<< Back to all Blogs
Login or Create your own free blog
Layout:
Home > Category: "Intelligent"(???) Investing
 

Viewing the '"Intelligent"(???) Investing' Category

401K Decisions and other Tidbits

November 21st, 2014 at 02:40 pm

I've decided not to make any changes to my 401k contribution percentage next year. The deciding factor is my marginal tax rate. The tax savings make it worthwhile to continue to contribute the maximum my plan allows even though my investment options could be better.

I'm still able to max my IRA contributions. (If I weren't I'd put less in the 401k and prioritize the IRAs.)

I'm also not making any changes to my 401k investment choices. I'm glad that the decisions have been made and I can stop thinking about them.

I went ahead and rebalanced my account; it was unbalanced by only 1% (had already rebalanced once earlier in the year) but since I was already poking around in it and it's as easy as a couple computer clicks, I just went ahead.

In other financial news, I finally found a bank bonus deal worth pursuing (they have been few and far between this year). Found it on the ever-reliable DepositAccounts.com web site.

And we're all set for our final weekend getaway of the year! I've already "warned" DH that I plan to treat myself to a bottle of beer when we go out for dinner ... A treat I have been looking forward to as I plowed through my most recent work assignment. Smile Even with that splurge, I'm pretty sure we will come in under our vacation budget for the year.

I really need to change my sub-category and stop calling it "Intelligent"(???) Investing because there's no reason to apologize for our conservative investing style. It works for us, we are ahead of schedule with our retirement savings, the funds are there to finance DH's dream if he decides to pursue it, and perhaps most important we don't shift course depending on the way the financial winds are blowing. We have a strategy that allows us to "stay on target ... stay on target" (that's for my fellow Star Wars fans).

P.S. - I think I forgot to mention that awhile back DH gave me the go-ahead to purchase an additional bit of Series EE Savings Bonds. A friend approached us about doing a private mortgage for a home he was purchasing; while we decided not to do the mortgage in the course of the conversation I asked DH why he would consider a 30-year mortgage but say that holding a bond for 20 years was "too long." Also, I think that he is feeling much more optimistic about his life expectancy since he had the minor medical procedure. Silly guy.

Open Enrollment Season

November 11th, 2014 at 08:17 pm

My out-of-pocket (well, actually it's out-of-paycheck) for medical/dental/vision insurance for DH & I will increase 6.5% in 2015, which is right in the ballpark of what I was expecting.

I have not yet decided if I am going to adjust my 401K contribution, but I will probably keep it unchanged. While I'm not thrilled with my investment options within the 401K, I already max out IRA savings so a reduction in 401K contributions would mean more post-tax savings. The tax savings is probably enough to stay the course with the 401K ...

P.S. - Oh my goodness, I have read and listened to so many books since I last updated my sidebar!

Today's Financial Doings

August 6th, 2013 at 05:56 pm

Purchased some EE Savings Bonds from Treasury Direct after checking WHO Life Expectancy Tables and assuring DH that the statistical odds are that we BOTH will still be here in 20 years. Big Grin (EE Savings Bonds are currently paying interest at the paltry rate of 0.20% but they are guaranteed to double if you hold for 20 years. That doubling translates to 3.50%. Doesn't make much sense to buy if you won't be around in 20 years.)

DH suggested that we go out to lunch which was a nice surprise. We eat out from time to time, but it's infrequent enough that it's a treat. When we do eat out, it's for brunch, lunch, an early bird special, or with some sort of coupon type deal.

We followed lunch with a shopping excursion looking for bargain-priced gifts to bring on our overseas trip next month ... the number of DH's relatives who plan to join the family gatherings when we go to his native country is growing by leaps and bounds, and because gift-giving is a critical part of the culture, we need to buy lots and lots and LOTS of gifts. It was a pretty successful excursion; there are still many more gifts to buy, but we got a really good start.

Minor Investment Shifts

April 10th, 2013 at 06:50 pm

Had the day off today so did a little financial housekeeping:

- Issued a purchase order for I-Bonds through Treasury Direct (had to transfer funds to my linked bank account first).

- Made a minor adjustment to the allocations on my 401K. Shifted to a very slightly more conservative mix.* (A few days ago I had done the same with my IRA accounts at Vanguard.)

*I'm really not happy with the investment choices in my 401K. I've been contemplating doing something kind of crazy and writing to the Committee within the company that Administers the Plan and let them know how I feel. My number one complaint is the lack of transparency in the Stable Value Fund. How can I as a plan member know if the "safe haven" offering really is safe? I don't expect the Committee to actually listen to what one lowly employee has to say, but I just may write to them anyway. Crazy, right?

This 'n That

January 25th, 2011 at 09:00 pm

1. Tax-Deferred Retirement Savings: Finally moved from Wellsley Income to a mix of Target Retirement 2005 & Target Retirement 2010 (all Vanguard funds). It means I am now invested a bit more conservatively but more diversified, and expenses are a bit lower. Had been considering a move for months. I tend to chew on "big" decisions for what to some must seem like way too long time (plus I take the time to actually read the prospectuses), but once I make a decision I usually take action right away. I made my decision over the weekend and did my Exchange Order online, so the exchange was done yesterday. DH decided not to make a change for now, so we now have a little bit of a friendly competition going to see whose funds do better!

2. Work: The organization I volunteer with wants to hire me. If all works out, I would work for the non-profit part-time and continue working with my current employer part-time from home. If it doesn't work out it's OK because I'll just keep doing what I'm doing right now.

3. Mattress Cover: When I took our mattress cover off to wash it, the zipper "broke" (the pull tab came all the way off). I am NOT a seamstress. I have an old Singer, and I can sew more or less a straight line when I need to, but I rarely sew. I'm also not clever at all when it comes to mechanical things. But other than the zipper the mattress cover is in perfectly good shape, so I knew I had to try to figure out how to fix it. It took over an hour, it was not easy for me, and at one point I had to recruit DH for an extra pair of hands, but I did it! It's now fixed! It looks a little funny because I had to do something to make sure the zipper pull wouldn't come off again, so once I got the zipper teeth put back together and the tab back on, I pinned teeny safety pins at the ends, one on each side. It may not be pretty, but it works! Didn't have to buy a new one ... didn't have to take it to a repair shop ... Don't have to leave it unzipped (losing the anti-allergen effectiveness). It's ridiculous how proud I felt for being able to fix that zipper. DH was really happy too and gave me a big high-five. (He never would have been able to figure out how to fix it. I don't think he has ever held a needle in his hand.) It may be of interest to my fellow frugalites that the teeny safety pins I used came from sewing kits that I got in hotel rooms back in the day when I used to travel for business. Smile

4. Groupon: I signed up for Groupon months ago (last summer I think) but just recently made my first purchase. It was for $14 at the restaurant Which Wich and it cost $7. I redeemed it today for DH & I ... 2 sandwiches & a large shake that came to exactly the face value of $14 (yes, I planned my order so I wouldn't go over the $14). Usually the Groupons are for things we don't buy (spa treatments, expensive restaurants, etc) and while they do offer golf packages regularly they aren't that good of a deal so DH has passed on all of them. While we were happy with today's deal, I'm not sure if it's worth the time of getting a daily Email when there are so few offerings that we would use. Anyone else had better luck with Groupon?

Our Stock Trading Days are OVER!

December 13th, 2010 at 06:47 pm

Almost 2 years ago we opened a Schwab account. Since then, we've made a grand total of two stock trades (or four, depending on how you count them ... Twice we bought shares in a company, and then sold it).

Today I called & liquidated the account because my poor DH just couldn't stomach it. After we bought the stock, he'd sit there and watch the price constantly, and even after we sold it he would sit there and STILL watch the price, second-guessing the decision to sell.

Poor guy was a nervous wreck. It just wasn't worth it.

Once he practically screamed at me "How can you be so calm about this???" Well, the answer is that even if we had lost every penny we had put in to the stock we still would have been fine. It wasn't like we had bet the farm. And I knew that my getting excited about it wasn't going to change the price of the stock one bit.

When we sold the last stock, I told him that we either had to: 1) choose some dividend-paying stocks to buy & hold, or 2) cease buying individual stocks forever. He chose option 2. As soon as our last sale had settled, I made the phone call to Schwab and a check is on the way. The check will go in to our savings account, and we will continue with our plain-vanilla investments.

P.S. Since inquiring minds will want to know, no, we didn't lose money. (We made a little in fact.) That's not why we liquidated the account. It was purely for my DH's mental health.

