Tag Archives: stock

Networth H1 2013 ($217k) and Investing Moves

In 2013 to date, I’ve decided to do a bit of rebalancing to my portfolio. I really have no idea what I’m doing when it comes to portfolio management, but trying my best to keep my cost ratios down, keep dividend-paying stocks in my retirement accounts (not doing the best at this), and be smartly diversified.

The good news so far is that I’m still “up” this year, but I haven’t effectively ridden up the stock market boom as too much of my portfolio was tied to AAPL, which, as anyone following the stock market knows, is down to under $400 from its high of $700 a share. Should have sold when it was $700 a share and I owned 100 shares, but what can you do if you’re not psychic?

TAXABLE ACCOUNT H1 2013 (TOTAL $65.2k)
BUY — F: continued to purchase Ford stock (should have bought more when it was under $10)
BUY — WFM: bought some more shares, not sure if this is a good move
BUY — HYG: bought about 26 shares
SELL — APPL 53 shares. I was overweight in AAPL and despite their future prospects the volatility was killing my portfolio. First sold some to pay for my car and then decided to sell more. If I understood shorting and calls and puts there might have been a better strategy there than selling the shares, but I’m trying to keep it simple and 103 shares were too many to own out of a $200k portfolio.
SELL — INTC sold all my shares of intel. Trying to diversify out of tech, and took a loss on them to offset apple gains.
HYG — sold the 26 shares I bought earlier in the year to afford the car. Shouldn’t have bought them in the first place.

ROTH IRA #1 (Total $11.1k)
BUY – VTI, 25 shares
BUY – VYM, 42 shares
BUY – XRT – 10 shares

ROTH IRA #2 – VANGUARD ACCOUNT ($23.3k)
No Change

TRADITIONAL IRA ($12.7k)
No change. Went with the ROTH this year.

401k #1 ($39.3k)
No matching from my company, but have maxed it out for the second year in a row. Happy to have done this early so as long as I keep my job the rest of this year I’ll see a higher monthly paycheck until Jan 1.

401k #2 ($22.9k)
No Change, should consolidate my retirement accounts at some point. If I go to a grad program or travel the world for a year this is a good time to convert everything to a Roth.

Then I have other funds like my Vanguard Index fund I bought a long time ago directly from Vanguard, my 529 plan I started for grad school or my future children (though I stopped investing in that a while ago and it just has $3683 in it, enough for textbooks maybe.) And, of course, my company stock which I exercised for $20k plus loan interest… which may or may not be worth anything. I like to pretend that my shares will one day be worth $5 a piece so I’ll have over $1M in networth, ideally before 35. It could happen, but still a very long shot. Those shares could also very well be worth nothing, which means $20k down the drain. Stock options, esp ones you’ve exercised early, really mess with your brain.)

Networth Up and Down and Up and Down

The majority of my networth today is tied up in the stock market. It is difficult to understand how much risk one should really take to reach their goals of wealth. It appears that the only way the 99% has a chance of achieving wealth and financial freedom, one must take great risk. Risk that leads to many days looking at your networth going down instead of in the positive direction.

A few months ago, my networth was $183,000, according to my Personal Capital accounts. Today, it’s $159,282, a 13% loss from the highs this year. Granted, I’ve also spent money this year and I started the year with $150,000, so I’m still “up.” But that includes all of the money I’ve put into my investment accounts so far this year as well.

Obsessing over becoming the next Warren Buffet isn’t healthy. But I also don’t believe that mutual fund advisors are better apt to succeed in the markets with my money versus investing in my own diversified strategy. The problem is that despite owning a lot of different stocks and ETFs, I’m not sure how diversified I am.

My idea for my Sharebuilder account, especially my taxable account, was that it would be my play money account vs my IRA and 401k programs, where I’d invest in time-based mutual funds. But now with over $100k in my Sharebuilder account, it doesn’t look like play money anymore.

They say don’t sell when a stock is down, but I don’t believe that either. If a stock has lost 50% it’s time to sell (it’s time to sell before that happens if you see it dropping) and put that money into something more stable. For instance, today my $4000 CBOU investment was down to under $2000. I sold 1/2 of that, giving myself $1000 in liquidity, and invested in AAPL, VZ, and KO (my first investment in Coke.) I’m concerned about investing in dividend stocks in my taxable accounts, but it seems these are the only stocks that have a shot at earning a decent interest income in the future.

I do need a better way to track my spending on investments (both in terms of principal investment and transaction fees) to understand my true gain or loss per year. None of the sites (Mint, PersonalCapital, Yodlee, etc) seem to offer this. Any ideas on how to do this more effectively? I’m sure all the information is stored in my many different accounts, but no one is surfacing to me. Sharebuilder is bad because they only show you how great you’re doing based on the account increases, removing any losses that you have sold off. So I’m “up” 33% this year, but that’s no where near true.

Selling GLD *Before* My Profits Are Too High

I’m not a day trader, or even a month trader. But I’ve started to realize if I want my portfolio to have any serious upside, I need to rebalance every now and again. I’ve sold off most of my cleantech investments including PBD, ENOC, and COMV, and put that money into a mix of large-cap tech companies (AAPL, CSCO), international funds (HAO, EWZ, EDIV), and food (MCD, CBOU, SBUX, WFM.)

Up until today, I’ve only sold small cap losses that seem to be destined for failure or, at best, growth after years of retreating even further, while that money could be in a large-cap dividend stock earning income. Today, however, I decided to sell one ETF where I have turned a profit.

