Sunday, March 26, 2017

The Side Hustle Report #3

Welcome back to the side hustle report! I'm looking at February data here and it's crazy to think that March is almost over and spring weather will be upon us soon.

As a recap, January was a $11.34 gain after expenses on $29.34 in earnings.

If you haven't read this before, the side hustle I'm trying this year is writing/self-publishing short stories. It's something I did back in 2013 and am trying it again in 2017.

There isn't a huge market for short stories so I'm not expecting this to be a huge earner but there's no harm in earning a little bit of extra cash while practicing my writing.

You can read the first two reports for my strategy and discussions around expenses so I won't repeat myself here but I do I notice that my writing is improving as I go through this process. I have written almost every day with the exception of a few days early in March due to illness.

I published a ton of stuff in January due to all the writing I did in December but that has slowed in February and March as I don't have that extra lean-in anymore like I did from December and have to spend more time writing and editing.

I will say that 50 minutes per day writing is not a lot of time to get stuff done as editing takes a huge chunk out of that.

I will also say that finding 50 minutes per day to write every single day is a struggle sometimes as I'm already tired after I get home from work. I only really have about three to four hours of free time during a weekday to walk and play with the dog, cook, spend time with my girlfriend, watch TV, play video games, read or take a walk so taking an hour out of that is certainly a challenge. It does help that I enjoy writing although some days I'd rather be doing anything else which is why it's key to do it every single day or I'll fall out of it like I did in 2013.

My TV watching has suffered the most as the result of this revival of my hobby/side-hustle and I really only watch TV on the weekends now because I don't have time for it on weekdays.

It's an interesting change in my life but I think it's a good one since I'm now spending that time on something productive that will help me grow instead of just vegging out on the couch.

I do sometimes think about bringing a personal laptop to work and just writing a bit in a conference room during downtime(of which there is a lot) or during lunch and that's something I might consider from time to time during slow season.

I'm glad I'm still sticking with this and while the numbers right now aren't all that impressive, I'm excited to see what happens to the royalties and net income from self-publishing as I stick with it for the full year.

Let's take a look at the February Data.

Sunday, March 19, 2017

My savings rate and expense - February update

February is generally a pretty good month for my savings rate and this year is no different.

The annual bonus at my company is paid out this year and that generally means that my monthly pay for the month is double what it normally is and most of that money goes into savings.

I bumped up my 401k contributions this month to nearly the max allowed by my company to get an early start on maxing out the 401k and to avoid the high tax load that comes with bonus payments.

That means that February is one of the highest savings rates I'll see for quite a bit and possibly the entire year.

Let's take a look at the gross income breakdown for February.

Sunday, March 12, 2017

My portfolio - March update

Q4 2016 earnings season is pretty much done.

According to factset, 99% of companies have reported and we're seeing a 4.9% earnings growth rate in Q42016 which is nice and it's the first time we've seen two consecutive quarters of earnings growth since Q42014 and Q12015.

The stock market has seen market large price inflation despite not seeing any substantial earnings growth since 2014.  CY2014 S&P 500 EPS was $118.96 and CY2016 will end up near $119.14.

That means that pretty much all of the price appreciation since 2014 has been driven by P/E expansion. That's not great to see from a long term investing standpoint as P/E expansion can only go so far and needs to be backed up by E expansion in order to sustain long term results.

I think the 2 months of growth is an excellent start but 2017 really needs to show some growth if investors are to get more comfortable around where the stock market is pricing securities right now. There are certainly some proposed changes from the new administration that might spur earnings but those are still out in the future and it's unclear how much of that will actually come to fruition.

The truth is that EPS estimates for CY2017 have continued to shrink down from $134.50 in September of last year to $131.28 right now which shows that some of those growth assumptions might be getting pushed off into 2018.

Still, 2017 estimates show 10% growth and would be awesome to see but keep in mind that 2016 projections also called for sizable growth that never actually materialized.

There's been a lot of comfort around mediocrity in the market the past few years due to low interest rates driving money out of suddenly low yielding alternative investments and into rapidly growing stocks.

It seems like that might change soon due to solid economic headwinds and likely continued interest rate bumps that might make other investments a bit more attractive. It's hard to say how that will impact the market in the long term but high yielding securities like REITs will likely take a hit in the short term.

I think rising interest rates are a good thing in the long run and there's also a lot of hope that things on the earnings side will change soon and that the future stock price growth will be driven by earnings growth. That optimism is driving the continued rally in the past few months that has been great for my portfolio. I'm happy to see and I'm hopeful that it will continue and yet I can't help but shake the feeling that we're getting too optimistic about something(tax/infrastructure plans) that might have less of an impact than we hope.

