Holiday Season Grind

The holiday season is here! For many people, the season is filled with warmth, delicious food, and cheerful spirits, as celebrations take place with the ones we love; it also brings anxiety, as people prepare to visit in tight quarters with people that you haven’t seen all year and to address awkward “table talks” about politics, religion, race, sex, and gender. We all have (or know people that have) that racist uncle…that homophobic grandparent…that bigoted cousin. I encourage you to engage in these conversations with your authentic values, and not sit aside, in an attempt to avoid confrontation for the sake of being polite. Our values are the principles that guide us.

Additionally, people tend to ignore their budgets during this time of the year. We spend lots of money on ourselves and others because 1) we convince ourselves that we’re getting a deal on Black Friday and 2) it feels good. Saving during a sale does not merit overspending; if you’re over your budget, then you’re over your budget — it does not matter that you saved $100 on a new television. Many Americans overspend in November and December, and spend the remaining 10 months of the year cleaning up the financial mess that they’ve made, only to do it again the next November. Heavy spenders, who are often the biggest givers, are notorious for justifying excess spending due to “getting a great deal.” As for feeling good, there are lots of things that feel good that are only good in moderation — personal finance is mostly a behavioral exercise; your ability to delay gratification is a primary success metric.

Stick to your short-term and long-term goals, the things that you really matter to you. Encourage friends and family to do a secret holiday gift system rather than buying a gift for everyone. Rally the ones you love to do a potluck, instead of one person/family doing all of the spending and cooking.

I’m not suggesting that you not give during this season, I am asking you to re-evaluate your giving habits; Our consumerism culture leads us to spend on ourselves and others in an excessive way. Take time to reflect on what the holiday season means to you.

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Investment Tip 2: How to Buy Stocks

In Investment Tip 1, I suggested that you go to the markets; starting a retirement savings account (401K, 403B, etc.) or opening a personal IRA or Brokerage savings account are the best ways to enter the market. In Investing 1.0, there is a list of IRA or Brokerage account options; for a retirement account, consult your employer’s human resources department.

Buying a stock is buying a portion of a corporation, giving you access to part of the corporation’s assets and earnings. Stocks are sold as shares at a particular price, which varies through trading hours (9:30a – 4:00p ET) each day.

Sample of Stock Prices and Performance

Sample of Stock Prices and Performance

Based on the chart, Toyota (TM) price was at $122.62 as of October 31, 2015. If you bought TM stock 10 years ago (10/31/05), then you would have made +32.12%. Performance is calculated by:  (New price – Old price) / Old price. The new price is $122.62 and the old price (10/31/15) is $92.81.

(New price – Old price) / Old price =

($122.62 – $92.81 ) / $92.81 =

0.32119 or 32.12%

If you bought TM stock 5 years ago (10/31/10), then you would have made +73.14%; if you bought TM stock 3 years ago (10/31/12), then you would have made +58.28%; if you bought TM stock 1 years ago (10/31/14), then you would have made +1.05%; if you bought TM stock 3 months ago (07/31/15), then you would have lost -8.12%. The same applies to Volkswagen (VLKAY), General Motors (GM), and Autozone (AZO) stocks.

Understanding industry basics is paramount when buying stock. Changes in company management, new strategies, products, and services, and general global events can have significant impacts on a company’s stock. TM stock is fairly steady, as it is comparable to the auto industry benchmark. VLKAY stock has recently dropped as a result of the bad press around their inconsistent emissions testing. GM didn’t go public (v.s. private) until November 17, 2010, after the infamous bailout; private companies do not trade on the stock market — therefore, stock is not available to the public. The best investment of the four companies is Autozone (AZO) stock. For the 1-Year, 3-Year, 5-Year, and 10-Year numbers, AZO outperforms all of its peers (TM, VLKAY, and GM) as well as the benchmarks (General Auto Industry and S&P 500 Index).

Graph of stock performance

Graph of stock performance

Comparing AZO stock to all of its peers, the general auto industry, and the S&P 500 index is known as benchmarking. Benchmarking is the key to finding a good investment. Would you rather own AZO or TM? AZO, of course. So while TM is performing in line with the industry and S&P 500, there are other auto stocks, like AZO, that are performing better. When buying a stock, you’re looking for the optimal performers, or the best returns for the least risks.