Monthly update – Aug 1, 2017

Yeah, baby! Broke past the 3-year mark, and I am 35 months from Financial Independence!

In addition, my investments went up $14,372,77 for July, a gain of 1.58% over the previous month. Here I was moping in a previous email about my investment strategy not exactly working, and the market takes off in the last week. The big gainers appear to be the S&P500 Index funds and my International Index funds (Internationals have had a great year!). Bonds are up a little, and my REITs (Real Estate Investment Trusts) continue to do poorly – though remember that my REITs did very well in the previous 2 years.

Overall, the balanced portfolio that I’m following with my 401K/IRAs (30% Bonds, 17.5% S&P500, 17.5% International, 17.5% Small Cap, 17.5% REITs) appears to be doing OK. For the year, I appear to be around 7.3% up. I know everyone is expecting a “correction” sometime soon, but until then, I will keep with my allocation and rebalancing. In fact, in July I rebalanced about $15K from stocks into Bond index fund to get back to 30%. Its not doing well now, but it puts me in better shape if there is a correction. How is that for discipline?

My stock pick portfolio (that I’ve written about before) didn’t do as well as my 401K/IRAs. This just goes to show me that the standard of having most of your money in Index funds, with a small portion for “funny money,” seems to work for me.

I’ve got an interesting book for my next post on timing the market (long term) that I will get out soon. I think you guys might find it interesting

Hope your July was fun and fulfilling!

 

Mr. 39 Months.

Six Month review of my investment strategy

I typically look at my investments every 3 months to see how they are doing. I also take the opportunity at the six-month point to rebalance if things have gotten way out of whack. This lets me get a good idea of how I am progressing and make adjustments. I don’t like to rebalance more than that – I think it would drive you nuts to do it more frequently.

If you remember my investment strategy, Mrs. 39 months and I each have an IRA (money we transferred from our company 401Ks when we left them) and a Roth IRA (which we’ve been investing in fairly regularly since 2001). For each of these, we have it split like this:

  • Bonds: 30% (was 20%, but we bumped it up at the start of 2017, as we are closing in on retirement)
  • S&P500 Index: 17.5%
  •  REIT Index: 17.5%
  • International Index : 17.5%
  • US small cap: 17.5%

For these, we are up about 6.6% total (capital gains + dividends), with International, Small Cap and S&P500 leading the way. REITs and bonds didn’t do very well (rising interest rates, anyone?). I will need to do a little rebalancing, but not much.

For my 401K and deferred account, I don’t have a REIT option, so it’s split up as

  • Bonds: 30%
  • S&P500 Index: 23.3%
  • International Index : 23.3%
  • US small cap: 23.3%

For these, we are up about 9.2% total (capital gains + dividends), with International, Small Cap and S&P500 leading the way. With only bonds not doing well, the 401K did better. However, I will also have to do some rebalancing.

Finally, I have two brokerage accounts that I have setup with Bond index funds and my own stock and REIT picks. I tried to set them up to maximize dividends, as an attempt to research how I might invest to get the most passive income out (see earlier post on this).

  • Pop’s Inherited IRA (50% bonds/25% stocks/25% REITs): 3.6% gain, mostly from dividends
  • Personal investments (41% REITs/29% bonds/30% stocks): 2.6% gain, again mostly from dividends

I put in $1,376 into personal investments each month, and I try to use that to get it to the 50/25/25 level of the inherited IRA. Still working to get there.

For rebalancing purposes, the mutual fund and 401K companies (Vanguard, TRowePrice) make it fairly easy to sell off funds and reinvest in others. I will just sell enough and buy enough to get somewhat close to the split that I want.

Overall, I am fairly happy with what I’ve got so far. I’m coming in around 5.6% gain at the mid-year point, so baring any major disasters, it should be a good year!

I hope your midway points are equally good!

