Today is August, 10, 2011, which is the day I should have rebalanced my portfolio. However, if you recall from my last "Full Motley" entry, I started by noting how quickly the trigger date had arrived. Well, I was a full month ahead of schedule! The most interesting part is that if I had waited the month, then I would have made my adjustments today as the market closed around 10,700, instead of the 12,600 mark where it was a month ago. I also would not have ceased my contributions into my Roth IRA, which was the right move to make in my opinion for my daily finances.
Most likely, I will move a portion of bonds from my Roth IRA to the stocks during this valley. Also, I will have an unrelated entry later this month (that is, unrelated to my personal portfolio and the markets in general), but for now, let's continue tracking the Dow's third-quarter freefall....
No rest for investors: Dow plunges 520
http://money.cnn.com/2011/08/10/markets/markets_newyork/index.htm?iid=Lead
NEW YORK (CNNMoney) -- After a one-day respite, U.S. stocks plunged sharply yet again Wednesday as investors were confronted with mounting fears about Europe's ongoing debt crisis, this time in France.
The Dow Jones industrial average lost 520 points, or 4.6%, to 10,720. The index ended the day near session lows.
The S&P 500 fell 52 points, or 4.4%, to 1,121; and the Nasdaq composite lost 101 points, or 4.1%, to 2,381.
Stocks were led lower by the financial sector. On Wednesday afternoon CEO of embattled Bank of America Brian Moynihan tried to reassure investors that conditions at the bank and in the country are much better than they were four years ago when the financial crisis hit. The comments were made during a call hosted by investor Bruce Berkowitz of Fairholme Capital Management.
But the comments were not enough. Shares of the Dow component plunged 11% on the day. BofA has fallen nearly 50% so far this year.
Other names in the financial sector were hit just as hard. Shares of Citigroup, Goldman Sachs and Morgan Stanley dropped about 10%. Shares of Wells Fargo, UBS and JPMorgan Chase were down around 7%.
Along with BofA's problems, investors remain worried about the Europe's ongoing sovereign debt crisis.
Ever since Standard & Poor's stripped the U.S. of its AAA credit rating on Friday, fears have been building that rating agencies may also downgrade AAA-rated nations in Europe, since they are also struggling with massive debt problems.
On Wednesday, shares of French bank Societe Generale tumbled 15% on the Paris stock exchange amid speculation that France, Europe's second-largest economy after Germany, may be first to face a rating cut.
European banking shares also fell sharply. Deutsche Bank's stock dropped 12% while Spanish bank Banco Santandedr dropped 9.5%.
Wednesday, August 10, 2011
Thursday, August 4, 2011
MSN MONEY: Dow plunges 513 points; 2011 gains are wiped out
Stocks plunged, with the Dow Jones Industrial Average ($INDU -4.31%) tumbling 513 points, their worst one-day loss since December 2008 and ninth-worst point loss, as investors worried that the U.S. economy may be slipping back into a recession. The overall market carnage wiped out all of the 2011 gains for the major averages.
The market rout was prompted in part by concerns that the Federal Reserve won't try to boost the economy again and the prospects of little -- if any -- help on the way from the federal government. A huge concern was what Friday's big jobs report will say. In addition, there were deep fears about the health of the European financial system; stocks on the continent fell sharply. Stocks in Brazil were down nearly 6%.
With today's losses, the market is now in a correction, with the Dow, Standard & Poor's 500 Index ($INX -4.78%) and the Nasdaq Composite Index ($COMPX -5.08%) all down more than 11% from the closing highs for 2011, reached on April 29. Nearly all of the declines for the indexes have come since July 21; the Dow's loss in that time is about 1,340 points.
Gold briefly surged above $1,680 an ounce for the first time and then sold off, and crude oil dropped below $88 a barrel for the first time since mid-February.
The Dow closed down 513 points, or 4.3%, to 11,384. The S&P 500 was off 60 points, or 4.8%, to 1,200, its lowest level since Nov. 30, 2010. The Nasdaq was off 137 points, or 5.1%, to 2,556, its lowest level since Dec. 1, 2010. The Nasdaq 100 Index ($NDX -4.57%) was down 106 points, or 4.6%, to 2,207.
While gold fell back, investors bid hotly for Treasurys. The 10-year Treasury yield fell to 2.458% from Wednesday's 2.599%.