Why I Bought My First Series EE Savings Bond

October 14th, 2010 at 03:23 pm

OK baselle, since you asked:

Did something recently that I never thought I would do ... I purchased a Series EE Savings Bond in my Treasury Direct account. Until recently, I've been able to find better options for cash not needed in the short term (such as CDs or High-Yielding MMAs). And although I own TIPS and used to buy Treasury Notes, it has been quite awhile since I bought a Treasury since, to be blunt, the yields suck. And Series EE Bonds always seemed to be just about the worst.

That was then. Welcome to 2010, and the age of ever-shrinking yields on bank accounts.

Last month I was looking for a place to park a bit of cash that I knew we would not need until our retirement years. (Our IRAs would have been my first choice, but they had been maxed out.)

After scouring rates on CDs and MMAs, I was getting frustrated at the low rates I was finding. Not expecting much, but figuring I had nothing to lose, I decided to poke around on the Treasury Direct site.

Found out that Series EE Bonds Savings Bonds purchased through Oct 31 are earning 1.4% interest. Not so good. For some reason I kept reading & I learned some interesting tidbits:

- A Series EE Bond earns interest for 30 years
- You have to hold the bond for at least 1 year
- After 1 year, you can cash out the bond any time
- If you cash it out before you have had it for 5 years, you will pay a penalty of 3 months' interest
- That means that if you hold the bond for 5 years, you can cash it out any time after that for no penalty
- THIS IS WHERE IT GETS INTERESTING: Your bond is guaranteed to double in value in 20 years! (I had to double-read that part to make sure my eyes weren't playing tricks on me.) Based on my calculation, that means that if I hold the bond for 20 years, the US Treasury will add enough value to the bond so that my interest earned equivalent will be 3.5%.
- TO MAKE IT EVEN MORE ATTRACTIVE: Interest income on federal taxes is deferred until the bond is redeemed. (I think state income tax is also deferred, but I'm in a no income tax state so didn't verify that.)

What this means for me is that I'm guaranteed 1.4% (tax deferred) holding the bond for 5 years, and 3.5% (tax deferred) if I hold the bond for 20 years. In 5 years, I'll see where interest rates are and decide if I want to cash the bond in and move the money or continue to hold it.

If anyone else is interested, I recommend going directly to the source and confirming all information on the US Treasury's web page: www.treasurydirect.gov

And if you have children & are saving for their college education, be sure to read about the tax advantages to using Series EE Savings Bonds to pay for their education. (If I had a newborn & knew I could earn 3.5% for 20 years, probably tax-free, I'd be buying an EE Bond!)

Sneakers On The Ground

May 9th, 2010 at 08:41 am

Tho I've not been around SA much lately, I am still actively involved in my household's personal finances on a daily basis.

I started this blog to chronicle our relocation to a lower cost part of the country (plus join the $20 Challenge), and now that we are firmly established in our adopted home of Austin, I just haven't been blogging as much.

In a nutshell, these are the major PF-related things that have been happening:

1. Wills Re-Done: Finalized (witnessed & notarized, including Affidavits, copy sent to Personal Representative) in early-March. I bought the NOLO book & used their software & created the Wills myself. I would have preferred to use an attorney (DH was not willing to pay the fees to have an attorney prepare our estate documents), but I am happy with NOLO and did the best job I could. The book was clearly written and I got quite a bit of helpful information from it. For me, the way the book was laid-out seemed very organized, and was a great way to think and work through the process. I recommend it for anyone else thinking of doing a DIY Will. I made an effort to keep things simple, in order to minimize the risk of making a mistake. For example, I decided not attempt to create a Trust myself. I also read up on Special Needs Trusts (I have a brother who is developmentally disabled who is a major part of my estate planning), but found out that he does not need one because he does not collect Social Security Disability Insurance.

2. Second Car Purchased: We finally bought a 2nd car. Paid cash. New car. We have owned both new & used, and I believe both are reasonable ways to go (I'm not a believer in "one size fits all" when it comes to PF). Based on how we have owned previous cars and how we feel about cars, I realize that for DH & I, Jonathan Pond's motto of "buy used if you love cars, buy new if you hate cars" is the way to go. In other words, if you are a "car person" and like to change cars frequently, go for used cars. But if you are NOT a car person (like DH & I), keep your cars forever, and do not necessarily like the car-buying process (but put a lot of time & research & mental anguish in to the decision-making), then buy new. Only once did we buy and sell a car within a short period of time, and that was a special scenario. Other than that, we have owned our cars for very long periods of time (our current "first car" is a 1999 model that we bought new, has almost 150K miles and we expect it to last for at least another 50K). We bought a Prius, at the height of the "anti-Prius hysteria." We had looked at the Prius for a couple years, but felt they were overpriced. For a very brief period Toyota offered a $1K Customer Loyalty rebate (if you blinked you missed it), and one dealer in our area offered previously-unheard-of discounts on a couple stock vehicles. On top of that, I was getting ready to restart my full-time seasonal job & we had been sharing one car for several years, so while it definitely wasn't "the best car deal ever" it was enough of a deal and the timing was perfect so we jumped off the fence and wrote a check (plus $5K on the Am-Ex ... for the points ... paid off when the bill came in). Boy that dealership was dead at that time; the salesman said we were his only sale that month.

3. Still Studying the Possibility of Buying a Vacation Rental + Looking at a Self-Directed IRA: At the turn of the new year, I had looked in to buying a 2nd home in our area to use as a vacation rental, then put it on hold because the real estate market in was firming up (didn't think we could get a very good deal). But now that the New Homebuyer's Tax Credit has expired, I think there may be another dip, so we continue to keep a close eye on the market. I am reading "How to Rent Vacation Properties By Owner" by Christine Hrib Karpinski, and that got me thinking about establishing a Self-Directed IRA. I had been wondering if an IRA could own an investment property, and it turns out that a Self-Directed IRA can. Also, I have been perturbed thinking that I could not own individual Treasuries in an IRA (can't see paying a fee to a mutual fund company to buy something I can buy myself through my Treasury Direct, but a Self-Directed IRA may be a way to do just that. These are my current "Big PF projects" ... learning more about vacation properties & self-directed IRAs.

4. Sneakers On the Ground: For some reason, I often ponder "big PF questions" while out walking the dog. On one walk recently, I was thinking about our investment style. While our MF investments are very conservative, we have made bold & risky moves such as DH quitting his job & starting his own business, me starting a small business, relocating to a lower cost part of the country, and now thinking about buying an investment property. I don't think you can categorize us as "risk-takers" or "conservative." I think the military expression about "Boots on the Ground" is fitting ... We like to be very hands-on, looking & observing & participating in what we are investing in; we willing to take risks as long as we have quite a bit of control over those risks and know exactly what is going on.

5. And Speaking of Sneakers: OK, this is not a "major PF thing" by a long stretch, but I did want to point out that everyone, no matter how firmly they have their personal finances under control, struggles with temptation. While it was definitely NOT the case in my younger years, I do feel that my DH & I do a pretty good job overall of managing our finances. But the "consumer bug" still bites from time to time. It's a constant job to keep things in balance. Right now I am hearing the siren song from those "Shapeup" sneakers by Skeechers. Just love the idea of getting extra toning (and maybe some health benefits) while walking just by wearing a certain pair of sneakers! But the rational side of my brain can't see spending $100 for them. So I've decided that if I ever see a pair for $50, I will buy them. I'm hoping they will come out with some awful color scheme that no one wants and they will put them on clearance (I won't care about the color), or maybe it's just a matter of waiting for the market to become more saturated. I will allow myself to indulge in a pair, but only if the price comes down by half.

Hope everyone here has been doing well ... I have stopped by to read folks blogs from time to time, but feel I am out of touch.

Decisions and A Bold Move

September 23rd, 2009 at 07:18 pm

1. Estate Documents: Decided to go for a DIY simple will instead of a trust. I think a trust would be better, but I don't have the confidence to do one on my own. After reading as many reviews as I could find, decided to use NOLO. Ordered their Simple Will book plus CD, and their book on Special Needs Trusts plus CD (because of my brother's situation). I decided against the on-line version since I'll need to do 2 wills (one for each of us), and I know I'll be redoing them in the future, so might as well have the disc I can use over & over again without having to pay over and over. DH has already conveniently forgotten his promise to let me hire an attorney when we turn 50. Sigh. Also, I want to read up (especially on the Special Needs Trust) before I get started.

