Monday, April 01, 2013

Wealth Builder Ratios - Q1 2013 Update

Here is our Q1 2013 Wealth Builder Ratios update. During the first quarter of 2013, the Dow, Nasdaq and S&P500 indices were up 11.3%, 8.2% and 10.0% respectively. My company stock was also up 13.5%.  Our investment portfolio increased in value 11.3 % due almost mostly to the rise in my company stock in Q1. About 10% of the gain was due to the gains in stock inherited from my parents..

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

Ratio and Target
Q4 2012
Q1 2013

Income to Salary
Target= 0.8 2007= 3.41
2008= -5.47 2009= -1.38
2010= 1.29
2011= 0.5
2012= 2.02


This has been an outstanding investment quarter.  However, neither the stock market or my company stock can continue to advance at this rate.

I plan to sell some additional shares of company stock in my retirement plan, keeping only the low basis shares in my company retirement for a future NUA execution.  I bought back a very small amount near the bottom of the trading range in June 2012 which I have sold at a 15% gain.  At this point, I plan to sell all the stock options with an early 2014 expiration during 2013.
Savings to Salary
2007=23 2008=16.7 2009=15.3
19.121.2During Q1, I had be slowly trickling funds back into the stock market.   I plan to continue trickling in funds into stocks and ETFs during Q2 2013.
Debt to Salary
2007=1.51 2008=1.46 2009=0


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

My financial goals for 2013 are:

1. Continue to maintain an Investment Income to Salary ratio > 0.8. (on track)

2. Maintain a Savings to Salary ratio of 20. (on track)

3. Maintain Debt to Salary Ratio at 0. (met final goal of 0)

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

Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments returns. With the very positive performance of my company stock and the high proportion of cash, our portfolio was up significantly.

Although I am pleased with our portfolio results, I am not confident the gains are sustainable. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. I continue to be concerned about volatility of our investment portfolio, and believe there equal downside and upside potential going forward due to EU sovereign debt crisis and the US debt ceiling crisis.  So I continue to slowly add funds to the stock market, and hold my company stock and stock options

I continue to have the same financial goals for 2013. At this point, I am slightly optimistic about the economy and the stock market.

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

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

Copyright © 2013 Achievement Catalyst, LLC

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