Very Meta


Though I’m grate­ful that you’re read­ing this, this blog is really more about me, than you. Some­times I write some­thing good and valu­able, but mostly it’s about shar­ing my perspective.

I’d like to write more, but I write a lot (Soft­ware AG, Elephant’s Pay­check) and this site is my 3rd priority.

As I was build­ing out the Elephant’s Pay­check site, I remem­ber see­ing the first draft of the art­work & lay­out. It was really excit­ing. But, it took about 3 – 4 months to launch and by then it looked a lit­tle tired.

I real­ized the chal­lenge with work­ing on a cre­ative idea for too long with­out launch­ing. It ages with you and you lose a lit­tle per­spec­tive. That got me think­ing about what lessons I could share of the process, rather than the sub­ject of the Elephant’s Paycheck.

I thought it would be inter­ested to share thoughts around build­ing Elephant’s Pay­check (the busi­ness, not just the site) on this blog. It’s a craft project right now. Elephant’s Pay­check serves me to share a deep belief I’m pas­sion­ate about while I learn about grow­ing an audi­ence, launch­ing a prod­uct, writ­ing a book, & more.

I’ve learned a lot already. In fact, I real­ize that the lessons I’m learn­ing are valu­able to my day job. I now also con­sider this prod­uct a con­tin­u­ing education.

Towards that end, I’m actively learn­ing rel­e­vant new skills. It’s been ad hoc for a bit, but lately I’ve taken it one step fur­ther with a pro­gram (and a curriculum).

I’ve joined Author­ity, a con­tent mar­ket­ing train­ing and net­work­ing com­mu­nity. The hard­est part is stick­ing to a reg­u­lar cadence of learn­ing more about a topic, and then apply­ing what I learn dili­gently. With so much going on, it’s very easy to fall back on old habits when it really serves me best to cre­ate new ones.

Have a look. If you’re blog­ging and try­ing to build an online com­mu­nity I’ve not come across mem­ber­ship more com­pre­hen­sive than Author­ity. If  you’re like me, and need a lit­tle more struc­ture than you’d nat­u­rally have, you’ll really enjoy the return on the mod­est investment.

Authority: Become A Smarter Content Marketer


Speak­ing of mod­est invest­ments… why not sign up for my free email course and learn how you can start to build long term finan­cial wealth for your family.

Apple vs Microsoft Stock Market Performance Insight

Stock Market Performance Apple vs Microsoft Chart from

[July 2013: This post has been updated. You should really read the cur­rent ver­sion.]

Size isn’t what mat­ters (mostly). When most con­sider stock mar­ket per­for­mance, they focus on the size of the port­fo­lio. The size of the invest­ment. It’s really not the only thing that matters.

In my opin­ion, it’s not even the thing that mat­ters most for the mod­est indi­vid­ual investor.

Div­i­dend per­for­mance and the result­ing income you receive from your port­fo­lio is a crit­i­cal per­spec­tive to take as a long-term investor. Let me share an example.

The Wall Street Jour­nal wrote an arti­cle yes­ter­day com­par­ing the stock mar­ket per­for­mance returns of Microsoft and Apple for the past 10 years. Had you invested $10,000 in each 10 years ago, you’d have about $13,000 in Microsoft today but $700,000 in Apple.

I saw the arti­cle late at night and tried to fig­ure out which 10 year span they used to show the gain in Microsoft! I looked at Yahoo! Finance for a few dates in the last month, and com­pared to 10 years ago Microsoft’s stock price was quite close to even or slightly down.

But, the thought in my head wouldn’t go away.

That thought was to com­pare div­i­dend per­for­mance of Apple and Microsoft over that same time period.

Since author Brett Arends didn’t tell us what dates he used, I’m going to do a quick “back-of-the-napkin” analy­sis that should be quite valid.

$13,000 of Microsoft stock at yesterday’s close of $26.95 would imply that we own about 482 shares. Let’s say 500 shares — notice I’m round­ing UP.

$700,000 of Apple stock at yesterday’s close of $589.36 would imply that we own about 1,187 shares. Let’s say 1,150 — notice I’m round­ing DOWN.

While at the time of the orig­i­nal pur­chase 10 years ago, nei­ther com­pany had a div­i­dend, both pay div­i­dends today. Microsoft paid some div­i­dends in 2003 & 2004, and started reg­u­lar pay­ments in 2004. They also paid a $3.00 spe­cial div­i­dend in 2004. Apple started a div­i­dend this past August.

