A Confusing Market

I did not expect the market to rally Friday after the jobs report, especially since the jobs number indicated the Fed is raising rates in December.   In addition, the ECB said that they would continue monetary easing in the EU.  So I expected the stock market to decline, especially interest rate sensitive stocks, dollar to rise, and gold to fall.

Instead the market rallied, dollar went down, and gold rose.   The market not only rallied, but it went up over 2% and recovering the losses from the previous day.   The main negative sector was energy, due to the OPEC deciding to continue their policy of not reducing oil shipments.

While confused, I am very happy with the outcome.   Our accounts were up and my company stocked (uncharacteristically) gained a little more than the market indices.

However, the market reaction has me questioning the sustainability of this rally. The market can't keep rising if interest rates are going to rise.     If I'm right, the next few weeks/months should be the beginning of a market correction.

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 © 2015 Achievement Catalyst, LLC

Tough to be Positive

With a month left in 2015, I find it hard to be positive about the stock market.  I expect the market to continue to be ambiguous and directionless.  I also believe that the downside risk is higher than the upside potential.

Given my poor track record of anticipating short term stock market direction, I'm maintaining hold on our current investments.  I like my current investments, my level of cash, and can still sleep at night if the market falls.   So I'm bracing myself for a decline, and ready to make some additional purchases should the stock market go lower.

If my psychological preparation is wasted, I will be happy to be wrong.

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 © 2015 Achievement Catalyst, LLC

My Watching Paint Dry Investments

Tracking my investments in 2015 has been lot like watching paint dry.   A lot of time goes by and very little seems to happen.   With 2015 almost over, most of my accounts within a couple percent of the beginning of the year.   One managed account is down about 7% and one is up about 10%.    So overall, everything is about the same.

One reason is that I have chosen to invest in stocks that pay above average dividends to build a more dependable source of retirement income.  These stocks usually don't see significant short term price appreciation, and thus have a smaller impact on the account value.  In fact, several of my purchases have fallen with the expectation of Fed raising rates.   So most of my account growth will come from dividend payments, which will be about  1- 1.5% of the invested value per quarter.

Another reason is that we chose to be conservative in 2014 and put significant amounts in 5-10 year CDs paying 2-3%.   While better that the 0.01% of money market accounts, 2-3% still feels like very little annual growth.   But it's steady.

Finally, I don't get any immediate benefit from income,  since the investments are in IRA accounts and I am still below the age for penalty free withdrawals.    In about 2 years, I will be eligible for penalty free withdrawals and hopefully will benefit from "watching paint dry" during this time.

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 © 2015 Achievement Catalyst, LLC

Seeking Higher Interest Savings Accounts

Yesterday, my bank informed me that I am now eligible for 0.7% on our money market savings accounts.  Historically speaking, that may not be much, but it is significantly higher than the 0.01% we are getting today.

This info caused me to check with our other financial institutions on similar interest rate increases.  Unfortunately, there were no matching hikes by other institutions.   However, most had 5-6  month CDs paying 0.5%, which seemed like a reasonable alternative to me.

So in the next month, I'll be moving our 0.01% money market funds into higher paying money market funds or CDs, especially if the Fed raises interest rate in December.

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

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

Copyright © 2015 Achievement Catalyst, LLC

A Frustrating Investing Year

2015 has been a very frustrating year for my investing.  The markets have been ambiguous and directionless. The indices have been seesawing all year, neither breaking out to new highs or falling o new lows. In addition, my company stock has fallen about 18% after hitting new highs in 2014.

My strategy of buying beaten down dividend paying stocks has lead to the purchase of several energy stocks, which unfortunately have fallen further.   The only highlight is the 4-8% dividend these stocks pay, if the dividend is maintained.   A dividend cut would only add to my frustration.

My last frustrating year was 2012, which was followed by a significant market advance in 2013.   However, my previous frustrating year was 2008, which was followed by a further large drop in early 2009.  It's not clear to me which will follow 2015, but right now I feel a negative outcome is more likely.

If there is a significant year end rally, I may take the opportunity to sell off some positions for a profit.  Otherwise, I will wait for a significant drop in the market to put more funds back into equities.
More than likely, the market will continue to be frustrating and not allow me to do either.

For more on Reflections and Musings, check back Saturdays.

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

Copyright © 2015 Achievement Catalyst, LLC

Cautious and Waiting

I believe that many individual stocks will test the August and September lows again before end of this year.   Until then, I am only making a few small purchases of 3-6% dividend paying stocks and a total market ETF that I plan to hold for 3-5 years.

