Monday, February 08, 2016

Trickling Funds into ETFs

We continue to trickle in funds to commission free dividend paying ETFs such as VNQ, VYM, VTI, FEU, SCHB and SCHD.   Since these ETFs are commission free, I can buy as little as one share at a time.  That way we can incrementally increase our investments without significant risk.   In fact, in today's market, we usually get to buy some cheaper shares a few days later.

These ETFs also pay dividends of 2-4%, which help mitigate the volatility in the current market.

Disclosure:  We own shares of VNQ, VYM, VTI, FEU, SCHB and SCHD in our investment acounts.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Saturday, February 06, 2016

Economic Slowdown or Recession?

Most economists seem to think the U.S. economy is just slowing down, but not heading towards recession.   However, the stock market seems to be forecasting a recession.

So which is it?

On one hand, the data indicates a slowing, but still positive, economy.   No contraction of GDP is sight yet.

However, individual stocks seem to be portraying a different situation.   Many stocks have been falling several months, with some down as much as 90% (e.g. oil and materials sector stocks).  Even the previous market leaders, technology and health care.  For example, Netflix is down about 38% from its all time high in December 2015.    Amazon is down about 28% in the same time frame.  Yesterday, Linkedin and Tableau both fell about 45% after disappointing earnings.

Either the stocks were extremely overpriced for perfection, or the economy is headed for a recession.
I think we are at an inflection point.   If the market continues lower, a recession is likely coming.  If the market demonstrates a major reversal in the next couple weeks, a slowdown could be the  explanation.

For now, I continue to remain cautious, waiting for market to show a clear direction.

Disclosure:  We own shares of Netflix.

For more on Reflections and Musings, check back every Saturday  for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Wednesday, January 20, 2016

Dollar Stock Menu

"Buy when there is blood in the streets, even if the blood is your own." ~ Baron Rothschild

Baron Rothschild was a British nobleman that made a fortune by buying during the panic that followed the battle of  Waterloo against Napoleon.

2016 is looking pretty bloody for the stock market and my blood is part of the mix.  I am buying cautiously at this point, making small purchases of commission free index ETFs and select dividend paying stocks.  I believe there is still more significant downside risk than upside potential and will wait before putting significant funds into equities.

In preparation for the further decline. I am making a mental list of falling stocks that that I'd considering buying at a $1/share price in the near future.  I recall that I had a chance to buy Ford stock at $1/share during the 08/09 crash.  Today, Ford is a $12 stock and paying a $0.60/share dividend.

Perhaps, the upcoming bear market will create similar opportunities with the current batch of falling stock valuations.  One area of consideration is the oil/gas and materials sectors, where stocks that were previously around $50+/share are now in the low single digits.  Another area is biotechs.

Disclosure:   We currently own Ford, which was purchased in the last few months.  We also own several stocks from the oil/gas, materials and biotech sectors that have fallen to the low single digits.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Tuesday, January 19, 2016

Waiting for More Clearance Prices

For the past couple weeks, I've been buying stocks on sale, at significant discounts of 20-50% off on average.   I've even been getting a few stocks at clearance prices - up to 90% off.

I think its time to stop buying on sale and wait for the inevitable clearance since there are few buyers and equities are in low demand.   I think the next two weeks will bring more prices down to clearance levels.

It will be worth waiting a couple weeks to see if I can get more stocks at clearance prices.

For more on Ideas You Can Use, check every Tuesdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Monday, January 18, 2016

Retirement Financial Security

I used to think having a large amount of investment assets would create retirement financial security.   Then came the 08/09 financial crisis.   This event has caused me to rethink depending mostly on stock market capital gains to support us in retirement.  Gone are the days of 7- 8% average returns for the stock market.

