Q12017 Investment Update

The reason why I’m late on posting my 1st quarter investment update is I’ve debated for a couple of weeks on whether or not to post it at all. I intended for it this to my first post. However, after reading so many FIRE (financial independence retire early) blogs, I’m a little embarrassed about what we have in our investment accounts. I am a public school administrator in Washington state and will have a pension at retirement. Hopefully. According to the Wall Street Journal, Washington state does not have a funding problem. At 34 years old, I read articles like this one from Financial Samurai, and I am nowhere near his net worth number for someone at my age, especially considering I hit literally every single one of his points for defining someone who is “above average.” The tenth point should be “good looking,” which I most certainly am. C’mon, I am The Foxy Dad. Kidding.

My investing story goes way back to Operation Iraqi Freedom, 2003. I was twenty years old. At every opportunity, I read Thomas J. Stanley’s Millionaire Next Door. Many of the concepts made sense to me, especially the idea of having the discipline to spend less than you make. Unfortunately, I liked to use that I was born in Olongapo, Philippines as an excuse to explain my spending habits. “I never had a lot growing up, so whenever I get money, I just spend it on things I never had.” I had roughly $12,000 in money saved up from my deployment. I blew a lot of it. A gaming computer, a drum set, and a new set of rims for my car are just a few examples of the terrible purchases I made. Thankfully, I was smart enough to save half of my deployment money for a year’s worth of community college tuition and another thousand bucks to gamble in the stock market.

In a Humvee doing convoy security on a stretch of Iraqi highway, I listened to 50 Cent’s “Get Rich Or Die Tryin'” CD from start to finish at least a billion times. In 2003, I knew one person who owned an iPod, a Marine in my platoon. They just didn’t make much sense at the time. iTunes was not available to me because I didn’t own a Mac, and iPods were expensive. However, the feel of the mechanical wheel as I scrolled through his music collection was hypnotic. I needed one, especially for PT runs and working out. Who wants to run with a discman in their pocket or strapped to their bicep?

I did not end up buying an iPod right away when I got back to the state, but I did take a long look at Apple stock. At the time, Apple was still developing iTunes for the PC market, and Roxio – the makers of CD burning software – was bringing Napster back from the grave. In July of 2003, Apple stock was under $1.50 per share. Feeling nostalgic yet? I was torn. I felt the future in my hands with the iPod, but Apple was such a niche brand with such a small devoted following. The Napster brand was well known, albeit from illegal file sharing practices, but it’s market potential was too large to ignore. I opened up an Ameritrade account and invested my $1000 of play money in Roxio stock. I bought at a great time and saw my investment quadruple, but I did not have the temperament to invest. I sold my shares and used my “winnings” to pay for a semester of college. My first investing experiment was a positive one, and since then, I have been haphazardly in and out of the market. Only recently have I had an investment plan.

In the last couple of years, we’ve been able to pay off some student loans, refinance our home to increase cash flow, eliminate bad consumer debt including all credit cards, pay off our second car, and build a small cash cushion. After spending a considerable amount of time reading blogs like Financial Samurai, The White Coat Investor, Go Curry Cracker, jlcollinsnh, and digging through threads at Bogleheads.org, my investing knowledge and confidence have increased dramatically. This has given me the confidence to invest.

Using Personal Capital, my following asset allocation is as follows:

As you can see, there isn’t a whole lot there. Currently, we have three accounts open with Vanguard: a Roth IRA, a Traditional IRA, and a brokerage account. Our only other retirement account is my pension. My wife only works part time, which helps because we have paid zero in child care, but she has no retirement plan from her employer. As a school administrator, the average of my five highest grossing years will be in the six figures, which is what our pension formula uses to calculate monthly payment. Even with “early retirement” at 59.5 years old, my monthly income will be between $8500 and $9500 a month, according to the benefit estimator on my pension website. Obviously, nothing is guaranteed, but right now, I feel good about where we are considering our only debt is our mortgage and the student loan that paid for my administrative credentials.

The plan for the rest of the year is to max out both IRAs, and build up more of a cash reserve that can also be used for buying opportunities as they come. The $1000 cash position is to help get to my ideal asset allocation, which will hopefully look like this by year end.

  • 45% in US stocks (35% in VTI, 10% in VBR)
  • 20% in REITs (10% in VNQ, 10% in VNQI)
  • 20% in International stocks (all of which is in VXUS)
  • 15% in Bonds (all of which is in BND)

Below is the performance data from Personal Capital. I am clearly trailing the S&P 500, especially considering Personal Capital doesn’t take into account dividend reinvestments of the S&P 500. My performance is also based on dollar cost averaging into the market, and only having recently added REITs – VNQ has been tearing it up lately both in it’s individual stock value and hefty pay out.

My goal is to continue to learn as much as possible and keep building on what we’ve done so far. I’m even listening to podcasts everyday to and from work – The Investor’s Podcast is my current favorite. I just can’t get enough of this stuff. I am just so motivated to leave a financial legacy for my family, and I will not let past financial mistakes get in the way of that. We will continue to explore ways to trim our spending, while at the same time still enjoying the things we value most, like traveling with our children.

Keep coming back for more investment updates in the future!