As the stock market did poorly last month, so did our net worth as we have a large portion of our assets invested in the stock market. Fortunately, we got a huge boost from the proceeds of selling our house. So October still turned out to be a very good month for us as we saw our net worth grew $90, 460.66 (12.45%) from the month before to $817,099.39, another record high for us.

The following is the breakdown of the net worth:

• Credit card balance(++): The total credit card balance increased another $308.71 (5.01%) last month to $6,468.15. The increase is entirely due to the whole month of tuition we charged on our credit card. Without that, the everyday charges is actually less than the previous month as we settled in our new home in Virginia. BTW, more than $1,800 of the credit card balance is from 0% loan. Subtracting that and the monthly tuition, we only charge about $2,700 a month for our daily expenses.
• Cash(+++++): This is where the positive gain came from. We finally sold our house last month and received the payment of about $96K at the end of October after commissions and fees. Since we have lived in the house for more than 5 years and have done some upgrades, we actually didn’t make any from the sale. But we are glad that we sold the house in the tough market. At the end of October, we have $220,480.31 in our bank accounts. That’s an increase of $105,370.60 (91.54%) from the month before.
• Taxable accounts(–): Our investments in taxable accounts didn’t do very well last month, in line with the performance of the general market. At the end of the month, the total market value of our taxable investments is $293,632.16 in various brokerage and mutual fund accounts. That’s was $4,009.63 (1.35%) less than what we had a month ago. Initially, I thought I may be a few IPO shares last month, but that didn’t happen. The only new investments made in taxable accounts last months were monthly mutual funds purchase of $600 and $400 in DRIP stocks.
• Retirement accounts(—-): It kind of surprised me that the biggest loser last month is our retirement investments, despite that we made our last quarterly contribution to our IRA accounts this year. Overall, we lost $11,055.97 (4.00%) on paper in our 401(k)s and IRAs. The total market is $265,006.36 at the end of October. The good news is that we now both contributed to the maximum amount allowed in our IRA accounts.
• 529 plans(+): We got a few more bonuses last month from the Ohio CollegeAdvantage 529 accounts referral program (see how you can get $50 bonus from CollegeAdvantage), which helped this part of our investments to stay positive. On October 31st, we had $25,844.11 in 529 accounts, an increase of $238.03 (0.95%) from September.
• Bonds(+): Our investment in bonds grew $154.68, (0.95%) last month to $16,384.24.

Year-to-date, our net worth has increased $344,339.08 (72.84%). Year-over-year, the net gain is $351,162.66 (75.37%).

Now that our *old* house is gone, we want to buy our next *new* permanent place next year before our current lease expires in September. For that, we have been saving quite aggressively for the downpayment, with a large portion in our savings accounts. Our goal before we buy the house is to have $1 million in net worth and $300K in cash for next house. To reach that goal, we will need to increase our net worth by a little short of $200K in about 8 to 10 months, which is quite ambitious. Is the goal reachable? I think we have a good chance given that we had increased our net worth by more $250 in the first 9 months of this year. Of course, we have to get a lot of help from the stock market to reach $1,000,000 next summer

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Four months after we put the house on the market, the sale of the house was officially closed today. Though we haven’t got the money yet, all the paperwork are signed and the keys of the house are in the hands of the new owner now.

Overall, it’s a long process, but rather smooth one, except the first two and a half months when we had a lot of showings, but no offer. Just as we thought we might have to move to Virginia with the house still on the market (we were also preparing to rent it out at that time), all of a sudden, a flood of offers came in at the end of August and we were able to leave for VA with a solid contract and a target closing date.

Things went quite well afterward. The home inspection didn’t find any serious problems and we only needed to give the new owner $500 credit to fix a couple of minor issues identified in the inspection report. After we left, our agent helped us arrange a professional cleaning of the house and obtain necessary safety inspection from the township. Everything was done on schedule on our part. Though there was a little delay for the buyer to get the mortgage, nothing major happened.

The check will probably be mailed to us next Monday. Once we get the money, we can start to look for our new, permanent place

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September didn’t turn out to be the month of market sell-off as I heard from some predictions when the month began. To the contrary, September was a good month for stock investors with all major indices finishing the month in positive territories: The Dow gained 2.2% for the month, the Dasdaq surged 5.6% and the S&P climbed 3.6%. As a result of the strong performance of the stock market, we saw our net worth jumped to a new level, crossing the $700K mark for the first time. At the end end of September, we had a total of $726,638.74 on paper in our savings and investment accounts, an increase of $32,811.62, or 4.73%, from the month before, the 7th straight monthly increase since March.

The following is the breakdown of the net worth:

• Credit card balance(+++++): A huge increase in our total credit  card balance last month, but not because we suddenly spent 18.41% more in September. A jump of $957.79 was entirely due to that we now can pay our children’s tuition with a Discover card. It means that we not only got to keep the money a little longer, but also receive 1% cashback by switching from cash to credit card. At the end of September, we had a total of $6,159.44 on our credit cards.
• Cash(+++): Comparing to the month before, we increased our cash savings by $5,117.48, or 4.65%, in September, to a total of $115,109.71, the highest level for us. We were hoping that the sale of our old house could complete at the end of last month, but it didn’t happen due to an issue with the FHA loan the buyers are getting, thus, there was no a 100% increase in cash last month. The issue seems to have been resolved. So the close could be this week.
• Taxable accounts(++): Our investments in taxable accounts, including both mutual funds and individual stocks, returned nicely last month, thanks to the strong performance in the stock market. At the end of the month, we had a total of $297,641.80 in brokerage and mutual fund accounts. The  increase was $13,372.87, or 4.34% compare to last month. Again, there was no additional new money added into taxable accounts except regular monthly purchases. This month, however, I am thinking of making some new purchases, especially a couple of new IPO stocks that I am interested in.
• Retirement accounts(++++): And once again, our retirement investments outperformed taxable accounts. In September, the market value of our  401(K)s and IRAs increased by $13,731.65 to a total of $276,062.33. The gain is equivalent to 5.23%, mainly from contributions to our 401(K) accounts. So far we haven’t maxed out neither 401(K) nor IRA accounts, but contributions to IRA account will reach the limit this month.
• 529 plans(+++++): I want to thank those who used my referral link to open their Ohio CollegeAdvantage 529 accounts (see how you can get $50 bonus from CollegeAdvantage). Without them, our 529 plans would not have the best performance, percentage wise, last month among all categories. For September, our529 accounts increased $2,079.37, or 8.84%, to $25,606.08, with more than half of the gain coming from new contributions.
• Bonds(+): Our investment in bonds grew $143.04, or 0.89%, last month to $16,229.56.

Year-to-date, our net worth has increased $253,878.42 (53.70%). Year-over-year, the net gain is $161,664.49 (28.61%).