Had you made the pur­chases Brett describes you’d receive the fol­low­ing annual pay­checks from your portfolio:

Microsoft’s div­i­dend is $0.92 per year (per share). 500 shares of Microsoft would give you a pay­check from Microsoft of $443.44 per year.

Apple’s div­i­dend is $10.60 per year (per share). 1,150 Apple shares would give you a pay­check from Apple of over $12,500! That’s right, you’d get 25% more than your orig­i­nal invest­ment back EACH YEAR.

Let me say this dif­fer­ently. As of today, Microsoft is return­ing 4.4% as a div­i­dend this year based on the orig­i­nal $10,000 invest­ment. Apple is return­ing %125 on that same orig­i­nal invest­ment (this year).

Heres’ a short quiz, just to make sure you’re fol­low­ing along:

Which is a bet­ter return 4.4% or 125%1?

Next, let’s con­sider div­i­dend increases. Apple has no his­tory of doing so since this is their first year hav­ing a div­i­dend (in a long time). Microsoft increased their div­i­dend 15% in 2012 (com­pared to 2011). If they increase another 15% next year, our Microsoft share­holder would earn an addi­tion $66.51 next year, pump­ing next year’s return to 5.1% on the ini­tial investment.

As Apple share­hold­ers, let’s hope/pray they increase their div­i­dend just 5% com­pared to Microsoft’s 15% raise. That 5% increase gives our Apple share­holder an extra $625 in income next year (an increase more than the total Microsoft return). That’s a 131+% return on the orig­i­nal invest­ment next year alone2.

And, this whole “back-of-the-napkin” analy­sis doesn’t even account for the stock mar­ket per­for­mance impact on the over­all port­fo­lio. I mean, you’d have roughly $700,000 more Apple than you would Microsoft (see that, I made the whole value of the Microsoft pur­chase a round­ing error com­pared to Apple’s value!)

I was going to actu­ally build a table of all the Microsoft div­i­dend pay­ments since 2003 to com­pare the extra 9 years of div­i­dend pay­ments com­pared to Apple, but now real­ize I don’t even have to to prove my point. Even if we assume our Microsoft investor received $450/year3 from 2003 – 2011 they’d still have less than $5,550 in div­i­dends total for the prior 9 years com­bined4. Notice that even accord­ing to Brett’s results, Microsoft’s stock mar­ket per­for­mance results were heav­ily dis­pro­por­tioned towards their div­i­dend return, and not port­fo­lio growth.

Make sense? I hope so, this is really impor­tant to you (if you care about your finan­cial future, the finan­cial safety of your fam­ily, or being respon­si­ble). Espe­cially as a mod­est investor.

Of course, we have to con­sider the oppo­site posi­tion. One could argue that Apple is worse for investors because the fis­cal cliff will cause Apple share­hold­ers to have a way larger div­i­dend tax increase than it will Microsoft share­hold­ers5.

If you found this inter­est­ing, you really should check out my free 10-part email course on invest­ing your 401K Rollover.

(dis­clo­sure: long Apple)

  1. 125% []
  2. I’ll leave the math of the fan­tasy of a 15% raise to you guys []
  3. The div­i­dends started smaller and have grown over time, so they got much less in the ear­lier years with the excep­tion of the $3/share spe­cial div­i­dend in 2004. []
  4. $450/year for 9 years, plus about $1,500 in spe­cial div­i­dend in 2004. []
  5. This is a joke. []

Get Started Investing, The Trick

This morn­ing I’m think­ing about key points of my invest­ing blue­print. I’m always work­ing to fine-tune how I intro­duce peo­ple to what I’m try­ing to share. It’s hard to get started investing.

A key point is the abil­ity to get started mod­estly. Like with a few hun­dred dol­lars. Yeah, right? That’s crazy. Most places want you to invest thou­sands, or more, just to get some per­sonal attention.

With a few hun­dred dol­lars you can build healthy sav­ing and invest­ing habits sooner because you can get started eas­ier and faster.

The trick is how to moti­vate peo­ple when there are such small amounts at play. Even if I could mag­i­cally help you earn 10% on a $250 invest­ment, that’s not much in terms of improv­ing your life. I mean, I went to the movies over the week­end and it cost $27. If I helped you earn 10% a year on your invest­ment, you couldn’t even go to one extra movie as a result. That’s not life changing.

