Stocks - Time to Sell?

Today, I sold some stock.  This was a momentous occasion because this was a first for me.  The last few years, in my IRA, I have been buying individual stocks (my 401k is mutual funds).  As of today, I had 21 stocks and my "change since purchase" (this would be my return if I sold everything) is in the 70s%.

Now, before you commend me on my stock picking skills, let me tell you that I am not an expert and you shouldn't be following my investment advice.  Secondly, I really started buying stocks in 2009, in particular March 2009, so much of my gains is as a result of a dramatic increase in the market between March 2009 and now.  Thirdly, I pick most of my stocks utilizing Fidelity's Preset Expert Strategies, so I am working off of expert research and not some particular skill on my part.

So, as I have been working on research for investing my 2013 Roth IRA monies, I noticed that I have several stocks that have done quite well.  One stock was up 500% in less than a year.  As a result, I was looking for some advice on whether to sell or not.  Thankfully there is a lot of good research available to read on the topic.

First, I realized that I am not setting any goals when I buy stocks.  And, sometimes you don't need to set a goal if this is a stock, i.e. blue chip, that one plans to hold for many years.  But, on some of my more riskier investments I should be figuring out what I want to get out of the purchase and then "pull the trigger" when that event hits.  For an example, if I buy stock XYZ at $10 a share and my goal is to triple my money, I need to set that as a goal and then set up a limit order to sell when it reaches that number.

Second, tax implications (and note I am not a tax expert either, and we were audited by the IRS so you really should not rely on any tax discussions that you read here).  Since, I am buying and selling within a Roth IRA there are no tax implications.  But, if I were selling this stock that I bought less than a year ago in a trading account I would be paying short term capital gains.  Roth IRAs are awesome because that $4,300 I earned today is tax free.

So, yes, I ended up selling my super hot stock, profiting and pocketed $4,300, tax free, and . . . .  I had immediate regrets.

Even though I set a well researched limit order to sell at a price that I thought was reasonable, the stock went even higher today.  Bummed, is how I feel, I could have made more money and I worry whether I could have made even more money by holding on to it.  I expect that I will continue to stalk this stock in the future to see how much more I "lost" out on.

The lesson I learned, among others, is that if I set certain goals for my stock purchases and I hit those goals I will feel better about my plan rather than being caught up in the exuberance of one hot stock.

How do you buy (and sell) stocks?  Do you have a goal or plan for each at time of purchase?

Dow Closes Above 15,000

Did you hear that the Dow closed above 15,000 yesterday for the first time ever?

How did you celebrate?  Me, I updated our NetWorthIQ profile and reviewed our Roth IRA holdings, which is where we hold individual stocks, to see if there are any holdings we should be selling.

2013 Goals - April Update

(1) Max out 401k(s) -        $13,392 (38%)   (goal is $35,000)
(2) Max out IRA(s) -         $6,010 (55%)    (goal is $11,000)
(3) Add to e/r fund -          $3,200 (32%)   (goal is $10,000)
(4) Pay down mortgage -   $1,245 (25%)     (goal is $5,000)
(5) Trading account fund - $50  (1%)        (goal is $5,000)
(6) House projects -          $800 (27%)      (goal is $3,000)

Total:  $24,697 (23%)

We are a couple of thousand ahead of where we should be.  I'm not sure how that happened except that Mr. Sam is ahead on his 401k contributions which may have occurred when he received his bonus but just showed up now.

401k Spillover

In December 2012, after Mr. Sam had maxed out his 401k, I noticed that he was still contributing to his 401k in something called an "after-tax option."

We both thought the "after-tax option" was his Roth 401k option. I was certain that he couldn't go beyond the contribution limit of $17,000 between his regular 401k and his Roth 401k.  And, I was correct, the 2012 contribution limit of $17,000 applies both to the 401k and the Roth 401k or a combination of contributions to both.  So, I promptly freaked out as I was concerned that he had gone above and beyond the 2012 contribution limits and we were going to be back on the naughty list for the IRS (we previously were audited).

