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Making the Case of Having Alternative Investments in Portfolio
In the July issue of Financial Planning magazine, there’s an article about including alternative investments such as energy, precious metal, real estate, etc, in portfolio and how they will impact the overall returns of portfolios with and without these assets. This isn’t the first time I read papers that argue the case of having commodities, [...]
March 2007 Score Card — Part II: Asset Allocation
Two months ago, I took a look at the asset allocation of my taxable mutual fund investment. A result of that review was the decision to sell on of the large-cap holdings, CSVFX, as I found my investments didn’t have enough exposure in the mid- and small-cap categories. CSVFX was unloaded in February and part of the proceeds was used to purchase Vanguard Small-cap Value ETF (VBR) to boost the small-cap investment in my portfolio.
Using Morningstar’s Instant X-ray (here’s an entry on how to use Morningstar to research mutual funds), I entered my mutual fund holdings (symbols and market values) last night and pulled the latest asset allocation, which looks like this:
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Which Mortgage is Right for You and Why
MSN Monday today has an article on some common mortgages with brief discussions on which type of loan makes more sense under certain circumstance. The following are excerpts from article. I added the “What” section to give definitions of each loan type for easier read.
Buying for the long haul
- Loan: 30-year fixed rate mortgage.
- What: A 30-year fixed mortgage is “a loan that has an interest rate that stays the same for the 30-year term of the loan.”
- Why: “Financial peace of mind can be worth the higher interest rate that comes with an interest rate that won’t change for three decades.”
Job with good but inconsistent income
- Loan: Option adjustable rate mortgage (ARM).
- What: Option ARM is “an adjustable-rate mortgage that allows the borrower to choose from four types of payment each month.”
- Why: “Each month you have a choice of payments: the full amount needed to pay off principal and interest as scheduled, an amount that covers only the interest owed that month, or an even smaller amount that doesn’t even cover interest owed.”
Refinancing (15-20 years before retiring)
- Loan: 15- or 20-year fixed or ARM.
- What: ARM is a “home loan in which the interest rate is changed periodically based on a standard financial index. Most ARMs have caps on how much an interest rate may increase.”
- Why: “A fixed rate generally has a higher interest rate than an adjustable but will give you more certainty in budgeting. However, if ARMs are significantly cheaper and your income can handle possible payment increases, you could save with the adjustable rate.”
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March 2007 Score Card — Part I: Net Worth
Our net worth growth returned to its normal rate in March after barely coming out positive in February as we got some cooperation from the markets (Dow rose 87 points in March, NASDAQ gained 5 points, and S&P added 14 points).
Overall in March, our net worth saw an addition of $15,032 (or 3.22%) as compared to February. On February 28, we had our net worth, excluding house and car related asset/liability, at $467,091. That number jumped to $482,123 on March 31. The breakdown into each category looks like this:
- Credit card balance: The net change in credit card balance is -$50,122, or 487.68%, which helped to push the total balance to $60,499. However, there’s nothing to be alarmed about as the iincrease is entirely due to the two 0% balance transfer offers I took in March: $18,000 from Citi and $32,000 from Bank of America. In addition, I also have another $8,186 with Discover. Excluding these BT balances, our credit card has about $1,700 from daily spending.
- Cash: All the $50,000 free loan from BT went to our cash account as we saw our cash reserve more than doubled in March, up from $42,855 in February to $89,670. Most of the money is at IGoBanking, earning 5.30% APY. I haven’t decided what to do with the $32,000 from BoA yet. Since I can only keep the money for seven months, the safest way, again, is to go with either Treasury bills or online bank accounts. There aren’t many choices available for me to guarantee both the safety of the principle and the growth of the money in such a short period of time.
- Taxable investments: The biggest story in our net worth in March came from our taxable investments, as this part of assets grew from $207,667 to $220,106, or nearly 6%, better than the lukewarm rebound of the general markets after February’s sell-off. Early last month, I bought 360 shares XFML on its IPO day and the stock has been declining since its debut. Now at $10.97 per share as compared to my entry price at $11.10, XFML is negative contributor so far. On the other hand, my largest stock holding, LFC, gained $3.23, adding more than $4,000 to the growth.
- Retirement accounts: The total assets in our retirement accounts added a moderate $5,260, or 2.67%, in March to reach $202,186. Unlike our taxable investments, the gain is mostly from new contributions to our 401(K) plans at work.
