11/5/07 Stock Purchase Update - Only Holding The Biggest Gainer

In my 10/29/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was still benefiting from the Fed rate cut and was up $3,311 for a 18.9 % gain, for a new high. As of 11/3/07, the portfolio achieved a new high of $3,543 for a 20.2% gain. I had owned AVT for 5 months before selling it for a 5.1% gain,TEX for 4 months before selling it for a 3.9% gain and SJR for 5 months before selling it for a 22.8% gain. Here's the current status on the one remaining stock:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 11/2/07
Potash (POT)	50	$71.39	$121.30
Shaw Communications B (SJR)	100*	$21.755	sold @$26.85
Avnet (AVT)	200	$38.21	sold @ $40.15
Terex (TEX)	50	$82.56	sold @ $85.77

* 2 for 1 split on 8/3/07

Overall, I am very happy with the performance of these four stocks, given the volatility in the market. Since the last update, POT was up $4.63. I have owned POT since June, 2007 and it has contributed significantly with a 69.9% gain in that time.

I continue to be impressed with my commitment to stay with the system recommendations, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week.

The recent events (credit crunch, central bank interventions) originally had convinced me that the bull market is in its last stage, and I was considering closing out these positions during the next significant rally. However, the Fed rate cuts of 0.5% for the discount and Fed funds rate of September 18, 2007 lead me to believe the bull market will last about another year. Recently, I identified a new set of stock purchases in my 10/15/07 updated buy list from the modified Unemotional Investor Growth system.

At this point, I have not made any purchases from the new stock pick list, since the market rally has not been consistently strong. The market activity continues to be concerning, with narrow breadth and a high number of new lows. I am staying on the sidelines for new purchases until the market strength and breadth is better.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Taking Courses To Explore Retirement Opportunities

Since I retired in my forties, I was offered an option to use transition services, normally offered to those looking for a new job. Therefore, I have access to expert help on personal assessments, learning about new options, and finding career opportunities. While this help is useful for people making career or job changes, it is also extremely useful for those of us that are going into retirement.

Here are the courses that I have taken so far and how I see them applying to retirement.

Strengths, interests and values assessments - These courses are directed towards helping people really understand what they are good at doing, what they like to do, and one's core values. While I am not a big fan of over analyzing things psychologically, I have found it useful to step back and do a personal inventory in these areas. The assessments have provided some interesting perspectives and insights.

Since I am looking for something new I want to do, the assessments have provided some very useful objective analysis and profiles. Not surprisingly, the profiles are a good match for some of my dream jobs.

New career field exploration - My dream job are in areas completely unrelated to my career. Since I have limited knowledge about the industry, I need to better understand the business and the roles, and whether I can do them on a part time basis. Also, I will want to identify top companies or individuals in the business already.

Networking - While I have good network in my professional field, I have virtually no network in the field of my dream jobs. I know the benefits of a good network. Since retiring, a colleague, a neighbor and technical temp company have offered to connect me with job opportunities, in my current field. While appreiciated, I haven't pursued them since I wouldn't have retired if I wanted to stay in the field :-)

I've already identified some networking possibilities for my areas of interest. I will put some addition effort in developing a targeted resume, before letting people know of my new interest.

Interviewing - Whether I do some part time work for a small company or strike out on my own with clients, interviewing and negotiating will be important skills. Not having done this since college, I found this course very helpful. I have already learned that saying I retired from my company may be "show stopper." Apparently, retirees are viewed as not being fully committed, not able to learn new things, and not likely to be a long term employee.

Also, this is the phase the applicant uses to determine whether the work and the company culture is a good match. This part is a two way evaluation - employer deciding about candidate, and candidate deciding about company.

Although these courses are great for those looking for their next job, I have found them very helpful for transitioning to my retirement phase, which will be also be a new endeavor. Whether it be my dream job, part time work, or other new activities, the strategies and tools shared in these courses will be useful to me.

For more on New Beginnings, check back every Sunday for the next segment.

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

Copyright © 2007 Achievement Catalyst, LLC

Lifestyle Inflation Choices

Although I am a proponent of buying only what I need, I recognize that I am not perfect:-) Here's a quick accounting of how I do in various areas.

	Did I Inflate My Lifestyle?
Category	Yes	No
Cell Phone	-	Don't have one, don't need one, don't want one:-)
Other Electronics	Laptop, high speed Internet, digital camera, and an IPod (gift).	No cable or satellite, video game console, or wide screen HD TV.
Personal Grooming	Powered Gillette Fusion (gift) and a Phillips Sonicare electric toothbrush.	-
Vehicles	-	Base model truck, manual transmission, manual door locks, with A/C as the only option.
Recreation	Pool table.	No gym or other club memberships.