I'm a long term investor and short term price appreciation isn't ideal for me as P/E expansion simply means things are getting more expensive so any additional purchases I make and will continue to make are bought at a premium. If earnings don't catch up with prices then there's the real possibility of mediocre long term returns as prices eventually revert to the mean.

I'm not a market timer so I'm staying in the market no matter what and I enjoy seeing my portfolio grow every month but I'm also realistic about what price appreciation without growth means for long term returns.

We'll start getting Q1 results sometime in April and we'll see if that 10% growth rate is realistic or if the market is being a bit too optimistic. I think Q1 is too early to make a certain judgement but it'll be a time where we get more clarity around this administrations healthcare and tax plans as well which should give a clearer view to where this market is heading.

With all that said, it's portfolio time. I was on my way to 400k last month and the market has continued to grow so let's see if I'm there this month or if it'll take another solid month to put me over that milestone.

Sunday, March 5, 2017

February dividend update

Spring is almost here and the stock market keeps going up much like the temperatures.

The last few weeks of winter(besides this weekend) have been rather temperate and I'm looking forward to a quick switch over to one of my favorite seasons.

This has been another good month for stock market returns and likely a good month for most portfolios as pretty much everything has continued to trend up. The likelihood of a rate hike soon is pretty high which might cause some income payers to take a brief pause and perhaps present some opportunities.

February isn't a huge dividend month for me but I'm already looking forward into March which is the first big payment I'll get in 2017. I'm hoping that the first quarter of 2017(Q1 2017) can beat Q3 2016 which would be great to see and would mean huge growth over Q1 2016 in terms of dividend payments.

I'm eager to start seeing those payments toward the end of this month but for now I'll have to settle at looking at February.

Let's take a look at how Steve did in February 2017.

Sunday, February 26, 2017

The Side Hustle Report #2

Welcome back to the side hustle report! It's month one of actually publishing stuff and I'm hopeful that positive results follow.

Last time I talked about my writing process and laid out the baseline as well as my earnings for the month.

As a recap, December was a loss of $10.44 after expenses since I spent some money preparing covers for January.

I'm writing mainly short stories which don't sell that well so the cap on my earnings here is pretty low but I'm trying to use this as an opportunity to learn as a writer and earn a tiny bit of money on the side while I work up to full-length novels later on in life.

My expenses here are limited which is what makes this a nice side hustle. The risk in writing like this is pretty low since the main expenses are covers and stock photos for those covers. I use fiverr for my covers to keep expenses low and had a stock photo subscription a few years ago that I still have a lot of stock photos from.

There are other ways to go about this as well. I'm doing it the cheap way but professional cover services, editing and promotional ads can cost quite a bit of money for those who want to go all in on self-publishing. I may get there someday when and if I start writing longer works but the money just isn't there in short stories so I have no interest in making big investments in this right now.

I do however find that my stock photo collection is lacking a little bit and am considering purchasing a stock photo bundle that allows me X images for X dollars for a year to help me out with some on demand cover variety. Right now, I often find myself having to use a cover that doesn't quite fit the narrative because I have it and I'm cheap which can cost me sales in the long run.

I talked about how I pulled a lot of my KDP select stuff to publish wide in the last update. I think that has had mixed results and while I intend to keep all those stories wide for now, I did publish my latest story on KDP Select(Amazon only) just to get more visibility on my author name which will hopefully help improve amazon sales. Those were slow in January and continue to be slow in February.

I've continued to write or edit every day which is awesome and I'm starting to feel like some of the things I'm writing show a lot of progress which is the goal with this whole process. I'm barely two months in so I have a long way to go since I committed myself to this for the full year but I'm still having fun with it and will hopefully make a little bit of money from it as well.

Let's take a look at the January info and see how it looks.

Sunday, February 19, 2017

My savings rate and expenses - January update

I'm excited about 2017 as this is the first year where I'll have a full year of savings rates and expenses tracked. It'll be good to see how months compare y/y and how the whole year compares at the end of the year.

I'm hoping for growth overall from 2016 to 2017 and that shouldn't be too hard since January and February are typically solid savings rate months for me as I front load my 401k contributions a bit and those were missed in 2016. 

