Year End Investment Portfolio Analysis

So after writing the article called “Mutual Funds versus Stocks Why I Choose Stocks“, I wondered if my personal “regular account” gains from the past would trump my 401k gains.  I was especially curious about as long of a record period as I could calculate.  So ironically (or is it because I’m focused on this right now), I click on reports in my brokerage account, and low and behold, they have a calculation for the past 4 years.  So since they have such an excellent feature, I decided to perform a quick and dirty Year End Investment Portfolio Analysis!

So let’s start with my regular brokerage accounts first!  I have over 5 accounts (2 of which are my kids) and unfortunately I couldn’t eliminate my kid’s accounts.  They almost certainly pulled my average down a bit since I haven’t done quite as well in their accounts as mine (I have no idea why, but most likely because I set them in stocks and ignore their account a lot of the time).  Their accounts didn’t do horrible, but I’m sure it did pull my account average down a few percentage points.

It’s noteworthy to mention that if I was to include my ESPP money hack, I believe that my actually percentage would be up another 1/2 to 1 percent.

So here is my number for the past 4 years, 19.04% (annualized).  Not bad huh, especially since I believe the number would actually be closer to 20%

Brokerage Account Return for the Past 4 Years

Last 4 years

In my 401k, my return for this period was 11.6%, not horrible but less than the S&P 500’s return which was around 16% per year (or close to this number).

So I was pleased with my 19% (really more like 20%) number (and if you take out my kids account from the equation, the return would have been higher)…  I think my Year End Investment Portfolio Analysis verifies that I’m doing okay investing in stocks versus mutual funds!

If I were to just let the account balances ride out with no new contributions to the principal to either my 401k or regular brokerage accounts, it would take a bit more than 10 years for my regular brokerage account balances to pass my 401k balance.  So I was a little too optimistic on my regular brokerage account passing my 401k balance, but it’s still fun to have the my stocks (regular accounts) compete against my mutual funds (my 401k balance).

Here’s to a great new year!

Don

 

 

 

Why Young Investors Should Not Shy Away From Investing in Stocks

For college graduates lucky enough to find work after they receive their diploma, the question as to whether or not they should invest and how they should do so is often a tricky one. With the market experiencing incredible high and lows in short periods of time, most young professionals are afraid to invest in stocks and are instead leaving their money in savings accounts.

Leaving money in a savings account is a great idea if you are saving up for a future large purchase such as a house or a car, but don’t underestimate how quickly you could be saving for retirement too. Keeping all your money in a savings account is very secure, but it also has incredibly low returns. Therefore, only emergency money and that being saved for a down payment or vacation should be kept in savings, as it allows you to have quick and easy access to the funds you need when you need it.

Otherwise, young investors should be looking towards stocks as they have their youth on their side.

Stocks offer the quickest and greatest returns which make them a great investment. However, because of their volatility, they are also not a wise investment for older investors who have a lot more to lose should their stocks not provide adequate returns. Because a younger investor has more time before retirement, they are able to more easily recover by further balancing their portfolio.

Because of the potential for great returns offered by stocks, young investors should not in any way, shape, or form be intimidated by them. In fact, most young investors should have approximately 70 to 75 percent of their savings in stocks and the other 25 to 30 percent in bonds. Not only will the right amount of diversity help them yield much higher returns, but it will also reduce the age at which they will retire. A good balance like the 70/ 30 ratio will also make investing a bit more stable and secure while still producing higher yielding results.

However, that doesn’t mean that young investors should just start blindly throwing money into the stock markets. There is a lot to learn about this topic, and taking tips from professionals like practiced professionals with a proven track record, like the Brian F. Prince Blog is a good place to start. While playing with small Forex markets or penny stocks can be a good investing lesson, those interested in establishing a firm financial future should contact a financial adviser to help them determine which stocks are worth investing in, as well as an appropriate amount of portfolio diversity.

This guest post was brought to you by Ryan

Alternative Income Level 1 Update

Two and a  half years ago, I created an article called Creating Alternative Income Milestones, and I’m happy to say that I’ve made it to level 1 already!  I’m about one year ahead of where I thought that I would be in my progress!

In the article Creating Alternative Income Milestone, I mentioned that I wanted to speed up the alternative Income Money stream, but I didn’t have any plans or really any ideas how to accomplish this feat without working another full-time job and saving the money like a fiend!  Well a lot has changed in two short years!  While my levels and goals are still the same, instead of taking thirty years to develop the money stream of dividends and other investment that would total $25,000, I now want to accomplish this feat in less than 10 years.

Obviously, developing a yearly money stream in 10 years is a far cry from when I thought it would take about thirty years… so what has changed?

My Investment asset classes!

Instead of sticking strictly to dividends from stocks and interest from bonds, I’m planning on trying to develop an additional money stream from a few choice rental estate investment properties.  I believe that if I could buy 2 or 3 multifamily units and collect the cash flow from those units, I could beat the thirty years that it would take for me to get to level 5 by just investing in dividends and bonds!

Just as a reference point, below is my Alternative Income (Passive Income) Milestones:

 

Levels Amount Milestones
1 $5,000
2 $10,000
3 $15,000
4 $20,000
5 $25,000

 

While I’m a long way from $25,000 or more in passive (alternative) income, at least I feel it’s a doable option now that I have more detailed plans!

Best

MR

Earning 25 Percent On My Previous Mortgage Payment

Occasionally I write about being totally debt free (no mortgage, car loans or credit card debt), but I had one problem with being debt free that took me a while to solve, and that was “What do I do with the extra infusion of cash each month”?  Such an increase of cash by paying off my mortgage was like getting a second job on the side!  In fact paying off my mortgage has cut my annual expense by more than 25%!

Back to my problem!  Obviously I don’t want to incur lifestyle creep since I worked so hard to pay off the mortgage early.  To spend more just to increase my lifestyle would have meant that I basically sacrificed for nothing because I really wouldn’t be getting ahead!  But what to do that extra money?  I didn’t want to put it in a savings account that would earn less than 1%…

Here’s What I Did!

It turned out that my employer offers an ESPP (employee stock purchase plan) that enables me to get a 15% discount on the purchase price of my employer’s stock.    Obviously, 15% beats less than 1%, but it gets even better so that option is a winner if I cash out the stock immediately after it get’s in my account.  But in addition to the 15%, I’ve been putting the money into a (what I consider) safe dividend stock and making over 10% there too.  So that effectively give me a return of over 25% for that each year of participating in the ESPP.

Next Step:

Why not use the money for future real estate investments?  Believe it or not, but often I experiment with working on the best financial strategy until I get the best mix, much like I did with the combination of ESPP and dividend investing.

Bests,

MR