Highlights for November
- Our properties are listed on our balance sheet based on their cost basis, not current market value. We have done this during the the real estate market highs and lows. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our November Zillow property estimates are: $208,815; $125,814; $295,570; and $234,105 (total: $864,304).
- Our November net worth growth is largely driven by paper gains in the stock market and cash flow savings.
- November was a peak savings month from a cash flow perspective. We incurred minimal travel expenses as our big travel expenses during November was paid for back in September. The $9k growth in cash on our balance sheet comes from this monthly cash flow savings and some stock sales we executed.
- We are gearing up to come back to our home in the US in December as my work assignment winds down. I am expecting December to be an expensive month between the holiday expenses and expenses associated with our move back to the US.
- I continue to shift small amounts to increase our cash position. I sleep better at night with more cash available for future opportunities. We still have a high stock allocation in our portfolio - look at our for 401k for example: roughly 84% stocks, 16% bonds/cash.
For those that live in North Carolina like myself, there was a fairly quiet change pass by the NC general assembly this year that removes the state tax deductions for NC529 contributions effective January 1, 2014.
For a married couple who makes the maximum NC529 contribution that means an annual loss of up to $347 in savings on state income taxes.
Its important to note the primary benefit of tax free qualified withdrawals for education expenses remains intact. However, the loss of the state tax income deduction on contributions is one less reason to utilize the NC 529 college savings plan for those that live in North Carolina. I recently migrated our 529 contributions to the NC529 plan primary to take advantage of this state tax deduction. In 2014 I'm likely to reevaluate our 529 plan options and potential re-utilize the Ohio 529 plan which appears to have lower fees. Bummer!
Here is a snapshot I took of my 401k YTD returns and my personal reflections:
Holy Cow! That is amazing. Not only have we had a huge upswing in US stock indexes, my entire 401k portfolio is up 20.5% for the year. That includes all the other assets classes like bonds/cash that are pulling down our performance. My 401k has gained over $65k this year - that is more than my annual salary when I started working full time at my employer!
Makes me think about how close I may actually be to the financial freedom line. My 401k is growing at a clip greater than my expenses this year. It is a good year, but will it last? Even if it grows at 1/2 this rate when you combine it with the rest of our accounts/assets (IRAs, taxable brokerages, rentals) etc its still would cover our expenses. Growing at least 1/2 this rate seems possible while the economy is looking better - doesn't it?
The Not So Good:
Stock fundamentals appear to be less of a concern to investors. I want to invest my money where I can see it earn a 10% return or greater for the risk I'm taking. Generally price/earnings ratios continue to climb, now averaging 15-17+? On the surface that means buying with a projected <7% return assuming no growth (I tend to be pessimistic on valuing growth in general).
At some point earnings have to sharply increase or those ratios will come back down. I continue to shift more assets out of stocks over time because there is no way this can last; is there?
My view is this could go one of 2 ways. 1) We are in the midst of a 20yr+ stagflation period where governments will continue to inject as much capital as they can to get us out, but we will teeter back and forth for years to come as debt levels continue to improve. 2) Quantitative Easing will ultimately work and inject enough capital that our economy will begin to expand on its own. This will lead to inflation being a bigger problem that will erode spending power in at least certain areas. I don't know of a great way to protect our spending power from inflation, the only play I know is to hold stocks, real estate, minimize cash/bonds and hope for the best.
I'm no expert, but I'm still worried things are not as healthy as they appear.
October 2013 Investment Report:
- October was another great month of paper gains in our portfolio (+5.09%). We continued to beat our VTI benchmark slightly (+4.77%).
- We made our regular monthly investments in our Roth IRAs, and had some dividend & dividend reinvestments.
- I still am looking for opportunities to get our portfolio in a more defensive position. We have had a fantastic run over the past 12 months and looking to lock in gains where I feel our investment is overvalued. As part of getting our portfolio more conservative we made a small additional investment in Fairfax Financial, and moved $30k (~8% of the account value) of our 401k into a cash fund (not shown on this report).
- We also sold 200 shares of our Genworth holdings this month.