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So how did we reduce the cost of our big move? In a guest post at Quicken Blog, I shared some tips on how we saved money when relocating. Check it out and let me know if you have anything to add to the list.

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How was your Labor Day long weekend? Did you enjoy the last holiday of the summer?

For us, the past three days were probably the busiest and crazies days in a long time (and that’s why I didn’t post anything since Saturday).

Ever since we decided to move to Virginia because of my wife’s job change, we had started to pack up and begun to move some of our belongings, those we won’t use for a while, to my relative’s place in Maryland when I was commuting between New Jersey and Virginia every week. Despite the early start, we still had a lot of stuff that needed to be put in boxes until the last minute. Because the moving day was last Sunday, September 6th, there was no holiday break for us. No beach, no pool, no barbecue. Instead, we spent the entire holiday weekend packing, moving, and unpacking

Since we moved from a house into a 2-bedroom apartment, it’s not difficult to imagine what the apartment looked like once the truck was unloaded: We can hardly find a place to sit down and take a break when every piece of furniture and box were moved in. Though the apartment has only two bedrooms, there are enough closets to put our stuff so after less two days, there was no box on the floor.

Tuesday was the first day to work from our new home and I already felt the pain of commuting in the DC area (not that I didn’t feel it when I had to drive back to NJ every Thursday or Friday afternoon): The 22-mile drive in the morning took me almost one hour. Fortunately, I don’t have to go this far for long because our company will be moving to a new location at the end of this month, cutting the distance in half.

Except the commute, we like this new place quite well. So do our daughters. Yesterday was also the first day both kids went to their new school and they told us they like it and look forward to going back tomorrow

*Photo from history.com

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The breakdown of the net worth calculation for August looks like this:

• Credit card balance(—–): We made big progress in reducing our credit card balance last month as we charged $1,028.02 less (16.50%) on our credit cards. The balance on our credit cards total at $5,201.65 at the end of last month. Actually, our spending wasn’t as much as I expected, though I have been commuting between NJ and VA every week since July.
• Cash(+++): The increase in our cash is still quite impressive last month, though the amount was only half of the increase in July. At the end of August, we had a total of $109,992.23 (not include some $40 in my pocket) in a number of savings and checking accounts. So far this year, we have been doing very well in saving money for our next house down payment. However, the pace will slow down next month as both our children will go to daycare and the tuition is much higher than what we pay in NJ. The good thing is that we sold our house so we don’t have to pay rent and mortgage at the same time. I mentioned early that I opened a EverBank Money Market account in July. Now I have most of our money in the account to enjoy the 3.01% APY promotional rate. BTW, when the sale is closed in October, this part will get a significant boost after we get the check (probably around $100,000).
• Taxable accounts(++): Though the overall gain in our net worth exceeded the return of the stock market last month, our taxable investments, including both individual stocks and mutual funds, actually lagged the market. For August, the increase in our taxable accounts was $6,538.10 (2.35%)  and the total market value reached $285,268.92. Except monthly contributions to mutual funds we have been investing for years, no new money was added to taxable accounts last month and I didn’t make any new stock purchase either.
• Retirement accounts(+++): I was surprised when I saw my 401(k) account at Fidelity gained more than 15% last month (including both new contributions and change in market value). I haven’t looked into all the details yet, so I am not very clear where the huge gain exactly came from. With every retirement accounts include, the overall gain in this part last month is $15,306.14 (6.20%) and the total was $262,330.68.
• 529 plans(++++): Somehow the performance of our 529 investments has been surprisingly strong for months, despite that we mostly buy index funds. Last month, the total market value in 529 plans increased $1,619.03 (7.39%) to $23,526.71. Of course for 529 plans, new contributions ($600 a month) is a much bigger part relatively than in other accounts.
• Bonds(+): For the bond part, the total increase last month was $152.84 (0.94%) and the total was $16,086.52.

Year-to-date, our net worth has increased $221,066.80 (46.76%). Year-over-year, the net gain is $113,576.69 (19.57%).

Following is a chart that compares the growth of our net worth since July 2006 when I started the tracking and the Dow Jones Industrial Average during the same period. If I had $1 dollar back then, now it has grown to $1.95. The Dow, on the other hand, only has 82 cents at the end of August.

I am glad that we almost doubled our net worth in 3 years.

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Our agent says “Things are heating up!” and they really are.

This time last week, we were worried that we may have to leave our house on the market, hoping either to sell it if we are lucky or rent it out before the winter comes, after we move to Virginia in early September. Then we got an offer last Thursday which, after a couple of rounds of negotiations, we accepted though it wasn’t the kind of offer we have hoped to get. Then yesterday, another offer came in, but it wasn’t as good as the first one, so we rejected it. But the competition just won’t stop. This afternoon, we received another offer to buy our house, the third one in five days. And it’s much better than the first one: The price is only $5,000 less than our listed price and the buyer doesn’t ask for concession. Eventually, we will get $7,000 more than what we could get from the first buyer

Our agent called the company which provided the potential buyer’s mortgage pre-approval (another FHA loan) and he said the buyer’s condition seems to be pretty good (better than the first buyer). So the decision is quite easy to make. Our agent told the first buyer we have a new offer and if they still want the house, they will have to remove the demand for cashback. But they didn’t.

Can’t believe all the sudden our house becomes so hot

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Thursday eventing, our agent told us that the buyer, who has already come to see the house twice, has made an offer to buy our house for $238K with up to $13K seller’s concession. The offer wasn’t very impressive because that not only the price is quite low, but also the buyer’s financial situation isn’t very solid. Of the couple who makes the offer, the husband is still in the graduate school, so he doesn’t have any income. Only the wife is listed as buyer, but she is now only working in a hospital as an intern (a physician in the future). The buyer plans to put down nearly $8,000 as deposit, but no other down-payment at closing. All the reset will come from loan and they will apply for a FHA loan. We have no idea how much an intern in a hospital makes every month, but the buyer did provide a pre-approval letter for the amount of $250K loan from an institution that I have never heard of together with the offer (I did Googled it and it seems legit).

We discussed the offer with our agent yesterday. Though he also isn’t very confident, he said we can make a counter offer to see if they are still interested in further negotiation. So we lowered the price by $5,000. The buyer almost immediately responded with an increased price, which is a good sign. Then today after one more round of back and forth, we reached an agreement with the buyer: $247K as the sale price with $9,500 cashback and the buyer will put down $9,100. The closing date is one month from now and the total commission is 5%.

After having the house on the market for more than 2 months and having to reduce the list price by $10K, this offer of course isn’t the one that gets us excited. But we will take what we can get at this moment. If the sale can go through, it will save us a lot of trouble because we really don’t want to rent the house out, then one year later go through the same process again. Plus, having the money in our hands will give us the flexibility we need when looking for a permanent place next spring.

