Sunday, July 1, 2007

Mid Year Review

I like to sit back and reassess my savings and investment goals every now and then. Today being the first of July, I did my mid-year review of my house savings, retirement accounts etc...

Looking back at my year end review - the markets had extremely solid returns in 2006 (the S&P returned about 15.8% last year) and these returns have slowed just a little in 2007, although the year isn't over yet. The bulk of my retirement assets are in an S&P Index fund, which is up just a bit more than 9.3% on the year. Amazingly, my emerging markets fund is up 22% so far this year. This compares with a 30% return last year. If I had put all of my money in this fund (instead of only 5%), I would be a very happy man today. However, I stuck to what I consider to be a more prudent long-term allocation scheme, and I'm sitting around the same percentages as I was at year end.

Some people have asked me for some specific numbers...I do track them, but I don't publish them very regularly. I now have $50,000 in my 401(k) account, and I contribute 15% out of every paycheck (pretax) into the account.

I have also been saving for a home down payment, and that has been progressing nicely. Since we live off my wife's paycheck, I have been fortunate to be able to deposit my entire paycheck into a separate account we have earmarked for a home purchase. Currently we have about $125,000 in that account, which puts us very near our goal of $150,000. We plan on purchasing a home for $300-$400k, and in addition to a down payment, I want to have a good cash safety net, as well as some extra cash for incidentals such as furnishing and repair.

The news on the housing front has been very positive for me lately. Sales are down, foreclosures are up, and hopefully this will lead to a more meaningful price correction. Bad news for homeowners and sellers is usually good news for potential buyers. However, interest rates have been climbing lately, which almost cancels out price declines. I wrote a post about this recently.

I work in finance and I consider myself to be pretty good with numbers. If conditions don't seem favorable to me (home prices and mortgage interest rates), I am happy to sit on the sidelines until some normalcy returns to the market. I think this is beginning to happen, but I am not convinced yet.

My home savings are now in an ING Direct Electric Orange checking account earning 5.25% APY, or about $440 a month in interest. You might recall a previous article where I decided against opening up an electric orange account. However, given the favorable rate of 5.25% for balances above $100k, and the fact that I have been able to get my balance above $100k, I decided it was too good (and too liquid) to pass up. My previous objections mainly centered around a suspicion that the rates were just "teasers" that would go away quickly, however they have remained high for a while. Also, even though I have been trying to keep fewer accounts outstanding, the electric orange account integrates nicely into my ING Direct accounts page, so it is not much work to keep track of it. Finally, I'm only using my Electric Orange account as a savings account so I am keeping my Chase accounts to make bill payments and write checks out of.

So to sum it all up, I've been able to add about $15k to my down payment fund in the first six months of 2007, and $10k to my retirement accounts (these figures include both mine and my wife's accounts). I hope to be able to top this and add $20k and $15k over the remaining six months of the year. We had some large expenses in the first half of the year, including a large charitable donation, car repairs, a hefty tax bill and some generally wasteful spending. I hope to be able to cut down on these things over the rest of the year!


think like the rich said...

you cant go wrong with an s&p 500 index fund, that is what i usually suggest to friends who ask. its low cost and low maintenance, but i do keep about 50% of my investable assets in low cost actively managed funds. for example, i like fidelity leveraged company and canada funds. both of these funds have managed to beat the s&p for the past few years, but i have been toying with a 100% index fund allocation recently. i agree it is an excellent long term policy. good post.

Big Investor said...

Are you worried about ING going bust? They are holding a lot of investments in subprime loans.

-Big Investor