2. Roth Conversion: We have looked at the idea of converting our IRAs to Roths upside down and sideways and have decided that it's not the right decision for us. We will NOT be converting. Since running the numbers involves making lots of assumptions, I could be wrong, but based on what I know for sure right now and our best guess of what the future will hold, it doesn't make sense for us. Everything we are reading is saying "convert, convert, convert" so I guess we are going against the grain yet again by not converting.

3. Readjusted Tax-Def Retirement Plans: I have mentioned before that we got a bit aggressive with DH's 2008 tax year contribution to his tax-deferred retirement plan, due to the "clearance price" on stocks, putting 100% of it in the Vanguard S&P 500 Index Fund. Last night we moved almost everything in both of our tax-def plans to the Vanguard Wellesley Income Fund. It has a target allocation of 35% stocks (tho currently it's 39%) and 65% bonds. The only portion of our plans that did not go in to Wellesley is a piece that we have to keep separate for tax/recordkeeping reasons that is still in the STAR Fund. DH actually wanted to go to 100% bonds, but I completely disagreed, so we went with Wellesley. This represents a pretty significant shift for us (according to Morningstar X-Ray, we were at 51% stocks before the shift), and I think it marks the beginning of our pre-retirement retreat from stocks. Right or wrong decision? Who knows? Time will tell. But a lot of thought went in to it, and again, as unconventional as it may be, it seems like the right move for us.

Note to Self: Might Want to Check the Minimums FIRST!

February 13th, 2009 at 09:33 am

As part of my on-going research on possibly going more aggressive with a small portion of our portfolio, I was researching US Stock funds at Vanguard. Saw the "Market Neutral Fund" and started reading about it ... thought it sounded a bit interesting (tho' quite complicated and would require MUCH more reading before deciding to invest) ... then I clicked on the "Minimums & Fees" page ... $250,000 minimum!!! Holy *@$%* Batman!

Wish Me Luck

February 10th, 2009 at 06:57 pm

okay ... Lots going on:

- House: We are getting extremely close to making an offer on a house. We have 2 in our cross hairs. The one we are most interested in is a bank-owned foreclosure. Might happen this weekend. DH is due to leave on a long business trip, so all the paperwork and details and negotiating will be left to me. Nothing new there. Smile

- New Little Side Business: As of this evening it's officially up but not yet running. Had to spend a little moolah today to get the ball rolling. DH is freaking out ... I must work hard to make sure I can at the very least recoup what I spent. (Don't worry. It's not enough to hurt us even if I fall flat on my face, but you wouldn't know that from the way DH is acting.)

- Stock Trade: We made our first trade. Bought an individual stock that we sold for an itsy-bitsy-teeny-weeny profit a few days later. Trust me, it was just beginner's luck! Interesting experience. DH got all worked up over the whole business. Been watching a couple stocks since then, but I'm thinking more seriously about becoming a buy & hold stock investor. We're really not "day trader" types and besides I think it would give DH high blood pressure.

- Volunteer Work: It's almost a full-time job right now. I have realized that my unpaid, volunteer work (due to level of responsibility and job title) would look better on my resume than my paid job. Right now is an important turning point for the organization I volunteer with, so everyone is working overtime and the number one gal is doing nothing but eat and sleep and work.

It would be nice if I could have just one or two of these developments going on right now, and save the others for later, but this is life and I am coping as best I can.

First 3 Financial Decisions of the Year

January 6th, 2009 at 07:01 pm

1. Today's 10-yr TIPS Auction (first of the new year, and one of only a couple for 2009): We decided not to participate. I sort of wanted to, DH did not want to, and I was not sure enough that it was a good idea to try to persuade DH. (I am starting to think that if DH was single, all his money would just be sitting in the bank. I'm the one who brings up things like TIPS and mutual funds, and sometimes I have to push to get any sort of investing done.) Since my crystal ball has not yet been delivered, I of course have no way of knowing what will happen in the next ten years. Best guess? A period of deflation (due to constriction in consumer spending) followed by soaring inflation caused by the pent-up pressure of the presses at the Bureau of Engraving and Printing running overtime during a deflationary period? Auction results were published at www.treasurydirect.gov and the yield was 2.245%. I suppose it would have been fine if we had participated in the auction, but it's not the end of the world that we did not. (If, 7 years from now, we are in a prolonged period of double-digit inflation, please remind me what an idiot I was.)

2. New Bank Account for Bonus: We decided to open up a new checking account just to get a $100 bonus (we had received a promotional coupon in the mail). We have to keep the account open for 6 months, and there is no minimum balance requirement. I do wish that banks would just offer better interest rates rather than offering these bonuses, because it is a bit of a hassle to open and close accounts ... But I suppose that is why they do it the way they do ... There are lots of folks out there who can't be bothered to open & close accounts, but for $100, I sure can!

3. We Decided to Buy a Specific House (it didn't pan out, so don't get too excited): While at a party on Saturday, DH received a semi-cryptic message from a builder's sales rep saying "I sure hope you're still in the market for a house. Call me." DH got up early Sunday morning and checked the builder's web site, and saw that on one house in particular they had taken a BIG-TIME price drop. He came in and woke me up all excited like a kid on Christmas morning. I checked it out and got very excited myself. I said "Let's buy it!" and DH agreed 100%. It was truly a screaming deal. We were ready to go out to the house and sign a contract on the spot, for the asking price. (It is in one of our favorite areas of Austin, we know and like the builder, and DH had visited that particular house and had liked it very much and explained it to me in a way that I knew I would like it too.) We had to wait several hours until the sales office opened for the day, but I got my checkbook out and put it in my purse so we could head out there and write them a check. While waiting, I was doing chores around the house and DH was on the computer Zillowing, etc. Before too long, it started dawning on both of us that something was not right, that it was just too good to be true. Gradually we came to the realization that there had to be a mistake, perhaps a mis-typing when the new price was inputted. It felt like the air slowly going out of a balloon. When the sales office opened for the day, I called them to check on the price, and as we expected the price posted on the web site was wrong. In fact, the actual asking price was more than double! Oops!

Poor DH looked so let down, but I wanted to end the whole experience on a positive note for him so I high-fived him and told him that he has a great eye for a bargain (he does).

What I learned from the experience is that we are 100% ready & willing to buy a house when the right deal comes along, and that we are capable of making a VERY quick decision if need be.

----------------------------------------

Our 4th financial decision of the year will probably be made very soon, and it will involve our apartment lease. We had wanted to move to a larger apartment back in December, but the management of our complex kept dragging their feet. Our lease is coming up for renewal very soon, and it's time for us to make a decision about what we want to do. We have new rent rates on our current unit, and information on a possible larger unit. Today I went out and checked out several other complexes for comparison purposes. We are now leaning towards going to a month-to-month lease. That will give us more flexibility. We're looking at Sept or Oct as possibly a good time to buy, but if we find a great deal (like the one we found over the weekend, but "for real") sooner than that, it will be nice to not have to break a lease. Never in my wildest dreams would I have imagined that I would be a "month-to-month lease" type of person, and certainly not at age 40-something. To me, month-to-month leases are for people who don't know where they will be a month (much less a year) from now. And guess what? Right now, that's me.

Out With The Old, In With The New

January 2nd, 2009 at 08:32 pm

1. Year End Net Worth Calculation: We ended up a leeeetle bit for the year. And when I say "leeeetle" I really mean it! 2%. Considering that ROR on mutual fund investments was -25.2% for the year, we can live with that. It means we retained enough of our earnings to ever-so-slightly more than offset our losses. Just like so many of you guys, living below our means was what saved us from being down for the year.

2. DH's Business (2008 results & 2009 outlook): DH's business for the year was down slightly (compared to his annual average). He had started the year off with a bang and we expected it to be an up year, but it didn't end up that way. In 2009, we expect business to be down more. There are a couple big factors working against us (one of them of course is the overall state of the economy), and a couple working in our favor. We will be satisfied with a year that is "just moderately bad to okay." And we know we will be fine even if it is really bad.

3. New Year's Resolutions: I don't make formal resolutions. My goals are created as the need arises, or as I am inspired by something, or learn something new that makes me realize there is something I should be working on. The ones I am working on right now are continuations of things I was already working on Dec. 31st.

While it's not a resolution, I did buy a special book for the new year ... "The Intellectual Devotional" ... I will be reading my way through that this year. Since it is formatted to be read starting on a Monday, I started it on Dec. 29th.

