knuckles

Back a few months ago we shifted our retirement investments from bonds and cash equivalents back to stocks, but mixing the mix a little more than we had before. Previously we were concentrated in international stocks, but for this shift we moved to roughly equal shares in bonds, big caps, small caps and international funds. And then the market kept sinking. I feel good that we avoided at least part of the downward trend, but in the last two months our stocks have sunk about 7%, which is hard to watch - white knuckles gripping the keyboard straining not to panic trade and lock in losses. As my dad always said, it's not a loss until you sell. So we're going to wait it out. We've got time.

Since the downturn in equities we've been more aggressively allocating our contributions in an effort to lower our overall cost for the shares we've bought. That's a long term strategy, and I feel both hopeful and anxious about it.

Now for a little theory (or whatever you'd like to call amateur financial market thinking). Starting with the presumption that the markets will generally increase in value/price over the long term (and we all pretty much must believe this if we've invested in the markets for long term savings), downward trends present what I would call a positioning opportunity.

Stocks to me have two basic attributes - price and quantity. Maybe this is merely a convenient way to rationalize my way through a downturn, but looking at my account statements I see value and number of shares for each of the funds we own. When the prices are rising, the number of shares stays relatively level because our contributions buy fewer shares. When the prices go down the number of shares increases faster because our contributions buy more shares.

Next thing I consider is time. That is, time to withdraw. We have time (we think) to the tune of 30 years, 35, maximum. So a downturn is actually beneficial to us over the longer term. Buying more "position" will allow us to increase our net by the time we are withdrawing, assuming that the downturn doesn't last forever and eventually stocks continue a generally upward trend.

So now I'm focused on position. What has lost the most value recently, how can I maximize my exposure to those sectors so that over the longer term I might benefit from a bounce back.

And if I'm wrong? Well,then so are many others, and we'll have bigger problems. I'm good with that...the risk, I mean, not any eventual "bigger problems."

One down...

Five to go! April 15, 2008 saw the full and complete payoff of my first student loan! Big party!

Now back to work. I still have about $130,000 in student loans as a result of grad school, but we have a plan. We pay extra to the principal of the highest interest rate loan, then roll over that payment plus the minimum payment from the loan just paid off, into the next one.

Line em up, knock em down.

2007

So I just learned how to do a chart in Excel, and I charted our "net worth" over 2007. Yowza! we went from about $40,000 in total net worth in January 2007 to over $93,000 at 1/1/2008, which we wrote down to $75,000 because of the possibly sinking value of our house. The house value estimate is all funny money anyway - the only loss or gain occurs if we sell or cash out, I guess.

At any rate, the point of this post was to talk progress this year. We went down a little bit from January to March, then April, which in this case was not the cruelest month, saw our net worth zoom from just over $75,000 to almost 88,000 by May 1. That has to be the largest one month gain, with the possible exception of December 1, 2007 - January 1, 2008, where we saw a $20,000 plus gain.

In this case, I think a confluence of events conspired to give us the boost: our tax return was about $4,000, the stock market rebounded just as I shifted from a bonds dominated portfolio in our 401k to 80/20 stock mix with a slight emphasis on internatial funds. That has worked out well...so far...

Overall, good news. I'm working on a private business that will at least be an interesting diversion, and at best make us a little side cabbage. It's fun - involves history and architecture and New York, a city that is rich in lots of ways.

Good night blog.