Managing Your Own Index Fund Portfolio

The topic of index investing seems to come up quite a bit, now that we are studying finance.

BTW, I used to work for a Wealth Management software company, which specialized in software that did asset allocation and investment selection for the ultra high net worth investor. While learning the ins and outs of the domain (CAPM, Monte Carlo simulation and Markowitz mean variance analysis) I came across a website that was great for the passive investor. The investor that wanted to invest in the true "market portfolio" or something close to it that all the theory from finance has taught us.

Here's the link to the site:
http://www.indexinvestor.com/

The proof is in the pudding: my portfolio is about a 80% stock 20% bond reference allocation, and is diversified into about 12 different index mutual funds and ETFs. You see, I decided to go "passive investor" and not try to beat the market and guess which fund or stock was hot for the upcoming year. And over past five years, I've gotten the expected return for the portfolios I put together (12.8%) after subscribing to the Index Investor website above. My target return was 10%, so it worked out pretty good, even after the market correction a few weeks back. Sure beats those 150 basis points I was paying that dude from Smith-Barney! And it was with a lot less risk.

How did I achieve this? I bailed from Charles Schwab, moved all my taxable money into Brown (lowest transaction costs for ETFs. Note: Brown was recently acquired by E*Trade), and also consolidated my retirement funds into Vanguard, which offers the best selection of no-load index-based mutual funds. I also did a bunch of research on 529 College Saving Funds, and it turns out California's isn't that great but Nevada's is (they use Vanguard). So those of you who have children should consider saving tax-free for college in the Vangard 529 using index mutual funds.

So now I sleep better and night and don't worry about my portfolio. I just worry about school.

-Chairman P

Link to Why Valley VCs are Like the Mob

A lot of our class is thinking about going into Venture Capital (if they aren't already in it). Here's an interesting blog post a friend passed on to me on Why Valley VC's are Like the Mob.

Also, I should send props out to Anil for taking on Class 32 blogging to a new level. He's written a very interesting post on the Economic Lives of the Poor. For those of you looking for more earthy entertainment value, there is Men In Thongs and Beer.

WEMBA Career Management Survey Published

As of today, Zia and I have published a WEMBA Career Management Survey on Zoomerang to gather data for what we should do for a WEMBA Career Trek. So for those of you in the Class 32 cohort, go vote! There's a link in the email I sent out on Yahoo Groups.

-Chairman P

Nichole's pictures from The Old Ship

I've snailed in posting Nichole's pictures from 1/23, but here they are (thanks Nichole):

http://www.kodakgallery.com/Slideshow.jsp?Uc=11xp1mb2.9pddhw0m&Uy=kygydw&Upost_signin=Slideshow.jsp%3Fmode%3Dfromshare&Ux=0&mode=fromshare&conn_speed=1

We'll all remember The Old Ship fondly after this is all long done.....

The Coefficient of Aging

It’s been quite a while since I last published a blog post.

Here’s the reason: Term 3 is difficult. Very difficult. And psssst: Wharton makes you old. It ages you.

Oh yeah, and I should mention that I started a new job in January, which was not exactly great planning on my part. There’s a few other classmates that also started new jobs this term, and from our discussions about it, it’s not recommended. But it can be done. It just takes a lot out of you to do it.

So as I sit here reflecting on Term 3, I realize that my personal coefficient of aging has increased this term. There are a few more wrinkles under my eyes, a few more gray hairs in my sideburns, and those bags under my eyes make me look….well….very tired. My golf clubs are sitting in my garage still packed in my travel case from my trip in November to Maui, and I haven’t watched my TIVO in days. And my Outlook task list has gotten a mile long. (I was wondering why the WEMBA grads all seemed really really smart but also very aged…)

It’s not really the subject matter (marketing, finance, operations, communications) that makes it a difficult term at Wharton; it’s the sheer volume of information that you need to absorb and learn. Add the fact that we have class after dinner from 8-10pm three times this term, and you get the recipe for a difficult term. The previous class said that Term 3 was the most difficult of the program, and I think that they are correct.