Again, while not a resolution, the one thing I was becoming dissatisfied with towards the end of 2008 was not using my time effectively. So, since the "devotional" (it is not a religious book BTW) is meant to be read one page each day, and since I am reading it in the evening, I stuck a post-it note to myself on the inside cover asking myself: "Am I satisfied with what I have to show for how I spent my time today?" So far, that has been a help. I hope it will continue to be.

4. In-Laws & Plans for the New Year: My FIL finally did it ... after much dragging-out, he got things wrapped up with his business and is now officially retired! I have mentioned before that DH & I want to give them something special such as a trip to commemorate their retirements (my MIL worked part-time at my FIL's business, so both of them retired). The gift is now in the planning stage! When we called to wish them happy holiday, we asked him where he would like to travel. He said he wants to come to the USA. And then he started listing the places he wants to visit. You'd think it would be something like "San Francisco, LA, and San Diego" or "Philadelphia, NYC, and Washington DC" right? But no! He said, "I want to go to Denver ... and Atlanta ... and Boston" ... LOL! That's so cute. (Places can seem so close to each other when you are looking on a map.) They want to come for 3-4 weeks, so I think we could actually make that itinerary work. We know this will be his last trip here, if indeed he is even able to make it this time. He has had some serious medical issues over the past few years, including a couple times he was rushed to the hospital for life-saving procedures ... Not the sort of thing that could be dealt with easily on a 13-hour plane ride. First he has to talk things over with his doctor, figure out what the risks are, and then decide if he wants to take them. DH & I have talked about it, and if the trip is a no-go, we are going to give them a cash gift and tell them to use it on anything that would make them happy. I mentioned that it might seem impersonal to give cash, but DH reminded me that in his culture it is perfectly acceptable, so that is what we will do.

5. Party: We got our first formal party invite since moving here to Austin. It's a "wrap up the holiday season" party. Isn't that a nice idea for a party, having it the weekend after New Year's? We did not have to worry about being out with the drunk drivers, we were able to stay home and calm our dog when the fireworks went off, and (most important for us old folks) no need to worry about staying up until midnight. Should be fun, and should be especially nice for DH, since part of the problem he has been having with Austin is feeling "out of the loop" socially.

What I'm Noticing and Thinking About These Days

October 24th, 2008 at 08:48 pm

1. On "Sensible Spending":

Went grocery shopping today. (For those of you following the HEB Banana Price Index, it is holding steady at 49-cents per lb.)

Midway through my trip I realized how much more comfortable my past couple grocery shopping trips have been. I had my list and coupons and pen, and I kept a running tally on my list of how many dollars worth of merchandise I had in my cart. Sometimes I paused to study the product and prices before deciding which item to buy. At one point I whipped out my little calculator before deciding on making a purchase.

What was comfortable about it? Not once did I get a funny look! I used to get funny looks from other shoppers quite often. Today no one looked at me sideways, and I noticed that I had a lot of compadres ... lots of people clutching lists & coupons. A nice older gentleman & I had a brief exchange over which package of frozen vegetables was a better deal with the in-store coupon. I saw something I rarely see ... people stopping and really looking and thinking before pulling something off the shelves, not just grabbing randomly. I saw one woman looking at the prices of soda with a VERY pained look on her face; I mean, I could almost see the internal struggle she was going through written all over her reddening, screwed-up face ... poor dear. I fought the urge to hug her and whisper "tap water ... it's better for you too" into her ear.

2. On "House Hunting":

We have about 80 houses on our watch list. Last weekend a very interesting thing happened ... On Monday, the status of 4 of them changed from "pending" to "sold." I found out the sales prices, and 2 sold for 97% of list, 1 for 99%, and 1 for 100%. Now, this does not necessarily tell the whole story ... for example, if the seller paid the buyer's closing costs, or threw in some appliances or a car or a vacation or whatever, then the sales price as percentage of list can appear inflated. And, please keep in mind that the houses that are likely to make it to our watch list are those that we consider to already be "bargain priced," so it's possible to percentage on our list that are selling is a bit higher than the percentage for the San Diego market in general. But still, it was interesting to see so many go to sold over one weekend (I had not been keeping track before this, but if my memory's correct there was maybe 1 going to sold every 2-3 weeks) and selling for so close to list.
Whether last weekend was a funny little blip or part of a trend remains to be seen. Very curious to see what will happen THIS weekend.

3. On "Investing & Risk Tolerance":

I've been thinking about this a lot the past few days ... You know those risk tolerance calculators that you can find on all of the mutual fund web sites (and other places)? Did they not work? Do they need to be re-calibrated? Or did people either just not bother to do them or not answer them honestly or without much self-awareness? Why do so many seem to be invested in things they very clearly did not have the risk tolerance for? The tools were right there for the taking, free of charge ... Did not enough individual investors not use them? Or did they not work as they should have? It's so baffling; am I missing something?

4. In Spite of the Craziness in the Stock Market, One Truth Remains: Numbers Don't Lie!

Yesterday my husband started talking about how he was thinking of moving his entire SEP-IRA to bonds - GASP! I knew I had to stay calm, so I just asked him why, and he started moaning about how much money he has "lost" (his word, not mine). I told him "you haven't lost money." And he said "how do you know?" I pulled out the good old-fashioned yellow sheet of lined paper from the front of his SEP-IRA file where I keep track of his annual contributions and I showed him how much he has contributed out-of-pocket and how much his balance is now, and whaddayaknow ... He hasn't lost money ... He has made money. Not a ton, but a bit. Up about 3-1/2% per year since he started contributing to his SEP (formerly a Keogh), tax year 2001, this in spite of the recent downturn. I think I've managed to talk him down from the ledge ... for now. I wonder how many other people have actually done better long-term than they think they have? They should look at the numbers ... they don't lie ... and they aren't emotional either.


ROR (Rate of Return)

October 13th, 2008 at 10:42 am

When I heard a TV commentator end of last week mention that the stock market was down 30% from its high a year ago, I decided to check my Vanguard portfolio to see how it was doing in comparison.

I discovered a nifty little tab labelled "Performance" which showed me my ROR (rate of return) for 1 year, 3 years, and 5 years.

1 year = -12.7%
3 year = +4.1%
5 year = +5.2%

Nice to see things from that perspective ... No, the last year has not been great, but I am still doing fine when looking back over the past 5 years. Not necessarily anything to celebrate, but nothing to get depressed about either.

This is for my account only. DH has not been with Vanguard long enough (he used to be with TRowe Price) to see anything longer than the 1 year ROR.

And just FYI, my portfolio has not always been as it is now. For a time, we had a jointly-owned Vanguard MMF (which we no longer have) which was included in the calculation, and in the past I owned other funds such as Target Retirement funds. But other than the MMF, I have always owned mixed asset funds or a mix of funds consistent with my preferred asset allocation.

I Know Enough to Know What I Don't Know

October 6th, 2008 at 02:23 pm

No secret around these parts that I am a conservative investor, so this may surprise some, but right I am feeling some urges to put more money in to the stock market. (Bet you never thought you'd hear me say that, right?)

My great-grandfather did pretty well putting money in to the stock market following the crash of '29. There's a side of me that asks if he had the guts to do it, why don't I? You know the little voice, the one that says:

Oooh ... Dow's below 10,000 ... prices are down so much, so stocks must be a real bargain, right? Maybe ... maybe not. Bottom line is: I don't know. I am not a stock-picking genius. I am not my great-grandfather. I am comfortable with my current investments, and I am going to stick with them. We will continue putting money in to our IRAs (as much as we are allowed), and those new monies will continue going in to mutual funds that are a mix of stocks & bonds.

In keeping with my conservative nature and spurred by the current market drop, I have set a date when I will start gradually pulling money out of the stock market. But that doesn't involve making any changes right now.

We will continue house-bargain-hunting and nurturing my husband's business. We will continue living below our means and saving. Those are areas where we feel comfortable and confident. That's what I know.

But I am NOT going to buy individual stocks or invest in stock funds outside of our tax-deferred savings ... and I can live quite happily with the results, even if I miss out on the next bull run. I will not regret that I did not buy stock XYZ and double my money in 6 months. And just what is stock XYZ, the one that will double in 6 months??? I have no clue.

I may not know a lot, but I do know enough to know what I don't know.

Still Around

October 2nd, 2008 at 08:50 am

No, the fact that 2 of my banks (WaMu & Wachovia) went buh-bye within a period of 5 days did not cause me to take a long walk off of a short pier. I'm still around. It's just that DH's business and my volunteer activities have really kept me hopping, and I did not want to crank out a hurried blog entry that would end up sounding completely incoherent.

