Category Archives: Investments

Year End Financial Results 2020

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2020 was horrible in all other respects, except financially!

Better late than never!

Because of the pandemic, I couldn’t work out at the gym and had to stay home which enabled me to gain weight. The company I work for was in the middle of a huge project so many a night, I would be working to 10 pm (sucks considering I start at 6 am), it was rough!

One silver lining was that a bit before February, I started moving a small portion of my investments into cash, but then once the stock market dipped 20% I started moving the cash back into investments in small tranches every few weeks until late May 2020.

Financially, at the end of the year 2020, my return was a few percentage points above what the S&P 500 achieved. So I did okay, I still experienced a big drop in my portfolio value during March and April (which always depresses me a bit), but I held tight, and much like in the past, I increased my contribution percentage. My philosophy during the pandemic was if the fan starts to turn brown and smelled, money wouldn’t really matter much anyway.

My Financial Pyramid results

So things are moving slowly along. It’s easier to move up from the earlier “white-colored” lower levels than once you get to the “green-colored” levels in the pyramid. Even though financially, I have moved up a quarter in the level called “Upper Middle Class”, I still have a foot firmly at the “Asset Accumulation” level, so I still live pretty frugally. I might go out a bit more than I used to, but I’m still driving a 2010 car, so obviously, my lifestyle has hardly changed.

Grading my performance

My game has improved, and although I’m not quite ready to give myself a solid “A” yet, I’m definitely a higher “A-“. What I could have done better is the following: small investments in crypto and other advanced stock strategies. Actually, there is a lot I would do differently, but that’s another article or two for some other time.

Financial Pyramid

Future Goals climbing the Pyramid

In the next 5 years, I would like to hit the next green level called “Financial Independence and Break-Even Point”. While I couldn’t retire on this level because of future recessions and other market downturns, I would like to semi-retire and get a part-time job, or a hobby job (that makes decent money still). It’s a stretch goal, but we’ll see.

A few of us are thinking about creating a wealth investment club for the less than upper classes (especially blue-collar workers). Half the battle is belief and planning an investment strategy so an investment club with mentors could really help others.

I have had my current investment tragedy for over a decade so I know mistakes I made and I think that my knowledge could benefit others by shortcutting the process for them.

We’ll see, I might wait until I go into semi-retirement to do such a club, but I might start now to work out the bugs with a few people.

We’ll see…

Sometimes Investing is a Lose Lose Scenario but that’s okay

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My sad, sad lose lose scenario story…

The year is too long ago, and I’m just a young boy talking to a friend that also have an interest in investing in stocks.  We both separately found this incredible product called “New York Seltzer” water during our employment at a grocery store… It the closest thing to the perfect flavored beverage that we ever tasted.  It seemed like a no-brainer investment, a sure bet!

Myself being a poor boy, I could only muster up $200 to use as the cash for investing in the stock.  I told my grandfather of my plans and he said to go ahead, but that it’s very risky and the investment will probably not turn out the way I expect!  He also said a new word that I was not familiar with, he said my investment was a “speculative” investment. I reassured him that this product was a sure bet since the product was even better and healthier that pop.

Needless to say the stock was doomed, but not because of an inferior product… In fact that product was far superior than anything that I encountered on the beverage market.  The problem is that nobody wanted to pay a premium for “flavored water”, even if it did fizz like pop.  I believe that there was also business reasons that the stock was doomed, but I didn’t have the foresight or knowledge (or access) to dig up that type of information.

So the moral of my sad, sad story (I was devastated) is that even though the product may be the best I’ve ever experienced, there may be other reasons that such investments of time and money maybe be a lose lose bet from all angles.  Quality does not always mean a win, and sometime such investments are lose lose scenarios from the start.

So what did I do?

Lesson learned…, took my beating, licked my wounds and move on less speculative investments that have less chance of going to zero.

Do you homework and think it through from all angles…

Good luck,

Don

Why Debt Reduction is Easier Than Investing

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Becoming Debt Free

After first becoming totally debt free,  I felt a huge weight lifted from my shoulders and I thought the journey to wealth accumulation was a downhill journey… but I wasn’t even close to reality!

I figured I’d be able to redirect all the money I use to spend on debt reduction, into the stock market, and blammo, I’d be wealthy!  This hasn’t happened and in fact the opposite has happened in that I’m constantly worrying about the stock market.  It the first thing check in the morning, during the day, and it’s the last think I typically review before I go to sleep.  It’s all-consuming for me, and becoming quite the obsession, much to my chagrin.

What’s really funny, is I don’t have millions, but the way that I monitor the stock market, you’d think I was (curse you CNBC!).

Cat

I’m Okay

Why It’s Harder to Invest than Reduce Debt

For me, it’s simply the variability of my investment portfolio that makes it so stressful for me!