That way, if I'm wrong and the market rises, I can participate in the gains.  If the market declines as I expect, I wlll be able to buy at lower prices.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Patience

Since July, whenever I purchase a stock, I could have gotten a cheaper price if I had waited a month, a week or even a couple of days.  It seems that stock prices keep going lower.   Either it's time to start shorting stocks, or I should be more patient.

For now, I will choose patience.  So I've added two rules to my purchase strategy.   First, wait until the dividend yield crosses into the next higher whole number, e.g. transition from 4% to 5% yield.  Second, I will only make one stock purchase each day.  This way I will limit the number of stocks that fall after I make a new purchase.

However, if the market continues to fall, I may choose to also short some stocks.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Preparing for a Bear Market

I've been wresting with whether the stock market is more like 2008, which was the decline before the crash, or 2011, which was the decline before a big rebound.  

With the recent stock price action, the market is starting to feel a lot like 2008...an agonizingly slow decline until a big fall.  Anecdotally, in 2008, I had decided to ride out the volatility, instead of selling out.   At this time, I have also decided to maintain our current investments, which may not be a good omen for me.

Also, several major companies, such as Hewlett Packard and Catepillar,  have resumed cutting jobs.  This doesn't bode will for their expectations for the economy.   I think there is now a risk of a U.S. recession, which virtually no economist is predicting.

However, the major negative is that stocks keep going down.  Many stocks are already down 20% or more.  Some previous high flyers, such as Ambarella and Alibaba, are now down over 50%.

So now, I'm going to assume a bear market is coming... at least a 20% decline of the S&P to 1705.

I will still try to make small purchases of select dividend stocks and a total market ETF as the market falls, but I will be patient.  At a 20-30% decline, I will try to be disciplined and move 10-20% of our cash back into equities.

Disclosure:  At the time of publication, we did not have any positions in Ambarella or Alibaba.

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


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

Copyright © 2015 Achievement Catalyst, LLC

Interest Rates

When I graduated from college, interest rates were high and going higher.  I remember getting a five year CD at 14% during the 80s.   People thought I was crazy since rates were probably going up to 30% in a few years.

Well, rates soon plateaued and declining rates led to the great bond bull market.

Nowadays, interest rates are so low, it doesn't seem worth it to put money in a CD.   After all, 0.05- 0.5% doesn't return much money.   Rumor has it that Ben Bernanke (60) said that the Fed funds rate won't return to its normal benchmark of 4% during his lifetime.

With the latest Fed action of keeping interest rates at 0, I'm starting to think that Mr. Bernanke is right. It seems the Fed only wants to give the impression of raising rates and doesn't really want to raise rates.

Now, I don't expect the Fed to raise rates at the October 29-30 meeting.   That will be too close to Halloween, which is a very scary time.  (Perhaps, Ms. Yellen can dress up as a witch at the press conference to make the point.)   The December 17-18 meeting will be too close to Christmas and the Fed won't want to give markets a lump of coal.  (For this press conference, Ms. Yellen can dress up as Mrs. Claus.)

When I was younger, we didn't think inflation and interest rates would come down.   Now, I don't expect inflation and interest rates to rise to normal again...at least not in my lifetime.

For more on  Crossing Generations, check back Thursdays for a new segment.

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

Copyright © 2015 Achievement Catalyst, LLC

Mostly Waiting

There may be one or two more stocks that I will buy in the near term.  But mostly, I will be waiting for a more clear market direction before making any substantial commitment.   The lack of any potential upward catalyst is becoming more concerning.

I expect the Fed interest rate decision to be a negative, either way.  If the Fed raises interest rates, the market will fall.  If the Fed keeps interest rates the same, the market will fall.   It's a no win situation for the Fed.

China looks worse everyday.   In 2009, I believe that China had a much better response to the financial crisis/great recession than did the U.S.   Maybe not.  Nowadays, I believe China is having significant issues in managing their economy and financial systems.   Perhaps this may create a contagion for other economies.

Although Greece is no longer a highlighted issue, Europe's overall economy still seems weak and possibly going into recession.  Emerging market economies are also weak and some are already in recession.

Finally, many previously high flying stocks have experienced their own bear market, declining 20% or more over the past 6-12 months.   Examples include Fitbit, Ambarella, Alibaba, and GoPro,

The only positive I see is that the U.S. economy is still growing and does not appear to be heading towards recession.

So right now, I see more downside risk than upside potential and I will wait before making any large investment of funds.