So, here’s my advice in surviving Term 3, in Letterman reverse-order ranking:
10. Stop blogging in Term 3. Check, did this one. Whoever in Class 33 wants to become the class blogger, make sure you spread the wealth and share the blogging with others.
9. Stock up on Red Bull. Doh, tried to use coffee and it was too weak. It doesn’t help when you are trying to stay awake in your communications class at 9:45pm in the evening after waking up at 5am and sitting through a whole day of class. If we can Wharton to supply some after dinner, that would be great.
8. Keep up with the work. Whoops, missed this too. Don’t get behind in your reading or class preparation, or it’ll kill you. Be warned. If you don’t, try to perfect the art of reading the case during the break right before the discussion. It’s called just in time case prep! Just don’t sit in the front of the class.
7. Unplug your TIVO and cancel your newspaper subscription. Check on the first one only. There is no time for watching TV, period. I’ve cancelled all my season passes. I haven’t seen a movie in ages either, except for “Pursuit of Happyness” last week. (Which is quite good, BTW). Oh yeah, and there’s a stack of unread newspapers sitting in my recycle container every week.
6. Get ahead in your reading. Check, but it didn’t work! My strategy was to read ahead in finance and marketing prior to the start of the term. It worked for about weekend, but there was so much to learn that I had forgotten what I read two weeks before. So my strategy had limited value.
5. Collude. Big CHECK in all capitals. As we learned in Microeconomics, collusion works. If you collude (when you can of course) with your study group and classmates, it will really help! For example, just knowing that the 2005 OPIM Final had most of the solutions to the homework was key for me.
4. Prepare for an adverse productivity shock. Check. If you take a new job, prepare for the massive adverse productivity shock (and labor supply shock, as Kip correctly points out) affecting your grades.
3. Optimize your time. Check. Big check. You will find yourself constantly feeling like you are behind (which you are). And then you will find yourself trying to optimize every moment of your day. And then you will fall further behind. So this term, I started to wake up earlier to study in the morning before heading to work. It’s still a struggle to get up at 5am every day, but it allows me to spend time with my family in the evenings. For those of you considering going to Wharton: this really is the FT program, in terms of curriculum, faculty, AND time required. It’s a ton of work when you do it FT. And it’s even harder when you are working FT.
2. Focus on the big picture. Hey, we are almost 50% done now. The first three terms have flown by, and this roller coaster will soon end before we know it. There is so much truth to what my cousin said to me about doing one of these EMBAs: DO NOT stretch it out and do a three year program, and choose one that you can get over with as soon as possible. Let’s just say that if Wharton had a 1 year program I would do it. There’s only 14 months left to go! I hear it gets easier after this term. We shall see…
1. Guard against the aging process. Check. I am using wrinkle cream, keeping up my workouts, taking lots of vitamin C, and drinking lots of water. Ok, maybe the last two more than the first two. J But at least the WEMBA prospective students that come through the class still recognize me from the picture on my blog profile…

-Chairman P

Earn Up to 6,000 Starwood Bonus Points

FYI, a few classmates asked me about the Starwood Preferred Guest promo going on. Click on the link below to check it out and sign up. Props out to John for bringing it to my attention.

This one is a no brainer for us WEMBA West students: Link to SPG.com promotion

-Chairman P

Comparing Wharton Full-time and WEMBA Programs

Check out Anil's excellent post on comparing the full-time and WEMBA MBA programs at Wharton: link

-Chairman P

Wharton West Grand Prix Results: Ariel Wins the Race

After class on Saturday, Loren organized a 10 person Wharton West Grand Prix at Go Cart Racing in Burlingame. So we cruised down there after wine tasting and raced around the track! I think everyone agreed that it was very fun but very intense. Ariel took pole position from Jack in the last few laps to take over the #1 spot. The rest of us were stuck in a pileup!

Here are the final rankings:

1 Ariel

2 Jack

3 Ron

4 Loren

5 Enoch

6 Ken

7 Gagan

8 Judy

9 John

10 Sridevi

Some takeaways:

§ Great way to blow off stress! It was really really fun. If you get 20 people, then I think that they will make a custom track. The other fun thing we could do is to do paintball. Section 1 versus Section 2? I can think of some professors we might want to invite…:)

§ Wharton Competitiveness. As I was slammin’ Loren "The Crash Dummy" into the wall and passing Gagan aka "Ghost Rider", I couldn’t help but get some great satisfaction! Everyone said afterward that their driving on the road was a lot more aggressive than normal, which I’m not sure was a good thing. It was also funny how everyone tuned into the statistics and their rankings that they gave us after the race (see pics if you want to see the numbers). Takeaway: our competitiveness in class translates into the go-cart track too.