Now we still need to keep our fingers crossed and hope the buyer get the mortgage.

BTW, here are some weekend readings:

• The Myth of Stable Employment
• Use Low Interest Rate Credit Cards To Lower Your Debt
• The Value of Establishing a Permanent Residence
• How to Qualify for Social Security Disability Benefits – Eligibility Requirements
• 7 Frugal Vacation Ideas in Newport, Rhode Island
• How to Save Money on Travel
• 7 Ways to Save Money on Back to School Shopping
• 5 Tips to Avoid Overdraft Fees

photo credit: Azhure*

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In the past, I have reviewed our investments, mainly taxable stock and mutual fund investment. The reason I skipped retirement investments before is that some of those investments, especially in the 401(k) accounts, don’t have a ticker symbol, so it’s impossible to analyze the assets allocation. This time, I think I should give a complete account of all our investments, including taxable stock and mutual fund investment and retirement investments, even those can’t be represented by symbols.

Individual Stocks

Over the years, I have opened a number of brokerage accounts, as I mentioned in my broker web-based trading platform review post. However, there’s only one account that I am very actively using now and it’s Scottrade. Most of my individual stocks were purchased through Scottrade, even though it charges the highest commission ($7 per trade) among brokers I have account with.

The following is a list of all the stocks and ETFs I currently own (current price is the price of July 31, so is the market value). Yes, it’s a long list. However, I don’t plan to hold onto every single stock in the list. In fact, many were picked up early this year when shares were beaten down badly. I used a relatively small fund (a little more than $10,000) to acquire lots of shares in cheap, and they have done very well since then. For those, I have a time frame of holding them for only one year. By next spring, I will probably cash out most of them to raise fund for our next house down payment Stocks I will definitely keep include LFC, PGJ, V, MO, PM, and those purchased through DRIP programs (PG, PGN, XOM, and BAC).

In addition to Scottrade, I also have positions with Zecco, TradeKing, and Firstrade.

Mutual Funds

Comparing to individual stock investments, our mutual fund holdings are relatively stable and much smaller. Actually, I have been buying most of those funds for years, the newest addition is Alpine Dynamic Dividend Fund (ADVDX) that I started 2 years ago. I used to buy a lot more funds, but gradually cut down the number of funds over the years and now I own all the asset classes that I want to own (large-cap, small-cap, international, precious metal, and REIT), except bond. It’s not that I don’t need to bond fund (I do buy I-bond regularly though). The reason for not having bond fund here is that I want to maximize the long-term growth potential when I can.

I buy new shares into these funds (except TGLDX) every month through their automatic investment plans, in good times and bad. While it was kind of pain to watch all the funds take a noise dive last year, I am not worried about the short-term volatility in the market. I just kept buying. Sooner or later, the benefit of these purchases will show in the performance.

Currently, all the accounts are hold at their respective fund company. I didn’t use any broker to buy mutual funds because there’s usually additional charge involved (except ADVDX, which was purchased through Fidelity without any fee until recently).

IRA Accounts

As you can see, all funds in our taxable accounts are actively managed funds. I have explained why we buy actively managed mutual funds instead of low-case, index funds before, so I am not going to repeat here. Basically, I am not against using index funds. That’s why I use mostly Vanguard index funds in our IRA accounts.

For this part, I want to use the minimum effort to manage the investments. Except making quarterly purchases, I almost did nothing to our IRA accounts, only rebalancing the accounts once last year when I moved some bond assets to stock funds to take advantage of the market condition. Due to the annual contribution limit, I can’t do what I usually do in other accounts when rebalancing, i.e., adding new money to underperformed assets without actually selling anything. The good thing is that there’s no extra cost when moving money from one fund to another withing Vanguard.

For IRA accounts, our investments are actually quite heavy in bonds (VIPSX, VBIIX, and DODBX). That’s quite different from what we have in our taxable mutual fund investments.

401(k) Accounts

Well, our 401(k) investments can be summarized by three words “what a mess”. Because this is the only part in our portfolio that we don’t have fully control on what we can buy and from where we can buy, the investments in our 401(k) plans are far more complicated than any other investments since the plan sponsors all have their different fund selections. Making the situations even worst is every time we change our jobs, we get a new plan with new funds and have to start all over again. I changed job a couple of time in the past 5 years, so I end up having 3 different 401(k) accounts

Of course, we can make our life much easier by rolling over our old 401(k) accounts to our IRA accounts at Vanguard. Actually, I have thought about the roll-over for a long time, but just seem never got the time to do it. Now looking at the performance of the stock market recently, I guess I have missed the best opportunity I could have to do the conversion, though dumping those holdings in the old plans at  multi-year lows doesn’t seem to be the best strategy either. Anyway, at some point, I will have to pull the trigger. It’s just too much

OK, that’s it. Except some simplifications,  I am pretty happy with our investments so far. I have heard that different investments, no matter where they are held, should be treated as they are in one portfolio with one single asset allocation plan. Here, what I am doing is just the opposite: I basically have one asset allocation for each account.

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After discussing with our agent, we decided to lower the listing price by $10,000 this week to see if anybody would be interested. I told our agent that this is the lowest listing price we can go right now. If it still doesn’t work, then we will have to wait another time to sell it. We plan to give it one or two more months, then we will move it to the rental market before winter comes. According to our agent, we could rent the house for anywhere between $1,800 and $2,100 a month, which is significantly higher than our current monthly mortgage payment plus HOA fee.

Even though we can rent the house at a decent price, we are reluctant to do so because we are not ready to become landlord. There are just too many things to do and with us being 250 miles away, managing the property won’t be an easy job. So instead, we may have to heir somebody else (such as our agent) to manage it for us. Plus, if we only want to rent it out for one year, we will miss next summer to sell the house. We don’t like this idea of getting into the landlord business, but will have to do that if nothing happens in the next month or two.

On the other hand, our search for a place to rent in Virginia has finally come to a close, almost. We made an offer to a 3-bedroom condo last week, however it was turned down because on the same day (maybe a little ahead of us), the owner received another person who can move earlier than we do. I told our agent we are upset not because we didn’t get the house, but that the owner will not let us get the house anyway (because he told me he doesn’t want to lose any rent) if the other applicant qualifies, but he still ran a credit check on both of us. I don’t understand why he had to check our credit when he already has a preference of whom he wants to rent his house to. Then we made another offer to a 3-level, 2-bedroom townhouse, which was accepted almost immediately. We have already received the least, but haven’t signed it because there are some issues need to be addresses. For example, the owner has already agreed that if we don’t ask them to have the carpet professionally cleaned before we move in, they will not ask us to do the same when we move out. However, they still have an item on the lease, saying that carpet, gutters and chimney need to be cleaned by professional company acceptable to the landlord with paid receipts as proof. Even though we have never rented a private house before, I think this is too much to ask us to do. Well, don’t count on us to clean those stuff for them if they don’t clean them up first and show us the receipts.