Disclosure:  At time of publication, we had no positions in Fitbit, Ambarella, Alibaba, or GoPro.

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 © 2015 Achievement Catalyst, LLC

Four Letter Words in Investing

As the market turns down, I expect there will be a lot of four letter words being used.   Here are some of the common ones in investing, in order of desperation:

Can't - The price can't go down any further.

Want -  I want the price to reach what I paid before I sell.

Hope -  I hope the stock gets back to what I paid for it.

Pray -  I pray that the stock stops falling and returns to the price I paid.

It probably won't be long before these four letter words are being regularly used,

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

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

Copyright © 2015 Achievement Catalyst, LLC

What I Learned from the Last Crash

The market volatility of the past three days has caused me to think back to the last major stock market crash in 08/09.  Here's what I learned from then:

The  new Fed chairman will make a mistake.   Back in 2006, Ben Bernanke claimed there was no subprime mortgage issue and did not address it.   He was a new Fed chairman at the time.  Janet Yellen has been chairwoman for less than a year.

It will get worse before it gets worse.   Monday's volatility will be repeated many times. Monday's lows will get taken out.

The market will take a while to bottom, up to several months.   During that time, being in the market will be extremely painful.

The market will recover and reach new highs, as it has from every other bear market.

My plan for now is to keep our current investments and add funds with every 10% decline in the market indices, with a target of being fully invested around a 50% decline.  While good in theory, I expect the plan will be difficult to execute as our current stock investment values are reduced by 50%.

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 © 2015 Achievement Catalyst, LLC

The Party Feels Like It's Over

This is the third longest bull market in U.S. history, and all bull markets must end.

There's a tremendous amount of negativity on the current bull market.

Bull markets rarely last over six years. 

China's economy is slowing significantly.

Emerging market currencies are in a crisis.

The Fed is raising interest rates.

Commodities and precious metals are in a bear market;

Oil is at a 6 1/2 year low.

31% of S&P 500 stocks are in a bear market.

39% of S&P 500 stocks are in a correction.

The 2.8% decline during the first three days of 2015 was the worst start since 2008.

The only positive I found was that 2015 is the third year of a presidential term.  Since WWII, the market has not experienced a loss during the third year.   However, it has closed flat during two of those third years: 1947 and 2011.

The negatives far outweigh the positives.  Unfortunately.

So it is very likely the market will continue to fall this week.   The only question is, "How far?"

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

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

Copyright © 2015 Achievement Catalyst, LLC

It's Probably Going to Get Really Ugly

The 1017 point drop in the Dow this week has wreaked havoc on my investment portfolio.  Unfortunately, I believe the indices will continue to fall next week.  At this point,China and the Fed have lost their economic credibility with the market.  Hence, I expect the selling will continue.

One factor that may contribute to a steeper decline is the high level of existing margin debt.  As stock prices fall, accounts with margin debt may receive margin calls that require further selling of stock. I have also read that the emerging market currency crisis may be another factor causing a stock market decline, just like in 1998.

Right now, I'm anticipating at least a 20% drop in the market indices.   During that time, I will be trickling in a small amount funds into commission free broad market ETFs.  In addition, I will make some small purchases of specific stocks to build our retirement dividend portfolio.    For now, I don't expect to put more than 20% of our cash position back into the market.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Managing Our Investment Risk

With the recent volatility of the U.S. stock market, I decide to revisit how we are managing our retirement investment risk.

My simple qualitative measure is whether i would be relatively free from worry in the event of a major market downturn.  In 2007, I gave an unequivocal yes as the answer.  However, during the 08/09 bear market, I was far from worry free.   I had too much invested in my company stock and not enough cash reserves in our accessible funds.

My answer today is a qualified yes.  Yes,  mainly because we've significantly increased our cash reserves, which we didn't do in 2007. Qualified due to my continued exposure company stock, even though I've greatly reduced the amount and reinvested the proceeds in a diversified stock portfolio.   Unfortunately, some of my company stock will need to be sold in the next two years, no matter what the price.   Hence, the possibility of higher worry during a near term bear market.

So from a risk perspective, we're better than in 2007 but not as good as I hope we will be in 2018. If we are lucky, the current bull market may last for three more years.:-)

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 © 2015  Achievement Catalyst, LLC

Market Pain Is Increasing

The market volatility and decline is starting to worry me.      At first, I believed the market was similar to 2012, i.e. lots of volatility but still finishing higher.    However, I'm starting to believe 2015 is going to be more like 2008, i.e. lots of volatility and a big downward spike.  The main difference from 2008 is that market indices are still near the all time highs highs.