First, on the bank thing. I know you're all sick of hearing about it, but as far as I know I'm the only one around here who has accounts at both of the "W" banks, so you might be curious to know how I feel about the whole business. It's fine. Really. Since WaMu was a bona fide failure, it was more disconcerting. But we had already done what we could (short of panicking and pulling all of our money out) to feel prepared for a failure. And with Wachovia ... well, the irrational side of my brain thought that it would have been nice if I could have had a couple weeks between bank blow-outs to get myself prepared emotionally for it! Smile But then again, maybe it was nice to just get it all over with at once. I'm still keeping my eye on what will happen with my yields. With WaMu, I have an MMA. Don't have very high hopes there. With Wachovia, most of my money is in CDs, so I am hoping that my rates will be in effect until the CDs mature.
I went in to my WaMu branch yesterday (had volunteer-related business that had to be taken care of), and the mood there was quite upbeat ... A big change from Friday.

On a really positive note, I did manage to earn some respect points with my DH for the nagging I did to get him to switch his business account from one that was not FDIC insured to one that is. (Side note: As small business owners, we are fully in support of raising the FDIC insurance limit, and think it is long overdue. This is something they have been talking about for years. For many small businesses, ours included, it is darn near impossible to operate efficiently and keep your balances under $100K at all times.)

Thrift-o-rama asked how we were coping with all of the turmoil in the financial markets, and someone else asked what we are going to change. This is what I've done and what I am going to do (and whether I'm right or wrong, I really don't know, but I'm doing what feels right for us.)

- Over the weekend, spurred by the WaMu failure, I printed out two well-known poems that I like and they are sitting on my table so I can glance at them any time I need to. They help me stay focused. One is "If" by Rudyard Kipling, and the other is "Desiderata" by Max Ehrmann. BTW, I know many people like the line in "If" about keeping your head when all about you are losing theirs, and I like that too, but actually my favorite part is "If you can fill the unforgiving minute with sixty seconds' worth of distance run, yours is the Earth and everything that's in it."

- On Monday I turned on the news as I was getting ready to make lunch. Saw the Dow plummeting. On top of 2 banks going under, it did feel overwhelming, and I'll admit I felt anxiety coursing through my body. I found myself thinking "OMG I hope the Dow doesn't drop below 10,000 ... no, it's not a logical response and 10,000 really is no different from 9,999 ... it's purely a psychological threshold ... but it goes to show that no matter how rational we try to be, sometimes irrational thoughts take over. I realized I still had work that needed to be done and I needed to focus. So ... and I admit this may sound silly ... I decided that instead of just throwing together a sandwich, I was going to make myself a nourishing lunch of brain food. I fixed a salmon patty and steamed spinach. That's right ... the Dow plummets and scfr steams spinach! Big Grin

- Monday evening, after I had finished the work I needed to get done for DH, I popped a Netflix DVD in the player and watched one episode of the old BBC series "As Time Goes By." I love that series ... It never fails to make me laugh out loud. By that point, I REALLY needed a laugh, and it felt good.

- As far as our investments go, we're not changing a thing. Our portfolio was designed so that we could emotionally handle a serious market downturn. I did write a date on my calendar (in 2015) when I will revisit our asset allocation, and come up with a plan to GRADUALLY, year-by-year start moving out of stocks. At a certain age, I'd like to be 100% out of the stock market. (My thinking at this time is that age 65 would be good ... I do realize this is not necessarily a wise plan for everyone.) I feel for the senior citizens whose portfolios are taking a serious beating. I wonder how many of them still have the same asset allocation that they had when they were 40 or 45 or 50 ... and if it made sense for them back then and they just never changed it?

- As far as cutting back, we decided not to renew our just-expired subscription to the Austin Sunday paper (I get the WSJ Mon-Sat). Because we are moving away, we may have decided to let it go anyway, but the country's financial situation made the decion to save $2.44 a week that much easier. I clip a couple coupons in an average week, but do not save enough from them to justify the cost of the paper. Also, DH & I have been discussing our grocery budget and how we might trim it a bit. I am going to be presenting my plan to him when he returns from his business trip next week.

- I have some scrap gold (broken necklace, etc.) somewhere. I'm going to go ahead and sell it ... If I can find it. Smile

- I'm going to vote. Nothing new here, but I do believe it's one of the most proactive things all of us can do to impact the course our country takes.

- We're moving whole-heartedly ahead with our plans to buy a house.

- And now for the more unconventional, and perhaps controversial, idea: When we open our next bank account (if we decide to bail on Chase or Citi for example), it will likely be with a bank that is owned by a non-USA company. For example, since we are moving to Cali, having an account with Union Bank of California makes sense. They are a member of the Mitsubishi UFJ Financial Group. If diversifying your stock portfolio internationally makes sense, then why not diversify your bank accounts as well? Y'all can call me crazy if you like, but as I said, we're doing what feels right to us.

How My Boring Portfolio Did: Today vs. Friday

September 15th, 2008 at 07:37 pm

Typically, I wait to check our mutual funds' balances until the end of the month. But when I heard the news over the weekend about Lehman & Merrill, I thought it might be "fun" to check our balances at the close of business Friday and the close of business today, in order to share how a boring (conservative) portfolio like ours does on a day when the stock market goes down big time.

For anyone interested in a recap of our conservative portfolio, and the reasons behind it, and how I understand that it is not for most people, you can check out this post:
http://scfr.savingadvice.com/2008/02/25/peekaboo_35981/

I'm sure you're all sick of hearing it, but here's a recap of the stock market today:
Dow down 4.4%
S&P 500 down 4.6%
NASDAQ down 3.6%

And here's how our funds did today:

Vanguard LifeStrategy Conservative Growth down 2.3% (from $15.83 to $15.47)

Vanguard STAR down 2.5% (from $18.68 to $18.22)

Vanguard Balanced Index down 2.5% (from $20.29 to $19.78)

Overall, our mutual funds are down 2.3% today compared to where they were on Friday. I can live with that. I'm not going to change a thing. I just cannot stomach wild swings (due to my fairly low tolerance for risk combined with the risk involved in owning a business). But 2.5% down compared to 4.6% down for the S&P is something I can handle. In fact, it's days like today that make me glad I'm invested the way I am.

And to those of you who are invested heavily in the stock market ... who have a high risk tolerance and are taking this crazy market in stride ... I salute you! Really, you are to be admired.

Psst ... Hey Buddy ... Wanna Hear About My Hot Investment?

July 23rd, 2008 at 08:39 pm

This investment's a guaranteed winner. And best of all, anyone can do it. Car maintenance. (What? You expected me to say I bought tulip bulbs?)

Yesterday I took my Camry in for its 120K mile tune-up. In addition to routine maintenance (oil change, radiator fluid change, tire rotation) there was a long list of things Toyota recommended should be checked out. Based on the lookover results, dirty transmission fluid was flushed and 2 accessory belts were replaced. Total "investment" was $377.

---Knock on wood---

Hopefully my investment will pay off in the form of a car that doesn't breakdown suddenly on the freeway, needing to be towed, causing me to incur unnecessary expenses, and making me miss pay because I can't get to work. And hopefully my investment will pay off in the form of a car that is still going strong at 200K miles (allowing me to keep my money in the bank, earning interest, instead of buying a replacement vehicle).

Getting Things Done

July 18th, 2008 at 08:01 am

1. Short Sale House: DH & I went to look at it yesterday. It is a real beauty, and it is being offered at a really good price. I had looked at it once, and was afraid DH would fall totally in love with it and want it. I say "afraid" because while it is a lovely home, it looks like the type of home where we would spend quite a bit of time on upkeep of the house and the yard. Fortunately, DH agreed that the house would require quite a bit of time on an on-going basis. (Actually, he made that comment about the yard only, but I can tell the house would be the same, and guess whose shoulders that work would fall on?) The house is pre-foreclosure and has been unoccupied for 6 months. It has not been trashed, but it has been a bit neglected. When we got home, DH walked in to our apartment, looked around, and said: "I like this apartment. It's so CLEAN!" I replied, "Yes, it is" but inside I was laughing and thinking "That's because the magic cleaning fairies show up on a regular basis" Big Grin I was also thinking "Give me 3 days alone with that house and it will sparkle" but I didn't say that because frankly I'm still hoping for a smaller, more modest house and I did not want to put any ideas in DH's head.

2. 2nd Car: Apparently I was not the only one researching cars the last month. In addition to the SmartCar that I want to test drive, DH wants to check out the new Volkswagen Jetta Diesel. Looks like a reasonable choice to me. Now I just need to find out if it's currently available in our area.

