Mid Year 2012 Current Asset Allocation and Net Worth Growth – January-June 2012

Liquid Net Worth Growth (not including condo nor blog/graduate fellowship unpaid income tax savings)

In October of 2011, I had to make a fairly significant change in how I calculate my net worth and asset allocation percentages each month. The change pertained to the cash I consistently save up throughout the year in a high interest online savings account (Dollar Savings Direct) in order to pre-pay self-employed or unpaid (from my graduate research fellowship) income tax to the government in the form of quarterly tax payments. What was happening was that the balance in this tax savings account (which was being counted in to the cash portion of my asset allocation) was becoming too large, and it started to skew my asset allocation calculations. 

Overall Net Worth Growth

Important Note: In general, I operate on the belief that I shouldn’t compare, measure, and/or gauge my financial success based on the performance of any market index. In particular, this comparison should and is not used to make changes in my financial planning. Instead, as I mentioned above, I prefer to think of if I am/am not doing well by if I am meeting the specific financial goals I set out for myself. However, I still do think it is interesting to track how the market does, and for that reason, I include the S&P500 performance in my progress updates. 


From 27-December-2011 (when the last portfolio update was computed – see link below for more information) to 11-June-2012, the S&P 500 index increased 3.45%. Not too bad I suppose!

My Personal Finance Journey – November-December 2011 Portfolio and Net Worth

During that time period (January-June 2012), my liquid net worth (excluding condo ownership and unpaid tax savings) increased 7.92%.

Condo Equity Growth

I now currently have 19.60% home ownership in my condo (up from 9.07% at the beginning of 2011), with this accounting for 28% of my real net worth (so net worth subtracting the condo loan – this is different from the net worth figure discussed above).

Permanent Portfolio Performance Update

Update on Financial Goals for 2012

Overall, 2012 has been a good year so far. A big thanks to everyone’s help for keeping me motivated and accountable! Below is a short summary of some of the big progress I’ve made so far. 

• I am well on my way to maxing out my Roth IRA for 2012, with over $4,000 contributed so far. 
• Donated close to $1,500 on my own money to the Multiple Sclerosis Society. Raised ~$6000 towards my MS150 fundraising bike ride in early June. 
• Saving money for and executing on my scheduled estimated quarterly tax payments.

Review of Current Asset Allocation (excludes condo and tax savings)

• Overall Fixed Income / Equity Allocation
• Currently, 29% of my net worth is invested in fixed income instruments (cash or bond funds), and 71% is invested in equity.
• This is 4% off from my targets for these categories of 25% (fixed income) and 75% (equity). So, while it is still within my +/- 5% allowable band limits, I will keep a close eye on this overall level in the coming months to increase the amount of equity holdings I have compared to fixed income to match my targets. 

• Equity Allocation
• In the equity portion of my portfolio, 72% is invested in US Domestic Equities with the remaining 28% being held in international equities. 
• This is almost perfectly aligned with my equity breakdown targets of 71% and 29%, respectively, for US Domestic and international holdings (only 1% off). No action needed at this time. 

My next moves for the July-August 2012 time frame will be to do the following:

• Contribute the remaining $800 to max out my Roth IRA contributions for 2012. Should be able to do that in July easily. 
• Once I finish contributing to my IRA for 2012, my financial attention will then turn to the following question – Do I use my extra money to pre-pay large amounts on my condo home loan, OR start investing in my tax-deferred Individual 401(k) account?
• I still am not sure what is the best answer here. What are your thoughts?
• Use my 1% home value home maintenance fund to fix various small things that are broken around my condo after 2 years of use. 
• These things include a closet door off the hinges, the light-switch in the bathroom not working all the time, and some pipes under the sink that need to be re-caulked. Once I get these things repaired, I will then need to replenish the depleted funds in the home maintenance account. 

Wish List 

• At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund, whenever more money is needed to increase my domestic large cap asset class holdings. This gives better, broader diversification to the US stock market.