After a little more than 8 years of early retirement, I am revising our investments to create a steady stream of retirement income from our savings: a retirement paycheck.   Unfortunately, money market rates are less than 0.1% and short term CDs are about 1% and won't be returning to 5% during my lifetime.  I've outlined my current thinking in Creating Steady Sources of Income in Retirement,

Recently, I've been taking advantage of the stock market volatility to increase our holdings of dividend paying stocks.   With the current sector corrections, I've been able to purchase energy stocks with dividend percentages ranging from mid single digits to mid teens.  As the market falls further, I plan to continue adding to a few of these positions, and initiating some new positions with stocks from other sectors.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, January 17, 2016

Bracing for a Bear Market

"The beatings will continue until morale improves." ~ unknown

The market decline has been relentless for the first two weeks for 2016.  It will likely continue this week and maybe even for the entire month.   In the worst case, the low oil prices will lead to a financial crisis similar to 2008, despite all the new regulations implemented by the Federal government.

For now, I expect sellers to be in charge of the market, driving the indices down another 5 to 10%.  During that time, I will continue to invest in increments, buying small lots of a commission free total market ETF and small positions in dividend paying stocks.  I am still following my rule of only buying one or two positions a day since stock prices will likely be lower in the future.  In addition, I won't make any purchases on days the market rallies.

I will continue to buy incrementally until the market indices reach a 20% decline (S&P - 1707,78, Dow - 14681, Nasdaq - 4185).   At that point, I will decide if stocks are just on "sale" or if "clearance" prices are likely to come. Depending on my answer, I will either continue to buy, or move to the sidelines.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, January 10, 2016

Lions, Tiger and Bears...Oh my!

 Last week's stock market results, as well as the decline of many cyclical stocks over the past year, appear to be foretelling a dramatic end to the latest bull market.   In addition, North Korea has allegedly detonated a hydrogen bomb, Saudi Arabia and Iran will likely compete on oil production, and George Soros observed the economic environment seems eerily like 2008.

All that's needed is an end-of-the-world-prophet to proclaim the apocalypse will happen in 2016.

Seriously, I don't doubt the likelihood of another bear market occurring in the near future.  In fact, I think the potential is high for a steep market decline to continue next week.  I've been bracing myself for a significant fall in the market for a couple years now.   So even though a market crash will be painful, it will be a little less so since I've been expecting it.

This week, I will continue to buy small positions in a total market ETF and a few 3%+ dividend paying stocks.   But given the increased negative market sentiment, I will be further lowering the target purchase price points for these ETFs and stocks.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Friday, January 08, 2016

Life Didn't Get Easier in Early Retirement

I always thought that life would get easier as I got older.   After all, I would have the benefit of more years of experience with the passing of time.  So retirement would be the easiest time in my model.

I was wrong.  Here of some of the reasons for us.
  • Finances -  Our early retirement if funded entirely by our savings since neither of us have a pension nor are old enough to collect Social Security yet.   The stock market volatility since 2007 has created greater uncertainty (and stress:-) on whether we have sufficient savings to fund a retirement for 30-40 years.  This has required changing the strategy of primarily depending on equity appreciation to a strategy using more equity dividends for income.  
  • Children -  We started late with having children, adopting just before and a few years into early retirement.   Raising children in today's world is a bit more complex than when my spouse and I were growing up.  When I was a child, there were less options, less distractions, less choices to make.  As a result, I was more focused on a few things and (I think) easier to raise as a child.
  • Maintenance - We have more stuff that requires periodic maintenance: house, cars, appliances, electronics.  Electronics seem to need replacement every 3-5 years  Also, many appliances shorter lives of 5-8 years, versus 15-20 years, and therefore requiring replacement several times during retirement.  Finally, many of the new items are more complex, and require more instruction effort to use.
  • Health - In the past three year, my health situation has changed, requiring significantly more effort on my part to maintain good health: new diet, more medication, and more intervention.   I expect the effort to continue to increase as I get older.
  • No complaints.   Just an observation from our 8 years of early retirement.  And  an acknowledgement of a change in one of my paradigms.

