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.

Thursday, February 9, 2017

My 2017 Annual Goals

I'm a bit late to the party here but it's time to lay out my 2017 goals. I didn't have any goals last year but I've been listening to a book recently that spoke to the value of writing down goals when it came to actually achieving them.

I think it'd be fun to set not only financial goals but also some personal goals. I also thought it'd be enjoyable to tier my goals into three levels. I'm going with bronze, silver and gold to reward myself at the end of the year! I'll make bronze a reasonable level that I think I can reach with my regular approach and then stretch it out with the silver and gold tiers. It'll be like the Olympics when I review this in 2018 and award myself a variety of medals based on how well I did in 2017!

I'm aiming to at least have as many bronzes as there are goals but am hoping for some silvers and golds in 2017 as well!

Sunday, February 5, 2017

January dividend update

I can't believe that it is February already and that I'm already writing the first dividend update of 2017.

Ferris sure was right when he said that life moves pretty fast because we're already 1/12th of the way through 2017.

For those among us that are big fans of winter, Punxsutawney Phil saw his shadow which means we're due for some more cold weather ahead. That's not too great in my mind but it's February already and we're getting closer to Spring, one of my favorite seasons so I'm excited for the quick passage of time. The days are getting longer and it's no longer pitch black when I leave work so that's also a great bonus of putting January behind us.

December was an amazing month for dividends but we're back to reality for January as I no longer own any individual dividend payers this month and the only cash coming in is my monthly payment from my bond mutual fund.

The cold weather means Steve, my trusty dividend employee who earned me a respectable $7000 last year had trouble finding work this month.

February will be similar story but we're both certainly looking forward to March which has historically been a good month for me as a lot of my ETFs, individual holdings and mutual funds pay quarterly.

The market has continued to do well although pockets of value have begun to emerge as we wade into the depths of earning season.

I'm keeping a close eye on earnings and have seen some big moves in certain industries. Apparel companies were the talk of the last few weeks and have tanked recently after a bevy of mixed results. Companies like UnderArmour or HanesBrands dropped 15-25% after earnings announcements and there were others as well that were hit by the negative sentiment in that industry.

Massive drops like that are quite interesting because they show how quickly this market punishes bad performance. It's certainly a stressful time to be an individual stock owner as companies can get a massive haircut by announcing poor earnings or guiding down for 2017.

I always feel like huge drops on solid companies are a good time to do some research. I've added a few companies to my list in the past few weeks to take a closer look. In the apparel sector specifically which has taken quite a pounding, I am looking forward to see how VFC does in the next few weeks as that's one that's getting closer to a really attractive valuation.

I'm eager to get started on the second full year of dividend tracking here and that all starts with January so let's take a look at how my portfolio employee Steve did for me this month.

Monday, January 30, 2017

The Side Hustle Report #1

I went into detail about my love for writing, how I see it as something that I want to do after I retire and how I want to try self-publishing again to see if I can get some extra cash to invest with in this post a few weeks ago so I won't reiterate all that here.

I started writing again in December in order to get started on building up a base of stories/novellas to publish starting in 2017. This first report sets a baseline for 2017 and will show how much I earned passively in December from the work I've published in 2013. It's not a lot but it's more than 0 and I'm hoping that writing and publishing again will help that grow.

The Process
The first thing to define is the amount of time spent on this side-hustle. I have a full time job and while I enjoy writing, it's not all I want to do with my free time. Still, if I want this to work out, I know that I have to be consistent with my writing and devote at least a part of each day to it or else I'll get lazy and stop writing. That's what happened in 2013 and I don't want that to happen again in 2017.

I'm pretty lazy and if I can avoid work then I will so my goal for all of 2017 is to write every day without fail. If I miss a day then I have to make up the time missed the following day. 

I decided that around one hour is a reasonable amount of time to devote to writing each day without cutting into my personal life and other hobbies too much. This hour can include writing and/or editing a story to get it all set to be published.

To help with this goal, I downloaded a pomodoro app on my phone to help me manage my time and keep me focused on the writing process. If you're not familiar with the pomodoro technique, it's a time management technique that breaks down work into intervals followed by a short break. You can either use an app on a phone or a physical timer you can buy online.

Here's a break down of how it works from Wikipedia. 
  1. Decide on the task to be done(writing in my case).
  2. Set the pomodoro timer (traditionally to 25 minutes).
  3. Work on the task until the timer rings. If a distraction pops into your head, write it down, but immediately get back on task.
  4. After the timer rings, put a checkmark on a piece of paper(I have an app that tracks it for me).
  5. If you have fewer than four checkmarks, take a short break (3–5 minutes), then go to step 2(I only go for two checkmarks meaning I spend 50 minutes writing and 10 minutes resting).
  6. After four pomodoros, take a longer break (15–30 minutes), reset your checkmark count to zero, then go to step 1(this last step doesn't apply to me since I stop after 2).
The idea behind this method is to focus entirely on one task and do nothing else for the full interval. The app I have has a ticking clock sound that helps keep me focused on my task and allows me to easily track the amount of time I spend writing each day.

Since my goal is to spend at least an hour writing or editing each day, I went with two pomodoros(25 minute intervals) instead of more but you can certainly do more if you'd like. If I was doing this full time then I'd certainly try to put in a full 8 hours each day.

In my case, I write for 25 minutes, take a break for 5 where I can do whatever, write for another 25 and then take my final break. This last one isn't really a break since I don't continue writing past it but I view it as such to get to the full hour! All in all, I spend at least 50 minutes writing each day and sometimes float past that if I'm enjoying a particular part of the story I'm writing. 