So three calls to Fidelity later and we learned that Mr. Sam's company offers an after-tax spillover contribution option in its 401k.  What that means, is that Mr. Sam can max out his 401k with pre-tax dollars up to the contribution limit of $17,000 ($17,500 in 2013) and then he can continue contributing to his 401k with after tax dollars up to a maximum of $50,000.

This is one of those retirement options that most people have never heard about.  So, why would we want to put more after-tax money into Mr. Sam's 401k?  For us, the big advantage is the company match.  Mr. Sam gets a great match and that match continues with the after-tax spillover contribution.  So for each extra dollar he puts in he gets an immediate 20% return.  While, his match is in company stock, since he is vested he can sell that stock at any point.

Now that we know about this option, we need to figure out how we better take advantage of this investment option in 2013.

Have you heard about the after-tax spillover?  Do you have that option in your plan?  If yes, do you use it?

Monthly Networth Review

I have started my monthly update of our networthiq profile for December 2012.  Updating our net worth numbers is part of my monthly personal finance tasks which also include the following:  (1) update monthly spending plan (our form of a budget); (2) pay beginning of the month bills; (3) update 2012 savings goals chart and move money to savings goals as appropriate; (4) review and monitor automatic payments/automatic savings/automatic distribution of our allowance monies.

When updating our net worth numbers I review, on line, the status and amount of our ING/Wells Fargo savings which is reflected in the "cash" category on our networthiq chart.  I, also, review our non savings ING accounts, these would include our various escrow and short term savings accounts for travel, holidays, fun, etc. and these monies are reflected in the "other" category on our chart.

Then, I review all of our retirement savings/investments.  I log on to Fidelity and review my IRA accounts and my 401k account from a prior employer.  My current 401k account is at Vanguard so I log on and check those numbers.  I also log on as Mr. Sam to Fidelity and review Mr. Sam's IRA accounts and his 401k accounts.  My IRA monies are reflected in the "stocks" category and Mr. Sam's IRA monies are reflected in the "bonds" category on our chart.  Our 401k monies are combined into one number and are reflected in the "retirement" category on our chart.

The other asset categories on our networthiq chart include the value of our home, the value of our other real estate, the value of our cars and the value of personal property.  Those numbers get updated about once a year.

On the other side of the networthiq chart are our debts which right now include the mortgage on our primary home, the mortgages on our investment properties and, currently, some Home Depot credit card debt (0% interest rate) incurred at Rental # 3.  I update the debt numbers when we pay our various mortgages.

Keeping track of all these numbers and updating them on a monthly basis certainly takes some work, but I find the tracking to be beneficial.  First of all, for me, tracking these numbers helps me stay motivated in our personal financial and savings goals.  Second, checking in on our investments online, at least once a month, is useful.  Today, while I was checking my Fidelity numbers I converted my non-deductible traditional IRA to a Roth IRA (I'll be posting about this later if you are curious) which took less than 5 minutes to do.  I would have, and I did consider, doing the same for Mr. Sam but I figure I ought to ask him before I go ahead and convert his account.  Three, being familiar with the online tools for our retirement accounts is very helpful because there are some great research tools.  When you jump onto those accounts once or twice a month you get much more familiar and comfortable with the tools and terms, you increase your education and knowledge.

Net Worth Number Crunching

I am in the office today, supposed to be working but ended up getting sucked into analyzing our 2012 net worth numbers at networthiq.com.

Overall this year, since January, our net worth is up $92,851 which I must say impressed me.  Most of the growth can be tracked directly to the growth of the stock market since $42,911 of our increase in net worth comes straight from growth in our 401k accounts.  Plus, we have contributed $30,565 to our 401k accounts, so all together our 401k accounts are up $73,476.

The other big area of movement is in our debt load.  We have reduced our debt (all mortgage) from $594,056 to $574,735 for a total of $19,321.  Between the grown in our retirement accounts and the reduction in debt our net worth is up $92,000+, maybe by the end of 2012 it will be up over $100,000.

The Importance of Reviewing Statements

I am pretty good at paying attention to the documents that arrive by U.S. Mail.  While I do most of the management of our personal finances by electronic means, I prefer to receive paper bills for review and tracking purposes.