Update: After going through the contract carefully and thoroughly, we decided that it’s not a contract we want to sign because it contains too many clauses, making it not worth it to rent the place for only one year. Instead, we got an 2-bedroom apartment. It’s much more straightforward to rent a managed apartment then a private house.

photo credit: TheTruthAbout…

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Given how much better the overall stock market has performed in July (the Dow up 8.6%, the S&P 7.4%, and the Nasdaq 7.8%), I expected a good month for our net worth. However, I am very surprised, and pleased, after finishing the calculation that not only it increased fifth straight month in a row, but also the rate exceeded the gain of the stock market. I am even more impressed that after reaching the peak in October 2007 before the market crushed and recession began, our net worth is now at a new high.

However, while the overall number looks good, we are still far away from where we were two years ago in our investments. For example, the total market value of our taxable investments was nearly $70K more then than now, despite tens of thousands of dollars new money we had put in those investments in the past 21 months. So the gain in our net worth came more from our new savings than returns of investments, even though the market has recovered a lot since reaching multi-year low in March.

Comparing to the month of June, our net worth in July rose $63,155.58 to a total of $664,402.27. The gain equals a 10.50% increase from the previous month.

The breakdown of the net worth calculation for July looks like this:

• Credit card balance(++): Our total credit card balance increased for second straight month in July, even though not by much, as I started to commute back and forth between VA and NJ last month. At the end of the month, we had a total of $6,229.67 balance on our credit cards. That’s an increase of $308.10, or 5.20%, from last month. A few one-time charges, such as our car insurance premium, also contributed to the overall increase. I expect our credit card balance to keep increasing in the next few months as we settle down in Virgina.
• Cash(+++): Our cash savings has been a bright spot for quite a long time and it shined once again in July as we saw our savings in checking and savings accounts increased by $9.552.85, or 10.01%, in July to a total of $105,014.18. Of the increase, $5,000 came from a tax-exempted lump sum payment from my wife’s employer to help us relocate. Other than that, there’s no other assistance from her company. Right now, most of our cash is in a new bank account I opened last month. No, it’s not Ally Bank. Actually, I was so disappointed that I moved all my money out from Ally Bank. With the new bank, I am enjoying a much higher return, but I have to say that the rate chasing isn’t fun at all.
• Taxable accounts(+++++): Well, our stock and mutual fund investments have finally ahead of all other categories in gains last month, both the dollar amount and the rate. As I mentioned above, July was a decent month for the overall stock market and that helped our taxable investments tremendously. The increase in market value last month was $32,001.93, or 12.97%, even though I didn’t put any new money in any broker account in July. At the end of the month, the total market value of our taxable investments is $278,730.82. The largest gain, percentage wise, came from E*Trade Global Trading Account, which registered a gain of 17.74% thanks to the stronger rebound of Chinese stocks. Going forward, I expect those stocks I bought at cheap early this year to contribution even more as the recovery continues. Last month, I opened a new broker account at OptionsHouse, but I was so annoyed by some of its requirements after tying it that I don’t plan to use it any more.
• Retirement accounts(++): July is one of the months when we make our quarterly contributions to our IRA accounts. So with more new money going into the retirement accounts, the gain was also quite significantly. For the month, gains in our 401(k) and IRA accounts reached $19,580.69, or 8.61%,  bringing the total market value to $247,024.54.
• 529 plans(+++):  It turned out that our college savings accounts were the second best performer last month, gaining $2,074.33, or 10.46%, to end the month at $21,907.68. Even though $600 of the increase came from new contributions, I am still happy with the performance since we use only index funds and target-date funds in 529 plans.
• Bonds(+): For the bond part, the total increase last month was $200.04, or 1.27%, to a total of $15,933.68.

Year-to-date, our net worth has increased $191,641.96, or 31.49%. Year-over-year, the net gain is $98,491.80, or 17.40%.

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The breakdown of the net worth calculation for June is as follows:

• Credit card balance(++++): Our total credit card balance in June increased rather significantly percentage wise. At the end of the month, we had $3,778.97 charged on our credit cards, an increase of $315.29, or 9.10%, from May. The increase in spending is related to a few minor projects that we did on our house last month before putting it on the market, which I think is worth it. Since now I am working in Virginia, I expect our spending in the next couple of months to be higher than usual, hopefully not by too much.
• Cash(++++): For a second month in a row, our savings in checking and savings accounts increased by $6,654.42, or 7.49%, in June to $95,461.33. Last month, I finally opened an Ally Bank Savings Account after considering whether I should do it or not for weeks. However, I wasn’t very happy with the bank when I was trying to open another CD account a couple of days ago. At the end, I didn’t move any more money to the account as I planed to do. Most of my savings is now back to Dollar Savings Direct. After all these trouble opening the account, I am very disappointed it ended like this. Maybe one day, I can still use the bank, but not now.
• Taxable accounts(—): As I was busy with job interviews and selling our house last month, I didn’t add any new money in broker accounts and didn’t buy any new stock in June either and my existing stock investments didn’t do well as the market was struggling a little bit (even though finished the quarter with the most gain in 10 years). The only new investment in taxable account last month was Exxon Mobile stock that I bought through DSPP program at ComputerShare. I scheduled the purchase in May, but it only started last month. For June, our taxable investments in brokerage accounts and mutual fund companies lost $2,633.59, or 1.05%, to a total of $246,728.44.
• Retirement accounts(++): Relatively speaking, our retirement investments did a little better, at least they ended the month in positive territory. For the month, the retirement accounts gained $3,987.31, or 1.78%, to reach a total of $227,443.85. Again, no other new money was added to those accounts last month except 401(k) contributions.
• 529 plans(+++): The gain in our investments in 529 accounts last month is the highest among investment accounts, percentage wise. On June 30th, the total market value of 529 accounts was $19,833.85, up $855.55, or 4.67%, from May.
• Bonds(+): I am still buy $100 I-bond every month, just to keep the only bond investment outside retirement accounts going. For the bond part, the gain in June was $128.96, or 83%, to a total of $15,733.64.

Year-to-date, our net worth has increased $130,628.53, or 27.63%. Year-over-year, the net gain is $34,993.56, or 6.16%. It’s the first time we saw year-over-year gain in a long, long time.

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The job is from the second employer that I was interviewed a few weeks ago. It’s a division of  the same employer who offered my very first job 9 years ago and does business mostly with the government. I got offers from the first two employers rather quickly. After evaluating the nature of the jobs, locations, and benefits, I decided to take the offer from the second employer mainly because the job is much more related to what I did before and the location is closer to where we are going to leave. So the decision is relatively an easy one.

