2007 Year End Review (I): Financial Moves

Posted by Sun on December 31, 2007
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As we are approaching the finial day of 2007, I feel it’s time to look back and examine what we have done in the last year that could affect us financially, both in the short- and long-term, as I did at the end of 2006. Since we didn’t make any official goals when 2007 began, this review won’t be about what we have achieved and what we have missed.

In the first part of this year-end review, I summarize the financial moves we made in 2007.

Mutual funds

Our mutual fund investments in 2007 are almost identical to our holdings in 2006. We didn’t make any new purchase as I feel what we have now is sufficient to build a well diversified portfolio (I will take about our investments in details in a later part). However, we did liquidate one fund (CSVFX) early this year after determining it didn’t add more diversification or exposure than what we already have. In addition, we also exchanged one fund (TREMX) in our T. R. Price account to another (PRNEX), making DODFX our core international fund. Through out the year, we have made regular purchases of all 10 funds we currently own. Though in the past I have somehow demonstrated that dollar-cost averaging may not be the best investment strategy, we continue to implement it in this turbulent market.

Stocks

There were many ins and outs in our stock investments last year, Though I am no longer active in trading stocks. New purchases in 2007 mainly came from investing in Chinese IPO stocks, such as EJ, XFML, CSUN, and GA, plus several non-Chinese stocks MO, BX, VLCK, and SWHC. So far, however, most of the new purchases are nothing but disappointing and some of the Chinese stocks were hit pretty hard in the last couple of months. Could 2008 still be the year to invest in China? Not so, according to some who have predicted a collapse after the game, but I am not buying that. In 2007, I eliminated several stocks, such as MSFT and GRRF, and exchange-traded funds (ETF) including PFM and PEY as they too have been lackluster. One addition in the ETF area is VBR. Most of our stock investments were made through one-time purchases. The only exceptions are QQQQ, BAC and PGN, which were bought on monthly automatic investment plans with no or little fees.

Bonds

We took a break from 4-week T-bill investments in the second half of 2007 after the once my favorite short-term investment vehicle’s yield lagged returns of most high-yield online savings accounts we are using. Though interest rates of those banks kept falling after three consecutive rate cuts, T-bills won’t get into the mix any time soon for us. That said, we did maintain our monthly purchase of $100 I-bond, which is our only bond investment in regular accounts.

401(k)s

Our 2007 401(k) contributions fell short of maximum, mainly on my part. When I started my new job in June, I was hoping to get a better job soon so I didn’t participate in the new employer’s 401(k) plan. That change, however, never happened and I didn’t contribute since then. So I only had the first 5 months of while my wife maxed out her 401(k). Since it looks like I won’t be changing job soon, my contribution will start in 2008.

IRAs

Comparing to 401(k)s, we did much better with our IRA accounts in 2007 as our contributions were automatically made on a quarterly basis. Since 2002 when we opened our IRAs, we have contributed to the maximum each and every year. In 2008, the annual contribution limit will go up to $5,000 and we will take advantage of the higher limit to save a little more

529 plans

We got a 529 plan at Ohio College Advantage for our second daughter shortly after she was born. Now we have 529 plans for both our children and are add $300 every month to each account, making the total monthly contribution to $600. For us, as long as it doesn’t become a burden that we can no longer handle, we want to support our children’s future education as much as possible.

New online savings accounts

In 2007, we opened two new online savings accounts at FNBO Direct and IGoBanking, while at the same time, our accounts at Emigrant Direct and Virtual Bank were closed. So the number of bank accounts remained the same as in 2006 though I thought about simplifying our finance a little bit. Among those accounts we are currently using, I think IGoBanking could be closed, maybe ING Direct as well. The thought of getting a new account with better rate was put on hold after the latest rate reduction made the difference between rates from existing banks and the ones I want gets less significant.

New brokerage accounts

While I am *lucky* in keeping the same number of bank accounts in 2007, the number of brokerage accounts went up a little. In 2007, we got four new brokerage accounts at Zecco, E-Trade, TradeKing, and OptionsXpress. Among them, Zecco, TradeKing and E-Trade Global Trading were opened for trading and OptionsXpress was just for the $100 bonus. Meanwhile, two brokerage accounts, ShareBuilder and Firstrade were closed when I wanted to reduce the cost of trading. The two were replaced by Zecco and TradeKing, respectively. Right now, Scottrade remains my primary brokerage account.

New credit cards

Three new credit cards, Citi PremierPass, Driver’s Edge and Chase Freedom, were opened under my name in the past year, all for taking advantage of their 0% APR balance transfer offer. In addition, I also received $200 bonus from Chase Freedom card and $15,000 ThankYou points from Citi PremierPass, though they were not the main purpose. I will continues to look out for good promotions to make some free money, but good deals are rare these days. Two cards, Citi Dividend Rewards and Discover Miles, were closed in 2007.

0% balance transfers

Playing the balance transfer game remains one of my favorites to earn free money. In 2007, I borrowed money at 0% APR from new and existing cards and deposited the money into online bank when FNBO Direct was offering 6.00+% promotional rate. At the peak, I had about $100,000 borrowed from three cards and currently still have about $16,000. However, as interest rate falling and banks impose 3% transfer fees, easy money may have already been made.

New auto & home insurance

We switched to Ameriprise in January 2007 from Liberty Mutual after with the latter for two years. The change saved us about $300 annually on our insurance bill.

In the second part of this Year End Review, I will take a look at how our net worth has changed since January 1, 2007.

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