- 529 plans: Our daughter’s 529 plans gained $517 in March, good for a 8.17% growth, to $6,862. In addition to our regular contributions, there was also an investment of $33.95 last month from the UPromise credit card reward program. The reward has been accumulated in my credit card for quite some time and finally reached the investment threshold. The last transfer I got from the credit card was $34.88 back in September 2006.
- Bonds: The gain in our bonds investments is a mere $154, or 0.65%, last month. On March 31, we have $23,697 invested in I and EE bonds, as well as 4-week T-bills. Currently, I buy $6,000 4-week T-bills every week. The total investment will be doubled this month as a portion of the balance transfer money will be used to buy T-bills. Actually, this should have started in the last week of March had I remembered to hit the “Submit” button when I updated my T-bill purchase plan, :((.
I have created a separate page to track our net worth, which will be updated monthly, but the page isn’t completed yet (now has only one plot from Networth IQ). For now, all the updates can be found under the About me -> Net worth category.
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Around the blogosphere
- In March, It’s Just Money has a net worth gain of $4,667.58
- Boston Gal’s Open Wallet added $11,227.73
- Savvy Steward saw his net worth grew more than 15%
- Our Finance Journey improved their bottom line by $8,612
- 2million increased his fortune by $10,274
- My New Choice saw an increase of 4.06%
- The Simple Dollar had an hefty gain of 10.6% in his net worth
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Posts I Enjoyed Last Week
Forget about saving for your retirement. You can get rich easily and quickly, IF somebody in your company cheats to fat their own wallets first. An interesting story by Silicon Vally Blogger at The Digerati Life reveals a dilemma that while the practice may be tainted, but what can you if ordinary folks also benefit?
Jeremy at Generation X Finance discusses the real estate generation gap between the baby boomers who “have fueled the housing market for the past 10-15 years as their kids moved out and a strong economy allowed them to buy or build a bigger house,” and Generation X who “do not seek or have a desire to own a large home.” If the baby boomers are cashing in on their real estate investment, who are buying?
While I used one more 0% balance transfer offer from Bank of America last week, Lazy Man at Lazy Man and Money is quiting the credit car arbitrage game, which has been fun so far for me in terms of the free loan I received. But if it comes with a high price tag (time & fees), the game may be not worth playing at all.
So you save and invest your hard earned money hoping to ride a growing economy to a happy retirement, with a little extra help from the magic of compounding. Do you ever wonder how long it will take for one dollar invested money to become two? Golbguru at Money, Matter, and More Musings offers a look up table that will make the guessing game a whole lot easier. In my opinion, it may as well encourage you to optimize your portfolio to shorten the time frame.
Fact and fiction in personal finance world. Ben at Money Smart Life asks “Are Money Myths Costing You Cash?” Here’s one of the questions that I like: Cashback credit cards will put more money in my pocket. Really? Take the entire quiz and find out the facts and myths.
Want to be rich? Who doesn’t! Henry at Binary Dollar shows you how with a Venn diagram and two easy steps.
Flexo at Consumerism Commentary offers Another Form of Credit Card Arbitrage by taking advantage of Health Savings Account (HSA). And, you can indeed profit from HSA and here’s how.
I bought tons of stuff online, from big screen TV to paper clips. Not just I can get better deals (pick and choose), but also save money on taxes (though sometimes I do have to pay taxes and shipping fees). Jim at Blueprint for Financial Prosperity asks Do You Buy Online To Avoid Paying Sales Tax? What’s your reason?
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Chase Freedom Card Received but Not as Good as Thought
About two weeks ago, I applied and approved for a new Chase Freedom card. The main reason for me to apply the card is the advertised $250 bonus after first purchase, though I can still use the 3% cashback on grocery store, gas, and fast food restaurant purchases. What could be better than $250 free money? That’s what I thought I would get as the terms & conditions of the offer says
You will receive $200 in bonus rebates which can be redeemed for a $250 check. Please allow 6 to 8 weeks after your first purchase for bonus rebates to post to your account.
I don’t know exactly how to read this condition. From what I understand, it tells me I will get $200 in bonus rebate in 6 to 8 weeks after I make my first purchase, regardless the amount (otherwise I would have to spend nearly $6700 just to earn $200 cashbacks). Anyway, the Freedom card arrived yesterday and here’s what appears on the carrier:
Redeem $50 in rewards for a $250 check or save up to $200 in rewards for a $250 check.
Different from the original offer, but not totally unacceptable. In this case, I will need to charge $1667 on the card to earn $50 rewards. That’s a lot of groceries we have to buy!
