Thursday, December 6, 2007

Update of Financial Plans

So I've finally reached the point where I've "primed the pipe" when it comes to my stock portfolio.

If you've read what I've written previously, you know that I'm following the advice of The Little Book that Beats the Market in how I screen my stocks and when I buy and sell. Basically, it screens on two filters, the overall price/earnings ratio of the stock and the ROA the company gets. Each month I've been buying a couple of stocks off of the report it creates and now a full year has gone by. This is significant because owning a stock for 1 year qualifies it as a long term investment so I will have to pay the lower long term capital gains rate on the profits instead of short term capital gains.

One thing I did not do correctly based off of the books suggestions, is that I bought stocks every month this year. Instead I should have determined the total amount I wanted to invest and then put a percentage of it in every couple of months for 3 years. Since the formula is suppose to average a >=20% ROI each year over the course of a three year period, unless I continue to add to my portfolio for the next two years, I will be very heavily front loaded. If this was the market highpoint of the three years, I will have bought less for more.

Regardless, I am excited to have finished building my portfolio base. While I will most likely continue to add to my portfolio, having set this future fund up, it gives me more security. I'm planning on doing some rebalancing of where I move my money, esp since I am planning some large purchases for the next year ( a car and a house). I will most likely stop funding my separate Roth IRA and move to my company's Roth 401k program.

Another reason I'm very encouraged by this, is that now that I have a security base, I can move into a little more concentrated and riskier investment. After consulting various sources for information over the last year and a half, I've determined one source that seems to have excellent stock filters and a very broad market view. I think I'm going to build up a risky investment fund and direct the resources towards their recommendations to test what kind of results they can produce. So that will be a side project for the year to come.

Also, I've been reading Having it All. The descriptions it has about how the mind and body work have been very interesting. Some of the ideas about each person's personal beliefs shaping their reality corresponds to what is discussed in The Greatest Salesman in the World and Rich Dad, Poor Dad. It seems the part of the book I'm at now is moving in the same direction as The Pathfinder right where I am on hold. They start discussing how to figure out what your dream life would be like and how to move towards it through goal setting, positive affirmations, and directing your subconscious through positive speak and such. While this is all good stuff, I've actually come to peace with where I am for the time being. While I plan on changing things in the next year, I have established the goals I want to reach and for now I'm trying to live in the present and enjoy the situation instead of ratcheting up more and more expectations on myself. So while the advice will be helpful in the future, I'm putting it on hold until I really want to focus on it.

Things have also picked up at work. I've moved away from doing testing and bug fixing (finally) and am back to doing some development work. This is actually the main part of the job that I enjoy, so I'm trying to learn from the people I'm working with and develop a real skill that I can rely on in the future. That way, no matter how things turn out I'll have the safety net of knowing I have a desirable skill that people will be willing to hire me for.

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