With debt reduction, it was always so clean!  You have an amount that you owe, and you make periodic payment to reduce that debt.  Pretty simple and straight forward huh…

With investing, it’s an entirely different animal that is very unpredictable.  Oh sure, you can invest on a schedule much like debt reduction, but that’s where the similarities end.  With debt reduction, there is no “real” emotion to the characteristics of the payment.  You pay the money, your debt decreases, no magic!

With investing you invest the money, and then who know what happens after that!  You can invest for years, then in a snap of your fingers, blammo you money is mysteriously gone!  Think Enron and Worldcom, blammo your investment is worth nothing except a tax write-off.

Another problem is that you can invest in a stock and it can flatline…  if a stock goes flat, you are just as good having your money in the bank, no?

Next there is the opposite of the above, boom, the stock appreciates hugely and you get rich.  This is the path that we all hope happens, but this is kind of like buying a lottery ticket to some degree.  It’s possible, but it take patience and determination.  Most stocks that appreciate hugely still takes years to get to that level.

So basically investing is like gambling and very emotional.

While investing is great and I love it, it’s very stressful for me.

I hope investing is less stressful for you.

Don

I think the MyRA will be a poor investment option

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myRA…  Let me start by saying that it looks like is should sounds like it should be pronounced Mira, and that’s not necessarily bad, but it definitely doesn’t look like it should be pronounced “My IRA” like I’ve heard the president say during the State Of The Union address.

Okay, why don’t I like the MyRA option?

To me is seems like a lame “bond” Roth IRA…  mostly because it’s a bond!?!  According to most financial authors, a young worker should not be in bonds!  Bonds are what old retired people use for a fixed income solution, not to be used by workers that need capital appreciation and growth!

Next reason I don’t like it is because it’s guaranteed not to lose value.  I think we’ve seen what happens when the government guarantees things… I’m not even going to mention the big city names that declared bankruptcy lately… Instead look at the prepaid tuition credits offered by state college savings plans, oh wait are there any of those left anymore?

Well at least we have social security and it’s solid… What, it’s not?  Then why doesn’t the government fix that first for the young workers of tomorrow?  Oh, it’s doesn’t make sense financially and the distributions may have to be reduced or some other radical changes made?  Oh… sad…

Since Social Security isn’t quite defunct yet, why have they decided to create something that seems like a poor investment option?

Well at least the Affordable Care Act is solid and error free… what’s that?  Oh in it’s current form, it kind of bites and has unforeseen errors both now and later.  Being in technology, I’m pretty sure on the back-end, there will be more errors discovered (but probably not communicated out to the public).  The front end is just forms for information collection, so if they messed that up, then the back-end must really be crappy.  Based on what I’ve heard the “Affordable” part of the title doesn’t make much sense, but I’m mentally wandering off topic so it’s time to get back to the topic at hand.

Okay, I don’t like myRA and I think it’s a poor investment option, but so what.  There are plenty of poor investment options and this is just another mediocre member of that crowd.  Hopefully most young people will be smart enough not to waste there time on such an option.  Especially where there are plenty of good Roth IRA options that only require a initial investment amount of $1000 or less if you look for them.

I think the guarantee is bad since people should learn to take sensible risks.  You see America was founded by taking risk all the time, practically every company in the USA was created by people willing to take a sensible financial risk.  Risk is part of reward and having an option without sensible risk is teaching young people a bad lesson in my opinion.

Financially, the myRA is better than nothing, but the problem is there is stuff out there already that is way better than nothing!

The Roth IRA is the way to go, and I’m sure anyone reading this article knows that already, but in case you don’t know where is why:

  1. Based on previous history there is a better chance that an investment in an stock index fund will outperform a bond option
  2. If you get in an emergency or some kind of tight bind you can withdraw all the money you contributed (but not the earnings if any) in a Roth IRA both tax and penalty free.  While this is an advantage, you must realize that the money should not be touched if possible!
  3. A Roth IRA serves multiple purposes… like a tax shield for dividends (most dividends anyway) and future capital gains in the account, an emergency fund source, etc.  (read Roth IRA – Unusual Benefits for more)
  4. In a Roth you can invest in stocks (commonally called equities), mutual funds, etfs and other options.  Isn’t diversity the spice of life?

The Roth IRA makes the myRA a poor investment options for working folks and especially young working folks!  I understand a myRA could be a gateway route to fund a Roth IRA, but I think the low return vs equities will discourage most people from participating.  I could be wrong though, but why not keep it simple and just get a roth IRA up front?

If you are thinking about going the myRA route, I think you should really think about the pros and cons.  To me it’s a dead option out the gate if you have any financial savvy or education at all.  That said it’s still something and I applaud the POTUS for providing such an option, even if I think it’s a poor choice and shouldn’t be used.  It will be interesting to see if it really gains in popularity…

What do you think,

Don