- Our recent monthly returns were: Jan 09 -4.98%, Feb -9.94%, Mar +8.45%, Apr +10.88%, May +4.65%, Jun +0.89%, Jul +9.94%, Aug +4.36%, Sept 3.15%, Oct -2.34%, Nov +5.83%, Dec +1.85%, Jan '10 -2.34%, Feb +2.25%, Mar +5.88%, Apr +2.54%, May -8.13%, June -5.64%, July 6.17%. Aug -4.87%, Sept +8.48%, Oct 2.47%, Nov -0.96%, Dec +8.01%, Jan 2011 +2.06%, Feb 2.57%, Mar +0.15%, Apr +3.04%, May -1.56%, June -1.63%, July -2.71%, Aug -5.42%, Sept -7.06%, Oct +9.88%, Nov -0.39%, Dec +2.10%, Jan '12 +4.03%, Feb +4.68%, Mar +2.35%, Apr -1.74%, Sept +3.47%, Oct 0.10%, Nov -0.20%, Dec +3.09%, Jan '13 +6.72%, Feb +0.49%, Mar +4.52%, Apr +1.30%, May +2.87%, June -0.97%, Jul +6.45%, Aug -3.67%, Sept +3.28%, Oct 5.09%.....
Note this is our monthly personal investment portfolio report. I view our ability to invest with above average rates of return as the most important factor in reaching our financial freedom goals. This investment report covers our taxable portfolio and IRA retirement accounts. My 401k (which is roughly 1/2 our portfolio) is not included as the index funds it includes are not publicly traded and difficult to incorporate in this report.
Highlights for October
- Our properties are listed on our balance sheet based on their cost basis, not current market value. We have done during the the real estate market highs and lows. I believe real estate is too illiquid to list based on recent sale transactions. For those interested, our October Zillow property estimates are: $206,616; $124,677; $291,139; and $233,654 (total: $856,086).
- Our October net worth growth is largely driven by paper gains in the stock market. This is the 3rd month in 2013 with a $40k+ increase in net worth - amazing! If only the good times could continue, but alas they cannot. I believe we'll be paying for this with either inflation or market corrections at some point.
- Our living expenses while on our work assignment in China are running higher than I hoped. Our employer benefits are smaller than we expected and significant inflation and currency exchanges changes along with expectations from our previous assignment have caused us to spend more to maintain our standard of living than I had originally planned. This means our savings rate has on increased a little while on assignment and we haven't been able to save significantly more while here. However we are still having a great family experience overall.
- We are in the middle a couple of our planned family trips while we are on assignment. We spent 5 days in Hanoi & Halong Bay, Vietnam in October and had a wonderful time. Based on my anecdotal observations I would say Vietnam is a compelling place for investment compared to China these days. The cost of living is considerably less in Vietnam and we got tremendous value for our money.
- Note the travel expenses are largely offset by savings in other areas (such as utilities, car expenses, etc) so I expect to be close to a wash on our monthly balance sheet, but coming out ahead with rich world experiences for our family.
- We continue to allocate free cash to paying down an IELOC on a rental property (House #2) with a variable interest rate. For now, with the economy heating up (and the lack of potential attractive investment opportunities), I'd like to continue to reduce our exposure to the effects of potential higher interest rates that are surely coming in 2014/2015.
Last 15 Personal Finance Entries
10/14/2013 | Packing Tips for Extended Family Travel
10/09/2013 | Investment Performance September 2013 (+3.28%)
10/07/2013 | September 2013 Net Worth Update (+$30,692)
09/23/2013 | Financial Freedom & Healthcare
09/20/2013 | Buy The Cheapest Baby Crib
09/12/2013 | Investment Performance August 2013 (-3.67%)
09/08/2013 | Free Museum Day 2013
09/03/2013 | August 2013 Net Worth Update (-$12,557)
08/25/2013 | Financial Freedom Plan
08/10/2013 | Investment Performance July 2013 (+6.45%)
08/05/2013 | July 2013 Net Worth Update (+$40,011)
08/03/2013 | Using Ooma Overseas To Save On Long Distance Calls
07/28/2013 | Survival Guide to Traveling with Young Kids
07/20/2013 | Investment Performance June 2013 (-0.97%)
07/13/2013 | Frugal Family Passport Holder