 

Mr. 39 Months

 

Mid Year Update

July 2017

Well, its early July, halfway through the year, and a perfect time to compare my goals for 2017 to what I’ve actually done, both financial and personal/other. A lot of folks don’t like to do this sort of thing, but as an engineer and amateur financial junky, I actually love taking a look at these sort of things. Even when I’ve had a bad quarter (or bad year) I like to look at the numbers and see what my situation is, and the future outlook.

Ok, I’m a numbers geek.

So how am I doing in comparison to my goals for 2017 (the ones that I listed on April 30th)?

My Goals for 2017 (some financial, some not):

  1. Put in $33,000 in tax-advantaged accounts throughout the year. Grade A. I have put in $20,200 so far this year (including some bonus money) and am on track to hit my goal by December.
  2. Put in all bonuses, gifts, and our previous house payments into regular accounts (estimate of $26,000 year): Grade A. I have put in $18,250 so far this year, and I am on track to hit my goal by December.
  3. Increase dividend income from our investments to $18,000/year (and reinvest them): Grade C. I have $8,877 in dividends so far this year. Going to be touch and go to see if I hit this.
  4. Get Passive income up to 65% of living expenses: Grade D. I am currently at 61.9%. To hit the goal I have to hope for some major dividend payouts in December.  We do continue to keep our living expenses low, though we did have to spend some money on home repairs which bumped it up a bit.
  5. Beat at 6% growth rate on our net worth: Grade A. I am at 6.2% so far, with only half the year gone by. Even if the markets come back with 0 growth for the rest of the year, I’m good.
  6. Begin attending local real estate investment association meetings, to learn about and begin preparing for real estate investing in 2018: Grade n/a. Plan was to start in July, and I have the date marked in my calendar. Not sure when I will start investing in it, because all you hear right now is that the market is too hot. We will see. My goal here is to start studying and learning.
  7. Start a blog (i.e. this one). Grade A. Done
  8. Fitness: Increase weight lifted by 10% over the year. Grade D. Currently appear to have hit a wall, as I haven’t gone up hardly any for the last 3 months. Need to work on this.
  9. Average 3 hours of cardio each week. Grade D. Currently only averaging a little over 1.
  10. Go on an international trip. Grade n/a. Wanted to do something bigger this year, but Mrs. 39 months job situation killed chances for larger trip. Plan to go to Quebec or Montreal in October.
  11. Visit one national park. Grade n/a. Again, job situation hurt this. Have never been to Ellis Island, so may try for this.

So in looking at this, I think I am tracking well for the first half of the year. Still got some work to do (especially in terms of personal fitness).

How were your first six months of 2017?

 

Mr. 39 months

Monthly Update for May 2017 (Month 38)

 

So how am I doing vs. my goals for 2017?

 

  1. Invest $33,000 in tax-advantaged accounts in 2017: Put in $4,660.87 into my 401K and Roth IRAs. Currently have put in $18,084 for year (including a 5.7K bump from part of my bonus). On track to hit it
  2. Invest $26,000 in regular accounts in 2017: Put in another $1,376.29 (my old mortgage payment). Currently have put in $16,881 (rollover money from Pop’s IRA and bonus money)
  3. Increased dividend income to $18,000: Won’t figure dividends till end of quarter, when a lot of them pay out
  4. Passive income covers 65% of base living expenses: Again, will wait till end of quarter to figure out
  5. New worth beats 6% growth figure: Assuming house worth stays equal (hard to figure out in this market), my net worth is up 5%, primarily due to investments. Looks like I should be able to hit my goal here.
  6. Begin attending REIA (Real Estate Investor’s Association)  Meetings: Will start in July
  7. Start a blog: Done in April
  8. Publish Student Finance Book: Done in April
  9. Increase weight lifted by 10%: I’m up 6% for year, but have plateaued for last 2 months. Part of it is just sticking to regular exercise
  10. Average 3 hours of Cardio every week: Currently doing a little over 1 hour. Not good
  11. Go on an international trip: Wife’s job status doesn’t allow for vacations till Oct. Will try to squeeze something in
  12. Visit a national park: Again, wife’s job status. Will probably try and hit Ellis Island this summer
  13. See the 2017 Solar Eclipse: August 21st! Unfortunately, we won’t be in the direct path, but I have family in Knoxville TN that will.

