Quarterly Update – Oct 2021

Well, it’s now mid-October, and I’ve had the opportunity to review performance for the 3rd qtr of 2021. With the September drop off in the market, the 3rd quarter ended up with fairly limited gains for my portfolio, but the other goals that I had for the year went better. Still not sure where the market is going to go in the near future, but since I don’t really attempt to market time all that much, it shouldn’t be too much of an issue.

My Goals for 2021 (some financial, some not):

Finance:

  • Save $29K in tax-advantaged accounts – 401K, and Roth IRA.  Grade B. Saved $4.1K in our 401Ks for the 1st qtr. Due to the size of my bonus, I’m not going to be eligible to do a Roth IRA contribution in 2021, so I’m just putting that money into my regular account.  
  • Save $41K in regular accounts.  Grade A. Put $9K into my savings, because I was going to do a Roth conversion of money for 2021, so I’d use this to pay the taxes. After doing the analysis, however, if I start pulling money out of my 401K/IRAs in advance of age 72, I end up with more money if I don’t do the Roth conversion. After October, I’ll be putting money back into the market.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019). Grade B. Dividends went back up a bit compared to to 2020, so it looks like we might hit our Dividend goal for 2021. Received $5,9K of dividends for 3rd qtr. Still need 4th Qtr to be bigger than last year.
  • Passive income covers 30.5% of base living expenses in retirement, estimated at $78K per year. Grade C, covered 28.8% for the first nine months of the year. However, my 401K and Deferred don’t report dividends separately, so I may not be getting the full amount. We will see.
  • Beat net worth growth rate of 7%. Grade A. Due to market and real estate value, the new worth is up 10.4% for the first nine months of 2021. Very hard to believe.  

Business:

  • Attend twelve SJREIA meetings. Grade A; I’ve attended twelve in the first nine months of 2021. My local market is pretty heated (like so many others). Still, its good to get the information.
  • Double the number of blog visitors in 2020. Grade F. Still not a large number of folks reading – maybe a little bump from last year.  Only 4,347 “hits” for 2021.
  • Sell $1,000 on TKD Woodworking (my side-hustle name). Grade: A. Sold $960 as of Sep 30th. Still have two more farmer’s markets to sell at, and these are typically the highest selling ones.
  • Setup funding for TKD homes. Grade A; I’ve got a significant amount of funds available now. Its invested in the market, but available for use to purchase houses with cash. While I’ve got a significant amount of money set aside to start this, I also need to explore additional funding methods.
  • Write/publish a book on finance.  Grade F: Haven’t done anything on this for a whole year. Not sure how to reboot this – need to try.

Personal:

  • Regular Workouts with Gymanstic Bodies internet system: Grade F: Was still doing this at the beginning of the quarter, but then got a shoulder injury and have been going through physical therapy for it. I am doing my PT religiously though – not sure if this counts.
  • Average 2 hours of cardio per week, which is about what I’m doing now. Grade A. Walking daily, so actually doing at least 3+ hours.
  • Backpack over 100 miles on AT (did around 50 miles in 2020). Grade: C: I had to cut my August trip short (The White Mountains in New Hampshire were brutal) so I’m at 55 miles. May end up around 90 miles for 2021.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site is still closed down
  • Reduce weight by 15 lbs. from Jan 2020 Again, I want to get in better shape as I get closer to financial independence. Grade C. I was down 3 lbs in 1st qtr, but only 1 lbs for 2nd quarter. Down 2 lbs in 3rd qtr. Still have a long way to go, and the virus is keeping me from eating as healthy as I’d like.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. Six more books in third quarter and I really enjoy it.

Travel:

  • Visit one national parks (that is the plan, right now). Grade: Incomplete
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Visited brother in VT. I would like to go to NY for my wife’s family, but she’s reticent due to the Covid. Grade: Incomplete
  • A week with Mrs. 39 Months for our 35th anniversary. Grade: B. We didn’t do a full week, but we did do a long 4-day weekend on the western shore of Maryland. Very nice.
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it. Grade F. Cancelled.

How did your third quarter go this year?

Mr. 39  Months.

Investment Update Oct 2021

Like most folks investing, September was not “nice” to me. The S&P was down about -4.7% for the month, and just about every other mutual fund that I was investing in was also down, including my bond funds. If you remember, at the beginning of September, I changed my allocation somewhat you shift some money to dividend stocks and out of my bonds and S&P 500. Well, my dividend stock funds were down -4.5%, fairly close to the S&P. You just can’t win.

Still, I’m up over 10% for the year, and that is with primarily only 60% in stocks for the first 8 months, so its been a good year overall.