I generally front load my 401k so that a good % of the overall contributions flow in the first two months(especially February) but don't max the whole thing. I would like to max out my 401k as early as possible but my employer does not do a true-up for the contributions so I have to make sure to keep contributing enough to get the full match on each paycheck. 

I do have some goals set for 2017 that relate to savings rates including hitting a 50% at least three times during the year as well as overall savings rate goals. 

I'm not sure January makes great progress on those goals as my expenses were a bit high due to some lag on expenses from Christmas as well as some personal expenses to improve my winter wardrobe and work clothing(awesome winter boots and gloves and some dress shirts). 

Let's take a look at how I did in January. First up is the gross income breakdown.

Sunday, February 12, 2017

My portfolio - February update

Earnings season is in full swing and so far results have gone as expected.

According to Factset, 67% of the S&P 500 companies that have reported have beat the mean EPS estimate and 52% have beat the mean revenue estimate. This isn't a huge surprise as most quarters see companies beat earnings around that clip(67% in EPS beat and 53% revenue beat are the 5-year average for the S&P 500).

The Q4 growth rate now is estimated to be 5% versus an estimate of 3.1% as of December 31st which is good to see as growth is the true engine that drives market appreciation.

Assuming this holds it will also the first time the index will see q/q growth in two consecutive quarters since Q4 '14 and Q1'15.

For all of 2016, the S&P is expected to see earnings growth of 0.5% and revenue growth of 2.4%. That's not great in my mind and I'm hoping for a better 2017 if this hot market wants to keep chugging along.

There were a lot of earnings call this last month and a lot of discussion was around policies the new government might implement that will hopefully spur earnings like a new tax policy and fewer regulations for certain industries.

I think the market sees a lot of those as a catalyst for growth but it's not clear when those will be implemented and if the benefit will really spur 2017 or if it'll fall more into 2018 results.

As far as expectations go, 82 companies so far have issued guidance for Q1 2017 and 57 of them were negative. This may sound bad but isn't out of the norm(5-year average is 74% negative) as companies prefer to set expectations lower so they can beat on the back end.

Still, this is a reactive market which has shown how punishing it can be when guidance/performance is lower than expected with companies like UnderArmour, Gilead Sciences and HanesBrands taking huge hits. On the other side, it has also rewarded handsomely those that perform well as seen by the recent surge in companies like Hasbro and Activision.

Overall, analysts are still optimistic about 2017 with projected earnings growth of 10.3% and revenue growth of 5.6%. I've mentioned before how analysts are often too optimistic as 2016 projects had us pegged at a 7% growth rate and we ended up close to flat.

It seems like the market still holds out hope that the analysts are right(and/or doesn't care because there's no great alternatives) as the S&P has continued to do well in the past month with a 2% increase since the last update.

It's hard to gauge this market right now and a lot of future performance might depend on 2017 earnings. The market continues to price in pretty aggressive growth compared to what we have experienced in the past few years(no growth) and if that doesn't materialize then we could be in for some pain.

We're certainly entering a riskier period in the investment cycle when you consider some of these high valuations. Low interest rates and lack of alternative investments makes it more difficult to analyze these in a historical context but higher valuations generally affect long-term returns negatively.

I have no certainty that the market won't just keep going up especially if earnings growth materializes so there's no change to my investment thesis but I do understand people who get worried when they see this type of stock market appreciation without any material growth to support it.

I'll be watching earnings closely and looking to pick up some values if any emerge. Work is slow right now so I have plenty of time to read earnings releases and follow the market which I quite like doing!

I haven't been overly active in buying anything as my set it and forget strategy works well in markets like this one where individual values are hard to stomach.

Maybe I'm too conservative these days as a lot of companies I've liked and thought about buying have surged after earnings. I could kick myself about missing these opportunities but I feel like I also have a good strategy in place that allows me to benefit from market appreciation while optimizing my risk profile.

The market seems risky to me right now and while I certainly don't want to exit it because it might keep growing, I'd rather be invested in a way where I'm spreading my risk across a bunch of securities versus just one. Yes if the market tanks then everything will tank in one way or another and I'm potentially missing out on upside by not sticking to certain securities but it's a risk profile that fits my personality and I'm not all that eager to change it anytime soon.

That doesn't mean I won't buy any individual stocks(it is one of my 2017 goals after all) but it'll have to be a really solid value for me to consider it.

The good news is that my portfolio has continued to grow and I've continued to funnel money into my accounts so I'll take continued appreciation any day if the market gives it to me and hope for improving earnings to make sure it stays that high.

Let's take a look at the portfolio this month.