Monday, December 17, 2007

Tracking Home Price Trends with S&P/Case-Shiller

The S&P/Case-Shiller Home Price Indices keep track of home prices in 20 major metropolitan areas. Data go back as far as 20 years for some markets.

I wanted to compare a couple of markets, one that is experiencing a bubble and one that isn’t. Los Angeles is a good example of a bubble while Atlanta shows no bubble whatsoever.

By placing a 10-year moving average on the charts, you can see how far prices in Los Angeles have moved from the average. For the past year and a half or so, prices have started to decrease, forming a clear downtrend. Because of this I would not be a buyer in the Los Angeles market. Granted, some neighborhood in Los Angeles might still be doing ok. But overall it is not an attractive market yet, not until prices have bottomed out and resumed an upward trend.

Atlanta home prices on the contrary are keeping steady with their 10-year moving average. The trend has been up for as far as the data go (January 91). For this reason I would consider being a buyer in the Atlanta market, but a cautious buyer. Considering that home price trends can differ greatly from one neighborhood to the next, I would check whether or not the neighborhood has experienced a healthy, unbubbly growth over the past 10 years.

Does anyone know any website with reliable historic home price data at the neighborhood level?

Friday, December 7, 2007

Company Health Insurance Costs up 50%

It was a long time coming. After many years of very affordable health insurance, my company finally decided to share the cost with its employees. The health insurance premium for 2008 goes up 50% (from $600/year to $900/year). The deductible and out-of-pocket max also increases to $300/family member and $1,000/family member respectively while coverage decreases by 10% to 90% in-network and 70% out-of-network.

The company is offering a second plan at no premium cost, but with lower coverage (80% in-network, 60% out-of-network) and hefty deductible ($500/family member) and out-of-pocket max ($1,500/family member). This plan will cost me less if my family stays healthy, but a lot more if we have a major medical event.

These costs are probably still well within the national average. But it is a bit of a wake-up call after having been spoiled for so long. On the plus side, the company offers a gym membership free of charge. So there is no excuse not to stay healthy!

Monday, December 3, 2007

Daytrade SOLF Long

What did I see? An orderly retracement with narrow range bars on decreasing volume.

Entry on the break of 6th bar high with a 17.25 limit order at 11:08am. Initial stop below 6th bar low at 17.02. After the PnL exceeded +1R, I entered a 0.50 trailing stop. Stopped out at 19.34 at 12:19pm.

Risk (R) = 0.23, 1000 shares, $250
PnL = +8.29R, $2073.70

Sunday, December 2, 2007

Net Worth Update as of Nov 30, 2007

The stock market had a bad month which is reflected in my net worth down 3.45% compared to a month ago. It now stands at $369,200. There were some signs of relief though towards the end of the month as the Fed hinted that there might be another rate cut in mid-December after all. At the last Fed meeting on Oct 31st, they hinted the exact opposite. Since then the S&P 500 has reached correction territory (-10% from last high) in November.

2012 Net Worth Goal Achieved – Drops from 38% to 37%
2007 Net Worth Goal Achieved – Drops from 97% to 93%

I will now need a Christmas miracle to reach my goal for 2007.

Thursday, November 22, 2007

Daytrading Rules

I am not a daytrader by any means. But every now and then I like to gamble a little bit. As opposed to Las Vegas style gambling where the house has always the upper hand, I believe that with a good strategy and strong discipline, there is a good chance to come out ahead.

I have drawn up some daytrading rules intended to keep me in control of my risk. The basic idea is to keep the losses small and let the winners run.

General Rules

-Use moving averages to plot the trend. Do not trade against the trend.
-Size my position on every trade according to risk taken.
-Use 15’ or 30’ setups.
-Trade only stocks with daily average volume >400K

Entry Rules

-Enter on the break of a narrow range bar (NRB)
For Longs: NRB should close around the opening range (OR) high
For Shorts: NRB should close around the OR low

Stop Rules

-Always place the stop order right after the entry is executed
-Place the stop a few cents below the narrow range bar
-Move the stop to break-even after the stock has moved to one time the risk

Exit Rules

- Consider taking partial profit at two times the risk
- Use a trailing stop to exit the trade.

If I were to daytrade full time, I would work on fine tuning the criteria to enter the trade. For now I will keep it open and try to learn from experience. The opportunities for me to daytrade do not come by very often because of my day job. I will try to log my trades in this diary.

Saturday, November 17, 2007

Stock Market Snapshot as of Nov 17, 2007

The S&P 500 is in a downtrend since Oct 10th. It is below its 200-day SMA which acted as resistance on Nov 14th.