Gold settled down $7.30 to $1,659 an ounce after reaching as high as $1,684.90. Silver was off $2.33 to $39.43 an ounce, a decline of 5.6%. Crude oil was down $5.30, or 5.8%, to $86.63 a barrel, its lowest level since Feb. 18 as the Egyptian revolution neared its climax. It had reached as low as $86.04.
What started the blow-off?
The number raised the worries for Friday's nonfarm payrolls and unemployment report. The report, which will come out at 8:30 a.m. ET, is expected to show little change in the unemployment rate, which was 9.2% in June, and maybe an 85,000 gain in nonfarm payrolls.
But there were other big issues, including a move by the Bank of Japan to push the yen lower against major currencies, especially the dollar.
In addition, European stocks plunged on worries that debt problems for Greece, Portugal, Italy and Ireland were worsening. The European Central Bank unexpectedly began large-scale intervention in the eurozone debt markets, the first time since March, buying bonds in an apparent attempt to prevent the region's sovereign debt crisis from engulfing Italy.
The market tensions also set off a furious battle between investors wanting safety in Swiss francs and the Japanese yen and the central banks of those countries, which don't want their economies priced way too high.
Posted 8/4/2011, 5:19 PM ET, by Charley Blaine
The market rout was prompted in part by concerns that the Federal Reserve won't try to boost the economy again and the prospects of little -- if any -- help on the way from the federal government. A huge concern was what Friday's big jobs report will say. In addition, there were deep fears about the health of the European financial system; stocks on the continent fell sharply. Stocks in Brazil were down nearly 6%.
With today's losses, the market is now in a correction, with the Dow, Standard & Poor's 500 Index ($INX -4.78%) and the Nasdaq Composite Index ($COMPX -5.08%) all down more than 11% from the closing highs for 2011, reached on April 29. Nearly all of the declines for the indexes have come since July 21; the Dow's loss in that time is about 1,340 points.
Gold briefly surged above $1,680 an ounce for the first time and then sold off, and crude oil dropped below $88 a barrel for the first time since mid-February.
The Dow closed down 513 points, or 4.3%, to 11,384. The S&P 500 was off 60 points, or 4.8%, to 1,200, its lowest level since Nov. 30, 2010. The Nasdaq was off 137 points, or 5.1%, to 2,556, its lowest level since Dec. 1, 2010. The Nasdaq 100 Index ($NDX -4.57%) was down 106 points, or 4.6%, to 2,207.
While gold fell back, investors bid hotly for Treasurys. The 10-year Treasury yield fell to 2.458% from Wednesday's 2.599%.
Gold settled down $7.30 to $1,659 an ounce after reaching as high as $1,684.90. Silver was off $2.33 to $39.43 an ounce, a decline of 5.6%. Crude oil was down $5.30, or 5.8%, to $86.63 a barrel, its lowest level since Feb. 18 as the Egyptian revolution neared its climax. It had reached as low as $86.04.
What started the blow-off?
The supposed trigger was a weak report on initial jobless claims. They were down 1,000 to 400,000. A week ago's estimate of 398,000 was revised to 401,000.
The number raised the worries for Friday's nonfarm payrolls and unemployment report. The report, which will come out at 8:30 a.m. ET, is expected to show little change in the unemployment rate, which was 9.2% in June, and maybe an 85,000 gain in nonfarm payrolls.
But there were other big issues, including a move by the Bank of Japan to push the yen lower against major currencies, especially the dollar.
In addition, European stocks plunged on worries that debt problems for Greece, Portugal, Italy and Ireland were worsening. The European Central Bank unexpectedly began large-scale intervention in the eurozone debt markets, the first time since March, buying bonds in an apparent attempt to prevent the region's sovereign debt crisis from engulfing Italy.
The market tensions also set off a furious battle between investors wanting safety in Swiss francs and the Japanese yen and the central banks of those countries, which don't want their economies priced way too high.
Posted 8/4/2011, 5:19 PM ET, by Charley Blaine
- Stocks plunge as worries about global growth cause traders to dump stocks and seek safety.
- Gold briefly tops $1,680 but falls back.
- Treasury yields fall as the dollar rises.
Friday, July 29, 2011
REUTERS: U.S. Stock Market Ends Its Worst Week In A Year
(Caroline Valetkevitch) - Stocks ended the worst week in a year as time runs out on Washington to reach agreement before the government loses its ability to borrow money.