§ Need Bigger Helmets. They need to stock some bigger helmets for those of us with bigger heads. I was the only one who fit a size XXL white helmet. I was told that it was quite easy to identify me, as the helmets were colored by size.

§ Black Head Socks are In. What’s better than the ninja head socks? We should wear them to our next group presentation….

Here’s some pics that Loren’s fiancée Yung took:

http://www.flickr.com/photos/66499233@N00/sets/72157594464297598/show/

Out for now. For those of you who expressed interest in guest blogging, now is the time! So just let me know.

-Chairman P

Thoughts on Term 3, Weekend 1

Marketing 621: Taught by Prof. David Bell. This first marketing class of the core is an interesting, interactive .5 unit class whose purpose is to educate us on how to do marketing. The next class focuses on strategy. Bell has an interactive style that I really appreciate. We had two lectures in the first weekend: 1) Segmentation, Targeting, and Positioning, and 2) Markets Analysis and LTVC (LifeTime Value of a Customer). Highlight of the class: Bell showed a funny video clip of Ali G and Donald Trump. It showed some of his pitches for ice cream gloves with some VCs. I think it's interesting how quite a few of our professors are starting to use video much more during their lectures, due to the availability of interesting clips and relevant content on the internet. It's an interesting trend in teaching that I personally like. It really drives home the point to be able to see what we are talking about in class.

Here’s a link to the Ali G / Trump video:

http://www.videovat.com/videos/1577/donald-trump-ali-g.aspx

Finance 601: This class is the core finance class for Wharton. We took a big picture, high-level view of the term and learned about Value Creation and Measures of Performance, using the Emerson Electric and Progressive Insurance case studies. Prof Percival is quite dramatic in his style, and he even slapped his own face twice in both sections to illustrate a point. (I was too slow to get a video clip…sorry) It was good to learn the intuition behind the DuPont model, and to learn the concepts behind MVA and EVA, two new acronyms to add to our MBA vocabulary. I was surprised to see some companies on the Top 5 and Bottom 5 lists in certain industries.

Quips and Quotes:

“And what is the problem wid ice cream? It drips.”

“All models are wrong but some are useful.”

“I think that Fortune has become the People magazine of business.”

“The time to be particularly worried is when you are doing well.”

“If I’m a lender, I like stable, predictable companies with fondle-able assets.”

Poker 601: There was a large poker game at the Le Meridian on Friday night in our study room that went until 4am. It was so crowded I couldn’t get a seat. But I hear Gagan hit QUAD Aces, and then Frank went “All in” on him….ouch! Bolaji has a picture of it that I’ll post when I get it…

-Chairman P

Field Report: Wharton West Coast Trek Sample

Thought I'd pass along my account of a day that I took to participate in the Wharton West Coast Trek, which concludes tomorrow. A few of our classmates will be missing the start of Term 3 tomorrow to participate.

The purpose of the trek is:"Student-managed visits to companies in various industries on the West Coast for the purpose of education and networking.". There's a big auction and students can bid points on the companies that they want. It's all managed and administered on the Webcafe website.

Here's some additional info from the fact sheet on the Trek:

• Audience: MBA 1st & 2nd years; WEMBA 2nd years (WEMBA 1st years if space permits)
• Trek Dates:Bay Area / So. Cal: Tuesday Jan. 2nd – Friday Jan. 5th
• Industries: Bay Area: Healthcare/Biotech, Technology, PE/VC, Real Estate, CPG/Retail, IB,
• IM, Consulting*; So. Cal: Real Estate, Healthcare/Biotech. Media & Entertainment, Consulting*

Some initial thoughts:

• The West Coast Trek is really good for getting a broad introduction into what it like to work in different industries and companies that are hiring traditional FT MBA grads. As an engineer, I had no idea what it was like to work in the traditional MBA-ish areas that I wanted to explore.
• I took a balanced approach to it, and selected one company in Venture Capital, Private Equity, and Investment Banking. The companies I chose were: Texas Pacific Group (PE), Morgan Stanley (IB/RE), and New Leaf Ventures (VC Healthcare). There were a lot of other types of companies and industries that I did not visit, but there are some WEMBA students who went to those. For example, talk to Loren if you want to know how the Bare Escentuals tour was! Alice went to Clorox.
• It was time well spent and totally worth it. I am glad that I did it as a first year student. It's on my must do list for next year.
• If you wait until next year to think about what you want to do after Wharton, it will be too late. Gotta start now. I'm really glad that I decided to participate prior to starting a new job next week. In talking to Zia, who's also in the same boat with a new gig, he also felt the same.

