Sunday, April 22, 2018

Component 5 Instructions (AQR Final Project)

For this activity, you will assume you have $50,000 to invest at age 25. Here are instructions broken down by row in the table provided.

Row 1 ("List the goals you'll...")

-Remember: you are completing this as if you're 25 years old. For each section, think about some goals you may want to save money for staring from that age.

-Examples could include (but are not limited to) saving for children, retirement, buying a home, vacation, graduate school, car, etc. Think about when in life you'd like to achieve each goal and fill the boxes appropriately.

-You must have at least one goal per time frame (at least one goal in short-term, medium-term, and long-term).

-Make sure to write down how long you will be saving (starting at age 25) for each goal.

Row 2 ("For these goals, where will...")

-Please choose from the following options: Savings account, Certificate of Deposit (CD), Bonds, and Stocks. You can choose more than one for each box. If choosing stocks, specify if you are investing in the stock of one company, several companies, or an index fund.

-When explaining your choice, make sure to mention why the risk of the investment option you chose matches the time-frame of your savings goal.

Row 3 ("Pick specific investments...")

-Remember, you are assuming you have $50,000 that you can invest between your short, medium, and long-term goals.

-Below are instructions on finding specific investments and their interest rates. Once you find your investments and interest rates, you will choose the principal amount you want to put in each investment. Then, you will use the compound interest formula to calculate the return on your investment over the amount of saving time you chose. Make sure to show your work. Here is the compound interest formula again: A = P(1 + r)^t.

Here are instructions for finding specific investments and their interest rates:

-Savings Accounts: If you picked a savings account for any of your investments, use the following links to shop around and find interest rates with different banks. Look for APY (annual percent yield), which is the fancy term for interest rate. When you figure out which one you want, write down the bank name and the APY interest rate.
       -Bank of Americahttps://www.bankofamerica.com/deposits/bank-account-interest-rates/
                Write in your zip code, after which click "View PDF." Find the APY for your principal amount
       -Chase Bankhttps://www.chase.com/personal/savings/savings-account/interest-rates
       -Wells Fargohttps://www.wellsfargo.com/savings-cds/consumer-account-rates/
                Enter your zip code. Find the "Wells Fargo Way2Save Savings" row and write down the APY.
       -Frost Bankhttps://www.frostbank.com/personal/banking/savings-money-market/money-market (you will have to find the rate next to the principal/deposit amount. It's not the big 0.75% on top, which is only for big principal of $250,000 or more)

-Certificates of Deposits (CDs): If you picked a CD for any of your investments, use the link below (after reading the instructions below) to shop around and find interest rates with different banks. When you select the CD you want, write down its name and the APY interest rate. Follow these instructions for searching on the website:
       -For "Deposit Amount," write your principal amount you're investing in the CD
       -For "Deposit Type," put "CD Rates"
       -For "Term," select the time period that you will keep your money in the CD. The longer the term, the higher the interest rate (but there are penalties if you draw your money out early).
       -For "Location," write the city in which you'll be living at age 25.
       -For "Sort By," select "APY" so that the highest APY interest rates appear first.
       -LINK: https://www.bankrate.com/cd.aspx

-Bonds: If you picked bonds for any of your investments, use the link below (after reading the instructions below) to shop around and find interest rates with different bonds. Follow these instructions for searching on the website:
      -Scroll through the list and click on the symbols to look at individual bonds. Only click on                    symbols that end in "US" so that you look at United States bonds.
      -If you click on a symbol, it will pull up an orange page with information about the bond's                    performance. Scroll down below the graph and find the number under "1 YR RETURN." This is       the interest rate on the bond from the past year.
      -Once you find the bond you want, write down its symbol, its name, and its interest rate (the "1            YR RETURN" percentage).
      -LINK: https://www.bloomberg.com/markets/symbolsearch?query=VANGUARD+CORPORATE+BOND&commit=Find+Symbols

-Stocks: If you picked stocks for any of your investments, you can use Google to effectively research different stock information. Follow these instructions:
       -To find the stock of a certain company, google the company's name and "stock." For example, if I wanted to look up Amazon's stock, I would google "Amazon stock." This is what comes up:


When judging a stock, it's best to look at the "1 year" or "5 year" option to see its value over time. When you choose a stock (or different stocks) that you'd like to invest in, write down the company name and the stock symbol. The stock symbol is usually a three or four-letter abbreviation for the company that is underneath the company name. For Amazon, we can see the symbol is "AMZN." This is how stock traders identify the stock.

You can also look up index funds. For example, you can Google "SP 500," "Dow Jones," or "NASDAQ" to see the three most common stock indexes. Make sure to write down their names and symbols as well if you want to invest in index funds.

The average annualized total return for the S&P 500 index over the past 90 years is 9.8%. We will use 9.8% as the interest rate for any stock you purchase (since this is our best approximation of the market average over time).