The S&P 500 fell every day this week and was down 3.9 percent for the week as legislators failed to work out an agreement to raise the federal borrowing limit, which expires on Tuesday. Investors also worry about the likelihood of a U.S. credit downgrade.
The CBOE Market Volatility Index .VIX, a gauge of investor fear, jumped as much as 9 percent to its highest level since mid-March before paring its rise.
Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, said investors are taking a more defensive stance, possibly moving more into cash.
"It's frustrating for investors and for U.S. citizens to see this unfold in the way it has been," she said.
"From an overall asset allocation standpoint, in an environment like this, you get bigger moves into cash and safe havens."
The Dow Jones industrial average .DJI was down 96.87 points, or 0.79 percent, at 12,143.24. The Standard & Poor's 500 Index .SPX was down 8.39 points, or 0.65 percent, at 1,292.28. The Nasdaq Composite Index .IXIC was down 9.87 points, or 0.36 percent, at 2,756.38.
President Barack Obama told Republicans and Democrats to find a way "out of this mess." The United States will be unable to borrow money to pay its bills if Congress does not raise the debt limit by August 2.
A second attempt for a vote in the House of Representatives is expected after the close of trading on Friday after a bill was modified to try to win over more conservative lawmakers. The measure has little chance of passing in the Senate, however.
At least one credit rating agency has said it is likely to lower the United States' prized tripe-A rating if the cuts in Washington don't go far enough.
"Will the deal be enough to satisfy the credit rating agencies is really what's at stake here," Trunow said, whose firm manages about $14.8 billion.
The S&P utility index .GSPU is down 2.1 percent for the week, while the Dow is down 4.2 percent and the Nasdaq is down 3.6 percent for the week.
The S&P 500 briefly fell below its 200-day moving average, seen as key support, and bounced back from its worst levels of the day.
Weak economic data also weighed on equities. The U.S. economy stumbled badly in the first half of this year and came dangerously close to contracting in the January-March period.
Among declining stocks, Chevron Corp (CVX.N), the second-largest U.S. oil company, fell 1 percent to $104.02 despite reporting a 43 percent jump in quarterly profit that beat estimates.
(Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)
The S&P 500 fell every day this week and was down 3.9 percent for the week as legislators failed to work out an agreement to raise the federal borrowing limit, which expires on Tuesday. Investors also worry about the likelihood of a U.S. credit downgrade.
The CBOE Market Volatility Index .VIX, a gauge of investor fear, jumped as much as 9 percent to its highest level since mid-March before paring its rise.
Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, said investors are taking a more defensive stance, possibly moving more into cash.
"It's frustrating for investors and for U.S. citizens to see this unfold in the way it has been," she said.
"From an overall asset allocation standpoint, in an environment like this, you get bigger moves into cash and safe havens."
The Dow Jones industrial average .DJI was down 96.87 points, or 0.79 percent, at 12,143.24. The Standard & Poor's 500 Index .SPX was down 8.39 points, or 0.65 percent, at 1,292.28. The Nasdaq Composite Index .IXIC was down 9.87 points, or 0.36 percent, at 2,756.38.
President Barack Obama told Republicans and Democrats to find a way "out of this mess." The United States will be unable to borrow money to pay its bills if Congress does not raise the debt limit by August 2.
A second attempt for a vote in the House of Representatives is expected after the close of trading on Friday after a bill was modified to try to win over more conservative lawmakers. The measure has little chance of passing in the Senate, however.
At least one credit rating agency has said it is likely to lower the United States' prized tripe-A rating if the cuts in Washington don't go far enough.
"Will the deal be enough to satisfy the credit rating agencies is really what's at stake here," Trunow said, whose firm manages about $14.8 billion.
The S&P utility index .GSPU is down 2.1 percent for the week, while the Dow is down 4.2 percent and the Nasdaq is down 3.6 percent for the week.
The S&P 500 briefly fell below its 200-day moving average, seen as key support, and bounced back from its worst levels of the day.
Weak economic data also weighed on equities. The U.S. economy stumbled badly in the first half of this year and came dangerously close to contracting in the January-March period.
Among declining stocks, Chevron Corp (CVX.N), the second-largest U.S. oil company, fell 1 percent to $104.02 despite reporting a 43 percent jump in quarterly profit that beat estimates.
(Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)
Friday, July 8, 2011
The Full Motley: 3Q 2011
Wow, things have been moving along at such a fast pace that I am surprised how soon I am to my rebalancing again. Sunday will be July 10, 2011, so I can submit my changes today or on Monday. Based on the amount of homework I have to finish, I opted to distract myself by rebalancing today.
When I logged onto my accounts today, I saw this as my current allocations:
Fund # - Real / Current / Target
Fund 24 - 25% / 0% / 25%
Fund 29 - 5% / 0% / 5%
Fund 59 - 25% / 0% / 25%
Fund 84 - 10% / 0% / 10%
Fund 85 - 25% / 0% / 25%
Fund 113 - 11% / -1% / 10%
Due to rounding, I had 101% of allocations in my 401(k) and I had no discernable means of moving the excess 1% anywhere. Obviously, this glitch was due to rounding. When I got into the more specific details of the funds, I ascertained that the following moves were needed:
Once again, not much activity, but the gain in the Vanguard Total International Stock Index Fund was removed from the fund and dispersed amongst other funds that have fallen. The overall expectations of the domestic markets right now is that they will fall through October and then hit a sharp rise, although that has not happened quite to the extreme that I have been anticipating. The markets have been going up lately and they are still above where they were in January 2011, which is especially surprising to me. My prediction was that the markets would gain under 10% for the year. At this point, it looks like they are in position to gain 10-15% for the year.
Therefore, I have a decision to make. I can either continue contributing to my Roth IRA or I can suspend contributions until later. After a couple days of consideration, I opted to suspend contributions because (A) I was expecting the market would be well below 12,000 (maybe even below 11,000), and (B) I need liquid assets in case I am unable to get part-time work (or if I decide against pursuing work) before I complete my degree.
When I logged onto my accounts today, I saw this as my current allocations:
Fund # - Real / Current / Target
Fund 24 - 25% / 0% / 25%
Fund 29 - 5% / 0% / 5%
Fund 59 - 25% / 0% / 25%
Fund 84 - 10% / 0% / 10%
Fund 85 - 25% / 0% / 25%
Fund 113 - 11% / -1% / 10%
Due to rounding, I had 101% of allocations in my 401(k) and I had no discernable means of moving the excess 1% anywhere. Obviously, this glitch was due to rounding. When I got into the more specific details of the funds, I ascertained that the following moves were needed:
- Vanguard High-Yield Corporate Fund (add small amount)
- Vanguard PRIMECAP Fund Investor (add small amount)
- Vanguard Total Int'l Stock Index Fund (remove 1%)
- Vanguard Total Bond Market Index Fund (add <1%)
- Vanguard Total Stock Market Index Fund (remove small amount)
Once again, not much activity, but the gain in the Vanguard Total International Stock Index Fund was removed from the fund and dispersed amongst other funds that have fallen. The overall expectations of the domestic markets right now is that they will fall through October and then hit a sharp rise, although that has not happened quite to the extreme that I have been anticipating. The markets have been going up lately and they are still above where they were in January 2011, which is especially surprising to me. My prediction was that the markets would gain under 10% for the year. At this point, it looks like they are in position to gain 10-15% for the year.
Therefore, I have a decision to make. I can either continue contributing to my Roth IRA or I can suspend contributions until later. After a couple days of consideration, I opted to suspend contributions because (A) I was expecting the market would be well below 12,000 (maybe even below 11,000), and (B) I need liquid assets in case I am unable to get part-time work (or if I decide against pursuing work) before I complete my degree.
Sunday, June 5, 2011
AOL: Feds Sue 'Winning in the Cash Flow Business' Infomercial Huckster
Feds Sue 'Winning in the Cash Flow Business' Infomercial Huckster
http://www.walletpop.com/2011/06/02/feds-sue-winning-in-the-cash-flow-business-infomercial-huckste/?a_dgi=aolshare_twitter
by Jorgen Wouters
The mastermind behind a get-rich-quick scheme whose infomercials lured hundreds of thousands of victims is being sued by the Federal Trade Commission for defrauding consumers.
Russell Dalbey, CEO and founder of the company behind the "Winning in the Cash Flow Business" program, swindled consumers with fake claims about the fast, easy, big money they could make finding, brokering and earning commissions on seller-financed promissory notes, the FTC charged.
Although consumers paid as little as $40 to get started, they were pressured into spending far more on worthless products, the FTC charged, with many consumers losing thousands of dollars.
"'Winning in the Cash Flow Business' was a real loser for hundreds of thousands of consumers nationwide," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement.