Here's my account of the day:
10:00am-11:45am Texas Pacific Group. We met in the lobby at 9:45am and then proceeded to head up to TPG's conference room, which sat about twenty people, all dressed in formal business attire. I ran into Zia in the lobby, so there were two of us from WEMBA Class32 there. Another comment: those FT MBAs sure look young. Heck, they *are* young! One of them asked me if I was Enoch Lee, who appears to be quite famous amongst Chinese women from HK in the FT program. Of course I said I wasn't, but that I knew him well. :)

12:00-12:45pm Lunch. Met up for some lunch with Zia, Enoch and Loren in the building where the next trek event was at: 555 California. All the investment banks are in that building.

1:00-3:00pm Morgan Stanley. We got 15 minute slots from a bunch of different groups: Corporate Finance, Financial Sponsors, Private Wealth Management, Fixed Income, Prime Brokerage, and Real Estate. It was a whirlwind tour of the different groups within MS. WEMBA students there: Alice, Ken, Peter, Richard and Jenn were all at the event.

3:00-4:00pm Rush out of Morgan to go get my car. Paid $27 for parking (ouch, but hey, its SF), and then sped down 280 to Sand Hill Road. Yeah, yeah, I went just a littttle fast. But I just made it down the Penninsula in time for New Leaf Ventures.

4:00-5:30pm New Leaf Ventures. Saw Masha and Haitao at the meeting, which was a Healthcare VC. Man, I thought they did some technology, but I was wrong. It was interesting to see their office in the same complex as Accell/KKR and Matrix Partners.

Takeaways:

• Sign up early. If you are a WEMBA first year, we get a total of ZERO bid points. Which means that whatever is leftover from the FT program and WEMBA second years is open to us. Not really that great.
• Get your best suit ready ahead of time. In my field, we NEVER wear a suit. I had to get mine altered. I must say that everyone was styling today, so much so that I almost didn't recognize some people. I am sure they didn't recognize me.
• This trek is very good and worth the time. I recommend it to all first years who are exploring what they are going to do post-Wharton.
• It would be even better to have a WEMBA only version targeted for more experienced job seekers. We should work with the Career Management office or Class 31s to do something for next year. At least we'd get auction bid points. If we try to do this, it would require us to start now.
• Most firms are only hiring a few interns and full-timers, and I'm sure it's really competitive. For example, TPG had 1-2 summer intern positions open.
• There are quite a few different types of investment banking jobs. It is not sufficient to say "I want to be in IB", you gotta know where in IB.
• Most people at the companies had heard of Wharton West. Some had not, so we still have some marketing and awareness to work on.
• Quote on working in IB: "Investment banks are coin-operated. Pay us more and you get better service."
• A shot on consulting careers from a former BCG consultant: "Consulting is for all those MBAs who don't know what else to do."
• Some quotes about working in VC, since I know many of us are considering it:

"If you want to work in VC, don't do it for the money. Go work for a hedge fund."
"Most of the conversations you have outside the firm are uncomfortable conversations. You say no 90% of the time."
"A VC job is about getting to no quickly."
"We don't build companies. We manage money."

• We also got some great advice on searching for a job via networking.
• WEMBA suffers from not having career services locally on the West Coast. Those in Philly are at a distinct advantage. The school tells us that they are going to fix this; we'll see if it will help our cohort or not.

There were also a few social events during the week with Columbia and MIT. A group of Stanford FT MBAs was sighted walking around today as well. In addition, there was an Alumni Event tonight at Oola which I didn't make it to.

It's late and Term 3 starts tomorrow, so I'm out for now. But it is nice to think about the light at the end of the long journey we are on...

-Chairman P