3. Short-Term CDs: BofA is offering a 7-month CD @4.11% (available on-line only). Not too shabby. We decided to go with that for some of DH's post-busy-season money. Higher rates are available elsewhere, but either the terms are longer or the bank is shakier.

4. VMSXX: We discussed, and DH is considering it. He's a bit anxious about putting non-tax-deferred dollars in a non-FDIC insured spot. Why that is any worse than putting tax-deferred money in a non-FDIC insured spot is beyond me. He keeps asking me: "How safe is Vanguard, really?" I'm all for VMSXX, but DH needs a bit more time to process the idea ... He has a couple friends who are both financially savvy and conservative. No doubt he will be consulting with them. Hopefully we won't end up with a mattress investment.

All and Sundry

May 6th, 2008 at 02:46 pm

Gonna try to get caught up on a big list of things I have been wanting to blog about. Please pardon the long and varied "everything but the kitchen sink" type post.

1. "Journey to Balance Sheet Affluent" Update: Did my end-April Net Worth Statement while the guys were out golfing on Sunday, and updated my number there to the left. Obviously, I fell short of my first-year goal. Ironically, the main reason was a very good year last year income-wise, so when I plugged in our new average income, the goal (number to reach) jumped up. The reason for the bigger than expected 4th quarter drop was due to taxes owed on said earnings. Quarterly income and non-tax spending were fine. This led me to question whether or not this is still a realistic goal. For the time being, my answer is a qualified yes. I'll be posting my 2nd year (5/1/2008 - 4/30/2009) goals soon, and for the time being I am going to continue to pusue the goal of becoming "Balance Sheet Affluent" by the time my DH is 50; however, I am going to revisit this within the next year, and would not be surprised if I wind up dropping my goal to something like 1.8 instead of 2.0.

And for those of you who like to compare numbers, please let me remind you that I have set the bar extremely high for myself, which is necessary if DH's dream of trying out for the senior golf tour is to have a chance of becoming reality. If not for this dream, I would be happy with any number at 1.0 or higher.

2. Investments = Decided to Stay the Course: Thought I would be switching my STAR Fund to Vanguard Conservative Growth, but after studying that possibility I decided to leave things where they are. If I made the switch, I feel I would be under-invested in international stocks. And besides that, my STAR fund shares are where I give myself permission to be a tiny bit daring.

3. Work: My current work assignment ended today. My next work assignment begins ... day after tomorrow. Perfect. Smile One day off and then back to work. Instead of paying bills & doing laundry tonight, I'll be curling up with a book and putting those chores off until tomorrow.

4. Groceries: YES, YES, YES ... prices ARE up! Here are 2 specific examples on prices of items that are consumed almost daily in our home:
- Bananas: Up from 33 to 44 cents per lb. That's a 33% increase!
- Rice: 20-lb bag up from $14 to $17. That's a 21% increase!

I think what is so "big" about the current price increases is that they are so across the board, rather than commodity specific. We're all used to seeing prices on certain items spike due to crop failures or seasonality. But when that happens, we just make substitutions, right? For example, in the past, if I had seen that bananas were up 11 cents per lb overnight, I would have looked at an alternate fruit. But guess what? Apples are also up, 20 cents per lb, and no other fruits come close to giving me the same bang for my buck. So, I buy bananas at the higher price.

I feel fortunate that even if my vigilance to "shop smart" is not enough to compensate for the increases, I am still able to absorb the price increases, and don't have to take exteme measures (such as giving up buying fresh fruit). I cannot believe that the increases are not affecting those less fortunate, and I am sympathetic.

One thing that I am doing to keep my own grocery bill down is teaching my husband some of my shopping techniques (for example: combine a sale w/ a coupon or skip buying that item this week) so that when he goes to the store the bill will be lower. Just recently, he used coupons for the very first time.

4. Speaking of Good Cheap Food: I recently discovered a great side dish ... Texas Caviar! No, it's nothing like Rocky Mountain Oysters ... It's a spicy black eyed pea salad. Nutritious and Delicious! Fantastic with BBQ or really as a side dish with anything. If it sounds like something you'd like to try, just Google it and you'll find recipes.

5. The Jonses House: Previously I blogged about "The Jonses" house in my old neighborhood that went in to foreclosure. After being foreclosed on, listed by the receivier for well under what was owed on the mortgage, and having a couple price drops, the house finally went under contract. I don't know the sale price, but given the latest list price it is very likely it sold for at or near the "lowball" price DH & I threw out about a year ago. This reinforced 2 things in my mind:
- We should continue to trust ourselves and our sense of where the market is.
- By all means look at buying & selling a house as a business transaction. Regardless of how you feel about it while you are living there, while you are buying and selling you are making an investment! Once the receiver took over, they approached the sale of the Jonses house in a very businesslike manner ... Pricing to market (no ego or emotion involved) and dropping the price as needed.

6. Interesting Retirement Tidbits: Saturday's Wall Street Journal published some very interesting survey results ... Definitely gave me some things to think about when considering retirement. Here are some of the items that gave me the most food for thought:

Q: What percentage of retirees say they left the work force earlier than planned?
A: 51%
My Thoughts: Wow! Sounds like it might be a good idea to chop a few years off of the age you enter as your expected retirement age when you run those calculators. For example, if you plan to retire at 65, plug in 60 or 62 to be safe.

Q: Surveyed adults ages 55 to 74 said they spend the greatest percentage of their leisure time doing which of the following? (choices were Socializing & Communicating, Watching TV, Reading, Relaxing & Thinking, Traveling)
A: Watching TV
My Thoughts: That is sad. Note to self = Make a plan pre-retirement for a life of meaningful activities!

 Q: What percentage of workers in the US say they or their spouses currently are saving for retirement?
A: 64%

Q: What percentage of workers age 55-plus report having $250,000 or more in savings and investments (not including primary residence or defined-benefit plan)?
A: 23%

Q: What percentage of US households are at risk of being unable to maintain their standard of living in retirement?
A: 44%

My Thoughts on the Above 3: Wake up America!

Peekaboo

February 25th, 2008 at 07:06 pm

Wanna peek at a boring investor's portfolio? ...

Are you like me? Do you sometimes wonder what is wrong with you because you aren't getting stratospheric returns on your investments? Do you slightly envy those who so confidently pick individual stocks, buy precious metals, and short put options on future Mars travel (yea ... I made that last one up)?

In the past I have been somewhat apologetic about the conservative nature of my investments. But no more apologies.

I am reading "The Number" by Lee Eisenberg. The Number refers to "How much money you need to secure the rest of your life." This book is not so much about creating a formula for determing your Number as it is an exploration of why coming up with The Number is so challening, and why it must be an on-going, lifelong process. It also offers interesting tidbits in to the world of those who sell financial products.

One passage in the book really jumped out at me (from page 129):

"Risk aversion. Overload. Hubris. That these qualities get in so many people's way, that they louse up investment returns, that they screw up the Number, is deeply regrettable, if only because they can be tempered by a trio of reliable, if boring, traits of character: moderation, balance, common sense."

Yes-yes-yes! Validation! Here's to being reliable and boring! My investments have been seriously thought out, they are working for us, and ... well ... they are very very boring, but no longer embarrassing to talk about.

So, for anyone interested, here is a peekaboo in to the portfolio of this very boring investor. [Why do I feel like I'm about to strip naked in a room full of supermodels?]

1. Cash: Cash makes up the single biggest chunk of our portfolio. Our cash is in MMAs and CDs. [In the past we have had T-Bills as well, and we likely will again in the future ... But not right now, because frankly the yields suck at the moment.] We keep much more cash on hand than the average person needs to. These are the reasons cash is essential for us.
- Cash flow for my husband's business. Squeezing off the business cash flow wouldn't exactly be killing a golden goose, but it certainly would be killing a good ol' laying hen. Smile
- Cushy General-Purpose EF ... one year's living expenses plus ... again, more than the average person needs ... because DH is self-employed and has no guaranteed income.
- Cushions in budget categories where irregular expenses crop up: Medical/Dental/Vision (we have a HSA), Auto Maintenance, Pet Care.
- Cash for the purchase (in cash) of our next house
- Cash for the purchase of furnishings once we have purchased above-mentioned house (we sold almost all of our furniture prior to our move).
- Cash for the purchase of our next car (we are currently getting by with one car, and plan to get by with one for as long as we comfortably can. But we know sometime in the not-so-distant future we may feel a strong desire to buy a 2nd.)