So my allocation, after my change in September is:

  • 10% bonds
  • 15% dividend Stocks
  • 15% S&P 500
  • 20% Small Cap stocks
  • 20% International stocks
  • 20% REITS

For investment performance in September, it came out to be:

  • S&P500: -4.7%
  • Bonds: -1.2%
  • REITs: -5.7%
  • Small Cap: -3.1%
  • International: -3.4%
  • Dividend stocks: -4.5%

I also have a Vanguard value fund (VVIAX) where I put in my after-tax investment money. That was down -4.0% for the month. I’ve been seeing a lot of articles of Value funds and ETFs doing better than the S&P500 – I guess we’ll see. I may do some additional research and write about this in the future.

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

The dividend paying stocks & REITS were down an average of -4.1%. Still up for the year, with significant dividends. I’ll report out on 3rd qtr dividends in a later post.

October can sometimes be an excellent investment month, and sometimes (1929, 1987, 2008) it can be savage. I’m hoping it will be a good month. I’m up for the year, and the market has been on a tear since 2010, so overall I can’t complain.

Hope everyone is healthy and your market returns for the rest of the year go up!

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Mr. 39 Months

Change to Allocation

I continue to be stunned and surprised at the increase value of the market as the year continues. From its March 2020 low point of 2,237.4, the S&P500 has now hit $4,524.09, basically doubling in value in 17 months. It seems like the market will just keep going up & up!

We all know this isn’t possible, but folks have been betting against the market (including me) for months now, and we continue to get it wrong. That’s why its always important to stay in the market, no matter what. Don’t pull your money out, because by the time you figure out the market has turned back up, you’ve already missed a significant amount of gains.

That being said, I have had two major concerns at this moment:

  1. The presence of high inflation may continue and force the fed to raise interest rates. If so, that will do some damage to the returns of my bond funds (which haven’t performed very well comparatively for the last several years).
  2. The S&P 500 continues to be way overvalued, with P/E ratios more than 2X historical values.

So I made the decision to make some changes to my investment allocation.

  • Change Bond allocation from 20% to 10%, reducing my exposure to the Fed raising interest rates
  • Change S&P500 allocation from 20% to 15%, reducing my exposure to the “overvalued” S&P
  • Add 15% allocation to dividend stocks – typically those steady stocks that continue to throw off income, even when the market sinks somewhat

While you could say that this might reduce my returns by reducing my exposure to the S&P 500, I actually have increased my stock allocation from 60% to 70%. I’ve just changed some of the stock investments to dividend stocks, which may not grow as fast, but should grow and throw income off better than bonds in the current environment.

So, my new allocation for my IRAs is:

  • 10% bonds
  • 15% dividend Stocks
  • 15% S&P 500
  • 20% Small Cap stocks
  • 20% International stocks
  • 20% REITS

We will have to see how that goes in the near future.

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Mr. 39 Months

Blogroll Purge IV – Aug 2021

I have written several times before about the need to clean up/purge the blogroll to the right, so that viewers can get recent, up-to-date commentary on FIRE related topics (and other areas that I’m interested in).

People stop writing in their blogs for a variety of reasons. Some folks like Cracking Retirement, just exhaust what they want to say, and decide to step away – and take the opportunity to announce it on their blogs.

Others do a “slow fade” and stop posting regularly. What I always try to do is leave them up for several months, in the hopes they will get “re-inspired” and start posting again. After 3+ months, my thought is that they will probably not be returning – so I drop them.

This gives me the space and opportunity to put up new bloggers and commenters on the blogroll, and introduce people to other ideas. Hopefully its of service to you.

Enjoy!

Mr. 39 Months

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Quarterly Update – July 2021

Well, it’s now August, so I’d better report out on how the first half of the year went. The Chinese Flu continues to cause concern and create issues throughout the country, and it looks like we may be heading back in for lockdowns. Not sure what effect that is going to have for the economy in the 2nd half of the year, so we’ll see. I’m not sure the American

My Goals for 2021 (some financial, some not):

Finance:

  • Save $29K in tax-advantaged accounts – 401K, and Roth IRA.  Grade A. Saved $4.8K in our 401Ks for the 1st qtr. Due to the size of my bonus, I’m not going to be eligible to do a Roth IRA contribution in 2021, so I’m just putting that money into my regular account.  
  • Save $41K in regular accounts.  Grade A. Put my bonus and additional funds in, so that’s $35.5K for the first half of the year. Great start.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019). Grade C. Dividends are still down for the year in the major accounts/mutual funds. Was only able to put $6.1K in for 2nd qtr, which leaves me at almost $11K for the year. Need 3rd and 4th Qtrs to be bigger than last year.
  • Passive income covers 38% of base living expenses in retirement, estimated at $78K per year. Grade C, covered 30% for the first half of the year. However, my 401K and Deferred don’t report dividends separately, so I may not be getting the full amount. We will see.
  • Beat net worth growth rate of 7%. Grade A. Due to market and real estate value, the new worth is up 12.2% for the first half of 2021. Very hard to believe.  