So long GLD, at least from my taxable account. After making an early $500 investment in GLD I found out that gold, even in an ETF, is taxed at a collectors rate. That means 28% capital gains tax. Instead of letting my $500 sit in my taxable account (it is at about $900 now) I’ve decided to sell the 5 shares and move my investments into other funds that belong in my taxable accounts. And after today’s AAPL earnings news, I’m tempted to put the $900 into purchasing two more shares of the company that made the computer I’m currently writing on and the phone I’ll be making calls on in a few minutes. I only own 70-some odd shares of AAPL stock, my goal is to get to 100 shares before the company hits $500 a share. Since AAPL doesn’t pay dividends, this is the perfect company to hold in my taxable accounts.

Meanwhile, I invest regularly in GLD in my Roth IRA account. It seems GLD is fairly expensive right now (afterall, I nearly doubled my initial investment from just a few years ago) so I might hold on aggressively investing in it. My Roth account is my “play” account, since I can only put $5k in it per year. I put that mostly into high-dividend ETFs and rebalance by adding more funds in new sectors the following year. For instance, this year I’ve already invested about $2k into XLE (oil) and XRT (retail companies) as well as GLD. I only have $3k left for my Roth this year, but I plan to start contributing to my 401k (no match) soon, and trying to max that out this year. I’m hoping for a significant raise, which in the ideal world will be enough to cover maxing out my 401k without noticing those contributions too much, but I’m not sure yet if that’s actually going to happen. Fingers crossed.

In the meantime, I have $900 liquid that I can invest somewhere. Oh goody. I think it’s pretty crazy that I currently have $149339.25 in my investment accounts right now, not counting about $10k liquid (though taxes are going to eat some of that up I think.) Even though $150k doesn’t seem like a lot of money, I’m proud that in the last 6 years since I’ve graduated college I’ve been able to go from $5k in savings to over $160k. Still pushing for that $200k this year — if the economy decides to recover and I manage a sizable raise it will help lift me up there, otherwise I’ll probably end up at $180k for the year. Really would like to see that happen, I’m so set on entering my 30s with $250k in the bank, I’ll be pretty peeved at myself if I don’t make that goal.

Turning 28 and Getting Serious About Investing

I don’t remember the exact day I opened my first Vanguard account, but I do remember the feeling that came with moving $3000 from my just-expired CD (then at a 3.5% or something renewable interest rate) into a Roth IRA. There was some thrill of taking a risk of earning more than 3.5%, and feeling proud that I was acting like a grown up and putting $3000 (a huge chunk of my savings at the time) into an account I couldn’t touch for another 45 years.

It was sometime around 2007 at this point. My yearly income was about $25,000, and I had $15,000 in savings which included the cash my dad gave me to buy my first car and money from a lawsuit when I was young. I could have spent $15k on a car, but instead I spent $7k on a used car and put the rest into savings and CDs. Investing from 2006 to 2011 hasn’t been a remarkably inspiring experience. I’m not surprised that the Millennial Generation doesn’t trust the market, and is afraid of investing. I’m trying to fight the urge to take my savings out of the banks and stock market and stuff my cash in a pillow.

A year or so after opening my Vanguard account, I started to test the waters of more significant investing. I somehow maxed out my Roth IRA that year, bought a taxable Index fund at Vanguard, and started researching other ways to invest any extra income. On 12/31/2007, I had $9,189.07 in all of my Vanguard accounts, and $7000 in a CD. That was the entirety of my investment accounts 4 years ago. At this time, I was paying $1000 a month in rent for a studio apartment, and making $35k a year. I opened my Sharebuilder account in 2008. According to my year-end account statements in 2008, I had $1542.28 in equities and $50.48 in a money market fund, totaling $1,542.28. That year, I earned a whopping $22.13 in dividends.

Read on to see how I’ve grown my investment accounts from $15k in 2007 to $110k in 2011. Continue reading Turning 28 and Getting Serious About Investing

Should I Exercise My Right to Stock Option Exercising

Working in startups, your pay is always split somehow between salary and “stock options.” If you don’t know what that means — basically an option gives you the option to purchase a share of stock at a low “strike price” of the company. If the company does well, the price of the stock goes up, and if it does really well the nitty gritty details that can make the purchasing of the said stock through the option become less painful to think about. Trouble is, most companies, even good companies, aren’t Facebook or even LinkedIn. So exercising options early could mean to big losses down the line.

There are some tax reasons to exercise options early. From my understanding, if you have ISOs (which I do), you can buy the stock options up front, before they’re vested, and wait a year to sell them at capital gains tax rates. That is, if in a year, or after a year, they’re worth more than they were when you bought them. And that only really makes sense if your company goes public — the odds of a startup going public are very, very small. More likely, even if your successful,  you get acquired. And as I experienced at my last startup — an acquisition, even when the founders do well, might not result in a great turnout for the rest of the employees.

So most of my instincts are telling me it would be silly to exercise the options now. Why not wait? Well, my company is likely raising additional funding soon, which means the value of the option will go up. While I’ll still be able to buy the option for the lower strike price, I’ll have to pay tax on the difference between the strike price and the value when I buy the option, which could be quite a lot, especially given that I’d be PAYING for the option and owe money on it. And there’s still a decent chance that eventually it will be worth $0.

Now, I could exercise a portion of my options – take a little risk, and wait on the rest – but it’s not clear this makes sense either. There is a whole issue with AMT that I don’t understand (anyone want to explain this to me?) that you can avoid if you exercise early, so says the Internets. I’m not sure at what point you hit the AMT issue in terms of your yearly gross income.

Besides all of that, the reality is that I don’t really have the $20k I’d need to purchase all of my stock options right now. Well, I do have it — I have $130k in random investment accounts — but I don’t know if it makes sense to pull my funds from any of them to exercise my options. It’s a huge risk. It might be better from a tax perspective if, in a year or a few years we get acquired, but who knows if that will happen. I do believe in this company (which is rare) so that says a lot. Still, I’m relatively risk-adverse when it comes to money. Hmm. What do you think I should do?