2. TIPS (purchased directly from Treasury Direct): A very slender portion of our portfolio, but worth mentioning since they don't fit in either of the other 2 categories. And they are a little pet investment of mine. As with the T-Bills, we are not purchasing any more at the moment because they are just too white-hot popular.

3. Mutual Funds (almost all in the form of tax-deferred investments) ... This is where our boring investment style really shines! We have 3 Vanguard funds, and they are all funds of funds or balanced funds.

Life Stragety Conservative Growth (VSCGX) = 80% of Portfolio (YTD Return = -3.33% / 10 year return = 6.23%)

STAR Fund (VGSTX) = 18% of Portfolio (YTD Return = -4.84% / 10 year return = 7.38%)

Balanced Index Fund (VBINX) = 2% of Portfolio (YTD Return = -4.23% / 10 year return = 6.01%)

BTW, if I had my druthers, we wouldn't have the VBINX fund. However, we needed to keep a very small portion of our investments completely distinguishable from the others for tax-related accounting reasons, so we chose that fund becaue it most closely resembled our chosen funds, VSCGX & VGSTX.

Also, as simple as our choices appear, a ridiculous amount of time went in to making the choices, and it's a somewhat amusing story (which I'll share at another time).

-----------------

Here's the Morningstar X-Ray breakdown of just our mutual funds (percentages rounded off to nearest whole number, therefore total does not equal 100):
Cash = 8%
US Stocks = 40%
Foreign Stocks = 7%
Bonds = 44%


Lg Cap Stocks: 25% Value / 27% Core / 29% Growth
Mid Cap Stocks: 5% Value / 6% Core / 5% Growth
Sm Cap Stocks: 2% Value / 1% Core / 1% Growth

Bonds: All high credit quality, 85% intermediate-term, 15% long-term

Expense Ratio: 0.28%, compared to expense ratio of a similar hypothetical portfolio of 1.42% [This alone is enough to make you break in to a big ol' grin, isn't it?]

----------------

I will be the first to admit that those returns are not one bit sexy; certainly nothing to brag about over on the forums! But I wanted to show that sometimes boring, reliable investments are just fine.

Here are some facts about where we stand:
- Every on-line calculator I can find says that we are on-track or ahead of the game in terms of accumulating what we will need for retirement.
- An analysis prepared for us last year by a CFP, using only our mutual fund investments (not including our cash) showed that we are at 140% of where we ought to be.
- A Monte Carlo analysis that was run for us 1-1/2 years ago showed a 70% success chance of success ... and again, that did not include our cash savings, which presumably (barring any huge business losses) will go in to the retirement funds some day and make our chances of success much higher.

So, maybe being boring isn't so bad after all! I feel pretty good about where we are, and I believe that with continued "moderation, balance, and common sense" we have a pretty good shot at having a secure future. How did we get here?

Rather than looking for the next hot investment, we have focused on:
- Spending less than we earn [This is where everyone has to start. If you don't do this, you are not going to get to your Number. Sorry, it may not be fun, but it's true.]
- Having game, both offense (earning) and defense (keeping big & small spending down, saving, and investing) --- DH is offensive coordinator, and I'm defensive coordinator, but we both play on both sides.
- Running a business
- Sensible investing

Having said all this and having let all of you peek at my boring portfolio, I know I must not rest on my laurels. We have some dreams that don't fit in to the standard "retire at 60 or 65" formulas. I have some ideas about changes I may want to make (such as switching funds from STAR to Conservative Growth), and I need to think about non-tax-deferred mutual fund investing (with part of the cash that we have set aside to buy our house, now that I think it's very likely we'll be spending less than originally planned).

The process continues ...

Asset Allocation / The Smartest Investment Book You'll Ever Read

October 28th, 2007 at 02:16 pm

Awhile back I read the book "The Smartest Investment Book You'll Ever Read" by Daniel Solin. It was a quick and very informative read, and I do recommend it.

In a nutshell, it explains why you should invest in low-cost index mutual funds and stay away from stockbrokers, and why asset allocation is so important. (I heard about this book on the Vanguard Diehards Investment Forum.) I was already a believer in low-cost index mutual fund investing, but this book helped solidify my beliefs and it was a real eye-opener about stockbrokers ... It offered the insider scoop on the tricks some brokers use to make their clients think they are smarter than they really are.

At the back of the book was a really interesting questionaire to help you determine your ideal asset allocation. It was very, very different from any other asset allocation quizzes I had done.

The ones I had done before were really simplistic: Age, years to retirement, and risk tolerence (I'm sure you've all done those things on-line). But I always felt those quizzes missed so much. I'd find myself asking: "Wait! What about the fact that our expenses are so low and we save a huge chunk of our net each year? Doesn't that count for something?!?" Intuitively I always felt that the stock/bond allocations spewed out were riskier than what we really needed. [60% stock, 40% bond was the most conservative I ever got with those simple on-line tools.]

Well, at the back of Mr. Solin's book there was a detailed but easy-to-follow questionaire that I completed, and it came up with a result of 10-30% stocks and 70-90% bonds as our ideal asset allocation. Well, you could have knocked me over with a feather, and I do wonder if that may be a bit too conservative. But it definitely gave me something to think about and helped validate what I had been feeling intuitively. [In case you're wondering, Mr. Solin does recommend up to 90% stocks for some people, so he's definitely not anti-stock. It's just that his formula takes so many variables in to account, and in some cases he recommends something fairly risky, and in some cases like mine & DH's something extremely conservative.]

I hesitated to blog about this before because I knew you all would want to know what the formula was, and it's too complicated for me to explain and I didn't want to in any way infringe on Mr. Solin's intellectual property.

Then, our friend Broken Arrow posted a question on Asset Allocation on the forums, and that got me thinking about this book again, so I started looking around on-line, and lo & behold, I found the questionaire published!!! So, you all can take it yourselves and see what numbers you come up with.

Here is the link, thanks to baselle teaching me how to make one:

http://www.smartestinvestmentbook.com/question/questionnaire...



Feel free to share what numbers you get and what you think of the results.

Don't Let Anyone Else Tell You How To Invest (or, Dear Vanguard, I Love You!)

August 12th, 2007 at 09:37 am

About a year ago, my DH and I decided to take a "big picture" look at our investments, and as part of that process we consulted with both Vanguard & another company that I will refer to as "TRP" Smile hehe

We explained our situation and why our risk tolerance is lower than what the "Average Joe's" might be, and what our target asset allocation is.

Vanguard took our information and gave us a very fine recommended portfolio based completely on what we told them.

TRP was a bit different. They asked us "Where do you think high-yield bonds fit in your investment strategy?" to which I repied "You mean junk bonds, right? They just aren't for us. We're not interested at all." They then proceeded to explain how their company's philosophy was that "high-yield" bonds had a place in every investor's portfolio, and then asked if they could go ahead and send us some information on them. I was starting to think "What part of 'no' don't you understand?" but just to keep the conversation moving along I told them fine, they could send the information. You can guess what I did with that info when it arrived --- straight to the recycling bin without a second glance!

After those conversations, DH & I decided that Vanguard is the company for us! It wasn't that TRP was overly pushy or sleazy, and I'm sure they do a bang-up job for lots of folks, but it was like they didn't really listen to what we had to say and tried to squeeze us in to a "one size fits all" plan. Vanguard on the other hand listened to us and believed us when we told them what we wanted!

This morning I was reading in the Business section of the paper about how investments in high-yield bonds are really taking a hit. I'm so glad we stayed true to ourselves and stuck with our conservative investments. In the end, we are the ones who have to live with the consequences. We've been sleeping just fine at night.

Don't ever let anyone else tell you how to invest! Listen to people's opinions and advice, certainly, but at the end of the day no one knows better than you what is right for you.

Buying a TIPS from Treasury Direct - Part 3

July 17th, 2007 at 08:46 am

Yesterday, funds were automatically withdrawn from my checking account for my TIPS purchase. It was recorded by my bank overnight, so I could see the amount withdrawn this morning.

The amount withdrawn was $2,968.47 for my $3,000 TIPS, based on a purchase price of $98.922415 per $100. I paid 20-cents more than what I had calculated based on the published auction results, and I don't exactly know why.

Coincidentally, I also received interest payments yesterday from the US Treasury for TIPS I had purchased in the past. I get interest payments automatically deposited to my checking account every 6 months. So, on the same day I had money coming from and going to the US Treasury. [It was pure coincidence, and I don't think that has ever happened before.]