Business:

  • Attend twelve SJREIA meetings. Grade A; I’ve attended ten in the first half of 2021. My local market is pretty heated (like so many others). Still, its good to get the information.
  • Double the number of blog visitors in 2020. Grade F. Still not a large number of folks reading – maybe a little bump from last year.  Only 3,000 “hits” for 2021.
  • Sell $1,000 on TKD Woodworking (my side-hustle name). Grade: Incomplete. Made my first sale at the end of June – $71! Had some additional sales in July, as well as a commission sale, so we’re off and running!
  • Setup funding for TKD homes. Plan to get into real estate means setting up funding. While I’ve got a significant amount of money set aside to start this, I also need to explore additional funding methods.
  • Write/publish a book on finance.  Grade F: Haven’t done anything on this for a whole year. Not sure how to reboot this – need to try.

Personal:

  • Regular Workouts with Gymanstic Bodies internet system: Grade C: Was still doing this at the beginning of the quarter, but then got a shoulder injury and have been going through physical therapy for it. I am doing my PT religiously though – not sure if this counts.
  • Average 2 hours of cardio per week, which is about what I’m doing now. Grade A. Walking daily, so actually doing at least 3+ hours.
  • Backpack over 100 miles on AT (did around 50 miles in 2020). Grade: Incomplete. Did 29.8 miles in April. Plan to do 60 miles in August, and another 30 miles in September, so it looks like I’ll hit this goal.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site is still closed down
  • Reduce weight by 15 lbs. from Jan 2020 Again, I want to get in better shape as I get closer to financial independence. Grade C. I was down 3 lbs in 1st qtr, but only 1 lbs for 2nd quarter. Still have a long way to go, and the virus is keeping me from eating as healthy as I’d like.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. Six more books in second quarter and I really enjoy it.

Travel:

  • Visit one national parks (that is the plan, right now). Grade: Incomplete
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Visited brother in VT. I would like to go to NY for my wife’s family, but she’s reticent due to the Covid. Grade: Incomplete
  • A week with Mrs. 39 Months for our 35th anniversary. Grade: Incomplete. We spent our 25th in Vermont with my brother, but it was only a 4-day weekend. Still, it was nice to get away.
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it. Grade F. Cancelled.

How did your second quarter go this year?

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Mr. 39  Months.

Rebalancing – July 2021

I’ve written before about performing regular rebalancing of your investments. This makes you sell off your items which have become too much of your allocation due to increase, and purchase of items that are low in your allocation, due to decrease in value – basically buying low and selling high. I usually do this fairly regularly, every six months.

African elephant female and her baby elephant balancing on a blue balls.

Since rebalancing does incur some costs, you don’t want to rebalance too frequently – but you do want to do it. Recently, I’ve read several articles on the subject (including this one from thebalance). The suggestion from many of them is not to do it on a specific, regular date, but when your portfolio shifts in a significant amount – usually 20% above your allocation or more (i.e. if you have your S&P allocation of your portfolio be 25%, when it is either goes up to 30% or down to  20% of your allocation, then it would be time to rebalance).

I’ve rebalanced fairly regularly every six months, but I thought I’d give it a try for 2021 and 2022. At this point, my allocation hasn’t shifted enough to be 20% off for any of my asset classes. 

I’ll let folks know when it does.

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Mr. 39 Months

Investment Update June 2021

Well the market and our investments continue to move up overall, with the typical ups & downs by investment class. We continue to be on track with what we are looking to add in 2021, and our allocation plan has not really changed. Like a lot of folks in the FIRE community, once you get everything set up, automated and regular, it gets a little boring. Kinda “Steady as she goes.”

Our allocation remains pretty much the same as when I set it back at the beginning of the year, and back in 2020:

  • 20% Bond Index Fund
  • 20% S&P500 Index Fund
  • 20% International Index Fund
  • 20% Small Cap Index Fund
  • 20% REIT Index Fund

My 401K doesn’t have REIT option, so it’s just 25% for each.