One argument against a significant decline is that almost everyone expects one to happen.  In fact, many of the pundits turned negative on the market over the last couple weeks.  Often, high negative sentiment is a good contrarian indicator that a market correction time frame is not near.  And the sentiment seems very negative at this time.

At this point, I'm still in a wait and see mode.  I'm ready for a downturn and trying to prepare myself to buy should there be a 20% or greater drop.   Hopefully, if there is a significant drop, I will have the discipline to put some funds into the market.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Early Retirement Miscalculations

In 2007, I took early retirement at the age of 49.   Before making the decision, I worked with my financial advisor to determine if we had sufficient funds to retire.   The analysis was positive and I retired early after 27 years of service with my company.

With almost eight years of retirement behind me, I have the benefit of experience in reviewing the analysis that was done in 2007.   Here are some of the miscalculations that I made in 2007.

Growth of company stock.    We used the historical 7% average annual growth that my company stock had experience during my time with the company.   Unfortunately, the actual stock growth did not match the historical growth rates.  From the 2007 high, the stock has only grown about 3% in total, much less than the projected 60% expected growth.

A significant recession occurring immediately.  For the Monte Carlo retirement analysis, we had over a 90% chance of not running out of money.   The 10% chance were most likely due to a significant market drop during the early years of retirement.   Lucky me, the 08/09 bear market started a few months after I retired.

Planning to live until 90.    Our retirement analysis assumed life spans until 90, which seemed reasonable at the time.   Recently, I've been thinking that living to 100 or longer may be a better plan.   After all, running out of money at 90 is a major issue since going back to work is not likely solution.  

With these revised considerations, I've decided to delay taking Social Security until the latest possible date, when I'm 70. Also, I've been asked to consider an executive director position which would have me returning to work as CEO of a non-profit for a few years. Both of these actions should help extend the life of our retirement savings.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Interesting Reads

Just a few interesting reads:

The $339,200 college debt example hurts more than it helps  After reading this article, I won't be giving my vote to this candidate for President.   If I don't agree with his personal financial choices, I'm sure I will disagree with his government financial choices.

Premier of Greece, Alexis Tsipras, Accepts Creditors' Austerity Deal  A great lesson in how not to negotiate.  Not only are the terms worse than what was on the table in January 2015, but the situation has worsened due to the delay.

Marc Faber: Recession is coming this year  For the last couple years, the best investment strategy has  been to ignore his predictions.   He has been saying the same thing since at least 2012.   Someday, he will be right, but it may not be for a while.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Looking for Extreme Market Pain

I am convinced the Greek debt crisis will create an investing opportunity.   However, whenever I've had this mindset in the past, I started investing right away and quit before the bottom because the pain was too great.   Case in point:   The May 2013 Taper Tantrum.    I started buying right away, and kept buying into the decline.  However, it took over a month for the pullback to complete.  By the bottom, I was feeling enough market pain to stop buying.

When the decline starts this time, I plan to only buy those stocks I was considering last week, but haven't purchased yet.  These stocks are dividend paying stocks and part of my strategy to create a steady source of retirement income.   After these purchases, I will wait until the stock market pain is very high (at least a 10% decline) and then start making the additional purchases.

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

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

Copyright © 2015 Achievement Catalyst, LLC

A Greek Induced Correction?

It appears a Greek default is the most likely outcome next week.

The current bull market is getting a bit tired, but it keeps going up.   Perhaps the impending Greek default will be the event that causes the market to have its first correction since 2011.

Or will buyers on the dip prevent the correction from happening?  Hard to say.

My plan is to make partial purchases of my buy list during the initial drop, and wait before making additional purchases.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Income Certainty

Over the past year, I have developed a greater appreciation for the benefits of a pension.  First and foremost, a pension offers a high degree of income certainty.   The amount and annual increases are guaranteed for the life of the beneficiary.  

With income certainty, there is also less financial anxiety, especially as one gets older.    Every month, the beneficiary receives a retirement paycheck.

A retirement paycheck is a concept that I like a lot.  Since we don't have pensions, we'll need to create our own source of a "retirement paycheck."   Something that is regular, certain and available for the rest of our lives.

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 © 2015 Achievement Catalyst, LLC

Be Awesome

After a slow start, our 2 3/4 year old son's talking skills have been growing exponentially the past few months.   He surprises us with new vocabulary words every day.   Recently, he started exclaiming "Be awesome!" out of the blue.   This isn't a phrase used in our house.  And he watches very little TV.   So we don't know from where he learned it.