Asset mix pie chart

To figure out the percentages you put into savings accounts, CDs, bonds, stocks, and that you left uninvested, you do the following calculations. Please show your work on your paper:

Savings: [(Total amount put into savings accounts) / 50,000] *100
CDs: [(Total amount put into CDs) / 50,000] *100
Bonds: [(Total amount put into bonds) / 50,000] *100
Stocks: [(Total amount put into stocks / 50,000] *100
Not invested: [(50,000 - total amount invested) / 50,000] *100

With these percentages, go ahead and draw and label the asset mix pie chart in the circle on the paper.

Sunday, April 15, 2018

Component 3 Instructions (AQR Final Project)

The first page of this component will ask you to make a monthly budget. The second page will ask you to calculate your savings.

Page 1

Before you get started, look at your monthly take-home income from Component 1. This is how much money you have to put in your budget. Keep in mind for this part that you want to spend by the 20/30/50 rule. That means:
-20% of your take-home monthly income put savings
-30% of your take-home monthly income spent in wants
-50% of your take-home monthly income spent in needs

So as you're making your budget, make sure you're spending about those amounts in the correct places. For each "Expense Type" you will need to write the "Expense" (the amount it will cost per month), whether it is "Need/Want," and finally cite your source (as a link or reference to another component of your project.

Expense types:
Housing: write the monthly cost of your housing as calculated in Component 2. When citing, say "Refer to housing section of project."
Utilities: write the monthly cost of your utilities, as calculated in Component 2.  When citing, say "Refer to housing section of project."
Transportation: write your monthly car payments or monthly cost of public transportation, as calculated in Component 2. DO NOT include insurance or gas prices here (those are listed separately). When citing, say "Refer to transportation section of project."
Gas and Maintenance: write your monthly cost for gas, as calculated in Component 2, and add $50 for maintenance. If you chose public transit in component 2, put "0" here. When citing, say "Refer to transportation section of project."
Care Insurance: write your monthly cost for car insurance, as calculated in Component 2. If you chose public transit in component 2, put "0" here. When citing, say "Refer to transportation section of project."
Clothing/Makeup: Go to www.texasrealitycheck.com . Click on "Quick View Calculator." Click on the city in which you plan to live (if city is outside of Texas, you will have to Google this cost in your city separately and cite your source). Scroll down to the "Clothing" section and write down the expense amount that fits you best. Add onto this cost the amount you'd expect to spend on makeup per month. Cite "Texas Reality Check."
Gifts: How much would you spend on a gift for your cousin for their birthday? This is about the amount you should write for gift expense per month. Cite "personal estimate."
Personal Hygiene: Go back to the "Quick View Calculator" on www.texasrealitycheck.com . Scroll down to the "Personal Care" section and write down the expense amount that fits you best. Cite "Texas Reality Check." (If city you'd like to live in is outside of Texas, you will have to Google this cost in your city separately and cite your source).
Medical Care/Insurance: Go back to the "Quick View Calculator" on www.texasrealitycheck.com . Scroll down to the "Health Care" section and write down the expense amount that fits you best. If you're not sure if your employer would pay for health care or not, Google it! Cite "Texas Reality Check." 
Restaurants: Assume the average fast food meal costs $9. The average restaurant meal costs $12. Estimate the amount of times you'd get fast food or restaurant food in a month and then calculate the total amount you'd spend at both. For citation, show your calculation work.
Groceries: The average meal from groceries costs $3. Estimate the number of times you will eat meals from groceries in a month and calculate the total cost of groceries in a month. For citation, show your calculation work.
Cell phone/internet/cable: Go back to the "Quick View Calculator" on www.texasrealitycheck.com . Scroll down to the "Utilities" section. Write down the total amount based on if you want to get a cell phone, internet for your home, and/or cable. Cite "Texas Reality Check." (If city you'd like to live in is outside of Texas, you will have to Google this cost in your city separately and cite your source).
Education Loan Payments: Find your total expected education debt from Component 1. Divide this number by 72, and you will get your  approximate monthly education loan expense. When citing, say "Refer to education section of project."
Blank spaces: This is where you can be creative based on your own preferences and needs. For example, Mr. Young-Saver takes about one plane flight per month, so he would use a row in this budget table to estimate his monthly plane travel cost. Some people may use this space for children costs, electronics costs, pet costs, or for vacation costs. It's up to you! Just make sure to provide a full link to the source from which you get your information. You can also leave these blank if you so choose.
Miscellaneous: Things come up in life you have to pay for unexpectedly. You may have to buy batteries, buy a new pair of shoes, buy a new lightbulb, buy a Christmas tree, etc. This is the category for all unexpected costs. The best estimate here is about $200 if you plan to live in Texas, $300 if you live in a big city like LA or New York, and $150 if you plan to live in rural area. For citation, you can put my website: mr.dashyoung-saver.com.

Page 2

Savings Summary
For the first line, put in your take-home monthly income.
For the second line, put in the total expenses from the budget you just made.
For the third line, subtract your total expense from your take-home monthly income to figure out how much you save per month.