Last night I was sitting on the couch opening mail, and we get quite a bit from day to day, and I started reviewing our joint Fidelity statement.  Fidelity is where we keep our individual IRAs and also where I have an old 401k and Mr. Sam has his current 401k and a roll over IRA.

The statement that we receive in paper form just covers our individual IRAs (traditional and Roth) but not any of our work related retirement accounts.  I spent some time pondering how each of our investments is doing (or not doing).  Since we utilize our individual IRAs for stock investing, reviewing individual stock performance is more exciting than following fund performance.  For example, I've done really well with Apple since I bought it in early 2009, up over $8000.  But, when I was looking at my performance for 2011 I was surprised to see that I have $3000+ (out of $5000 contributed) just sitting in cash and not invested in anything.

I was stunned that I had this chunk of cash just sitting in cash.  I really have no idea what happened.  Did I forget to invest it? Was I researching stocks and never circled back around to effectuate a buy?  Did I put in a limit order that expired and I forgot to put in another order??

Ugh, I am mad at myself, since the market is up 9% from January 1st of this year and up 17% from this time last year.  As such, I have likely missed out on a positive return by letting this money sit in cash.

The morale of the story, I should be paying more attention to the statements we receive from Fidelity.

Recession Map from Moody's Analyitcs

Here is a handy map from Moody's Analytics that you can use to figure out if your city is still in recession, at risk, in recovery or expanding.

For me, the map tells me that my closest city, the one in which I work is in recovery.

2007 - 2010 Survey of Consumer Finances

Following up on my earlier Balance of Power post there was a timely article regarding states that had the biggest drops in net worth.  Guess which state made the list  . . . Florida.

The very interesting underlying report* from the Federal Reserve can be found here.  The data and charts are fascinating.

• The decline in median income was most pronounced among more highly educated families, families headed by persons aged less than 55, and families living in the South and West regions.

Well that would be us, highly educated, less than 55 and in the South.  And, no my income has not recovered to 2008 levels.

• The decreases in family income over the 2007−10 period were substantially smaller than the declines in both median and mean net worth; overall, median net worth fell 38.8 percent, and the mean fell 14.7 percent.

So, that is the good news I guess.  Incomes didn't fall as hard as net worth.  Average net worth is now down to the level found in the early 1990s.  So almost two decades of progress was wiped out for average families.  

• Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices.  The decline in median net worth was especially large for families in groups where housing was a larger share of assets, such as families headed by someone 35 to 44 years old (median net worth fell 54.4 percent) and families in the West region (median net worth fell 55.3 percent).

Well, that would be us, for sure, we have lost almost $200,000 in our real estate investments (that doesn't include our primary home, which also lost value).  As mentioned in prior post, we were heavily weighted in real estate before the bubble popped so we have taken a major hit in our net worth due to the real estate collapse.

*I find the title of this survey to be ironic.  We are only consumers in the eye of the Federal Reserve.  

I'll Be Rich When . . .

According to this article from msnbc.com Gallup found that the median amount of savings, real estate holdings and other investments Americans would want to have in the bank in order to feel rich was $1 million.

I thought this was an interesting tidbit, since Sam, Inc. has been over the $1 million mark for six months running.    And guess what, I don't feel rich and Mr. Sam's favorite saying is "we must be the poorest rich people ever."

Mr. Sam's saying comes from the fact that we restrict how much we can spend via our allowance system and our rules.  So its hard to feel rich when you have to pay attention to how much you are spending otherwise you'll run out of funds.  I think I probably feel the same way, you are "rich" when you can spend without thinking or without care.  We, on the other hand, have gotten to this point only because we think about our day to day spending every day (just about).

I also think that your target income or target net worth is driven by your peers, and by what you see in your circle of reference.  I blogged about this back in December when I was at a "ladies who lunch"  charity event on Palm Beach.  A person's normal changes over time.  So while I am very happy that we have reached the $1 million mark, and recognize the hard work and discipline it took to get to this point, I don't feel rich at all.

What say you?  What is your target number for income and net worth in order to feel rich?

Balance of Power

For a very long time, our investments, and our net worth, were heavily weighted towards real estate.