Overall, our investment classes performed as follows:

  • Bonds were up about 0.7%
  • S&P was up 0.7%%
  • International was ups 3.2%%
  • Small Cap up 0.1%
  • REIT Index up 0.8%

I also have a Vanguard value fund (VVIAX) where I put in my after-tax investment money. That was up 2.9% for the month. I’ve been seeing a lot of articles of Value funds and ETFs doing better than the S&P500 – I guess we’ll see. I may do some additional research and write about this in the future.

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

The dividend paying stocks were up an average of 1.8%, and the REITS were down an average of -1.6%, so we’re roughly even for the month of May.

One of the things I did this month was shift my automatic investment amount from my Vanguard Value fund to savings. Its my intention to do a Roth conversion of some funds from my regular IRA to my Roth by the end of the year – because I believe taxes are going up in 2022. I want to try to shift as much as possible into the ROTH, and I’ll be using the money I normally put into investments to pay the taxes on the conversion.

Hope everyone is healthy and your market returns for the rest of the year go up!

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Mr. 39 Months

Quarterly Update – Apr 2021

Well, it’s mid-April, and the year has started out fairly well, all things considered. While the Chinese Flu continues to cause concern and create issues throughout the country, for the most part it appears the economy has continued to move forward, markets have stabilized, and the world moves on. There are still a lot of issues out there, but hopefully we are turning the corner.

My Goals for 2021 (some financial, some not):

Finance:

  • Save $29K in tax-advantaged accounts – 401K, and Roth IRA.  Grade A. Saved $4.1K in our 401Ks for the 1st qtr. Plan to put my $14K bonus into the Roth in 4th Qtr once I know my tax status.
  • Save $41K in regular accounts.  Grade A. Good start.
  • Increase dividend income from all accounts to $27K/year (compared to 29K in 2019). Grade C. Dividends are down for the year in the major accounts/mutual funds. Was only able to put $5.8K in for 3rd qtr, which leaves me at $17.6K for the year. Unless 4th qtr is a “gang buster” dividend time, I won’t hit it.
  • Passive income covers 38% of base living expenses in retirement, estimated at $78K per year. Grade C, covered 23% of 1st qtr. However, my 401K and Deferred don’t report dividends separately, and usually 1st qtr isn’t a heavy dividend quarter. We will see.
  • Beat net worth growth rate of 7%. Grade A, because we’re up almost 3% / $70K for the year already.  

Business:

  • Attend twelve SJREIA meetings. Grade A; I’ve attended six already, just in the first quarter. My local market is pretty heated (like so many others). Still, its good to get the information.
  • Double the number of blog visitors in 2020. Grade F. Still not a large number of folks reading – maybe a little bump from last year.  
  • Sell $1,000 on TKD Woodworking (my side-hustle name). Grade: Incomplete. Website is up and running, I’ve tested the e-Com, and it appears to be fully functional. I’ve got two reservations at a local craft fair/farmer’s market. We’ll see how it goes.
  • Setup funding for TKD homes. Plan to get into real estate means setting up funding. While I’ve got a significant amount of money set aside to start this, I also need to explore additional funding methods.
  • Write/publish a book on finance.  Grade F: Haven’t done anything on this for a whole year. Not sure how to reboot this – need to try.

Personal:

  • Regular Workouts with Gymanstic Bodies internet system: Grade A: I’ve gone through all the starter programs. Almost ready to start on their phase I program.
  • Average 2 hours of cardio per week, which is about what I’m doing now. Grade A. Walking daily, so hitting this.
  • Backpack over 100 miles on AT (did around 50 miles in 2020). Grade: Incomplete. Actually just got back from 4-days, 29.8 miles in Virginia, so I’m off to a great start.
  • Continue volunteering at Pennsbury Manor at their joiner’s shop (woodworking). Really enjoyed this. Incomplete. Site is still closed down
  • Reduce weight by 15 lbs. from Jan 2020 Again, I want to get in better shape as I get closer to financial independence. Grade B. I’m down 3 lbs in first quarter, but still have a long way to go, and the virus is keeping me from eating as healthy as I’d like.
  • Read at least one book a month. I surpassed this goal in 2018, and re-learned the joy of reading. Grade A. Six books in first quarter alone and I really enjoy it.

Travel:

  • Visit one national parks (that is the plan, right now). Grade: Incomplete
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often. Need to get up to see my brother in Vermont. Grade: Incomplete
  • A week with Mrs. 39 Months for our 35th anniversary. Grade: Incomplete
  • Visit Ellis Island. Still want to do this – its so close. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it. Grade F. Cancelled.

How did your first quarter go this year?

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Mr. 39 Months.

