Category: 401k and Personal Finance

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401k and Personal Finance

Best mutual fund and shareholder return

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It’s that time again, the end of 2009 (and the decade of 2000s) means we can also look at the performance of mutual funds in past year/decade. The winner of US based mutual fund is CGM Focus fund, managed by Mr. Heebner, the fund’s manager since its 1997 launch. CGM Focus is a large cap growth fund with annualized total return of 18.2% in last 10 years (source: WSJ, Best Stock Fund of the the Decade: CGM Focus). Sounds pretty good, right?

Not really. According to MorningStar in the same article:
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Too bad investors weren’t around to enjoy much of those gains. The typical CGM Focus shareholder lost 11% annually in the 10 years ending Nov. 30, according to investment research firm Morningstar Inc.

These investor returns, also known as dollar-weighted returns, incorporate the effect of cash flowing in and out of the fund as shareholders buy and sell. Investor returns can be lower than mutual-fund total returns because shareholders often buy a fund after it has had a strong run and sell as it hits bottom.

……

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401k and Personal Finance

Year end tax tips 2009

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NBR at PBS is running a series of year end tax tips (link here). My take is in investing, taking gain/loss should first based on the investments prospectus (how you think your investments will work in the future), the tax should be secondary consideration. It is still important because in some cases you want to make sure you have enough cash to pay the tax from tax gain. With this in mind, here is the first video of the series. This one is about capital gain.

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401k and Personal Finance

How I redeem AA award miles for someone else

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Not really someone else, but my in-law 🙂

Here are some explanations on redeem mile for someone else at About.com. I thought about this idea, because I got about 55,000 miles in my AA advantage account (mostly from my China trips, plus some business travel I did in last year), and it appears a deal to redeem the miles (rather than pay cash/credit card) for my in-law China to US air ticket. It takes 70,000 miles for a round trip ticket. So what I did was holding the ticket first, bought 15,000 miles using credit card (it cost $375 + $30 processing fee + $28.xx tax). It took a few days for AA to process (I bought miles on Friday, the miles was added to my acct on Monday). Once I got the miles, I click on “Purchase ticket” (the ticket I previously hold). At that time I paid $38.xx tax for the ticket itself.

Overall I think it’s a deal because I paid about $472 for the air ticket. Obviously saving money is secondary comparing to the joy for my wife meeting her dad. Another reason I decided to pull the trigger early was I was afraid those redeemable seats run out quickly.

Rule of thumb
Should I redeem miles or buy the ticket?

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401k and Personal Finance

The new normal

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The other day my wife asked me an interesting question: how long will the recession last? I think her implied meaning is how long the job market will be like this (with unemployment rate reach 10%)? I thought about it, and my answer is it could last 2 to 3 years. But on the other hand, I am not too worried about our lives. Because we both got our skills, and we will survive. A few weeks ago I read this article from WSJ titled “The ‘Democratization of Credit’ Is Over — Now It’s Payback Time”. Basically it’s saying the lower income consumers (borrowers) are having more trouble in terms of paying back debt, or getting new credit. The picture below (from WSJ) shows the problem well.

WSJ consumer credit default different income levels pic

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401k and Personal Finance

A little busy lately

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I was a little busy recently, due to many reasons. Thus I did not paid much attention to stock market in the past week, and the big drop in last 6 trading days did not concern me as much (due to distance), another reason is I sold some stocks before and during those days, so I think I am OK.

Why I am selling stocks
Obviously not trying to timing the market. I was the worst market timer, as I ran out of cash in early March (all in stocks at the time, stocks like Berkshire). The main reason I sold stocks is I want to have some liquidity, not that I did not need it in the past, but now liquidity becomes more important as we are expecting our first baby early next year (see my wife’s blog).

How I think about stock market and economy in general
Obviously my opinion does not count much, we already got so many knowledgable people, from President to economist, trying to predict what’s next. Here is my simple take, for what it worth.

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401k and Personal Finance

Portfolio management lessons: ESPP

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Two things I wanted to talk about ESPP: personal bias and taxation.

I remember I grew tired of my undergraduate college at the fourth year, due to various reasons. But after leaving my college for so many years, now I think that’s one of the best places I have been. Personal congnition bias also plays with work. There are always misgivings in the work place, this got intensified with the recession. Recent Economist has an article on this “unhappy work place” topic. But if we take a deeper breath, I think many work places are not as bad as we perceive. In fact, some maybe fabulous business if some reform initiatives being applied.

On the other side of the equation, we all know what happened to Enron and WorldCOM employees and retirees when they put signigicant amount of personal wealth on company stocks. They believed in the pep talk of their CEOs.

Taxation is a complicated matter. Some explaination from Yahoo (Turbo Tax).

Appendix: my ESPP history

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401k and Personal Finance

Bounce back in my old 401k

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I did not do anything with my 401k when I left my old employer about one year ago. The past year was also a year of hugh up and downs. I managed not to do anything with it in the past year: no re-balance, no jump in and jump out, no rollover to IRA, and no withdrawl either. Here is the record in past year.

One Year
10-09-2008 to 10-08-2009: +16.90%

half year
03-09-2009 to 10-08-2009: +65.80%

YTD
01-01-2009 to 10-08-2009: +26.10%

Current asset allocation (100% equity)
39% US large cap, 23% US small cap, 30% Non-US developed market, 5% Non-US emerging market, 3% company stock.

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401k and Personal Finance video

Is cash for clunker a windfall for consumers?

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Not really. Some issues: eligibility, trade-in value of your old clunker (maybe more than $3,500 or $4,500), also your clunker may worth more than its face value (consider the insurance cost and property tax of a new car).

MyMoneyBlog has did some analysis on his/her own (used) vehicles; and Edmunds.com has a comprehensive article including a FAQ.

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401k and Personal Finance

SogoTrade

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(Update 07Sept09) I found a minor problem with Sogotrade. I had this happened to me twice. Basically I changed my mind for existing limited sell order, so I clicked “cancel”. But Sogo works so fast and diligently, partial of my order has already been executed. So basically later on when I want to sell the stock, I need to pay another transaction fee.

SogoTrade pic

(Original) Opened SogoTrade account couple weeks ago because I got a bit tired of Scottrade $7 per trade fee, and the “friendly” reminder email about my trading pattern. The accounting opening preocess is a bit long, although most things are done online (except the VOID check and an eletronic transfer form to send in). Here are the main steps:

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401k and Personal Finance Shanghai Composite

Investing in China: I

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I have talked about investing in China many times in this blog. Recently a good friend of my wife asked this question: how to protect her parents retirement (life style) now that they are near retirement?

I think this is a very good question, also a very common one. Recently I read Charlie Munger’s book Poor Charile’s Almanac, and he said three stocks are enought (diversified) if they are good stocks and the person trully understands it. I agree.

So, let me apply this three stocks approach and run a hypertheoritical portfolio for my wife’s friend (‘s parents 🙂

The first stock comes to mind is 601628.SS, China Life Insurance (NYSE: LFC; HKSE: 2628.HK). I talked China Life couple times, during its Shanghai IPO (secondary offering to be precise), and “Got Yuan” post. I believe China Life is uniquely positioned to take advantage of weakened competitors (China Ping’An and AIG China subsidiary), and this down market.

China Life Insurance logo

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