But due to the real estate bust here in Florida, many of our properties lost considerable value over the last few years.  It appears that the market, maybe, has found its bottom because prices have started to inch up and housing stocks are way down.  But, our properties are filled and paying for themselves.  And by paying for themselves, that means that our tenants pay the mortgage and other costs.  That is the joy of rental property, someone else pays the mortgage.

In June of 2008, our real estate investments were valued at $460,018 (valuation less outstanding debt).  As for our retirement/investment accounts, in June 2008 they were valued at $290,145 (this is just before the market tanked in the fall of 2008).

Now, 4 years later, our real estate investments are valued at $287,810 and our retirement/investment accounts are valued at $521,634.

We have made good progress in the last few years in our retirement savings by (1) maxing out all our accounts, (2) buying some great stocks and funds at bargain prices in 2009 and 2010, (3) by taking advantage of Mr. Sam's company match.

Is it painful to lose $172,208, in 4 years, in the real estate market?  You betcha!  But really, we haven't lost that money, yet, because we have not sold any of our real estate holdings.  In the mean time the properties are filled and paying for themselves (although looks like one of our tenants will be leaving in September).  I am hopeful that the Florida real estate market has found its bottom and over the next 10 years the properties will appreciate to the point that we can make a profit.

Six Months Straight

So, since January 2012 our next worth has been above, and more importantly stayed above the $1 million mark.  Why?  I would say its a combination of factors.  First, the stock market has generally been up (although not the last 4 weeks) so our retirement monies are up.  Second, our real estate holdings have generally stabilized, three are not worth what we paid for them, but the bleeding has stopped.  In my county, prices have been trending up over the past six months and the available inventory has shrunk and sales are way up.  Third, we keep saving quite a bit of money and chipping away at debt each month.

All of this may change, as Mr. Sam's job may go away between September and December.  So, we'll enjoy it why we can and we'll keep saving assuming that he will be unemployed by the end of the year.

2012 Savings Goals - Mid-April Report

(1) Max out 401k(s) - $10,705 (31%)(goal is $34,000)
(2) Max out IRA(s) - $1500 (15%)(goal is $10,000)
(3) Add to e/r fund - $ 2800 (28%)(goal is $10,000)
(4) Pay down mortgage - $1245 (25%)(goal is $5,000)
(5) House projects - $350 (7%) (goal is $5,000)
(6)  Trading account fund - $0 (0%(goal is $5,000)

Total - $16,600 (24%)


At present, we are about $3300 behind on our 2012 goals.

We have started to put money aside for the funding of our 2012 IRAs.  But, because Mr. Sam's employment status is somewhat precarious (his division is in the process of being sold to another company) we are putting that IRA money into an ING sub-account.  We won't invest these monies until we have confirmation that Mr. Sam has a position with the new company or has a new job.

If you are funding your 2011 IRA, Monday, April 17th is your last day to do so.

How Did You Celebrate the Dow Hitting 13,000?

I updated our NetWorthIQ numbers  and did a happy dance that we hit a new high for our net worth.

Also, we really need to take a hard look at some of our stock purchases made back in early 2009 and some of those stocks have more than tripled in value since we purchased same.  We need to think about whether we should be selling some or all and reinvesting the profits into bargains.

Roth 401(k)

Mr. Sam and I both split our 401k monies between the traditional 401k plan (pretax dollars) and a Roth 401k plan (after tax dollars).  But, it sounds like we are among a minority.   This Wall Street Journal article  indicates that fund companies report that rate of participation in Roth 401k plans ranges from 6% - 15%.

We opted to put a chunk into the Roth 401k, I'm putting about a third into the Roth 401k plan, because taxes for us are a big unknown.  Will we pay more or less in retirement, we don't know.  Will taxes go up or down in the future. we don't know.  So we hedge and put some of our retirement monies in each plan.  We opt to put more money in our regular 401k because it helps to lower our current taxes and ups our take home pay.  Since we fund our IRAs with after tax monies we have, in the past few years, since we became eligible, have converted a big chunk of our IRA money to Roth IRA.  We've already paid taxes on this money so we'd rather convert and have the money grow tax free and be able to withdraw it tax free.

How about you, are you splitting money between a regular 401k and a Roth 401k plan?  If yes, why and how much.  