The salary of this new job is about 15% higher than the salary of my previous job. In addition, I also get 4 weeks of vacation to start, 8% match of 401(k) contribution, plus an annual bonus that’s 10% of the base salary. The benefit is much better than what I got from my last employer. After the first day at my last job two years ago, I was very disappointed by what I had to do every day. For the time that I spent with the company, I never liked what I did, even though it also paid quite nicely. I hope that won’t happen to this new job

Now I am still waiting to hear from the last interview I took last week. It’s a very nice company (one of Forbes 100 Best Companies To Work For) and the job also matches my background quite well. I don’t know whether there will be an offer or not. If it does come, then it will be a much tougher decision to make between the job I am having now and the latest offer. But that’s not something I need to worry at this moment.

Now I am just going to enjoy my first day at my new job

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This afternoon, we called one of the agents we talked with before and signed all the paperwork with him so we can get the process started.  Originally, the plan was to list the house at the beginning of the month, but now it’s the middle of the month already. We can’t afford more delays if we want to sell the house before the new school year begins. We were told that June, July, and August are the best time to sell a house.

The realtor we hired seems to be quite easy-going (we didn’t use the realtor who helped us buy the house five years ago because she was a little pushy). He has been in this business for more than 12 years, bought his first house also in this community, so he’s very familiar with the market. After we mentioned to him that we prefer to sign a three-month first instead of six-month, he gladly agreed. As for the commission, the maximum we will pay is 5% under normal condition. If the agent finds a buyer himself, then the commission is reduced to 4%; if we can bring in a buyer, then we only need to pay him 2.5% commission.

Now let’s wait and see how it goes.

My job search, on the other hand, went much more smoothly than I thought. As expected, I got my first offer yesterday, from the second interview a couple of days ago, not the first one last week. Speaking of the job offer, it’s quite ironic that after more than 8 years, I may work for the same employer who offered me my first job after graduating from school. And more ironically, I finally could make more now from this job than from my first job That’s 8 years, back to where I started as a new graduate.

The job hunting could end very soon, given how it has gone so far. Next week, there will be another, maybe the last, interview with one of the 100 Best Companies To Work For. Since it’s a big company, I don’t expect it to be a quick process. So I guess my best bet is take the offer I just got, then see what will come out of the next interview.

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First, our 4-year old was diagnosed with Strep last Thursday. She started to cough a little bit on Tuesday, then woke with a mild fever on Thursday. Since New Jersey is one of the hardest hit states by the Swine flue virus, her symptoms really made us nervious. When we called the school she attends, we were told that there were other three kids called in sick last week. Fortunately, she tested positive for Strep and that explains the fever. After a couple of doses of antibiotic, she appeared to be recovering very well.

But that’s not the end the of it. Since Strep is highly contagious, we tried to separate the 4-year old from the rest of the family. But our effort failed badly. First was my wife, then me, then our 2-year old, all feeling ill over the weekend. And I was the worst. I had to bed rest for entire weekend to just get some strength back. Haven’t felt that sick for a long, long time. While nobody else was tested positive for Strep, we all had a little fever and sour throat and I have to take antibiotic as well

The timing couldn’t have been worse for us. Last week, we hired a contractor to fix a few minor issues around the house and plan to use the weekend to do some final clean up before putting the house on the market. That, of course, didn’t happen and it’s at least one more week of delay.

Then there are job interviews. My search for a job in the DC area has yielded some very positive results. After a few phone interviews, I went down to Maryland last Wednesday for my first face-to-face interview and will go to Virginia again for another interview Then there will be one more, at least, in two weeks in Virginia. I’d love to do all these interviews in a couple of days so I don’t have to drive 500 miles every week or two. Unfortunately, that’s not going to happen.

Anyway, this is a pretty busy period for us with a lot of things to do. Hopefully, I can keep up with the posts, when I have time

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So far I have never included house in my calculation because I have no idea how much our house is worth. So instead of guessing, I chose to focus on assets that can be easily tracked month over month, such as cash and investments. Now that we are moving, we finally had a good estimate of the market value of our house. If we could sell it for around $260K now, then we would have more than $120K after the mortgage and that would push the total to over $710K before broker commission. But I still prefer to only include those I know exactly

Here are some details of how each category looks like on May 31th:

• Credit card balance(-): We continued to keep our expenses low last month. With the total balance at $3,463.68 on May 31st, we reduced our credit card balance by $232.68, or 6.29%. However, the spending is likely to increase this month as we spent some money to fix a few minor issues of the house before putting it on the market. Also the preparation of moving will also increase spending.
• Cash(+++++): I am very pleased to see that, after 3 straight months of decline in our cash reserve, this part of our net worth finally grew again in May. At the end of the month, we had a total of $88,806.91 in savings and checking accounts, up $10,259.49, or 13.06%, from the previous month. Right now, most of the cash is in the savings account at IGoBanking. As I mentioned early, Ally Bank’s 2.50% APY 9-month no plenalty CD seems very attractive. I may open an account with them move most of my money to there to take advantage of the high yield.
• Taxable accounts(+++): Our taxable investment accounts, including brokerage accounts and mutual fund accounts, gained the most among all categories in terms of dollar amount last month, though not percentage wise. With everything included, the total market value of our taxable accounts was at $249,362.03, up $21,708.57, or 9.54%, from April. Unlike previous couple of months, I only put $1,000 new money in my broker account at Scottrade to buy stocks in May. After huge gains since March, stocks are no longer as cheap as they were three months ago.
• Retirement accounts(++): Our retirement accounts also did quite well last month, gaining $15,396.48, or 7.40%, to a total of $223,456.54. The only new money added to our retirement accounts is contributions in 401(k)s.
• 529 plans(++++): Our investments in 529 accounts another double-digit gain last month, after more than 16%  increase the month before, thanks to the $25 bonus promotion from CollegeAdvantage that has ended on May 31st. The total market value of 529 accounts at the end of May was $18,947.80, up $1,857.72, or 10.87%, from April.
• Bonds(+): Even though I-bond interest rate from May to November is zero, I kept buying the bond every month using my automatic purchase plan (I am probably too lazy to cancel it). For the bond part, the gain in May was $172.06, or 1.12%, to a total of $15,604.68.

Year-to-date, our net worth gained $121,939.51, or 25.97%, even though year-over-year, it still shows a decline of $10,820.76, or 1.76%. If the trend continues, we could see a net year-over-year gain next month.

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We have been living in New Jersey for the past 13 years, moved a few times, but always in the state. Probably because of having been here for so long, we kind of like where we live. We think we are going to stay in NJ forever (OK, maybe not forever since nobody can see that far, but at least a long time), but it looks like that the time to leave has come earlier than we expected.