Fortunately, most of my lifestyle inflation items were one time costs. The only item I chose with a recurring cost is high speed Internet. On the other hand, most of the lifestyle inflation items I avoided have (high) recurring cost. Hmm....I didn't realize this difference until writing this post and there may be a lesson in this analysis. Perhaps a topic for a future post :-)

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 © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #5 - Setting Goals, Developing Plans and Tracking Progress

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #5. ( #1 is about our childhood , #2 is about education, #3 is about working, and #4 is about lifestyle.) I'll begin this segment on Goals, Plans and Tracking Progress with a quote from Alice in Wonderland, by Lewis Carroll:

"Chesire Puss," she began, rather timidly, ... "Would you tell me, please, which way I ought to go from here?"
"That depends a good deal on where you want to get to," said the Cat.
"I don't much care where -" said Alice
"Then it doesn't matter which way you go," said the Cat.
"- so long as I get somewhere," Alice added as an explanation.
"Oh, you're sure to do that," said the Cat, "if you only walk long enough."

Fortunately, I did have a goal and knew where I was going. However, I did not have a single bullet-proof plan from the very beginning, that was executed flawlessly to enable me to retire in my forties. In fact, the plans were fuzzy in the beginning, refined over time, changed course as needed and took advantage of fortuitous opportunities as they arose. The only thing that didn't change was that I wanted to be financially secure enough so that I could retire. Here's my story:

Original Goal - Save enough to live off interest. Right after graduating from college and starting work, I began to estimate how much I needed to "retire." I always knew that I didn't want to work forever. The idea of living off interest income was very appealing to me. I quickly figured that I needed 25 times my salary at 4% interest in a savings account. While experts will quickly point out that I didn't account for inflation, it didn't matter. 25 times one's current income is a very big number, especially is one is just starting to work.

Lesson learned: Having a good, while not perfect, goal got me started in the right direction.

Plan A - Save enough from my salary and company retirement plan. Needless to say, the early years were tough. I had a student loan, and soon afterward took out a car loan and a home mortgage. Even so I managed to save about 10% of my salary each year. And my company was contributing 5-20% (depending on years of service) of my salary to a retirement plan. Unfortunately, at this contribution rate and 4% interest, it was going to take about 45 years to achieve 25 times my salary.

Lesson learned: Even though my initial goal wasn't exactly right, it was close enough to show how challenging it was to achieve financial self sufficiency. Keeping track of the progress and estimating what was needed clearly showed I needed to do something different.

Plan B - Create additional sources of income I quickly figured out I might need additional sources of income to achieve a savings goal of 25 times my salary. I considered the stock market and rental property as two viable options. While both options yielded positive returns, they were never as reliable or as high as my wage income. However, they served to augment my savings contributions.

Lesson learned: My additional sources of income took committed effort to create and maintain, but were insufficient to close the gap.

Revised Plan A - Get more income from my job. In my early years, I wasn't reaching my potential in my career. While I had advanced one level, some peers had advanced two levels, and one had advanced three levels. During those years, I typically worked about 40-50 hours per week, keeping a good work life balance.

I consciously put more time and commitment in my job, including taking on some high risk, high profile projects. My work hours increased to averaging 60-80 hours per week. During this time period, I was promoted two levels, almost tripling my compensation. While part of the increases raised our lifestyle, most of it was put into savings. It was during this time that our retirement savings grew the fastest.

There was tremendous personal sacrifice during this time. However, there was also significant payout towards our savings goal, which made it worth the sacrifice.

Lesson learned: For me, retiring early required exceptional hard work and personal sacrifice.

Revised Goal - Live off investment income. Four years ago, I hired a professional advisor who showed me living off investment income was a better approach than living off interest income. By including stock investments in the equation, I would be better able to account for inflation and maintain our lifestyle. His strategies and track record have given me confidence to retire, even though we are in our forties.

Lesson learned: Good professional advisors have access to better information and tools that I do.

Here's the series:

1. Our Childhood Preparation
2. The Value Of Higher Education
3. Making The Most Of My Job
4. Lifestyle and Spending Choices
5. Setting Goals, Developing Plans and Tracking Process
6. Staying The Course
7. How Luck Played A Role
8. My Personal Finance Mind Tricks
9. The Professionals We Used
10. When Preparation Met Opportunity

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

Photo Credit: Wikipedia

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from October 29 - November 1, 2007

Here are links to select Carnivals from October 29 - November 1, 2007:

Carnival of Personal Finance - Trick or Treat Edition

Carnival of Family Life

Carnival of Stocks - October 29th Edition

Twenty Something Finances - October 29, 2007

Festival of Frugality #98 - The Happy Halloween Edition

Carnival of Financial Planning - November 1, 2007 Edition

Please give these hosts some recognition for their hard work and check out their Carnivals.