If I were retired or near retirement age, I think I would be putting a much larger percentage of my money in TIPS, as a way to keep my principal secure and make sure my money earned at a rate a bit ahead of inflation. I read somewhere that John Bogle, the founder of Vanguard, has moved a larger percentage of his portfolio to TIPS as he has gotten older.

Regarding short-term US Treasuries (T-Bills), the interest rate from yesterday's auction was the highest in 3 months:
6-month T-Bill (Rate 4.865% / Yield 5.071%)
3 month T-Bill (Rate 4.840% / Yield 4.982%)
They're not quite up there with the best MMAs or short-term CDs yet, but they are getting close. It might be time to start thinking about T-Bills again ...

Buying a TIPS from Treasury Direct - Part Two

July 12th, 2007 at 03:51 pm

The US Treasury's 10-year TIPS Auction was today and these are the results:

Interest Rate = 2.625%
Yield = 2.749%
Price per $100 = $98.942199

So, my $3,000 TIPS should cost me $2,968.27. I will be paid interest every 6 months, and my principal will be adjusted at the rate of inflation, which means I'll be yielding 2.749% PLUS the inflation adjustments. So hypothetically, if inflation were to hold steady at 3%, my yield would be 5.749%, and of course if inflation goes through the roof my principal would grow in line with inflation. I think that's not too shabby. [Actually, I am really happy with the auction results.]

Hopefully this explains why I like TIPS as an alternative to long-term CDs.

I'll report again when the funds for my TIPS purchase are automatically deducted from my checking account.

Buying a TIPS from Treasury Direct - Part One

July 9th, 2007 at 11:07 am

This is for anyone who may be interested in purchasing US Treasuries (bills, notes, etc) directly from the US Treasury, but doesn't know how to do it. Specifically, I will explain the process I go through as I purchase a TIPS (Treasury Inflation-Protected Security) at this week's auction.

Buying Treasuries directly is very easy. There is no need to go through a broker or pay any fees. All you have to do is set up an account with Treasury Direct. I have an on-line account with Treasury Direct that is linked to my primary checking account. That means that any time I purchase a Treasury the funds are automatically taken out of my checking account, and any funds I receive (interest payments and proceeds from matured Treasuries) is automatically deposited to my account. I like having the accounts linked because there is no "lag time" while funds are being moved.

In the past I have purchased T-Bills through Treasury Direct, but I haven't done that for awhile because the interest rates have not been competitive with what I can earn on a MMA or short-term CD. However, I do keep my eye on the T-Bill rates, and no doubt I will buy more in the future.

What I am buying this week is a TIPS: Treasury Inflation-Protected Security.
The minimum investment for a TIPS is $1,000. I will be buying a $3,000 TIPS.

TIPS are currently available in 5-, 10-, or 20-year terms. I will be buying a 10-year TIPS.

Unlike T-Bills which are sold as often as weekly, TIPS are sold infrequently. TIPS are sold either Annually (5- and 20-year terms) or Semi-Annually (10-year term). They are also re-opened Annually or Semi-Annually. That means that if you want to buy a 5- or 20-year TIPS, you only get 2 chances a year. And if you want to buy a 1o-year TIPS, you only get 4 chances a year. If they are something you are interested in, you will definitely want to check out the US Treasury auction schedule and note the dates on your calendar.

The 10-year TIPS I am purchasing was announced today (tho' the announcement had been tentatively scheduled long ago), and the actual auction will take place on Thursday. The TIPS I am buying will be issued on July 16th (because the 15th is a Sunday), and will mature on July 15, 2017.

TIPS pay interest every 6 months, and the principal amount is adjusted for inflation (or deflation). The interest you earn is on the inflation-adjusted amount, so as long as there is inflation your interest payments as well as your principal continue to go up.

This is why I like TIPS:
- They are an extremely safe investment, fully backed by the US government.
- They are a good hedge against inflation. I prefer TIPS to long-term CDs because I know that I'll always be getting "inflation + alpha." I do not have to worry about inflation eroding my principal.
- Once you have a Treasury Direct account set up, they are a breeze to buy.

These are the drawbacks to TIPS:
- They are pretty conservative investments. If you are looking for gangbuster returns, they aren't for you.
- They make tax time just a wee bit more complicated because you get a form "1099-OID" in addition to a "1099-INT." The 1099-OID is for the inflation-adjustment you receive on your principal.
- You have to pay taxes on not only your interest but also the inflation-adjustment to your principal in the year it is received. What that means, quite simply, is that you are paying taxes on money you haven't even received yet.
- The government's formula for inflation may or may not accurately reflect the "real rate of inflation" you experience in your life.

These are the steps I went through to purchase the TIPS:

1. I checked the auction schedule and made a note on my calendar that a TIPS auction announcement was scheduled for today.

2. Once the auction announcement was posted at the Treasury Direct web site this morning, I logged on to my Treasury Direct account and entered a buy order for a $3,000 10-year TIPS. That means that I now have a non-competitive bid entered for Thursday's auction.

3. I went to on-line banking and transferred $3K from my MMA to my checking account. I could have waited a few days to do that, but I didn't want to risk forgetting or being unable to do that and being charged an overdraft fee. [Of course, this means I lose a bit of interest income because my checking account pays less than my MMA.]

Easy as pie.

Because my bid is non-competitive, I won't know what the interest rate will be until the auction is completed. Once the auction results are posted, I'll blog again and let you know how it went.

Want to learn more?

Treasury Direct web site:
http://www.treasurydirect.gov

To learn more about TIPS in general, start here:
http://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm

Upcoming auctions are announced here:
http://www.treasurydirect.gov/instit/annceresult/press/press_secannpr.htm

Blogging is Better than Pulling out your Hair

July 7th, 2007 at 04:36 pm

Arrrgh! Been trying to figure out how to reconfigure our mutual fund investments and I feel like pulling out my hair! DH insisted we make some changes, and I agreed.

At the end of every month when we look at our assets and net worth, if one fund is down even just a little bit DH always says something along the lines of "Oh that's not good --- We should sell that fund." [He just can't stand to see anything go down. He's even more risk-averse than I am when it comes to investing, which is interesting considering what a risk-taker he is with his business.] We have the same old discussion over and over again about asset allocation, how the overall performance of the portfolio is more important than looking at individual funds, etc, etc, and then he agrees to keep things as they are. But the same thing comes up every month and it's just like a tired old broken record. End of June ... same discussion ... but he was more insistent. And I frankly have been thinking that it's time to rebalance because of how well our International Stock Fund has been doing.

So I decided, what the heck, let's just reconfigure the whole portfolio, not only for rebalancing but also to give DH more peace of mind. But it can be such a difficult decision to make, because you never know if you are making the right decision.


[DH is very much involved in the decision-making process, but I do most of the researching, reading of prospectuses, running Morningstar X-Rays, etc. He's more of a big picture guy and I am more detail-oriented, which makes us a good team, but it does mean I end up doing the time-consuming stuff. Also, DH speaks English as a second language so it makes sense that I do the heavy reading.]

Well, I don't know if this is the right decision or not, and it may just be lazy or cowardly, but I decided (and DH agreed) that we are going to move all of our Tax-Deferred Savings (Keoghs & various types of IRAs) to a "fund of funds," the Vanguard STAR Fund. It's a mix of 8 stock funds (domestic & international), 2 bond funds, and 1 short-term investment fund. Hopefully it will be up EVERY month from now on, even if just a wee bit. Smile

As far as the money that is in our non-tax-deferred mutual fund account, I wanted to split that between the STAR Fund and a Money Market Fund, but DH insisted that it all go to a Money Market Fund. He actually quoted CNN Money ... He said "The expert there says when you are getting ready to buy a house your money should be in completely safe investments!" Which I reminded him is completely irrelevant. What the CNN Money expert is talking about is the money you are planning to use to buy the house!!! We are talking about money that I consider to be part of our retirement savings. [The money that is supposedly to buy the house is tucked away in FDIC-insured deposit accounts.] Finally we agreed to do what DH wanted, put it in the MMF (sigh), and then revisit the whole thing again after we have bought a house.

Why, oh why, am I getting a sneaking suspicion that DH is starting to think about buying a more expensive house than what we had originally agreed on ... ??? Oh well, that will be something to blog about in the future, after we have moved to Texas.

But in closing I'll just say "Bless my DH" because he did put everything in to perspective when he reminded me that not everyone has the "problem" of trying to decide (and come to agreement as a couple) where to put their money because they have no money to put anywhere. As usual, he's right.