** I don't pretend to be an investment professional or expert nor am I a tax professional or expert (I've been audited), talk to someone who knows something about this topic before you make a decision.

2012 Savings Goals - March Report

(1) Max out 401k(s) - $6788 (20%)(goal is $34,000)
(2) Max out IRA(s) - $0 (0%)(goal is $10,000)
(3) Add to e/r fund - $ 2000 (20%)(goal is $10,000)
(4) Pay down mortgage - $1245 (25%)(goal is $5,000)
(5) House projects - $250 (5%) (goal is $5,000)
(6)  Trading account fund - $0 (0%(goal is $5,000)

Total - $10,283 (15%)


We are just about $3,000 behind on our goals.  Which makes sense, since we didn't finalize our goals until a couple of weeks ago.  Plus we have spent close to $6,000 on Mr. Sam's two certification classes.  It is going to take real focus and drive to catch up.

I have also updated our networthiq.com profile. With the market off yesterday, our investments are down today.

How are you doing on your 2012 savings goals?


**Edited once on March 8, 2012

Retirement Savings

I have had a a chance to update our networthiq.com retirement savings numbers.

In January 2011, we had $381,076 in our 401k accounts and a total of $445,933 for retirement savings.  Now, in January 2012, we have $407,895 in our 401k accounts and a total of $484,333 for retirement savings.

If you follow this adventure, you will note that we actually "lost" money this past year in our 401k accounts as we contributed the max to our 401k accounts, $33,000 (plus my husband receives a match) but our 401k accounts only increased by $26,819.  The 2011 markets were generally flat, so our returns were worse than the market.

We did a bit better in our IRA accounts.  In January 2011, we had $60,858 in our IRAs and in January 2012 we have $76,438.  We contributed the max to our IRAs, $10,000, in 2011, so we had a "profit" of $5,580.  I think it is interesting that our IRA investments did better than our 401k investments.  Our 401k monies are invested in mutual funds, while our IRA monies are invested in riskier individual stocks.  However, we did buy some super bargain stocks in the spring of 2009 and those investments are doing quite well.

As an aside, I heard an interesting tid bit on NPR the other day.  The speaker suggested that when purchasing an investment, one should keep track of the cost of that investment, the amount purchased, and why the purchase was made so that when considering selling you have much more information.  I think this is a great idea and one I'm going to suggest to Mr. Sam.

Market Impact on our NetWorth

With the recent market volatility we have been pushed back below the millionaire mark.  We also had a major expense for which we had planned for, but had to take $10,000+ out of our short term savings. 

Bummer . . .

Invest Now or Invest Later?

A Reader in New York had a question regarding whether it is better to fully fund an investment, i.e. our IRAs, early in the year or spread out the investments over the course of the year to take advantage of dollar-cost averaging. Great question.

First, although we have fully funded our IRAs for 2011 we have not actually invested all that money. We use our IRAs for individual stock investments. We pick out stocks that we like based on our investment goals and then we try to buy same on down days via a limit order. We plan to hold these investments for at least 3-5 years or until they double in value. 

Second, for our 401k contributions we contribute over the course of the full year. We do so for budgeting purposes.

Third, regarding dollar cost averaging. Our savings goals are really a savings snow-ball.  I stay motivated with savings by working towards the goals and crossing them off as soon as possible.  If I could fully fund our 401ks earlier in the year, I would do so. 

I'm not an investment expert, but my goal is to get my/our money invested as quick as possible. Get that money working sooner rather than later.  Here is an expert's opinion and explanation that sums up my feelings about this issue.

What say you?  Are you pro dollar-cost averaging and if so, why?

Forcasting Tool

Mr. Sam came across a tool at CNNmoney.com which provides information from a number of  analysts (varies from stock to stock) as to the forecasted stock price information over a 12 month period.  Seems like a handy tool, but whether it is helpful will require some analysis of our own. 

For example, I own 275 shares of Citigroup (symbol:  C), this forcasting tool tells me that over the next 12 months the high forecast on price is $6.50, the median $5.63, and the low $4.00.  So, I'm going to watch Citigroup over the next few months and compare to this tool.