Courthouse Sum Up

Courthouse results for this week were only slightly better than last week. Eight new listings for the county. In doing some checking, it seems that Monday will be a holiday for the courthouses and they will be closed. What I might do, is go to work on Monday and then take the holiday on Wednesday or Thursday since it's an optional holiday that I can move around. I'll have to see how I'm feeling on Monday.

Recently, the subject of retirement and investing has come up a lot in what I read and conversations I've had. A friend of mine said that his Financial advisor told him that with some smart planning he would be able to retire by the age of 50. This shocked me because the guy is an engineer, is already buying his own house and is putting money away towards retirement. You'd think he would be farther ahead than just 5 years. Apparently justification for only 5 years is based on theoretical expenses for children and some emergency funds in case something else comes up. I still think he should be much farther ahead than that.

Personally, I have three accounts setup for retirement saving. First is my 401k through my company. I have this balanced pretty well in some mutual funds that will avoid a lot of current USA domestic problems caused by the credit crunch going forward. My rate of return for the year is only 3% in this account, mainly because I set it up at the start of June and it got whacked pretty hard by the dip in the market before I did some more research and setup a better selection. Ever since I rebalanced I've been charging back and I plan on leaving this alone and letting it grow for the remainder of the year. The combination of not having to pay tax on what is put in and my employer matching really helps this grow.

I also have another 401k from a previous company that is averaging about 9% return so far this year. If last year is any view of how the last quarter will turn out, I should end up with about a 15% return for this year.

My second account is a Roth IRA that I setup last year. It's focused on some foreign markets that are mainly revolved around gold mining. It's been averaging 11% growth per year, so it seems fine to leave alone. I'm not sure how high the management fees are, but it's more of a bonus fund so I'm not tinkering with it much. I realize I can't touch this money till I'm 65, but not having to pay taxes on earnings is worth it since it's a solid long term setup.

My third account is my individually selected stocks. I'm taking the value investing approach and following the system of Joel Greenblatt, the investment stud who has averaged insane returns over the last 25 years. This is my pride and joy account that I've been priming for almost a year now. I've heard a lot of people talk about their failures in picking individual stocks, but I believe in value investing and I'm dedicated to sticking this out, esp since it's already produced 10% gains even during the dry period of the market and should really excel during the upcoming months.

The combination of those three accounts are the backbone of my retirement savings plan. My current goal is to prime them and let them compound over the next 20-30 years. The result should easily leave me in a comfortable position to decide if I really want to keep working long before the retirement age.

Like I stated previously, I'm trying to move away from saving now that I've setup the backbone. The greatest and worst thing that stocks have going for them is that they are so passive. While I don't have to do any work to see change, I also have no control over that change after the initial buy decision. I'd like to shift my money flow into priming other things that I have control over into a larger state of growth. The best example is the Jobber business I'm building. Eventually I would like to significantly increase operations by purchasing a laptop to use to collect lead information as well as start using some paid sources to acquire leads. At that point I will increase the number of investors I work with as well as pay to join some local REI clubs. But again, this growth hinges on some capital investment. But the nice part is that I have direct control over the results.

The final thing I want to mention is the use of mutual funds. My guess is that a large number of "investors" throw their money into a mutual fund and then go on with the assumption that someone's active management of that fund will lead to their profit. I'm warning that this is not the case.

Mutual fund management is a job like any other, and with any job there is always a range of how good or bad the person doing it actually performs. Just because they hold that position does not mean that they are really more educated about the market than you are. They most likely are just following a corporate system that does not take into account any of the real factors that determines how a business will perform. Warren Buffett follows the value investing approach of determining the actual value of a company and its shares. He takes it a step further than just that, though. He looks at the management and decision making and sees if they are intelligently directing the business.

I read the book Good to Great a year or so back. This book was a brilliant analysis of what are the differences between a company destined for success and one that will walk the average line. They are real, they are true and they are greatly overlooked. Never forget that what you are investing in is not just a name, it is a business. A business is only as strong and capable as the people who do the work.