    For more on Reaping the Rewards , check back every Friday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2016 Achievement Catalyst, LLC

    Wednesday, January 06, 2016

    Investing in a Volatile Market

    This continues to be a confusing market but I want to continue putting more funds into dividend paying stocks or total market indices.   I am using an approach of buying small quantities each time to minimize the risk of the market or the stock declining further.  To minimize costs, I am buying commission free ETFs or using free stock trades from broker promotions.

    First, I am buying commission free ETFs that are offered by my brokerage.   One brokerage has not holding requirement and another brokerage has a 30 day holding requirement.

    Second, I am buying small stock positions in select dividend stocks with commission free trades.   That way if the stock falls further, I can add to the position at a lower price.   Several brokerages are offering commission free trades for opening a new account or adding to an existing account.

    These approaches give me a bit of psychological support as I make the investment,  Of course, neither of these strategies will protect our purchases against a significant decline.

    For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2016 Achievement Catalyst, LLC

    Monday, January 04, 2016

    2015 Wealth Builder Ratios

    Here is our 2015 Wealth Builder Ratios update. During  2015, the Dow, Nasdaq and S&P500 indices were down 2.2%, up 5.7% and down 0.7% respectively. My company stock was down 12.8%.  Our investment portfolio decreased in value by 8.0% due mostly to my company stock.

    Overall, the returns were very poor for our investment portfolio.

    For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.

    Ratio and Target
    2014
    2015



    Comments
    Retirement Income to Salary
    Target=0.8
    2007= n/a
    2008= n/a
    2009= n/a
    2010= n/a
    2011= n/a
    2012=  n/a
    2013=0.84
    0.880.79This is the new metric that I'm using which is based on a 4% withdrawal rate of the liquid assets in our retirement and savings accounts.

    The target I'm using is a 0.8 ratio, which would be 80% of our pre-retirement pre-tax income.   With the decline in our portfolio, we fell below a 0.8 ratio.  
    Investment
    Income to Salary
    Target=0.8
    2007=3.41
    2008= -5.47
    2009= -1.38
    2010=1.29
    2011=0.5
    2012=2.02
    2013=5.89
    0.99-2.07In the transition, I will report this metric for 2015 even though I have replaced it with the Retirement Income to Salary ratio.

    -2.07 is the biggest decrease in this wealth ratio since the Great Recession. This was caused primarily be a decline in my company stock of 12.8%.
      
    Savings to Salary
    Target >20
    2007=23 2008=16.7 2009=15.3
    2010=16.6
    2011=17.1
    2012=19.1
    2013=25.0
    26.024.0In the transition, I will  report this metric for 2015 even tough I have  replaced it with the Retirement Income to Salary ratio.

    Almost all  of the loss was due to decrease of my company stock.


    Debt to Salary
    Target=0
    2007=1.51 2008=1.46 2009=0
    2010=0
    2011=0
    2012=0
    2013=0

    0

    0
    We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment reduced our monthly expenses by 24%.

    My financial goals for 2015 were:

    1.  Maintain a Retirement Income to Salary ratio >  0.8.  (below target at 0.79)

    2.  Maintain an Investment Income to Salary ratio > 0.8. (below target with -2.07)

    3. Maintain a Savings to Salary ratio of 20. (exceeded target with 24)

    4. Maintain Debt to Salary Ratio at 0. (met target of 0)

    (For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)

     #1,  #2 and #3 were directly correlated with how well our stock, bond, and CD investments returns. With the decline of my company stock, our portfolio had a negative return worse than the indices.

    2015 was a very humbling investment year.   I continue to reduce my company stock holdings to prevent a similar deviation from the indices in future years.  In addition, I am migrating towards building a portfolio of higher dividend paying stocks

    I will only keep goal #1 and #4 for 2016.  I believe these will be better and less volatile measures. At this point, I am slightly optimistic about the economy and the stock market.

    For more on Strategies and Plans, check back Mondays for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2016 Achievement Catalyst, LLC