Early this month, my wife’s employer informed them that their location will be closed at the end of the year and all positions will be transferred to a location in northern Virginia. However, the move isn’t mandatory. Only those accepting the offer will go. For those who don’t want to move, they will eventually be let go if they can’t find a position within the company in the next few months. According to my wife, the rumor of consolidation has been around for quite a while, but it’s a little unexpected that it came down in this way. The company basically won’t provide any other assistance, except giving them $5,o00 to cover the moving cost. Not time off for relocation and, of course, no salary adjustment. It makes me wonder whether her employer really wants them. It’s more like just a tactic to get rid of a bunch of people.

Anyway, after evaluating our situation and comparing where we live now and the DC metro area, we decided that it’s better for my wife to take this offer and keep her job. Having gone through two economic downturns (the current one and the one eight years ago), we know that good jobs in our area are getting harder and harder to find. Maybe there will be more opportunities if we move. Also we have been to that area many times and we think it’s a nicer place to be. Living cost will be higher, but schools are better

Our House

Making the decision seems to be the easy part. What’s difficult is moving the whole family. Unlike previous times when there were just two of us and we could move with just a couple of days of notice in advance, we now have two children and a house that we have to sell, in a bad, bad housing market, on top of our things to do list.

For the house, our first option is sell it, even though we won’t need the money to buy a new house in at least 6 months. We have already asked a few agents to give us an estimate on the current market value of our house and based on the information we received, the price could be around $260K, slightly higher than the price we paid five years ago. One agent told us that one unit similar to ours was sold at nearly $275K in 2005, one year after we purchased ours. But 2005was almost at the peak of the housing market. Now, the market has gone back where it was five years ago. Even if we can price it a little lower (we didn’t do much upgrade since we moved in, only replaced the floor, the carpet, the refrigerator, the stove, and the furnace), selling it won’t be easy in a buyer’s market. Our agents told us that on average, it could take two to three months to sell a house like ours right now. We will be lucky if we can sell it before we move.

Another option we have been considering is to rent it out if we couldn’t find a buyer. One realtor’s estimate is $1,800 to $1,950 per month for our 3-bedroom townhouse. That’s more than our current monthly mortgage payment plus management fee. While it will be nice to have the house generate some income for us, there are some risks and difficulties associated with this option. Since we are going to be a place 250 miles away, we won’t be able to manage the house ourselves. Of course, we can always heir somebody to manage it for us, but that will cost us something around 10% of the monthly rent according to the realtor. That won’t leave us too much after the mortgage and fees. Plus, we can’t turn the house into a rental property completely, because soon we will need the money to buy a house in a place where houses can only be more expensive. So the best is to sell the house, even if it means we will make less from it.

Our Jobs

My wife’s employer won’t say anything about her position even after the move, so we don’t know what will happen later, with her being in a new environment under a new manager, though she will be doing the same job as she’s doing now as she was told. Since the new location is much bigger than the one in NJ, maybe she can find other opportunities. As for me, I have started looking for a job in that area and got a couple of phone calls already. Seems things went pretty well so far, though there isn’t an offer yet.

There are a lot of things we need to do before we pack and leave the Garden State. Actually, once we made the decision, we feel actually a little excited about going to a new place

photo credit: MattHurst

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Here are some details of how each category looks like on April 30th:

• Credit card balance(—-): I am very pleased with our effort to reducing credit card balance. After cutting the total balance by more than 29% in March, we lowered our credit balance by another $1,028.01, or 21.76%, to $3,696.36. Of course, credit card bills from previous couple of months were higher than normal due to some one-time charges.
• Cash(–): It’s not unexpected to see our cash in online bank accounts took a hit last month after we paid a large sum in federal and state income taxes and moved some money to fund my SEP-IRA account. However, the overall decline, $8,364.78, or 9.62%, appears to be smaller than expected. At the end of the month, we had a total of $78,547.42 in mostly online savings accounts such as Dollar Savings Direct and Bank of America Checking Account.
• Taxable accounts(++++): All our investment accounts grew in double-digit last month, with the gain in taxable accounts being the smallest percentage wise. As I mentioned early, I took advantage of the sharp decline in the stock market and bought many beaten-down stocks recently. My strategy paid off as our taxable investments gained $30,929.75, or 15.72%, last month to $227,653.46. Going forward, I expect this portion keeps doing well if the stock market continues to improve (at least May is off to a good start).
• Retirement accounts(+++++): Well, our retirement savings accounts are the winner of last month, because of the new SEP-IRA account addition. At the end of April, we had $208,060.06 in our IRA/401(k) accounts, up $32,440.84, or 18.47%, from the month before.
• 529 plans(+++): What is really impressive is that our investments in 529 accounts also sew a health gain last month. Since we use mostly index funds in those accounts, we kind of expect this part to be relatively stable. But the $2,377.58, or 16.16%, gain in April cannot be described as stable. At the end of the month, the market value of all 529 accounts was at $17,090.08.
• Bonds(+): We still bought I-bonds last month, but since the I-bond interest rate for the next 6 months will be zero, I am reconsidering whether we should keep buying. For the bond part, the gain in April is $171.28, or 1.12%, bringing the total to $15,432.08.

Year-to-date, our net worth gained $72,194.45 (15.27%), but year-over-year, it is still down $48,077.05 (8.11%).

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Here are some details:

• Credit card balance(—–): We kept trimming our credit charges. In March, the total balance on all credit cards stood at $4,724.37. That’s $1,935.08 (29.06%), less from February, which, however, was unusually high. The biggest expense last month was the semi-annual auto and home insurance premiums.
• Cash(-): On the other hand, we again wasn’t able to increase our cash position last month. For a second month in a row, we saw our cash declined, though not by much. At the end of the month, we had $86,912.20 in checking and savings accounts, a drop of $1,118.69 (1.27%). The month we will take another hit as the taxes are due
• Taxable accounts(++++): OK, this is the big driver for us in March. On March 31, the market value of all our taxable investments was at $196,723.71, an increase of $25,951.94 (15.20%) from February. I took advantage of the sharp decline in the stock market early of the month and bought a few stocks that were very attractive from Scottrade. Shares I purchased last month were Citigroup (C), WuXi Pharma (WX, already sold), Research in Motion (RIMM), Sina (SINA), and Lincoln Financial (LNC). They all performed quite well so far. If the current trend continus, we should get more help if the recovery begins.
• Retirement accounts(++): Comparing to taxable accounts, our retirement investments didn’t do as much better in March, though there was still a nice gain. In March, investments in our 401(k)s and IRAs went up $11,573.84 (7.06%) to a total of $175,619.22. Since we use mostly index funds in retirement savings accounts, we don’t really expect any drastic change in market value like we saw in the taxable accounts. But that’s what we want for retirement accounts, isn’t it?
• 529 plans(+++): The gain in our daughters’ 529 accounts was also pretty impressive last month, though it didn’t match the gain we had in taxable accounts. At the end of month, the market value in those accounts was at $14,712.50, up $1,793.02 (13.88%), from February. In addition to our own contributions, we also earned some bonuses by referring people to Ohio CollegeAdvantage 529 plan (you can still get $25 bonus if you open an account before May 31).
• Bonds(+): Our investment in I-bonds, which is our only bond investment in non-retirement accounts, increased by $100 (0.66%) from new purchase last month to a total of $15,260.80.

