buying put options- A put option is a legal contract by which someone agrees to buy shares of a stock for a predefined price before a certain date.  This can be though of as an insurance contract on the shares of the stock.  In exchange for this agreement the owner of the shares gives the seller (called the writer) of the put a certain amount of money, called the “premium”.  For example, a put option for selling 100 shares of XYZ stock at 50, good for three months, might cost $300 when the price of XYZ was at $51 per share.

Writing covered calls on the stock–  Here a contract is written that allows another individual to purchase your shares for a fixed price.  This limits the amount the investor can make on the shares (since if they go up above the agreed to sales price they will be purchased for the sales price) but reduces losses somewhat if the shares decline in price due to the premium collected.

Buying short ETFs– This involves buying short exchange traded funds (ETF).  These are financial instruments that are designed to go in the opposite direction of a particular market segment or index.  For example, an owner of several mining companies might buy a short basic materials ETF as a hedge against a fall in commodities prices or a slowdown in goods production.

Selling a portion of the position The simplest way to guard against losses in a position is to simply sell some or all off the position, and is probably the best thing to do if you really need the money in the short-term since it is the most cost-effective way to be safe.  This, of course, reduces the possibility of future gains, however.

If you’re interested in individual stock buying and this strategy, I go into far more detail in my book, SmallIvy Book of Investing: Book1: Investing to Grow Wealthy.  Check it out at the link below if interested.

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Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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Having a Great Vacation without All of the Money Stress


Summer is the season of vacations and judging from the current hotel rates, people are back out in force.  Hotels, airlines, and rental car companies all suffered when housing prices collapsed in 2008 and people were no longer able to use their house like a piggy bank to reset their credit cards and continue spending money they didn’t have.  Indeed, many of those underwater in their mortgages were actually underwater because of all the equity they took out of their homes rather than a drop in home prices to below where they bought their homes.

Now that home prices have recovered fully, and then some, and we’ve seen that the end of the world did not come, people are whipping out the plastic once again.  Many are shocked by the credit card bills waiting for them when they return.  Bills that may be past due since the statement wasn’t sent out until after they left and was due before they returned – thanks Mr. credit card issuer.  Indeed, the attitude is often “I’m on vacation” so people stop worrying about the price of things and splurge a bit.  Hotels and shops love people on vacation.  (As an aside, why is everything extra and overpriced at the upscale hotels like the Hyatt, Hilton, Ritz, etc…. I mean you are already paying about 50% more for the room – couldn’t they throw in some things besides a fancy lobby to make it worth the extra cost?  Do they really need to charge $10 per day for internet and $4 for a bottle of water when it’s all included at the Ramada?)

Beyoung(TM) Car Seat Organizer only $9.99

For some, this spending leads to remorse and perhaps fights when they return and need to face up to the costs.  For others, this leads to a great deal of aggravation while on vacation.  It’s not fun when you’re trying to scrimp and save your way through a vacation.  No one likes to be the gate-keeper when the kids want the $6 souvenir cup they will use once and then leave around the house for the next five years.

People who have built up pipelines can vacation without the stress – either during or after the vacation.  Recall that by pipelines, we mean sources of income beside a job, such as stocks or real estate.  The secret is to use the pipelines to fund the trip and plan the trip wisely.  Specifically:

1.  Determine your budget.  The first step is to determine how much from your pipelines you are going to use for vacations.  This could be a fixed percentage from all of your pipelines – for example, 10% from all of the income received from your assets for the year, such that your vacation funds would grow as your wealth and pipeline income grows. As another option, you could set up a specific pipeline just for vacations.  For example, you could put $10,000 in a mutual fund after a few years of working and then withdraw 10% of the funds each year to pay for a vacation.  When you are just starting this would be meager – only $1000 – so you might need to supplement with some of your income from work, but this would grow with time.  You could also add funds each year – maybe $2500-$5000 each year – until it reached $40,000 or so and then it would generate enough for a nicer vacation.

2.  Plan your trip scaled based on your budget.  Let’s say that you have $2500 for a vacation.  You might choose to drive to the beach.  Figure up gas, hotels, and money for activities, food, and souvenirs.  Add or remove nights as needed, or find ways to reduce costs like choosing a cheaper hotel if you are over your budget.  Budget in maybe $50 extra each day for things you don’t know about yet.  From experience, plan about $100 per day for food for a family of four at moderate restaurants.  Add more for dining at a fancy restaurant or less if hitting the fast food for a meal a day.

3.  For things that will be fixed, like hotels, gas, and amusement parks, fell free to pay with debit.  The cost of these things are relatively fixed, so it makes no difference if you pay with debit or cash for them.  You really don’t want to walk around most places with $2500 cash in your wallet, plus the hotels and rental car companies will give you endless grief if you pay for cash since they want a way to charge you if you make a phone call or break something.

4.  For things that are variable, like food and souvenirs, consider bringing cash.  You don’t feel the same twinge from a $150 meal when you drop down the credit card as you do when you lay out eight $20 bills, so you will tend to spend less.  Plus it is much easier to track your spending when you have cash.  You can also set limits for the children and yourselves by using cash.  Give the kids $10 each for whatever they want that day from the shops and you won’t need to tell them yes or know when they want something.  If you limit yourself this way, bring a little extra cash in case there is something you weren’t expecting, but keep it in a different place so you know you’re blowing your budget for the day.

5.  Agree on the plan before the trip.  Remember that you and your spouse are in this together.  Agree on the amount you want to spend on the trip and have for extra spending cash.  Agree on the itinerary, which level of hotels you’ll stay at, and what you’ll do for meals.  Remember that it is more fun to have plenty of cash than to scrimp and save, so it is probably better to shorten a vacation than try to vacation on $25 a day.  You can stretch a budget, however, by maybe buying some food and lunching in the room.  Be sure it is an agreement and not one side forcing their will upon the other.

6.  Tap the pipeline.  Just before the trip, withdraw the money for the vacation from the pipeline and place it in your checking account so it is ready.  Get needed cash, and you’re ready to go.

                   

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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