This process not only helps me focus but also gives me a clear goal to follow. I know  that I have 2 pomodoros(50 minutes) of work to do each day and use the app to keep my mind on the goal.

This is something I read about recently and I'm trying it for the first time with this project and I like it quite a bit. The ticking of the clock really helps me get into a rhythm and more importantly keeps me focused on nothing but the task at hand. I get into a zone where I just write until I hear the ring of the clock that indicates it's time for a break.

Saturday, January 21, 2017

2016 : Year in Review

2016 ushered in the birth of this blog. I started this blog as a way to analyze and track my portfolio results in order to introduce a level of accountability to my savings plan and early retirement goals.

I've always had a clear investment plan in mind as well as a goal to retire early in the not so far off future but it wasn't until this year that I took a long hard look at my numbers to see how far along I actually was and whether financial Independence and early retirement was actually in the cards. 

I realized early on that I still had a lot of work to do by seeing how far away I was from my targeted investment plan. This blog helped me refocus on my goals and take steps to change that.

I became more aware of my expenses and saw the benefit and motivation that tracking data brings with it.

I saw excellent results in my portfolio driven by both constant contributions and excellent market performance and began to realize that financial independence was a possibility for me.

Through this blog, I began to look inward and assess what was really important to me beyond finances and got the motivation to bring back a side hustle I started in 2013(writing) and give it another try for 2017 as a way to expand my skills and find something to make my post-retirement life more meaningful. 

I think a lot of those things happened because I started this blog. I still would have saved money if I didn't but I wouldn't have directed it in a way that most benefited my portfolio and wouldn't have gotten a better understanding of my own expenses and savings rates and how they affect my future plans.

I wasn't someone who was way out of line when it came to spending or saving or laziness before but this blog certainly brought a new level of consistency to my life. The weekly posts I forced myself to write here at the start became one of my favorite parts of my week towards the end of the year and the continued enjoyment of writing brought along some ideas of how to do more of it in 2017.  

I met a lot of great people in the community as well; people with similar goals and ideas and enjoyed reading their posts, talking to them, celebrating with them and learning with them. This was a good year for me for a variety of reasons and the blog certainly was a part of that. I look back at 2016 and the posts I made here as a trial and see the positive results the trial has yielded in my portfolio and my personal growth and I look forward to doing more of the same next year. 

I went back recently and combined all of the data I tracked in 2016 to see how the full year wrapped up. I had a full year of tracking for my portfolio and dividends but missed the first two months of savings rate/expenses tracking. This full year(almost) of data will help me build a good foundation to grow from and I look forward to seeing all of these things(portfolio, dividends and savings rate) grow for years to come. 

This post will lay out all my successes this year and help me set goals for 2017. I'll make a separate post around 2017 goals but all of it will use this data as a basis to grow from. 

Thanks for reading in 2016 and hope you stick around for 2017. It's awesome to be a part of the communities that spawn around common themes whether they be FIRE, early retirement, dividend growth, etc. There's a lot of awesome people out there to connect with that have aspirations beyond just working 9-5 forever and are searching for a way to get there by saving as much as they can now to have those opportunities later and I'm glad to be part of this community now and in the future. 

First, let's take a look at my portfolio.

Sunday, January 15, 2017

My savings rate and expenses - December update

December was a great month. Lots of family time, lots of time off and lots of dividends plus three paychecks which always makes for a strong savings rate if expenses don't creep up. 

My family isn't huge on gifts for a variety of reasons. Part of it is that most of my family is not in the US as we're first generation immigrants and part of it is that we're all notoriously difficult to shop for which means we've historically just exchanged cash and gift cards. It was actually my parents who brought up the idea of just stopping gifts all together for the adults and only buying gifts for the kids(there's only one) which I was happy to get on board with as a cash exchange didn't really make much sense anyway.

For our family, the holidays are more about spending time together as we were never huge on gift giving mainly because we grew up poor in Europe and early on in the US and didn't have the money half the time. It may seem odd that we never changed that dynamic much after we shifted into the middle class but it just wasn't something that mattered to us much then or now. Therefore it wasn't hard to make the decision to just cut out gifts all together and concentrate on other things during the holidays. We still do small little gifts like chocolates but there's no major expectations from any of us when Christmas approaches.  

That means that my holiday gift expenses for me weren't that huge. I got small gifts here and there and bought my girlfriend and my nephew something nice but I didn't dread the holiday shopping season as much as others because I knew ahead of time that my spending would be limited. 

My girlfriend's family is a bit different as they spend a bit more than us. This was the first year I participated and was impressed by the efficient way her family chooses gifts for everyone else. I enjoyed all the google spreadsheets and tracking that they do in regards to what everyone's getting, how much it all costs and what everyone owes at the end of the day. 

All that means December wasn't bad for me from an expense and effort perspective. I didn't have to do much shopping for anyone and the shopping I did do was all on Amazon. I let my girlfriend handle everything on her end and just cut her a check for my portion of the expenses. I didn't actually pay her for that until January so that expense isn't reflected in this month's expenses but it wasn't a big one anyway as the total cost of all the gifts they got was split among multiple people. 

On the savings rate front; things were good due to this limited spending. Three paychecks plus reasonable expenses means good things when it comes to that. 

Let's take a look at how things look for the last update of the year. First up is the gross income breakdown.