"When someone is selling a program designed to help people make money, they have to accurately describe how much consumers can expect to make and be truthful about how quickly they will be able to do so," Vladeck added. "None of that happened in this case, and people who bought the program paid the price."
The FTC's complaint against Dalbey and others involved in marketing the program, which was filed jointly with Colorado Attorney General John W. Suthers, accuses the defendants of misleading consumers about the amount of money they could earn using the program, as well as how quickly and easily they could rake it in.
The FTC and the state of Colorado are seeking a court order to stop Dalbey, his wife and their businesses from making misleading claims, as well as to recover money to refund their victims. Defendants include Russell T. Dalbey; DEI LLLP; Dalbey Education Institute LLC; IPME LLLP; Catherine L. Dalbey; and Marsha Kellogg, a consumer who provided a false testimonial for the service.
Dalbey began pitching his "wealth building" program on the Internet and via direct mail in 1996, and since 2002, millions of consumers nationwide have been bombarded with 30-minute infomercials for the "Winning in the Cash Flow Business" program, which were hosted by TV personality and repeat DUI offender Gary Collins.
The program promised to teach consumers how to find, broker and earn commissions on seller-financed promissory notes -- privately held mortgages or notes that are often secured by the home or land. The infomercial claimed consumers could successfully earn substantial income brokering promissory notes in three easy steps -- "Find 'Em," "List 'Em" and "Make Money."
"[Y]ou'll be amazed at just how easy it is to generate a stream of extra income every month. Build financial freedom and a better quality of life in just minutes a day. Or even retire earlier than you ever dreamed possible. Order now and you'll be ready to profit in minutes," the infomercials claimed.
These claims were supported by "testimonials" from consumers who claimed to have made "$1.2 million in 30 days," "$79,000 in a few hours" and "$262,216 part time," according to some. "In less than 30 days, I closed two transactions, and I netted 1 point – a little bit over $1.2 million," a testimonial by "Don B." from New York stated.
Those who fell for the infomercial's spiel shelled out approximately $40 to $160 on the initial program but were soon encouraged to spend hundreds or thousands of dollars more on multi-day seminars, coaching sessions and promissory note holder lead lists. Very few of these consumers ever made the money Dalbey promised them, the FTC said.
The complaint accuses Dalbey and his co-defendants of violating the FTC Act and Colorado law by making false and unsubstantiated claims about the "Winning in the Cash Flow Business" program, as well as their coaching programs, workshops, seminars and note holder leads.
Although Dalbey claims to have made big money in the promissory note business, the FTC charged, most of his note-related income for the past two decades came from pitching products and services that purportedly teach consumers how to find and broker these notes.
The defendants are also accused of inflating the success customers could expect with the program in the consumer testimonials. One of these customers, Marsha Kellogg, claimed in one testimonial that she earned $79,975.01 from a single promissory note transaction, while she actually earned $50,000 less.
Kellogg agreed to an order settling the FTC charges against her -- the first time the FTC ever charged a consumer with making misrepresentations in a product or service testimonial. The order forbids Kellogg from making future misrepresentations, and she has agreed to cooperate in the case against Dalbey and his co-defendants.
Consumer information from the FTC about how to spot and avoid investment fraud, "get-rich-quick" schemes and other types of wealth-building scams can be found at the link below:
http://www.ftc.gov/bcp/edu/microsites/moneymatters/jobs-wealth-building.shtml
http://www.walletpop.com/2011/06/02/feds-sue-winning-in-the-cash-flow-business-infomercial-huckste/?a_dgi=aolshare_twitter
by Jorgen Wouters
The mastermind behind a get-rich-quick scheme whose infomercials lured hundreds of thousands of victims is being sued by the Federal Trade Commission for defrauding consumers.
Russell Dalbey, CEO and founder of the company behind the "Winning in the Cash Flow Business" program, swindled consumers with fake claims about the fast, easy, big money they could make finding, brokering and earning commissions on seller-financed promissory notes, the FTC charged.
Although consumers paid as little as $40 to get started, they were pressured into spending far more on worthless products, the FTC charged, with many consumers losing thousands of dollars.
"'Winning in the Cash Flow Business' was a real loser for hundreds of thousands of consumers nationwide," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement.
"When someone is selling a program designed to help people make money, they have to accurately describe how much consumers can expect to make and be truthful about how quickly they will be able to do so," Vladeck added. "None of that happened in this case, and people who bought the program paid the price."
