Retirement Nestegg Report – June 2010

Retirement Nestegg Report – June 2010

Well things are headed down again and I have to admit I am sort of hooked back into the market and have been doing a lot of research on possible investments again. Funny if you read my posts from the turn of the year I had pretty much said I was in cruise control and would only be looking at my investments a couple times a year. Well that certainly hasn’t been the case and I have been doing a lot more research and been buying a few new stocks as of late.

Part of my excitement may have been due to the fact that the market is headed south again and also because I went back and calculated my individual stock performance since I started investing (previously I had lumped it in with my 401k/mutual funds) and found out that my individual stocks purchases are consistently beating the market and my mutual fund purchases and have been the last 4 years. You can now see this additional line item “Individual Stock Performance” and my performance vs the SP500 at the end of each Nestegg Report.

Here is my individual stock performance for 2006-2010 YTD vs the SP500
2006 -1.59%
2007 +1.76%
2008 +1.42%
2009 +9.32%
2010 YTD +6.13%

The only year I have trailed the SP500 was my first year and I sure picked some horrible stocks with my first couple purchases. Since then I have been doing pretty well. I guess this justifies some of the time I spend researching individual stocks.

Here is my monthly nestegg report.

Traditional Rollover IRA – $10,792.32 (-2.27%)
My Roth IRA – $33,229.84 (-2.72%)
Wife Roth IRA – $18,681.44 (-7.15%)
Current Traditional 401k – $59,670.70 (-2.29%)

Roth/Traditional % = 42.42 % (tax free)

Total Retirement Nest Egg $122,374.30 (-3.18%)

Monthly Contributions $908.76 (401k)
SPY Performance -5.15%
My Monthly Investment Performance -3.90 % (+1.25%)
My Monthly Individual Stocks Performance -4.52 % (+0.63%)

  • JD

    I have been following you for quite some time now. And you are doing a really awesome job. I hope to hit 100k by the time I am 30 to, but I dont know if that will happen. I am about half way there with 2.5 more years to go. Roth 401k is invested with various company offered funds, but Roth IRA is all in CD’s… (and I am fairly young) With the way that things are going I just dont trust the market, due to manipulation by market makers and speculators along with, in some instances, fraudulent blance sheets… and not sure if things will change.

    Got any advice?

    Also what are your thoughts on the article below:

  • MFJ

    Hey JD –

    Congrats on the progress you’ve made on your 100k by 30 goal. My guess is you will be surprised at what you can accomplish.

    Regarding trusting the market. This is really something that you have to decide what you are comfortable with. If your investments have you worried or keep you up at night then you are probably in too risky of investments. Everyone is different though and you have to find your comfort zone.

    I’ll give you my personal thoughts though and yous can see if they jive with you. Yes the stock market is a freaky place and there are a lot of greedy bad people doing bad things out there – that being said I don’t think there is anything special about today’s market that is any different than the stock market in the last 100 years. I don’t feel its any more dangerous to be invested in the stock market now than it has in the past.

    I do know though that even if the article argues the actual rates of return – I don’t think anyone can argue that the stock market has been the hands down winner when it comes to long term wealth creation. I think they make many one sided and convenient points on the stock market. I’ll try to address each point below.

    Point #1 – Yes if you invested in the stock market at 1 point in time you could potentially pick a very bad time to invest and your returns would suck. Don’t do this!! Invest regularly and then these doomsday scenarios are a non issue. To flip the coin what about the people who invested in March of 2009 – I bet they are pretty happy right now. Long term this doesn’t matter if you invest regularly then the market fluctuations don’t hurt your long term gains.

    Point #2 Ok but then you need to take away inflation from CDs, Bonds, etc – bottom line stocks will come out on top over any longer period of time – which as a person in your late 20s is all you care about.

    Point #3 – yeah in the short term we have no idea what is going to happen – if we did then we probably wouldn’t let them happen 🙂 Hindsight is always pretty convenient, but unrealistic.

    Point #4 – I invested in wall street for most of the last decade and have been doing ok. If you diversify yourself globally then isolated incidents in specific countries won’t hurt you that much. You can’t tell me the world as a whole is not going to expand and grow going forward – and if it doesn’t your investments are going to be the least of your concern.

    Point #5 – not sure what point they are trying to make here – I agree that you don’t have to be overly risky to make a good return. One way to greatly reduce your risk is by regularly investing in the stock market in a diverse basket of investments.

    Point #6 – I agree no one metric can be used in all situations to value the market. I’d still argue that even if your metric tells you the market is more expensive you still need to be investing regularly. Having money in cash or CDs is even more risky in my opinion due to the fact that inflation will eat away those returns. This point kind of makes me think they are talking about trying to time the market.

    Point #7 – I will agree to a point but I don’t think you should go to extremes of taking money in and out of the market. I’d argue you could maybe invest more money safely after a huge downturn like we had in 2008 and we had very depressed metrics, but again don’t over do it – only what you are comfortable with. On the flip side when things are super high valuations you might want to lighten your investment a little or put it in cash if you feel the market is overvalued, but I’d never recommend having more than 20% cash no matter how overvalued you think the market is as in the shorter term you just don’t know what will happen. You are a long term investor and short term valuations should not have a big impact on your investment strategy if you are investing regularly and getting all of the various valuation points.

    Point #8 – I agree – buy a few low cost index funds. Split them up with however you feel comfortable (internationl stock, domestic stock, bonds, commodities, cash, etc). Buying loaded mutual funds or high fee funds and trying to diversify that way just assures you get sub-market returns after fees.

    Point #9 – I agree – buy index funds for the vast majority of your portfolio.

    Point #10 – I disagree – first off 10 years is a very valid long term time period – very applicable in your situation and its rather convenient that the last 10 years just happen to be about the worst 10 years – even then we are probably about even IF YOU INVESTED ALL OF YOUR MONEY IN THE PEAK OF THE DOT COM BUBBLE!!! If you kept regularly investing the last decade you would very likely be positive. Span that out over a 20 year period and even with the last 10 years the returns look pretty good to me

    As you can see I am a firm believer in the long term wealth creation of the stock market. In the short term – less than 10 years things might not always go up, but if you stick with it and invest regularly I think you will be very happy with the end result. Don’t invest all of your money in short time periods and come up with an asset allocation that you feel comfortable with LONG TERM and stick with it. Don’t let short term anomalies or scare tactic media influence your plan or you will be guaranteed to have crappy performance. The media has been predicting the end of the stock market for the last 100 years and they’ve been dead wrong every single time. Besides if the stock market does go up in flames – you have a lot bigger problems than losing money on some investments 🙂

    Hope this helps some.


  • JD

    Thanks! Great insight, thanks again for your time!

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