January 2007 Score Card — Part I: Net Worth

Posted by Sun on February 2, 2007
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Since I started tracking the monthly changes of our nest egg in last August, January 2007 was the first month that I saw a dip in our taxable investment accounts (accounts that are not tax deferred), though not by much.

On January 31st, we have a total of $466,658 in our various savings and investment accounts. Compared to last December, the net change is $7,665, or 1.67%, the smallest gain I have seen since the tracking began half a year ago. The break down of the changes are:

Credit card debt: The balance on our credit cards went up $553, or 4.75%, in January to $12,215. A big chuck of the total balance, however, is due to a 0% balance transfer I took last year from Discover card. Therefore, I am not worried about the seemingly large number. Overall, our spending in the past month went up a little bit due to some leftover holiday purchases.
Cash: Our cash reserve at the end of the month was $38,981, up $2,496 from the end of last year. The increase is good for about 6.85%. Early January, I opened an IGoBanking account for their 5.30% APY and I have transferred almost all our deposits with Emigrant Direct and HSBC to IGB. Though IGB is relatively new, my experience so far is quite positive. Also, I probably won't take the HSBC 6.0% promotion as I originally thought. The reason was I don't have direct link between Emigrant and HSBC. To transfer money Emigrant to HSBC, I have to go through another bank (either BoA or IGB), meaning I couldn't take the full advantage of the promotion period. So I decide to settle with IGB instead.
Taxable: Well, the big story of this part is the drop of China Life (LFC) in January. On January 3rd, the stock was traded at $54.03 per share. At the close of yesterday, the price was $44.18. The fluctuation of LFC alone reduced our net worth by more than $13,000. Fortunately, we got gains from other investments to offset the loss. For more than a year, LFC has been a significant driving force behind our net worth growth. When it finally decided to take a breather, we suffered. On January 31st, we had $217,634 in all taxable investment accounts, down $705, or 0.32% from last December.

Retirement: Our retirement account balance went up $5,898, or 3.16%, in January to $192,717. After more than three months, the transfer of our IRA accounts from Scottrade to Vanguard finally completed, but I have to say this isn't a pleasant experience. The auto investment plan is supposed to start this month, but there are still issues with my wife's plan. Hopefully, I can fix them without bothering Vanguard. I am just sick of them.
529: Our daughter's 529 plans saw a net increase of $372, or 6.5%, in January to $6,110 in total. Three hundred dollars of that gain came from our regular monthly contributions.
Bonds: We continued to invest in both I bonds and 4-week Treasury bills last month. For the month, the net change was $157 (0.68%), making the total investment to $23,421, of which $12,000 are invested in 4-week T-bills.

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4 Comments

February 2, 2007

You’ve got quite a bit of cash. You know cash loses value to inflation, so if you can get that working for you asap, you’d probably want to do that. $40K is a quite a lot to have stuffed under the mattress

your friend in finance, 1mil
from millionster.com

Posted by 1mil

February 9, 2007

I’m thinking about open a Roth IRA account and a mutual fund account. Do you have any suggestions as of which broker/bank to go? Is Vanguard good for these - as I saw you moved your Roth IRA to Vanguard?

Posted by John

February 9, 2007

As for where to go for an account, it depends what you want to invest in. For a regular mutual fund account, I think the best way to go is getting it from the fund company directly. If you go through a third party, either a brokerage firm which sells hundreds of funds (mutual fund supermarket), or a mutual fund company such as Vanguard or Fidelity, it’s very likely you will have to pay a certain amount of transaction fees (commission). This, however, is not the case with a mutual fund company which manages the fund. They don’t charges any other fees for non-load fund except the expense. The problem with each individual fund company is that if you want to invest in several funds, you have to have a account with each of them, sometime make it a little bit difficult to manage. But I’d rather have these individual account than paying a fee every time I buy only a couple of shares using dollar-cost averaging. Firstrade offers no fee mutual fund investments, but I don’t if they will change that policy. I used to Scottrade for mutual funds several years ago then focused to sell all of them when they started to charge fees. You can also check with Fidelity as they offers quite some fee-free mutual funds from other companies.

As for IRA account, since the investments are supposed to be long term, you have to consider the cost of owning the fund. All 12 mutual funds in my regular accounts are actively managed, but four out of five funds in my IRA account are Vanguard funds. When it comes costs, Vanguard is hard to beat. However, with Vanguard, they charge $10 annual fee if your assets in one fund (not the entire account) is less than $5000. Due to the annual IRA contribution limit ($4000 for 2007), it may not be a good idea to spread that $4000 over several funds and pay fee for each of them if you decide to open an account with Vanguard. And Vanguard requires a minimum of $3000 to open an account for most of their funds. Some other companies require much less initial investment, but their expense ratio is always higher than that of Vanguard funds.

Posted by The Sun