Spending a load, but still saving (I think)

Either my mouth is too small or my coordination is still in the developmental stages. Just the other day, I was sitting on the couch, IBM notebook (circa 1999) on my lap with the TV as background noise. I reached over to take a drink of my strawberry fanta soda and as I was drinking, I over shot my own mouth with the majority of the Fanta soda spilling out of the sides of my mouth and onto my beloved computer. This was an "Oh Shit! I'm so stupid!" moment right? Well, the laptop was still working, there was just some liquid in the vicinity of the keyboard. I grabbed a paper towel and starting wiping some of that fluorescent red soda up but unfortunately, the paper towel I had wasn't close to being like that Brawny shit on TV. Minimal absorption onto the towel. Of course, some seeped into the keyboard and suddenly, the IBM notebook was no more. After 7 years of near flawless performance, the IBM failed because I spilled a drink on it like a 7 year old kid would.

I thought, since breaking the computer was completely my fault, shell out some major clams to replace it; especially since I still had a desktop that was fully functional.... That lasted 2 weeks. My web-surfing behavior was completely altered. I was hardly using a computer at home since the desktop was in the "other" room (i.e. the room without the Tivo).

So I finally caved in and bought a new laptop. After much discussion with different people and some intense research, I decided to make the leap to an apple.

My biggest hold-up with making the switch from PC to apple was the price premium one pays for going Mac (after all, this is a personal finance blog isn't it?) But, now that the macbooks had recently come out near $1000 and macs were using Intel processors, I felt it was a near ideal time to make that switch. To sweeten the deal, Macbook just released the 2nd Generation Macbook Pro meaning that the original Macbook Pros must be cheap.

And this indeed was the case. I looked on the apple store website at the refurbished models and found a 1st generation MacBook Pro for $1499 (original price $2499). While it isn't the newest generation, I forfeited only a little processing speed which is fine for me as I do not consider myself a high-end user.

So while it was painful to spend that much for a computer, I still feel like a got a relatively good deal. I'm pretty happy with the purchase thus far, I just get that nagging sense that I've conned myself into believing I've saved money when in fact, I've just lightened my wallet by 15 Benjamins.

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Investor Return vs. Total Return

I read an interesting article in the NY times recently regarding investment return vs. total return. The article touches upon how most investors do not reap the returns that are usually published by the mutual fund companies. A large part of this is due to investor behavior. In other words, most of us are guilty of chasing performance and buying into funds that do well (see Fidelity Magellan in the 1990s, Janus in the late 1990s, international funds in the first half of this decade... are people doing the same with American Funds now?). However, by the time people buy into a fund, much of the great performance has already occurred.

The article mentions that Morningstar will soon be publishing not only total return but also investor return. This will give us a more realistic view of what performance is for a typical investor. Again, we shouldn't let these #s (investment return) dicate whether we should purchase into a fund. Rather, deciding to purchase or sell a mutual fund should be based on a number of factors, perhaps most importantly, whether or not the fund fits in with your overall assett allocation and investment plan.

Despite what academics tell us about how human behavior leads us to make poor investment decisions, it seems that collectively, we are all prone to continue to make the same mistakes by chasing performance. To behave otherwise (i.e. buy and hold), although better for our financial health, would not be very human. Fight those genes and resist the urge to chase performance and you will be in much better financial shape.

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