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

Copyright © 2007 Achievement Catalyst, LLC

A Safe Car for a New Driver

Although our daughter is still 13 years away from driving, I already have picked a good car for her, a classic boxy Volvo 240 DL:-) Here are the reasons:


Built like a tank. 16 year old drivers are three times more likely to have an accident with injuries than drivers of all ages. Volvos are designed with a structural cage to protect the passenger compartment. If one uses seat belts, a Volvo will likely provide maximum protection in the event of an accident.

Not a cool car to drive. Classic Volvos, while safe, are probably not the first choice of teenagers to drive. They are pretty uncool looking. Thus, the car would not be driven frequently:-)

Safe and infrequently driven, the best of both worlds for a new teenage driver. Unfortunately since the last Volvo 240 DL was produced in 1993, it may be hard for me to find one 13 years from now:-)

Credit for the idea: Tom and Ray Magliozzi, Car Talk

For more on Crossing Generations check back every Thursday for a new segment.

Photo Credit: Wikipedia

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

Copyright © 2007 Achievement Catalyst, LLC

Afraid Of Investing In The Stock Market?

I've noticed a some bloggers are losing their confidence when it comes to investing in the stock market. Even people who strongly advocated buying and holding index funds are now pulling out of the market themselves. While they may feel better in the short term, it is likely their portfolios will significantly underperform in the long term.

Here's the data from Dalbar, an investment research firm. They found that market timers in mutual funds lost an average 3.29% per year, resulting in an average investor annual return of 3.51% during a time when the S&P index returned 12.98% annualized. A net difference of -16.49% is quite a big penalty for trying to time the market.

However, I understand fully that staying invested is an intellectual and psychological decision. In the past, emotion usually prevailed, causing me to sell instead of staying invested. Here are some ways I have tried to conquer the emotional element:

Allocated a portion I felt comfortable to risk. I confess that I have not been fully invested in the stock market. Historically, most of the accounts we control (taxable and tax exempt) have been in fixed income investments, with a maximum of 30% allocated to stocks. Thus, a minority portion of my savings would participate in the stock market. During the great tech bull market, my overall portfolio didn't grow exponentially like most of my peers. However during the tech crash of 2000 to 2002, I didn't lose as much money either, which made me feel good.

The other portion I was willing to risk was the company retirement account since 100% was invested in company stock (unnamed to maintain my anonymity:-) for most of my career. Fortunately for us, my company stock has returned about 16% annually for the past 20 years, outperforming the 9.5% return by the S&P 500 index during the same time.

Invested a small portion in quality companies with potential for exponential growth. When I first started investing, I tried to win big with with every stock pick. I would try to find out of favor stocks that I thought were under valued. More often than not, I was wrong would lose money. In the eighties, I did not to invest in "darling" stocks such as Dell and Microsoft. As it turned out, $1000 invested in Dell or Microsoft would return $386,250 and $246,700 respectively by May, 2007. So now I try to find "high potential" stocks in which to invest a small portion of my portfolio. I have chosen three stocks for this category, Google, Amazon and General Electric and made them part of my personal core stock holdings.

I won't sell these stocks unless there is a significant deterioration of the company fundamentals. For example, I have stayed invested these stocks despite the volatility of that past few months.

Hired a good professional wealth manager. As noted above, the returns from my company retirement plan were exceptional because I was required to stay 100% invested in our company stock. Therefore, about three years ago, I hired a professional manager for 1/3 of our personal accounts. He designed an investment strategy and has kept the funds 95% invested in the stock market during that time. My running joke with my manager is "Keep me invested when I bail out in my own accounts." Although I do pay a asset based fee, the returns have been comparable to the S&P 500 index and higher than my fixed income returns, after fees.

For reference, I found an advisor who is committed to wealth preservation and growth strategies, and part of an advisor team that had a track record of over 20 years. I didn't want someone who was successful primarily due to a narrow sector (e.g. energy, gold or tech) focus. My main expectation is that our advisor will keep us invested in a divesified portfolio so that our returns, at a minimum, match the S&P 500 index over the long term.

Although I haven't done the calculation, I expect that the returns outside of my company retirement account have been below those of the S&P 500 index. However, I am not disappointed since the level of risk was acceptable and returns were offset by the company retirement plan which beat the market.

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

Photo Credit: morgueFile.com, Jane M. Sawyer

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

Copyright © 2007 Achievement Catalyst, LLC

Collision and Comprehensive Car Insurance - When I Consider Dropping Them

Although I am a firm believer in having adequate insurance coverage, I also like to avoid being over insured. One of the insurances I periodically review is collision and comprehensive coverage for our cars.