He says, "Be awesome!" with so much enthusiasm that it got me thinking.  Wouldn't it be great if "be awesome" was the inspiration by which I lived.  Too often, it's too easy to get caught up in daily life demands and lose the inspirational elements.

So the next time he said "Be awesome!," I came right back with my own, "Be awesome!"  Without hesitation, our son responded, "We are!"

"Yes, you're right," I thought.    And I need to keep remembering that we are :-)

For more on Crossing Generations, check back Thursdays for a new segment.


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

Copyright © 2015 Achievement Catalyst, LLC

Taxes

I usually file my taxes in the summer or later since we don't get a refund.  By managing my withholding and estimated tax payments, I usually am pretty close to owing just a little on April 15th.   This year, however, we have large refunds coming from both the federal and state returns, since I am unable to adjust the withholding from my income.

If the past is a predictor, my state refunds will come first, in about 2-4 weeks.   My federal refund will come later, in about 6-8 weeks.

I still do my taxes by pen and paper, with the help of an excel spreadsheet, which gives me an in depth understanding of how and why I pay the amount of tax that I do.   My conclusion is that federal taxes are going up and getting more complicated, mainly due to the Obamacare tax changes that were implemented in 2014.   Our resident state taxes are going down, and keeping the same complexity.   Our non-resident state taxes are stable, with complexity increasing slightly.  

Although, I am still competent at doing our taxes by hand, I expect I will need to use tax software if the complexity or the amount of tax law changes continues to increase.  This has caused me to consider simplifying our retirement finances, which should simplify our income tax filing.   For example, going from 7 part time jobs to no part time jobs has already been a simplifying event.  There are probably several more that I can do over the next few years.

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 © 2015 Achievement Catalyst, LLC

Preparing for a Market Decline

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

It is very hard for me to put additional funds in the stock market during a market decline.  Instead of buying, I become conservative and worry about how much my current investments have fallen.  By the time, the market recovers, I've missed my opportunity to buy stocks at a discount.

At this time, I've decided to prepare myself to buy into the next decline and build our core investments.  First,  I have designed  strategy using 4-6 commission free ETFs. Second, I have created a list of dividend paying stocks to buy in addition to the ETFs.  Third, I've identified cash funds that can be invested for 3-5 years without causing financial hardship if the investments decline.

I'll learn how much this preparation helps when the next stock market decline occurs.

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 © 2015 Achievement Catalyst, LLC

Happy Pi Day

Today is special Pi Day.  At 9:26:53 the date and time date/time 3/14/15 9:26:53 will be equal to first 10 digits of Pi, 3.141592653  This only happen once every 100 years.

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


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

Copyright © 2015 Achievement Catalyst, LLC

Changing Core Investments

Before I retired, my core investments to generate income were my job and my company stock.   After I retired, my company stock continued to be a core investment, accounting for 33-50% of our net worth.  Over the past two years, I have been selling down the percentage we have in company stock toward a target of 10-15%, which will be achieved in 2017.

As I was reducing our company stock exposure, I realized we need to replace my company stock with another core investment.   I've looked at a few options: 1) advisor managed accounts;  2) self directed stock selection; and 3) index ETF portfolios.

I've been testing advisor managed accounts as a core investment since late 2012.  During that time, I have been happy with the results since the returns have been positive in the double digit range.  So I've been able to rationalize the 1% wrap fee as equivalent to the expenses of an actively managed mutual fund.   Of course, I realize that the 1% would have been an additional loss if the market had declined.  Also, none of the manage accounts exceeded the benchmark returns.  Thus, I am open to considering other options which may be lower cost.  For now, I will keep the managed accounts I have mainly because I like the stocks that have been selected.

Since mid 2012,  I've been experimenting with investing in individual stocks.  I've tried a long/short strategy, a sector (biotech, energy or materials) focused strategy, and a dividend stock selection strategy.  The main issue with the long/short and sector strategies is insufficient time and expertise to continually research the hundreds of stocks that can be considered for each strategy.  Also, I have a tough time deciding when to sell a stock, either for a gain or to cut losses.  The dividend stock strategy appears to be a good approach, since the stocks tend to from good companies and the dividend will offset short term price declines.  In addition, the plan is to keep the stock in perpetuity for the dividend, and therefore would only be sold due to a catastrophic event.  I continue to slowly build a dividend stock portfolio.