The FTC's complaint against Dalbey and others involved in marketing the program, which was filed jointly with Colorado Attorney General John W. Suthers, accuses the defendants of misleading consumers about the amount of money they could earn using the program, as well as how quickly and easily they could rake it in.
The FTC and the state of Colorado are seeking a court order to stop Dalbey, his wife and their businesses from making misleading claims, as well as to recover money to refund their victims. Defendants include Russell T. Dalbey; DEI LLLP; Dalbey Education Institute LLC; IPME LLLP; Catherine L. Dalbey; and Marsha Kellogg, a consumer who provided a false testimonial for the service.
Dalbey began pitching his "wealth building" program on the Internet and via direct mail in 1996, and since 2002, millions of consumers nationwide have been bombarded with 30-minute infomercials for the "Winning in the Cash Flow Business" program, which were hosted by TV personality and repeat DUI offender Gary Collins.
The program promised to teach consumers how to find, broker and earn commissions on seller-financed promissory notes -- privately held mortgages or notes that are often secured by the home or land. The infomercial claimed consumers could successfully earn substantial income brokering promissory notes in three easy steps -- "Find 'Em," "List 'Em" and "Make Money."
"[Y]ou'll be amazed at just how easy it is to generate a stream of extra income every month. Build financial freedom and a better quality of life in just minutes a day. Or even retire earlier than you ever dreamed possible. Order now and you'll be ready to profit in minutes," the infomercials claimed.
These claims were supported by "testimonials" from consumers who claimed to have made "$1.2 million in 30 days," "$79,000 in a few hours" and "$262,216 part time," according to some. "In less than 30 days, I closed two transactions, and I netted 1 point – a little bit over $1.2 million," a testimonial by "Don B." from New York stated.
Those who fell for the infomercial's spiel shelled out approximately $40 to $160 on the initial program but were soon encouraged to spend hundreds or thousands of dollars more on multi-day seminars, coaching sessions and promissory note holder lead lists. Very few of these consumers ever made the money Dalbey promised them, the FTC said.
The complaint accuses Dalbey and his co-defendants of violating the FTC Act and Colorado law by making false and unsubstantiated claims about the "Winning in the Cash Flow Business" program, as well as their coaching programs, workshops, seminars and note holder leads.
Although Dalbey claims to have made big money in the promissory note business, the FTC charged, most of his note-related income for the past two decades came from pitching products and services that purportedly teach consumers how to find and broker these notes.
The defendants are also accused of inflating the success customers could expect with the program in the consumer testimonials. One of these customers, Marsha Kellogg, claimed in one testimonial that she earned $79,975.01 from a single promissory note transaction, while she actually earned $50,000 less.
Kellogg agreed to an order settling the FTC charges against her -- the first time the FTC ever charged a consumer with making misrepresentations in a product or service testimonial. The order forbids Kellogg from making future misrepresentations, and she has agreed to cooperate in the case against Dalbey and his co-defendants.
Consumer information from the FTC about how to spot and avoid investment fraud, "get-rich-quick" schemes and other types of wealth-building scams can be found at the link below:
http://www.ftc.gov/bcp/edu/microsites/moneymatters/jobs-wealth-building.shtml
Friday, May 27, 2011
The Full Motley: 2Q 2011
I will be honest: after quitting my job last month, I haven't paid attention to what the markets have been doing this quarter. Case in point, I drafted this article a couple weeks ago and then I forgot to update this quarter's rebalance as described below and publish the entry until today. However, the vast majority of investors (especially those investors exclusively in their employer-sponsored plan) do not follow daily market performance either. They are too busy living their own lives, which do not revolve around how much money they will have at retirement upwards of 30 years away. However, I have said numerous times thorughout this blog that the most important element in personal investing is not what the markets do daily (or weekly, even annually) but how your account is allocated across the investments and your ability to maintain the percent you have earmarked previously in each investment.
For the specifics actions required for the maintenance of my 401(k) account this quarter, here is my new breakdown:
Fund # - Real / Current / Target
Fund 24 - 25% / 0% / 25%
Fund 29 - 5% / 0% / 5%
Fund 59 - 19% / +5% / 25%
Fund 84 - 10% / 0% / 10%
Fund 85 - 34% / -9% / 25%
Fund 113 - 9% / +1% / 10%
This graph may have looked slightly different in the past quarters. In the past entries, the "current" column was used to represent the allocations of money coming into the account, but because I am not currently employed, there is no incoming money. Therefore, the "current" column represents how much money is going to be moved in the current transaction.