Should you plan for inflation in 2021?

There have been talks for the last several years about the potential for inflation, and the effects it would have on individuals spending, investments and lifestyle. The inflation rate has jumped around significantly throughout the 20th century, and it wasn’t until Reagan and Volker (in the 1980s) took the steps to “slay the inflation dragon” and get it to a more controlled level, without the wild swings in the past (it went from 4.7% in 1976 to 13.3% in 1979!).

Since the 1991, the inflation rate has stayed under 4% every year, and average around 2% for the last two decades. Whole generations have grown up without the threat of watching their purchasing power melt away over a short period of time. Some argue that the CPI (Consumer Price Index) is not measuring accurately, and that the key items for living (shelter, food, transportation, etc.) have been going up at a much higher rate than the CPI index shows. This is similar to the Monevator’s article on personal inflation rate I noted earlier in the year.

Now with the huge amount of government spending over the last year (added to the large amount of government spending since the 2008-2009 crash) has led to renewed articles on the potential for inflation in 2021 and its effects. Stocks continue to rise well above all levels of base P/E ratios, and more people are talking about a bubbles. So what can you do?

I’ve written before about having a SHTF plan and what you can do to prepare. The key is to look at the items that will increase in value, and do things to ward off the effects of rising prices.

  • Invest in stocks vs. Bonds. Bond rates typically don’t keep up with inflation rates, so you can lose buying power, while the stock price of companies tend to go up at a better rate
  • Invest in hard assets to hedge (gold, oil, etc.). As the purchasing power of a dollar goes down, these items will increase in value.
  • Real Estate: Inflation typically makes real estate values shoot up (see house prices in the 70s). They’re already on the rise now – which lends to the belief that we are already experiencing inflation

The last bit of advice I have in regards to this is the opposite of what you typically should do in times of high inflation. The base suggestion would be to take out loans (especially low interest loans) with today’s dollars, and then when the dollar inflates, you can pay the debt off with lower value dollars. My suggestion in times of high inflation is to pay off your debt – not take on more. High inflation times are uncertain times, and job losses and economic disruptions happen. Having little or no debt will help you to weather through these tough times.

My hope is that we don’t see anything major happen in the next decade or so. However, I am very concerned at the out of control spending at the federal level. It just isn’t sustainable.

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Mr. 39 Months

Investment Update Jan 2021 – they did it again!

If you remember, at the end of last month, I noted that the market appeared to take a small dive right at the end of the month. In January, the market dropped about $40K in the last week, leaving me from a +3.0% to a -0.5% return for the month.

In February, I checked the market on Thursday, Feb 25th in the morning, less than 36 hours before then end of the month, and I was ups over 5% for the month. Yeah, baby! By Saturday morning, however, when I went to check it, the market had dropped close to 3% again, and I was only up 2.8% for the month. Still up over $41K, but not the $70K plus that it was on Thursday. They did it again!

In talking with some folks in the community, we all agreed that it was madness to be checking the market continuously. It is s also to be noted that all these gains/losses are just paper gains/losses. Until you sell the stock/mutual funds/ETFs, its all on paper, so it doesn’t do you any good to cry over a loss or crow over a gain. Just track it and see how it does over time.

So how did I do for the month of January? Overall, pretty good.

My allocation remains pretty much the same as when I set it back in July 2020:

  • 20% Bond Index Fund
  • 20% S&P500 Index Fund
  • 20% International Index Fund
  • 20% Small Cap Index Fund
  • 20% REIT Index Fund

My 401K doesn’t have REIT option, so it’s just 25% for each.

  • Bonds were down about -1.8%
  • S&P was up 2.8%
  • International was ups 2.3%
  • Small Cap up 6.1%
  • REIT Index up 3.4%

I also have a Vanguard value fund (VVIAX) where I put in my after-tax investment money. That was up 5.0% for the month. Maybe 2021 will finally be the year value investing starts beating the growth stocks? Who knows.

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

The dividend paying stocks were up an average of 1.5%, and the REITS were up an average of 3%. These specific REITs really starting paying off in February, after a couple of months of almost nothing. It will be interesting seeing them in the months ahead.

Again, wow. The dividend account has been down all year and hasn’t recovered anywhere near what the 401K/IRA accounts have. Now its come roaring back. Hopefully it will end the year in the black.

Again, my intention is not to alter my asset allocation or “get out of stocks” but I am mentally preparing myself for a very bumpy 2021.  As I stated in January, I think the market is overvalued right now. We will see.

Hope everyone is healthy and your market returns for the rest of the year go up!

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Mr. 39 Months