The Nasdaq 100 is faring a little bit better, sitting between its 50-day and 200-day SMAs. The 200-day SMA could act as support again as it did in August.

The Russell 2000 has been the weakest of the bunch for a while now, failing to beat the July highs in October. It is below the 50-day SMA which itself is below the 200-day SMA.

Wednesday, November 14, 2007

A Look at my Health Care FSA Eligible Expenses

I am contemplating opening a Health Care Flexible Spending Account for next year. After studying the FSA documentation my company provided, I was surprised to find out that condoms are an eligible expense! So are any birth control expenses for that matter. The following eligible expenses are or may become relevant to me:

-Birth control
-Childbirth class, Lamaze class
-Contact lenses and solutions
-Coinsurance, co-payments and deductibles
-Dental care
-Prescription drugs
-Over-the-counter medicine and supplies
-First aid kits
-Health screenings
-Maternity services (prenatal care, delivery, care provided after delivery)
-Sales Taxes
-Transportation to/from receiving medical care including health care providers, hospitals and pharmacies ($0.20/mile in 2007)

In 2007 my only expenses were contact lenses ($161) and solutions (around $50). For next year with a baby due in March, I can definitely add the childbirth class and maternity services.

Friday, November 9, 2007

401K moving to a new investment platform

My company announced today that our 401K will be moving to a new investment platform. Out of the current 29 investment options offered, 21 of them will be eliminated and replaced with 18 new ones. The company is putting a positive spin on the change: “These changes are being made so you may select from a more diverse and competitive fund array“. Even though there are slightly less investment options to choose from, I guess it is possible that the new ones are more diverse and more competitive…

My current asset allocation is 25% International, 25% small cap, 25% mid cap and 25% large cap. My international fund remains in the new platform. I have until December 10th to choose 3 new funds for the other categories.

Thursday, November 8, 2007

My credit card account data may have been compromised?

“We have learned that some credit card information for your FIA Card Services account may have been compromised at a third party location”, states a letter I received today from FIA Card Services. I call them up to find out who the third party in question was, but that information is apparently not available to me.

FIA Card Services has closed the account. I cannot access it online anymore. And new cards are already in the mail.

Last December, about 2 weeks after a short trip to Jamaica, a physical swipe of our card was made in another part of the island, even though the card was not missing. How could that happened? A copy of the card must have been made. FIA Card Services detected the discrepancy right away and confirmed with me on the phone that the swipe was a fraudulent one.

If I truly appreciate the level of protection offered, I wish I would know where and how the card information was compromised.

Tuesday, November 6, 2007

NetworthIQ review

I have been using NetworthIQ for 6 months. The widget on the side directly links to my latest net worth entries.

NetworthIQ has helped me tremendously getting a better picture of my financial progress. It is simple to use, and allows you to interact with other users by asking questions or commenting. Finally you can see how well you are doing by using the overall NetworthIQ community as a benchmark. Here is my comparison report:

The site has a lot of room for improvement and growth. One item that is particularly lacking is knowing what percentage of net worths are for individuals and what percentage are for households. Being in age group 35-39, I suspect a lot of those numbers are for households.
But overall NetworthIQ is a great tool for all ages.

Monday, November 5, 2007

One mistake to avoid while maximizing your 401K

I almost made a major mistake in the process of maximizing my 401K: not properly adjusting my deferral amount for the last quarter of the year. The main advantage of a 401K is the company match which equals to free money. My company matches each dollar I contribute up to 4% of my pay. If I don't contribute, there is no match. Therefore it is crucial to be contributing on all 26 paychecks with each of my 26 contributions being at least 4% of my pay to get the full company match. If I were to reach the $15,500 contribution limit prior to the last paycheck, I would lose out on the company match.

Because I receive compensation pay for working week-ends and for traveling throughout the year, I never know exactly what my end-of-year salary is going to be. Every quarter end I have the opportunity to change my deferral amount. So every quarter I must re-calculate my deferral amount to make sure I will not reach the contribution limit prior to the last paycheck. At the end of September I must calculate my deferral amount one last time to make sure the $15,500 limit is reached on the last paycheck of the year. And I can only estimate how much compensation pay I will receive during the last quarter.

All this could be made real simple if I could specify a fixed amount as a contribution: $15,500/26 is all I need to contribute every paycheck. Alas, my company is making it a bit more interesting by allowing only to specify a percentage of pay as a contribution, and not a fixed amount. I wonder if this is the same for all other 401K plans out there or if it is just one of my company's quirks.

Saturday, November 3, 2007

$1.6M Retirement Balance by age 55?