Since we drive our cars for a long time, at some point they are no longer worth insuring. Liz Pulliam Weston wrote a good article about this in MSN.com titled Dump the insurance on your clunker. At some point, one should start considering stopping insurance for damage to car. Ms. Weston writes that point is when one's annual collision and comprehensive premium is equal to 10% of the car value less the deductible. For example, if one owns a $6000 car with a $500 deductible, one should consider dropping the collision and comprehensive insurance if the cost is more than $550 per year.

For me, 10% may be a little to low, since it will take 10 years of premiums to cover a totalled car in the first year. I personally like to use 20%, since that is a shorter time (5 years) to carry the risk. Also, I like to use an absolute car cost (e.g. $4000) I am willing to "self insure." When my car value drops below that amount, I will drop collision and comprehensive insurance. Finally, I consider our driving record. Luckily, we have only been involved in four car accidents in over forty years of combined driving, in which only one was at fault (by me.) Averaging only one accident every 10 years of driving lowers the probability of us to have an incident in five years.

At this time our, the collision and comprehensive premium for our cars is about 2% of the value of our cars after the deductible, primarily because of good driving records. Also, neither car is close to the threshold value at which I am willing to self insure. Therefore, it appears we will be carrying collision and comprehensive coverage for several more years.

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

Photo Credit: morgueFile.com, Daniel T. Yara

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

Copyright © 2007 Achievement Catalyst, LLC

How Much is Enough Money?

If one doesn't know the answer, then one will never get there:-)

As More, more, more .... and then some more notes "we never seem to have enough money.... ever." In Silicon Valley, Millionaires Who Don’t Feel Rich by Gary Rivlin of The New York Times observes that people with a net worth of $2, $5, or even $10 million feel they don't have enough money, and need to keep working. People see others with $100 million in net worth and start thinking they need more.

To me, the question should be "How much is enough lifestyle?" Once the lifestyle question is answered , "How much is enough money?" will have a straightforward answer. For example, if someone wants to live in a $2 million house, drive a Mercedes 500 SL, attend private schools, and have a yacht, then $3 million net worth is probably not enough. On the other hand, a $250,000 house, 2003 Camry, public schools, and ski boat can probably do very well on $3 million net worth. To me, either lifestyle is acceptable. I am not one to judge the lifestyle another person chooses, if they can financially support it.

In our case, once we chose a lifestyle, it was easy to calculate the cost of supporting that lifestyle. We took that number and multiplied it by 20 to get a good initial estimate of a comfortable value of "enough money" on which to retire. Of course, as with any major personal finance decision, we had our professional advisor do an in-depth analysis to confirm the validity of our estimate.

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

Photo Credit: morgueFile.com, Matthew Hull

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

Copyright © 2007 Achievement Catalyst, LLC

10/29/07 Stock Purchase Update - Only One Stock Remaining

In my 10/22/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was still benefiting from the Fed rate cut and was up $2,788 for a 15.9 % gain, for a new high. As of 10/26/07, the portfolio achieved a new high of $3,311 for a 18.9% gain. I had owned AVT for 5 months before selling it for a 5.1% gain and TEX for 4 months before selling it for a 3.9% gain. Last week SJR dropped off the buy list and I sold it for a 22.8% gain after owing it about five months. Here's the current status on the one remaining stock:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 10/26/07
Potash (POT)	50	$71.39	$116.67
Shaw Communications B (SJR)	100*	$21.755	sold @$26.85
Avnet (AVT)	200	$38.21	sold @ $40.15
Terex (TEX)	50	$82.56	sold @ $85.77

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the volatility in the market. Since the last update, POT was up $9.77, and SJR was slightly up when I sold it. I have owned these two stocks since June, 2007. POT has contributed significantly with a 63.4% gain in that time. SJR has contributed with a 22.8% when it was sold.

I continue to be impressed with my commitment to stay with the system recommendations, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week.

The recent events (credit crunch, central bank interventions) originally had convinced me that the bull market is in its last stage, and I was considering closing out these positions during the next significant rally. However, the Fed rate cuts of 0.5% for the discount and Fed funds rate of September 18, 2007 lead me to believe the bull market will last about another year. Recently, I provided my 10/15/07 updated buy list from the modified Unemotional Investor Growth system.

At this point, I have not made any purchases from the new stock pick list, since the market rally has not been consistently strong. Last week's market activity continues to concerning, with narrow breadth and a high number of new lows. I am staying on the sidelines for new purchases until the market strength and breadth is better.

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

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

Copyright © 2007 Achievement Catalyst, LLC