In 2013, I began to build a ETF investment portfolio based on low cost, commission free index ETFs. Unfortunately, I sold out of most of the ETFs a in the bounce shortly after October 2014 correction since I expected a further decline.   Up until now, I've been using the commission free ETFs for a trading strategy.  So the next step is to test using commission free index ETFs as a core investment portfolio.  I will be implementing the ETF strategy this month in our IRA accounts.

At this point, the index ETF strategy feels like a good option for the main core investment strategy.   However, I will run the test to determine if I will be comfortable keeping a significant amount of our investment funds in this strategy.

For more on  New Beginnings, check on Sundays for another segment.

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

Copyright © 2015 Achievement Catalyst, LLC

The Crash that Never Came

Since the bear market of 08/09, I've been extremely cautious and kept most of our investment funds in cash or cash equivalents.  During that time, I've been expecting a significant correction of more than 20%.  Unequivocally, I've been wrong.   With the exception of an almost 20% drop in the summer of 2011, the stock market hasn't been close to another bear market since 08/09, despite many experts forecasting near term market collapses.

Going forward, I continue to be cautious.   I still think that bear market is coming soon.   However, for now, it seems the market trend is up.  In hindsight, my biggest investing mistake was to take profits too early for the stocks I did buy.   So,  I will start keeping my winning stock picks longer, instead of taking only 20, 30 or 50% profits.  My second biggest mistake was not selling losing stocks soon enough.  I need to start cutting losses sooner for my poor stock picks, before the price drops over 20%.  

Finally, I'm preparing myself to make some selective purchases, when the next bear market does occur.  

For more  Reflections and Musings, check on Saturdays for a new segment.


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

Copyright © 2015 Achievement Catalyst, LLC

Creating Steady Sources of Income in Retirement

Over the past year, I realized one of the deficiencies of my retirement finances: insufficient steady income streams.   Our retirement income is primarily dependent on the gains of our investments. While investment gain strategy works well when investment values rise, it under performs during market corrections and bear markets, as I learned and experienced in 2008.

Here are the four investments elements I am working on to create steady sources on income:

Fixed income -  For us, these are mainly CDs.  Over the past year, we bought several 5-10 year CDs that pay 2-3% a year.  (Alas, gone are the days of earning 5% in a money market account.)  We purchased the CDs through a brokerage, and therefore, can sell them before maturity, if we need the funds.  I am also considering investing in closed end municipal bond funds, which pay about 5% yields.  I am targeting to get 25% of our retirement income through fixed income.

Dividend income -  I will be increasing the number of stocks that pay dividends in our investment portfolio.   First, we have invested in a fund that focuses on dividend income and growth.  We have used this fund from 2009 to 2011 and since 2012.  I have been happy with both the dividend yield (~3.5%) and the investment gains over that time.  In addition, I plan to add dividend paying stocks on my own, using the Dividend Aristocrats and Dividend Achievers lists as a starting point.   Finally, I plan to keep, instead of sell, the remaining stock I have of the company from which I retired since it has a 3% dividend.  I am targeting to generate 25% of our retirement income through dividends.

Rental Income - In 2013 I became a landlord when I inherited part ownership of a commercial rental property.  The good news was that the mortgage was paid off and the property is positive cash flow.   It is also handled by a property management company, which reduces direct involvement by the owners.  Although there is consistent income, the annual net rental income varies due to vacancies and economic conditions.  I would like the rental income to cover 25% of our retirement income.   However, once this property is sold, I don't know if we will purchase another property to replace it.

Annuity Income -   I've looked at purchasing a lifetime annuity through an insurance company, but haven't been able to rationalize the cost.  I am interested in an immediate annuity in about 20 years, but most agents aren't interested in selling me a policy in 20 years :-)  At this point, our most likely source of lifetime annuity income will be Social Security, for which we won't be eligible to receive for about a decade.  I expect that Social Security will cover about 25% of our retirement income. 

For now, we will consider gains in our investments as a bonus, but also target investment gains to cover 25% of our annual retirement income.  This will provide a cushion if the four income categories fall short of their 25% target.

I'll be working on implementing this retirement income strategy over the next few years.

For more on Strategies and Plans, check Mondays for a other segments.

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

Copyright © 2015 Achievement Catalyst, LLC

Returning from Sabbatical

Happy New Year!

After over a year on sabbatical from blogging, I am returning on an occasional basis, posting between one and four times a month.  I will try this posting frequency for a few months and decide whether to continue.

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

Copyright © 2015  Achievement Catalyst, LLC