In fact, 10% would be a great return. So, we need to mea­sure what mat­ters, and what mat­ters is not the absolute return (the $25 in my exam­ple) but the % increase. And, we need to antic­i­pate the impact of com­pound­ing of that return. For exam­ple, if you rein­vest­ing the first year’s $25 gains, the sec­ond year earn­ing the same 10% would give you $27.50, and the third $30.25.

To put that $30.25 in con­text, that’s 12.1% of your ini­tial investment!

Now, I can’t guar­an­tee 10% returns (let alone 10% returns 3 years in a row!). But, I can help you under­stand how to find solid returns that present them­selves with reduced risk (less risk than the gen­eral pop­u­la­tion of stocks). In a true eco­nomic model, risk and reward are linked. The more reward you want, the more risk you have to assume. How­ever, in a prac­ti­cal world, we can make some deci­sions that help us reduce what I like to think of as prac­ti­cal risk.

So, if we get year-over-year pos­i­tive returns, and do it in a way that max­i­mizes safety, the next trick is to moti­vate you to hold out for a few years (or more, many more) so that com­pound­ing and rein­vest­ing have time to juice your returns. That’s per­haps more dif­fi­cult, but gets eas­ier over time. Researchers assume that peo­ple don’t want to think long term. I dis­agree. We buy 30 year mort­gages. As par­ents, we save 20 years for our kids’ col­lege. We can think long term when other bar­ri­ers are out of the way. Fear of not know­ing what to do, and under­stand­ing how well we’re doing are two of those barriers.

Let me summarize:

Two key tools in our invest­ing arse­nal are:

  1. Com­pound­ing
  2. Rein­vest­ing

We’ll be moti­vated if we:

  1. Mea­sure the cor­rect results
  2. Under­stand how those results matter

Get­ting started mod­estly and mea­sur­ing in a way to moti­vate helps us:

  1. Just get started
  2. Build good habits

There’s a lot more to this, includ­ing how to find those invest­ments that reduce our prac­ti­cal risk. To stay in touch, fol­low this project on twit­ter.

Is Apple’s Stock Expensive?

Here are some thoughts on invest­ing. Two in fact.

I love when peo­ple tell me “Apple’s too expen­sive”. Really?

Let’s say you have $1,000 to invest.

You hope to invest in a com­pany that grows 25% in the next year, so at the end of the year you’d expect to have $1,250.

How does share price play into that?

If you bought Apple at 600, you’d have 1.66 shares. If Apple grew 25% to 750, your 1.66 shares would be worth $1,250.

If you bought some other stock at 20, you’d have 50 shares of that stock. If it grew 25%, at 25 your shares would be worth $1,250.

How’d I do that?


Sleight of hand? 

No! Share price doesn’t mat­ter. It’s all about how well you think the com­pany will do.

Sure, it feels good to have more shares of a com­pany. No doubt. But, it’s really mean­ing­less in the end.

So, you’re won­der­ing how to buy 1.66 shares of a stock?

In truth, I don’t think you can for Apple. But, many other com­pa­nies allow you to through Direct Pur­chase Plans. These direct pur­chase plans are great for small investors who have a fixed amount to invest and want to make the most of their investments.

Of course, Direct Pur­chase Plans have other impor­tant char­ac­ter­is­tics that mat­ter to you, but that’ll be the sub­ject of another post.

I couldn’t resist the phrase “that mat­ter to you”. There are lots of facts involved in deci­sion mak­ing. Not all of them mat­ter to you. Keep that in mind as you try to under­stand how to max­i­mize your invest­ments and tune an invest­ment strategy.

And, It’s Only Going to Get Worse

Nearly half of all Amer­i­can senior cit­i­zens die broke

(from a Har­vard, MIT, and Dart­mouth study)

It seems like sav­ing for retire­ment is not about how much you man­age to save, but if you man­age to save any at all.

How come there’s so lit­tle prac­ti­cal per­sonal finance edu­ca­tion avail­able to help peo­ple under­stand how to make bet­ter per­sonal finan­cial deci­sions? Even Ben Bernanke has come to real­ize the dis­abil­ity we all face in this area. Ear­lier this week, he told a bunch of teach­ers some­thing sim­i­lar:

As the recent finan­cial cri­sis illus­trates, con­sumers who can make informed deci­sions about finan­cial prod­ucts and ser­vices not only serve their own best inter­ests, but, col­lec­tively, they also help pro­mote broader eco­nomic stability”