The Personal Finance section of Yahoo!Finance has many useful calculators. A popular one is called “How much will I need to save for retirement?”. You input your assumptions and it gives you a chart and a spreadsheet of what your retirement balance should look like over the years. So let's see how much savings I need if I want to retire at say age 55.

The graph above shows that my retirement balance must be about $1.6M at age 55 to be able to enjoy 30 years of retirement with 75% income replacement.

The spreadsheet below shows my required savings for the next 20 years in order to reach a retirement balance worth $1.6M by age 55.

The bulk of the money comes from the interests. Being able to produce an 8% investment return year after year will be the most challenging part. Is this plan actually feasible?

Friday, November 2, 2007

Credit Card Rate Increase

FIA Card Services is changing the terms of my credit card agreement. Credit cards can be very costly if not used with moderation and responsibility. I use credit cards essentially for the rewards and for the convenience. They also help my credit score as long as I am not late on my payments. Not only do I pay by the due date, but I also pay the balance in full each month.

The APR increase, from 14.99% to 24.99%, is for cash advances only. It does not apply to purchases which remains at 14.99%. It goes in effect in January 2008.

I would never use a credit card for cash advance, so this rate increase does not really annoy me. But a sentence in the notice caught my eyes : "We increased your APR due to the balances and APRs on this account." What does this mean exactly? Why are they increasing my rate? Could it be because I am a credit card deadbeat?

Thursday, November 1, 2007

Goal Trackers

The “My Goals” section on this blog show my progress toward my net worth goals. Thanks to Clutter2Cash for the code.

I started tracking my net worth on a spreadsheet in 2006. I gave myself an arbitrary goal of reaching a $1M net worth by age 40. Hence the year 2012. A little bit too optimistic you think? Time will tell.

Assuming a consistent linear increase of my net worth, I will need a yearly growth of 20.4%. Here is the breakdown :

Starting net worth on Jan 1, 2006: $273,200
Target for Dec 31, 2006: $328,800 - Missed by $29,700 (9%)
Target for Dec 31, 2007: $395,800
Target for Dec 31, 2008: $476,400
Target for Dec 31, 2009: $573,400
Target for Dec 31, 2010: $690,200
Target for Dec 31, 2011: $830,800
Target for Dec 31, 2012: $1,000,000

In 2006 I fell short of my goal by 9%, mostly due to some investing mistakes that I would call “tuition”. I have learned from my mistakes and my investments are doing a lot better this year. As of October, I am just 3% shy of the goal for 2007. With 2 months left in the year, and with a little help from Mr Stock Market, there is a chance I can get there.

Obviously this rate of growth is not really sustainable. As I get closer and closer to 2012, it will get more and more difficult to grow my net worth by 20%. Even if my stock portfolio manages to grow by that much, the value of my house will definitely not, and neither will my savings capabilities. But at least it is something to go by.

Tuesday, October 30, 2007

My Nest Egg Score

AG Edwards has developed a Nest Egg Score to help gauge the level of saving & investing in America. My Score comes out at 777, significantly better than the national average. Which gives me little comfort overall being aware of America's ongoing love story with debt. :)

Based on my score, AG Edwards recommends the following:
1. Continue to manage debt. My only debt is my mortgage.
2. Maximize your retirement contributions. I managed to maximize my contributions in 2007!
3. Consider your other financial goals. Next step is buying a bigger house as the family is expanding.
4. Review your investment mix. I manage my investment actively.
5. Create or review your estate plan. A bit premature as I do not have much of an estate yet.

The questions were general, and the possible answers had wide ranges. But my score will likely change with a major life changing event looming in the near future.

Monday, October 29, 2007

2007 Retirement Plan Contribution Limits

2007 represents the first time I would have maximized my contributions to both my 401K and my Roth IRA. I will try to make it a habit from now on.

2007 Contribution Limits
401K - $15,500
Roth IRA - $4,000 if Modified Adjusted Gross Income below $99,000

2008 Contribution Limits
401K - $15,500
Roth IRA - $5,000

Sunday, October 28, 2007

First Post

I have been reading financial blogs for a couple of years now. I have learnt a lot from them and from other readers commenting on them. One thing especially I came to realize is that I have not been growing my wealth as much as I could have in the past 10 years as an income earner.

By starting my own blog which I intend to use as diary of everything financial in my life, I am hoping to gain some focus on growing my wealth. I hope it will help me keep track of my progress towards my financial goals, and help me make better financial decisions.

My long-term financial goal is to accumulate sufficient wealth so that I can have the luxury of retiring early if I wish to do so. How early? 55 years old would be nice. That gives me 20 years. Let's start now!