Year-over-year, our net worth was down $56,356.84 (10.38%).

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Details of each category are as follows:

• Credit card balance(—–): The biggest progress we made last month was to reduce our overall credit card balance by $10,096.93 (60.26%) to $6,659.45 after I paid off the remaining  balance on my Citi Driver’s Edge card. There will be no more credit card arbitrage for, at least in a foreseeable future.
• Cash(–): Even though we returned more than $10,000 borrowed money (at 0% APR of course) from our checking account, our cash position, surprisingly, didn’t take much hit. It turned out that the overall cash level was only reduced by $3,707.79 (4.04%) in February to a total of $88,030.89. Our savings got a boost last month after my wife received her annual bonus. Now that’s something really nice to have in this economy
• Taxable accounts(-): We did relatively well with our taxable investments even though we were not able to produce a positive result. Somehow, we only lost $319.36 (0.19%) on paper last month to a total of $170,771.77 in our brokerage and mutual fund accounts. We did add new fund into our brokerage account at Scottrade last month to take advantage of the slumping stock prices, in addition to our regular monthly investments. Our hope is that once the stock market recovers, who knows when, we will benefit from the purchases we made now.
• Retirement accounts(—): On the other hand, we were not that fortunate with our retirement investments, losing $11,526.88 (6.57%) in February to $164,045.38 in our IRA and 401(k) accounts. Since we only contribute to our IRAs quarterly, new contributions to our retirement accounts were very limited last month.
• 529 plans(–): Our daughters’ 529 accounts kept getting smaller and smaller each month, despite our sizeable new contributions. Last month, the accounts shrank by another $725.39 (5.32%) to $12,919.47.
• Bonds(+): Even though the stock market performed poorly, we didn’t jump on the bond bandwagon with increased investments. Instead, we maintain our regular purchase of $100 I-bond per month. At the end of February, we had a total of $15,160.80 invested in I-bonds, up $170.34 (1.14%) from a month ago.

Comparing to the same period a year ago, our net worth dropped $104,462.73 (18.97%).

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Here’s a quick look at each element that I am tracking every month:

• Credit card balance(+): Our total credit card balance increased by $501.84 (3.09%) to a total of $16,756.38. The increase is largely due to the $2,000 we put down when we replaced our furnace last month. The credit card balance will return to a normal level next month since I already sent payment to pay off the remaining balance on the Citi Driver’s Edge Card which I used to pay off our car loan a year ago.
• Cash(++): The only good news is that we kept increasing our cash, despite the increase in our spending. For the month, we added $3,381.68 (3.83%) to our bank accounts, making the total at $91,738.68. This number is likely going to go down in the coming months because we seem to owe a sizable amount of taxes
• Taxable accounts(—-): Big disappointment in this category as you can imagine, given the size of the drop in the stock market. Actually, our losses in taxable investment accounts matched the drop of the S&P, $15,715.45 (8.41%). At the end of the month, we had a total of $171,091.12 in brokerage and mutual fund accounts.
• Retirement accounts(—): We did slightly better in our retirement investments than in taxable investments, only losing $7,705.50 (4.20%). With the much bigger losses in taxable accounts, our assets in 401(k)s and IRAs are now the largest at $175,572.25.
• 529 plans(–): Without the $600 new contribution, this part could have been worse. For the month, our investments in 529 plans dropped $258.58 (1.86%) to $13,644.86.
• Bonds(+): Our I-bond investments increased $169.68 (1.14%) last month to $14,990.46.

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Even though I don’t keep a record of our spending, it’s not difficult to gather the information I need because, as you know, I charge credit cards with almost everything. And for those I can’t pay with a credit card, such as child care, I pay with checks. Once in a while, I did make cash purchases, but the amount is every small (usually less than $5).

So I extracted data from three credit cards that I use for everyday purchases, Chase Freedom at grocery stores and gas stations, AMEX TrueEarnings card at Costco, and Fidelity 529 College Rewards card for everything else, for November and December and used the average of the past two months for monthly discretionary spending. Adding some fixed expenses every month, I draw the following pie chart which illustrates roughly where our money went each month.

The top three categories, Investments, Child care, and Mortgage, count nearly three quarters of our total monthly spending, of which Investments is the largest piece of the pie at 31.66%. As I mentioned early, our monthly investments include taxable investments in stocks, mutual funds and bonds, IRAs, and 529 plans. All these investments were made every month through automatic investment plans without our intervention. In addition, I also automatically transfer a certain amount from checking account to online savings account (currently at Dollar Savings Direct) to make saving easier. Putting savings and investing on autopilot allows us to contribute $2,435 to our savings accounts every month.

The second largest monthly expense is on Child care at 21.46%, which now totals $1,650 for our two kids, all used to pay tuition and day care, even though we paid $5,000 from our pre-tax child care reimbursement account.  This part will likely to increase this year as we started to take the kids to some weekend classes. Before the kids go to public schools, the cost for child care will remain high and continue to be a big part of our monthly expense.

The third largest is Mortgage which includes both the mortgage and the monthly association fee, currently at $1,460, nearly 18.99% of the total expense.  If we buy a bigger house this or next year (Is it a good time to buy now?), this part will sure to increase.

The reset of the monthly spending goes to groceries (grocery stores and Costco), gas, utilities (water, electricity, oil, phone, cable, internet), estimated taxes, and miscellaneous which includes entertainment, eating out, clothes, and any that doesn’t fit into other categories. Relatively speaking these are small parts of our monthly spending and it’s where cuts will come from (the groceries and miscellaneous spending are higher in the past two months because of the holidays). Now the next question is figure out what to cut and how much we can save, which is much more difficult than knowing where the money went

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December Net Worth Update

First, an update on how we did in the last month of 2008. After three consecutive monthly declines, our net worth at the end of December 2008 actually went up a little bit, which is definitely a good news considering how much paper wealth we have lost throughout the year.

On December 31, 2008, we had a total of $472,760.31 excluding house and car related items. That’s a net increase of $23,835.31 (5.31%) over what we had a month ago, thanks to the rebound in the stock markets.

