My Current Asset Allocation and Net Worth Growth – September-December 2010

So, this fall has been quite crazy. I got all moved in to my new condo in Virginia, and started graduate school on August 23.

As is usually the case with buying a new home and moving, my finances were all over the map towards the end of July. However, I was finally able to sit down after the fires had died down from the semester and assess where I stood financially.

Let’s take a look….

Net Worth Growth (not including condo)

From July 14 (when the last portfolio update was published – see link below for more information) to December 28th, the S&P 500 index went up by 14.9%. Very nice run for a quarter!!!

My Personal Finance Journey – July 2010 Portfolio and Net Worth

During that time period, my net worth (excluding condo ownership) increased by 5%. While this increase is respectable, the fact that my net worth growth is not keeping up with the market indicates that since I have taken a 67% pay cut in graduate school, I am not able to save money as effectively (which is probably to be expected)

Condo Equity Growth


Since I am not counting the home equity in my condo as part of my asset allocation, I have added a new section to these monthly portfolio reviews to account for this important aspect.

Currently, I have 9% home ownership in my condo (up from 0% in July), with this accounting for 34% of my real net worth (so net worth subtracting the condo loan – this is different from the net worth above).

Update on Financial Goals for 2010

I have now achieved the following financial goals in 2010. I have done quite well I think – thanks to everyone’s help for keeping me motivated and accountable!

• Achieved my short term target net worth for this year.
• Contributed the maximum contribution level of $5000 allowed for my Roth IRA for the year 2010 (and 2009 as well).
• Eliminated all significant holdings in individual stocks from my portfolios.
• Eliminated the actively managed Vanguard Short-Term Investment-Grade Fund (MUTF: VFSTX) and replaced it with the following short-term bond index fund – Vanguard Short-Term Bond Index Fund (MUTF: VBISX).
• Successfully purchased a condominium to live in for graduate school. Yah!!!
• Initiated Rollover IRA to Vanguard from my Fidelity 401k from my previous employer.
• Purchasing a TIPS inflation protected mutual fund.
• And last but certainly not least, sold out of the actively managed mutual fund, CGMFX (CGM Focus Fund) recommended by Jim Cramer several years ago that didn’t make me any money at all! 
• Completed my will. Next step is to have it reviewed by a lawyer.
• Set up accounts for making home ownership automatic – automatic deductions for loan repayments, real estate taxes, maintenance reserve funds, insurance, etc.

For a detailed list of my short term, mid term, and long term financial goals, click on the link below:

My Personal Finance Journey – Financial Goals

Review of Current Asset Allocation (excludes condo)

• Overall Fixed Income / Equity Allocation
• Currently, 26% of my net worth is invested in fixed income instruments (cash or bond funds), and 74% is invested in equity.
• This is almost perfectly aligned with my targets for these categories of 25% (fixed income) and 75% (equity).

• Equity Allocation
• In the equity portion of my portfolio, 74% is invested in US Domestic Equities with the remaining 26% 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.

While the overall percentages for these categories looks pretty good, a detailed look (table below) at the allocation breakdown reveals the real story and provides for better analysis of the current state.

Remember: a red flag goes off if your current % allocation in a category is greater than +/- 5% off of the target allocation. This is my trigger that I need to rebalance that aspect of my portfolio.

% Cash (money market target 5%) 7%
% non-inflat Bond Funds (target 15%) 15%
% TIPS Bonds (target 5%) 4%
% International Equity (Target 11%) 11%
% International Emerging Markets (Target 11%) 9%
% Domestic Large Cap (Target 8%) 8%
% Domestic Small Cap (Target 8%) 9%
% Domestic Small Cap Value (Target 14%) 15%
% Domestic Large Cap Value (Target 13%) 14%
% REIT (target 10%) 9%

Analyzing my current asset allocation percentages, it appears that I am lucky enough to be exactly on target with all of my asset classes (within +/- 5% banding) . Therefore, no rebalancing is required.

My next moves for the December 2010 / January 2011 time frame will be to do the following:

• Begin contributing to my Roth IRA for the 2011 tax period!
• Reanalyze my dreams and goals and set  new ones for 2011.
• Possible candidates at first glance would be to save money for a washer/dryer installation in my condo and saving for a possible trip to the Grand Canyon (something I have never seen).

Wish List

• At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund. This gives better, broader diversification to the US stock market.
• Purchase more microloans in developing countries as part of my “making a difference” life value in my Purpose Focused Financial Plan.