Welcome to the New PFStock

I have finally gotten around to updating my blog template, and resolving the issues that I had with Internet Explorer 7 and the new Blogger Beta. I have tried to keep the same color scheme as the original PFStock. However, I have changed the underlying template. One interesting feature of my new template is that the blog post pane will resize itself depending on the size of the browser window. Also, it is much easier for me to add (or remove) list items on the side bar using the new Blogger template. For example, updating the blogroll or sponsors section is much easier than before.

This reminds me that I am still looking to add more blogs to my blogroll. If you have a bona fide personal finance blog, please Email me (my contact information is listed in the sidebar) about exchanging links. Note that I do not currently link to commercial, real estate, or multi-level marketing blogs. However, you are welcome to contact me about advertising rates for the sponsors section.

After Google converted PFStock to Blogger Beta, I had experienced some problems with the RSS feed. As a result, my readership at PFStock dropped. For the record, the correct RSS feed for PFStock posts is now http://pfstock.blogspot.com/feeds/posts/default or http://pfstock.blogspot.com/feeds/posts/default?alt=rss and http://pfstock.blogspot.com/feeds/comments/default for comments. Because of this and a few other posting problems, I plan to republish some of my blog posts that readers may have missed.

Lastly, I wanted to mention the addition of polls to PFStock. Currently, I am asking readers to vote on which brokerage they use. So far, TD Ameritrade is the most popular brokerage among PFStock readers. This is not surprising since I do tend to write a lot about that broker. Anyway, if you haven't voted yet, please try to get your vote in before the poll closes.

DC

MSN Money Fiasco

MSN Money has recently "upgraded" its online account services. According to their website, MSN Money’s banking services have been updated to improve the online banking experience. This can be described in one word: fiasco! I logged into MSN to find that nearly all of my bank and brokerage accounts had little red exclamation points next to them. These exclamation points mean that the login information for each of these accounts needs to be updated.

It might be acceptable if I only had to re-enter the new updated information. But in most cases, I had to go through the whole process as if I were adding a new account. Then I have to delete the old account. I have to repeat this process as many times as I have accounts. So far, this task has already taken me hours, and I'm not even half way done.

Great job, Microsoft!

DC

Update on Discover Card

I mentioned getting cash back at supermarkets when using a Discover Card. By choosing cash back (also known as cash over) as a option during checkout, this works out as a nice interest-free loan. I pay off the card every month, and it saves me a trip to the ATM. I even said that I earn cashback on the cash back since it goes on my statement as being a purchase. Well, I guess that it couldn't last forever.

My last Discover Card statement had two supermarket transactions, that say "cashover $50". They now separate out the "cash over" part from the "purchases" part of the transaction. I am no longer earning a cashback bonus on the cash over amount. Oh well. At least it still saves me a trip to the ATM.

Again, I do not recommend this strategy to people who run a balance on their credit card, and end up paying interest charges on the cash over amount.

DC

Whole Foods Recommendation Withdrawn

In the past, I made a stock recommendation to buy Whole Foods Market Inc (Nasdaq: WFMI). However, due to recent events involving the CEO of Whole Foods, PFStock is withdrawing its recommendation of Whole Foods (WFMI). To make a long story short, Whole Foods CEO John Mackey has admitted to making anonymous comments about Whole Foods and its competitors on Yahoo Finance. Using the Yahoo user ID "rahodeb," Mackey had posted negative comments about a competitor, Wild Oats Markets Inc (Nasdaq: OATS). These comments were made prior to Whole Foods' offer to acquire Wild Oats.

This type of behavior is simply not appropriate for a CEO-level employee. As a direct result of Mackey's reckless judgment, Whole Foods is now the subject of a Securities and Exchange Commission (SEC) inquiry. Needless to say, this is not good news. Due to these recent developments, I cannot recommend WFMI to anybody.

DC

TD Ameritrade's Cost Basis Tool

I had previously mentioned that TD Ameritrade has added a gain/loss tracking tool called GainsKeeper to their website. I have used GainsKeeper before, and I believe that it can be very helpful to keep track of investment cost basis. However, there are a few obstacles to their new tool.

For me, GainsKeeper didn't have any cost basis information for investments that I bought before 2003. I had to go through a process known as "baselining" to tell the online tool what I originally paid for my stocks and mutual funds. For the most part, this process is straightforward if you have your cost basis handy. However, if a stock or fund has undergone a stock split, spinoff, or merger, it can get very confusing. For example, I had a mutual fund that was merged into another one, and I had to manually figure out the cost basis, and update it in GainsKeeper.

TD Ameritrade uses this GainsKeeper cost basis information to figure the Unrealized Gain (Loss) on your monthly statement. If it doesn't know what you paid, it shows "NP" for the Average Cost, and leaves the gain amount blank. On the other hand, I noticed that the GainsKeeper cost basis doesn't seem to be reflected on the "Balances & Positions" page. New trades are almost immediately reflected here. This leads me to conclude that TD Ameritrade uses two different sources for the cost basis data. The fact that they do this can lead to confusion.

Going forward, I think that GainsKeeper has the potential to provide accurate cost basis information at a glance. But, I do have a wishlist of improvements to GainsKeeper that I think would be easy to make. First of all, I would like to see a bigger font size; my eyes are not what they used to be. I'd like to see green and red colors used to indicate a gain or a loss. Another improvement would be for GainsKeeper to flag securities that could potentially trigger a wash sale if you buy or sell. Currently, GainsKeeper divides all gains into long and short term, giving you a subtotal for each. How about adding a line that gives you the total gain too? Lastly, I found that if you make a trade during the day, GainsKeeper doesn't reflect that trade until the next day. This could be updated in real-time.

DC

Interest Compounded Continuously

Have you heard of the concept of continuous compounding? This is a question that I posed a while back while commenting on a post at My Money Blog. In that post, the author, Jonathan asked the question if it matters whether interest is compounded monthly or daily. The answer was that it doesn't make much difference.

In Jonathan's post, he included the following example of a $10,000, 1-Year CD paying 5% APR (Annual Percentage Rate). He then went on to calculate the amount of money you would end up with after one year of compounding.

At this point, some readers might like to review my post about how to calculate APY on a bank account, as the following math is similar. For an account that is compounded monthly, you will have the following after one year:

$10,000 x (1 + .05/12)¹² = $10511.62

And if this amount is compounded daily, you would end of with this amount:

$10,000 x (1 + .05/365)³⁶⁵ = $10,512.67

In other words, you'd end up with $1.05 more by compounding daily versus compounding monthly.

I have always held that it is best to compare the Annual Percentage Yield (APY) for deposit accounts, rather than Annual Percentage Rate (APR). And, the author agrees with this sentiment.

But getting back to the original question, what about continuous interest compounding? This is not compounded daily, hourly, every minute, or every second, but continuously. Many people (erroneously) believe that if they could have their savings compound continuously, then they would have an infinite amount of money. However, taking the formula above, in the limit that the 365 goes to infinity (continuous compounding), the formula results in this one:

$10,000 x exp(.05) = $10,512.71

…or about 4 cents more than compounded daily. Note: This formula uses the e^x key on a scientific or financial calculator.

In reality, no bank offers continuous compounding. But if it did, you would probably realize that it was certainly an advertising gimmick because even continuous compounding doesn't make much of a difference.

DC