Obviously, the Total Stock Market Index fund needs to have about 10% removed and it should be split (although, obviously not evenly) into the PRIMECAP Fund and Total International Stock Index. In this instance, I split the money I moved from Fund 85 and put the majority of it to Fund 59 and the remainder into Fund 113 (in previous installments, I didn't touch Fund 59 since I was building it up completely through Dollar Cost Averaging to its target, but once you leave your employer, you cannot put new money into the account so my opportunity to build the fund is over).
Notice how the vast majority of these quarterly rebalancing transactions only affects three funds on average and the amounts moved are usually less than 10% of the overall balance. Most professionals recommend rebalancing accounts on an annual basis, but I am reviewing it quarterly because when the markets move harshly, it happens quickly so I would rather make changes in amid that market movement, but during normal market conditions (which 2011 should exemplify nicely), reviewing your accounts annually is sufficient.
In the coming months and years, it will be interesting for me to see how well I stay abreast on the changes to my 401(k) account and my quarterly rebalancing as my studies continue and when I adopt a new job outside of the financial field.
For the specifics actions required for the maintenance of my 401(k) account this quarter, here is my new breakdown:
Fund # - Real / Current / Target
Fund 24 - 25% / 0% / 25%
Fund 29 - 5% / 0% / 5%
Fund 59 - 19% / +5% / 25%
Fund 84 - 10% / 0% / 10%
Fund 85 - 34% / -9% / 25%
Fund 113 - 9% / +1% / 10%
This graph may have looked slightly different in the past quarters. In the past entries, the "current" column was used to represent the allocations of money coming into the account, but because I am not currently employed, there is no incoming money. Therefore, the "current" column represents how much money is going to be moved in the current transaction.
Obviously, the Total Stock Market Index fund needs to have about 10% removed and it should be split (although, obviously not evenly) into the PRIMECAP Fund and Total International Stock Index. In this instance, I split the money I moved from Fund 85 and put the majority of it to Fund 59 and the remainder into Fund 113 (in previous installments, I didn't touch Fund 59 since I was building it up completely through Dollar Cost Averaging to its target, but once you leave your employer, you cannot put new money into the account so my opportunity to build the fund is over).
Notice how the vast majority of these quarterly rebalancing transactions only affects three funds on average and the amounts moved are usually less than 10% of the overall balance. Most professionals recommend rebalancing accounts on an annual basis, but I am reviewing it quarterly because when the markets move harshly, it happens quickly so I would rather make changes in amid that market movement, but during normal market conditions (which 2011 should exemplify nicely), reviewing your accounts annually is sufficient.
In the coming months and years, it will be interesting for me to see how well I stay abreast on the changes to my 401(k) account and my quarterly rebalancing as my studies continue and when I adopt a new job outside of the financial field.
Saturday, April 16, 2011
Career Changes
I am going through a major career change right now, and I realized last week that this is the perfect addition to any financial blog since uncertainty of money and future cashflow is often what keeps people staying in a bad situation for longer than they should. I worked in the financial industry for 10 years, and 8 1/2 of those years were with the same company (through which I had 6 years of perfect attendance), so I know all about finding a comfort zone and riding through it. And I am by no means endorsing frequent career changes here either, but unless you spend 10+ years in school for a specific career, then there is no harm in learning another industry.
Of course, going from comfortable employment like you get from an employer of 8+ years to unemployment is a scary thing. But I have been planning this change for a long time, and it was in the back of my mind even before any planning began, so here are some things that I have done:
Make sure that your savings account reflects 3 months of your CURRENT salary. Sometime last year (or was it is 2009), I realized that my savings account (I call it my "base" account and I don't include it in my investment decisions) reflected three months of my starting salary, which would have only gotten me through a couple months at most if I let it be. Increasing money in your savings account is not hard to do if you have incoming money and you are actively contributing to retirement accounts. Put a slight priority on it over the retirement investing, and you're good to go in a few paychecks.
Find the right banking account for your new situation. This was one of the last steps I made, but my existing bank account was ideal for my years of employment. It was with the branch closest to my employer and it waived monthly fees if there were more than $500 in direct deposit. Unfortunately, quitting the job would result in forgoing the direct deposit. Therefore, I had to shop around and move my money to another bank to avoid getting fees on my checking accounts (and if you have to change banks, do not forget to alert any companies who automatically pull money from your accounts).