A quick look at each category:

• Credit card balance(+): We continued to trim our credit card balance last month, downing $373.25 (2.24%) from November to a $16,254.54.  This month, however, the balance is likely to go up as we bought some stuff before the holidays.
• Cash(++): Our savings at banks kept growing in December with another $4,096.43 (4.86%). The total balance at the end of December is $88,357.00. Most of our money is now in account with Dollar Savings Direct, which, surprisingly, still pays 4.0% APY.
• Taxable accounts(+++): When stock markets rebounded like they did in December, we can always expect a nice gain in our investments and that’s indeed the case last month.  For the month, our investments in taxable account gained $12,499.42 (7.17%) to a total of $186,806.57.
• Retirement accounts(+): Comparing to the our taxable accounts, our retirement accounts weren’t as impressive (probably because I only use index funds in retirement account?). In December, our 401(k)s and IRAs gained $4,990.28 (2.80%) to $183,277.76.
• 529 plans(++++): OK, here comes the largest gain last month: $1,125.25 (8.81%) in 529 plans to a total of $13,903.44. Obviously, the stock markets alone don’t do it. A large part of the gain actually came from the CollegeAdvantage referral program that I ran last month (thanks everyone for using my referral). Too bad it ended already.
• Bonds(+): Our I-bond investment increased $104 (0.91%) to $14,820.78.

2008 Net Worth Review

Now the hard part.

Don’t know about you, but 2008 is bad, bad year in terms of growing our net worth. Not that we grew it very slowly. We actually lost a big chunk of our paper fortune, thanks again the miserable stock markets.

Following is a monthly net worth chart from July 2006, when I started tracking, to December 2008. As you can see, we are basically back to where we were two years ago, even though we made much more now than then.

Our net worth peaked in October 2007, coinciding with the stock markets, including the Chinese stock markets. Since then, it has been declining most of the time, with the biggest drop in September/October 2008. The reason, of course, is that we have most of our money invested in stocks and mutual funds, even though we have nearly 30% in conservative investments such as banks accounts and bonds.

Year-over-year, we

• Reduced our credit card balance by $2,039.64 (11.15%) from $18,294.18 in December 2007 to $16,254.54 in December 2008;
• Increased our cash by $24,655.82 (38.71%) from $63,701.18 to $88,357.00;
• Lost $115,269 (38.16%) in our taxable investments, from $302,075.57 a year ago to $186,806.57;
• Lost $51,617.32 (21.97%) in our retirement accounts, from $234,895.08 to $183.277.76;
• Gained $1,105.11 (8.63%) in 529 plans, from $12,798.33 to $13,903.44;
• Gained $1,874.40 (14.48%) in bond investments, from $12,946.38 to $14,820.78.

Of course, all those gains and losses in investments include our own contributions, which are very significant considering we have maxed out our 401(k)s (nearly $30,000) and IRAs ($10,000), and made about $1,000 investments in stocks and mutual funds in taxable accounts every month ($12,000) and $600 in 529 plans ($7,200).

What will happen in 2009?

Since I am determined to invest in the stock markets and have been buying throughout the year, I can expect to see a better result at the end of the year if the stock markets indeed recover, and that’s a big if

Original Post on The Sun's Financial Diary

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As you know, generating passive income, which I define as incomes without my active involvements, is one of the two goals that I have for my taxable investments (the other one being, of course, growth). When I buy stocks that I want to hold for a long time, the ability to generate dividends down the road is always one of the considerations. That’s one of the reasons I use ComputerShares to buy dividend-paying stocks through DRIP programs. I am hoping that some day in the future passive income will replace a large portion our salaries. That’s the ultimate goal for me.

Then my effort to reaching that goal took a major hit 2008. From all sources, dividends, capital gains, and interests, I collected a total of $8,557.63 in passive income, which is pretty low. I didn’t really realize how bad it is until I compared it with the passive income of 2007. Can’t believer it but in 2007, my investments generated $17,804.35 Not only I failed to improve my passive income last year, I actually lost more than half the amount from 2007, despite I owned more shares in 2008 due to continuous monthly purchases of mutual funds. Comparing the table from 2007, the decline was across the board. What used to be my biggest generator, CGM Focus (CGMFX), only got me $95 ($3,392 in 2007) and Buffalo Small Cap (BUFSX) didn’t even bring in a penny ($1,156 in 2007).

So what’s behind the huge decline in passive income? I don’t think I did anything wrong last year that caused the dismal results. Rather, it’s the general market conditions:

1. Companies cut dividend: I didn’t track which company cut how much dividend last year, but I did hear a lot in the news that companies slashed their dividend payment in half, some times halted the distribution all together, to preserve their capital bases. Even if the economy gets better this year and companies improve their balance sheets, it will take a long time before dividend payouts can get back to the level before the credit crunch began.
2. Lowered interest rates from savings accounts: Last year, I could earn 5 or even 6% yield from savings account easily. Not any more. Now I am lucky to earn 4% return for my money after the Federal Reserve cut its interest rates close to zero. Can interest rates get back to where they were in 2007? They could, but not this year.

Looking forward, I don’t expect any significant improvement in my passive income generation in 2009. If there’s any, it will probably come from dividend reinvestments and the increased number of shares that I own. In addition, I may add one or two more DRIP stocks with decent dividend payments.

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Anyway, there are two reasons that I traded more last year than usual. First, I set up a play account at Zecco early in the year so I can use a small amount of money to play a little bit, with the only goal to make a few quick bucks. Why I went to Zecco? Because of the commission free trades it offers (check out my Zecco review for more about the broker if you are not familiar with it). It doesn’t make sense to pay a $5 or $7 mission if I only want to buy $100 worth of stocks. Unfortunately, my effort on the play money, which I got by referring people to Zecco, was a failure. I bought some stocks with Zecco account in the first half of the year, but the stock market took a nose dive in the since the summer.

Then starting in the fall, I switched to Scottrade after earning some free trades from Scottrade and have been using it to play again for the past two months. But with Scottrade, I had to fund the account with some new money ($3,000 to be exact). As you can see from the following table, after the sharp decline of stocks  in October and November, my trading volumes went up a lot, along with my luck.

Remember, I don’t do any research with what I called “play money” so there weren’t a lot of reasons why I want to buy a particular stocks. All I want is making some quick money. And it seems that I succeed in some sense after buying a few beaten down stocks in November. When I sold 500 shares of JASO on December 31, 2008, the $3,000 that I put into my account early has earned me $3,000 profits (you can find my published results here). Unlike what I did with Zecco account, I held those stocks in my Scottrade account much shorter and took profits when I was happy. From what I can see, there were opportunities in the stock markets after months of heavy selling.

I am not sure whether I will trade as much in 2009 or not because November 20, 2008 seems to be the bottom for the stock markets. If stocks indeed recover this year, it may be a good time to buy and hold again

Original Post on The Sun's Financial Diary

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