Savings information
-Fill in first box with savings projected over one year and 40 years. Make sure to show all calculations on right side. 
-Fill in the second box with percentage spent on each category. Here is the formula for that calculation:

Example: Needs
(Amount spent on needs / take home monthly income)*100

Monday, April 9, 2018

Instructions for Component 2 of AQR Final Project

Page 1--Large Costs: Housing

a) Choose the type of home in which you’d like to live. A condominium is a type of housing that usually larger than an apartment but smaller than a home. Like an apartment, in a condominium you’d live right next to or close to your neighbors.

b) Think about buying and renting in terms of how long your plan to live in that housing. Make sure you discuss which option (buying or renting) is better in the long/short run in your response and why.

c) If you chose....

Renting, go to www.zillow.com. Above the search bar, click “Rent.” Type in the city or zip code name of the area in which you’d like to live and click “Search.” Many results will pop up. To narrow your search, you can click on “home type” and select if you just want to see apartments or houses or condominiums. You can also use the “price” option to filter certain price ranges. When you find the place you’d like to rent from, write the square footage of the home and include information about the home’s amenities, such as what appliances it has, what kind of flooring it has (carpet or hardwood), if it has a backyard, if it has a balcony or deck, and what kind of countertops it has (wood, granite, marble, etc.). You don’t have to list every amenity, just try to give a sense of what the housing comes with. Provide the link to the home where it says “link to listing.”

Buying, go to www.zillow.com.  Above the search bar, click “Buy.” Type in the city or zip code name of the area in which you’d like to live and click “Search.” Many results will pop up. To narrow your search, you can click on “home type” and select if you just want to see apartments or houses or condominiums. You can also use the “price” option to filter certain price ranges. When you find the place you’d like to buy, write the square footage of the home and include information about the home’s amenities, such as what appliances it has, what kind of flooring it has (carpet or hardwood), if it has a backyard, if it has a balcony or deck, and what kind of countertops it has (wood, granite, marble, etc.). You don’t have to list every amenity, just try to give a sense of what the housing comes with. Provide the link to the home where it says “link to listing.”

d) If you chose renting, write the rent price per month. If you chose buying, write the full price of the home and the mortgage payments per month. For expected price of utilities, go to www.texasrealitycheck.com. Click on “Quick View Calculator” and select the city in which you want to live. On the next page, scroll down to find the utilities section and write down the estimated cost of utilities per month for the package of utilities you’d like.

Page 2--Large Costs: Transportation

a) Choose if you'd like to transport by car or public transportation. Keep in mind the area in which you'll be living at age 25 and if public transportation will be available.

b) Only answer this question if you chose ‘car’ in part (a). When answering this question, keep in mind how much value cars lose over time (and if they lose more value at the beginning of their lifetimes or towards the end).

c) If you chose....

Public transportation: Use Google to research what kind of public transportation is available in the area in which you'll be living. Then, use Google to find the price of a monthly public transportation pass (that could be a bus pass, a subway pass, shuttle pass, etc. depending on what type of public transportation you want to take). Make sure to cite the specific link from which you got the price under "sources."

Car: Use www.autotrader.com to research a specific car for sale you may want to buy. Make sure to put the zip code of the home you selected in the previous part before clicking “search.” When searching, many results will pop up. The menu on the left will let you filter results based on new/used, car age, car price, etc. When you find a car you want, write the link to that car’s sale page next to “Car listing:” under “Sources.” Write down the full price of the car. On the right of the screen, there should be a link with a picture of a calculator that says “Calculate payment.” Click that and write down how much monthly payments would be (in dollars). Write down the make, model, and year of the car. The make is the company (ex: Toyota, Ford). The model is the type of car (ex: Focus, Tundra, Mustang). The year is the year in which the car was made.

To get an estimate for car insurance, please follow this link: https://www.carinsurance.com/city/San-Antonio-auto-insurance-TX.aspx

On the website, scroll down to the part with the heading “San Antonio Car Insurance Rates by Zip Code” Enter the zipcode you will be living in. For age, put 30 (we are rounding up from 25). Put your gender. For the coverage set, I would recommend putting the state minimum liability option, but you can put more coverage if you’d like to feel more secure and have coverage up to $100,000 in damages (note: the more the coverage, the more expensive the insurance). After clicking “search,” the website will show the average annual premium (what you pay per year) for your insurance. Convert this number to a monthly rate, and then write the monthly rate down on your paper. Make sure to cite that insurance web link under “Sources” for insurance. 

To get an estimate for the monthly cost of gas, Google the average price of gas in the city in which you’ll be living. Write this down. Then, Google the miles per gallon of the car you are buying (with the same make, model, and year as your car). Finally, assume you drive 750 miles in a month. Use what you found to calculate the amount of money you’d spend on gas per month. Please show your calculation steps on your paper.