Scale back on your 401(k) contributions. I would not advise going below the full benefit of your company match, but if you were contributing a handsome amount to your 401(k), which I started doing when the markets tanked and all the stocks were incredibly low, then scaling back on them will abed you in the near future. If I am able to get in a comfortable position sooner than I expect, then I can put the money I missed from my 401(k) into an IRA. What I am determined to avoid is getting hit with a 10% penalty from the IRS for an early withdrawal of my retirement funds.
Time your departure. If your company provide company profit sharing or, even better, an annual bonus, then consider staying with the company to take full advantage of that extra money. In my case, my annual bonus is in June, which was too far for me. But we also have a quarterly company match paid directly into our 401(k) at the end of each quarter. Therefore, I put in my two-weeks notice my first day back after the March 31st profit sharing payment.
Network. Facebook is more than kids' games. It is a useful tool for getting and staying in touch with old friends, and that includes those former employees whom you promised to stay in touch with but never did. You can find out what paths they took after their position with your company, especially if you are more interested in changing jobs than re-careering.
All in all, the right move is the one that is best for you. Sometimes you have the luxury of quitting your job, sometimes it happens abruptly (I cleared out my personal trinkets from my desk months ago in case I came into work one day and decided I could not stay there for another one). In my case, I am ready to begin back at Square One, for the first time in 8 1/2 years. I feel my past will provide enough credentials to get me to where I want to go next, and my friends are not going to let me stay unemployed for long either.
I have two more days left at my current position, and I truly feel at peace with this decision and I am ready to make the next steps.
Of course, going from comfortable employment like you get from an employer of 8+ years to unemployment is a scary thing. But I have been planning this change for a long time, and it was in the back of my mind even before any planning began, so here are some things that I have done:
Make sure that your savings account reflects 3 months of your CURRENT salary. Sometime last year (or was it is 2009), I realized that my savings account (I call it my "base" account and I don't include it in my investment decisions) reflected three months of my starting salary, which would have only gotten me through a couple months at most if I let it be. Increasing money in your savings account is not hard to do if you have incoming money and you are actively contributing to retirement accounts. Put a slight priority on it over the retirement investing, and you're good to go in a few paychecks.
Find the right banking account for your new situation. This was one of the last steps I made, but my existing bank account was ideal for my years of employment. It was with the branch closest to my employer and it waived monthly fees if there were more than $500 in direct deposit. Unfortunately, quitting the job would result in forgoing the direct deposit. Therefore, I had to shop around and move my money to another bank to avoid getting fees on my checking accounts (and if you have to change banks, do not forget to alert any companies who automatically pull money from your accounts).
Scale back on your 401(k) contributions. I would not advise going below the full benefit of your company match, but if you were contributing a handsome amount to your 401(k), which I started doing when the markets tanked and all the stocks were incredibly low, then scaling back on them will abed you in the near future. If I am able to get in a comfortable position sooner than I expect, then I can put the money I missed from my 401(k) into an IRA. What I am determined to avoid is getting hit with a 10% penalty from the IRS for an early withdrawal of my retirement funds.
Time your departure. If your company provide company profit sharing or, even better, an annual bonus, then consider staying with the company to take full advantage of that extra money. In my case, my annual bonus is in June, which was too far for me. But we also have a quarterly company match paid directly into our 401(k) at the end of each quarter. Therefore, I put in my two-weeks notice my first day back after the March 31st profit sharing payment.
Network. Facebook is more than kids' games. It is a useful tool for getting and staying in touch with old friends, and that includes those former employees whom you promised to stay in touch with but never did. You can find out what paths they took after their position with your company, especially if you are more interested in changing jobs than re-careering.
All in all, the right move is the one that is best for you. Sometimes you have the luxury of quitting your job, sometimes it happens abruptly (I cleared out my personal trinkets from my desk months ago in case I came into work one day and decided I could not stay there for another one). In my case, I am ready to begin back at Square One, for the first time in 8 1/2 years. I feel my past will provide enough credentials to get me to where I want to go next, and my friends are not going to let me stay unemployed for long either.
I have two more days left at my current position, and I truly feel at peace with this decision and I am ready to make the next steps.
Subscribe to:
Posts (Atom)