 

Investment Returns for May:

  • IRAs (30% bonds, rest split between S&P500, REITs, Small Cap & Int’l): +0.87%
  • Roth IRAs (30% bonds, rest split between S&P500, REITs, Small Cap & Int’l): +0.75%
  • 401K (30% bonds, rest split between S&P500, Small Cap & Int’l): +0.80%
  • Deferred compensation from work (30% bonds, rest split between S&P500, Small Cap & Int’l): +0.87%
  • Inherited IRA (set up for income; 25% REITs, 25% dividend stocks, 50% bonds): +0.78%
  • Personal investments (26% stock, 44% REIT, 30% bond ): -0.92%

 

Apparently, I continue to do poorly at picking stocks, REITs and bonds for my personal investments. I doesn’t help that I’m trying to get my personal investment allocation to match my inherited IRA. That means I’ve been buying a lot of bond index funds – and with rates going up, I’m getting hammered.

 

Overall, I’m pretty happy with May, and with the year so far. Month 38 is “in the can” and retired.

 

On to month 37!

 

Mr. 39 Months

 

 

 

 

Status Update: April 30, 2017

Status Update for end of Month 39

I thought I’d start putting out regular status updates for where I am, and goals for where I am going forward. The idea would be to provide information to the reader, and to help motivate me as I move forward.

I understand that for some folks, they may not be able to relate (the numbers may seem too large or too small for their current situation) but I believe that everyone can benefit from more information. Take what I am doing with a grain of salt and with the other reading you are doing, and make your plans appropriately.

My Goals for 2017 (some financial, some not):

  1. Put in $33,000 in tax-advantaged accounts throughout the year
  2. Put in all bonuses, gifts, and our previous house payments into regular accounts (estimate of $26,000 year)
  3. Increase dividend income from our investments to $18,000/year (and reinvest them)
  4. Get Passive income up to 65% of living expenses
  5. Beat a 6% growth rate on our net worth
  6. Begin attending local real estate investment association meetings, to learn about and begin preparing for real estate investing in 2018
  7. Start a blog (i.e. this one)
  8. Fitness: Increase weight lifted by 10% over the year
  9. Average 3 hours of cardio each week
  10. Go on an international trip
  11. Visit one national park

The primary reason we can devote so much money to investing in our 401K/IRAs and other accounts is that we’ve managed to pay off our mortgage last year, and I got a significant raise. With my wife’s and my salary, and no debt, we are doing the typical thing folks in their 50’s do – pouring a ton of money into investments to try and prepare for retirement/financial independence.

We live fairly frugally (average under $4000 in expenses per month in one of the more expensive places in the US to live). While we have the funds to do a lot of stuff, we chose to keep our expenses low, so we can save and keep our stress level low.

At the end of April, here is where we are:

  • Savings/Checking/CDs: $141,601 (my wife likes to have a lot in cash; we argue about this sometimes)
  • Investments: $220,285
  • 401K/IRA’s: $468,883
  • Roth IRAs: $195,602
  • Total: $1,026,372

For the first time in our lives, we are over $1M in liquid net worth! With the 4% rule, we could take out $40,000/year for the rest of our lives. Just knowing this dramatically decreases the stress that we are feeling.  Based on the social security payments we could get (I know, if we get), we could go to $66,000/year right now, even if we only got 75% of our benefits.

Overall, I would have to say that I’m pleased where we are at this point. Based on savings plan and growth, my hope is to be over $1.1M by the end of the year, as we progress towards financial independence.

I’ll try to go over my investment strategy and allocation in a future post.

Thanks for reading, and let me know your thoughts.