July 30, 2014

Updown performance so far in 2014

Practice invest


I totally forgot about my Updown portfolio.   I haven't written about it since September 2013.   I don't recall the last time I even logged into the account.   I clearly haven't been actively managing the account.

Here's how my portfolio has compared to the S&P 500 so far in 2014 :



Freeby50 S&P 500 diff.
Jan-14 -1.9% -3.6% 1.7%
Feb-14 1.3% 4.3% -3.0%
Mar-14 2.7% 0.7% 2.0%
Apr-14 0.5% 0.6% -0.1%
May-14 0.3% 2.1% -1.8%
Jun-14 0.6% 1.9% -1.3%
Jul-14 2.1% 1.0% 1.1%
SUM 5.6% 7.0% -1.4%

The S&P500 index is beating me by 1.4% thus far for the year.

I'm still ahead of the S&P500 for the entire portfolio history.      I'm up 77% total and the S&P500 is up 49%.   However most of the difference there was in the first couple years when I was really actively playing the portfolio and managing it.   For 2011 to 2014 I've underperformed the S&P500 by about 10% total.

I also have 16% of my portfolio in cash.   That will cause me to lag the performance of the index by a ways since only 84% of my money is actually in the market.     So for example if I had 7% gains in the year on my stocks like the S&P500 then my portfolio would only be up 84% of that or 5.88%.   SO the asset distribution I've got of 16/84 cash vs stocks does explain some of why I lag the index.   The cash was mostly thrown off by dividend payments as I've had a high dividend yield investment strategy in general.  Updown doesn't seem to have anyway to do dividend reinvestment which is a pity.

About 60% of my stock holdings are in just 5 stocks T, WDC, BA, MSFT, MRK.   I can't for the life of me remember why I bought those stocks, but thats most of what I own in the portfolio.   I am sure I had some logical reason to buy those at the time, but who knows that those reasons are now.  I haven't looked at them lately so I don't know if they're stocks I'd own right now.   T & BA each did worse than the S&P500 so far in 2014 but WDC, MSFT & MRK have outperformed the index.    The other 40% of my holdings are a mixed bag of 14 other stocks.   Again I now don't remember why I bought any of them.

So this is what happens if you neglect your investments.  I end up with a pile of stocks I bought which I may or may not feel are worth owning today, I have too much money sitting idle in cash and I get beat by the S&P500 index.

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July 28, 2014

Unscheduled Vacation

HI all... sorry for the lack of articles for the past couple weeks.   I've been busy in real life and simply not had the time (or ambition/energy) to get some articles up.    Things should be back on track sooner or later.   

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July 25, 2014

Best of Blogs for Week of July 25th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

MyMoneyBlog has a Free FICO vs. non-FICO Credit Score Comparison

I found this article The Trouble With Shadowstats  via this article Confessions of an Inflation Truther from The Big Picture.   I previously talked about why I think Shadowstats is Wrong on Inflation


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July 18, 2014

Best of Blogs for Week of July 18th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

Doughroller lists  9 Credit Cards That Offer Free Airline Companion Tickets
and they also share 3 Key Ratios to Evaluate Real Estate Investments (#1 is All You Really Need)

Financial Uproar discusses How I Saved $201.49 On Travel Insurance

BiggerPockets gave The 7 Dirty Truths about Landlording (Like it or Not!)



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July 11, 2014

Best of Blogs for Week of July 11th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week

MyMoneyBlog tells about Rewards Dining Programs and Avoiding Airline Miles Expiration Policies

DoughRoller gives his list of the Top 10 Best Cash Back Credit Cards of 2014
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July 10, 2014

How Common Is Natural Gas in Homes?

I saw someone on the internet talk about using natural gas as if every home must have it.   They seemed to take for granted that everyone would have gas service.   The home I grew up in only had electricity and had no access to natural gas or any other type of fuel (propane, fuel oil, etc).    It simply wasn't in the area.   The first home I built was the same deal, only electric.   My wifes home before we married (which is now a rental) is also all electric.   Both of those homes have natural gas available at the street but simply aren't hooked up.    Most places I've lived in my life were electricity only.   I think the dorms I lived in had steam heat boiler setup or something and I vaguely recall that a house I roomed in for a summer had gas.   So I'm on the other end of the perspective of not being very familiar with natural gas in homes.
 
How common are houses with only electricity?  How common is natural gas service really?

I previously talked about the form of heating in homes when I wrote What Do People Heat Their Homes With?  That mostly answers the question, but not exactly.   See you can actually have homes with gas service that don't have gas heat.   Its a minority of homes but a notable percent have gas but don't use gas heat.   I suppose its more common in warmer climates where heat isn't a big deal but they might like gas for cooking or such.

TO answer the question I pulled the data out of the 2011 American Housing Survey Table C-03-AH

The percent of homes with each type of fuel : 


Electricity   98.2%
Gas  67.5%
Fuel oil   8.3%
Others 3.1%

And homes with only electricity :

All electric units  29%

So the majority of homes at 67.5% do have natural gas but a sizable minority of homes 29% have only electricity.

Theres only a little difference between owner occupied and rental units.

Trivia bonus :  108 homes in the US have coal or coke fuel.   Yes ... coal.

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July 8, 2014

Is the Washington State GET Pre-paid Tuition a Good Deal?

UPDATE :   Washington state passed a law that reduced tuition for their public universities.   This impacted how GET works and the program has made some changes to adapt.    Currently though they are freezing new enrollments for a period "up to two years".    See the GET site for more information.    Because of these changes the information in the article below is not currently accurate.

I've been working on a series of articles discussing the prepaid tuition programs offered by several states.  Today I'll take a closer look at Washington state's prepaid plan called GET.

How does the plan function?
Washington state's prepaid college tuition plan is called Guaranteed Education Tuition GET.   The basic deal is that you pay now to buy a "unit" of education and then when your child attends college they get 1 unit worth of tuition.   A unit is worth 1% of a full years tuition at the most expensive public school in Washington, (which is currently University of Washington).   100 units would equal a full year of tuition.   You can use the equivalent amount of money at any university in Washington or out of state.   Right now it costs $172 to buy a unit and the payout is $117.82.    So basically you pay $172 today to get the value of 1% of a years tuition at U. Washington (or cash equivalent at another school) when your kid hits college age.

Is there a good return on investment?
If your child is fairly young then the plan can be an OK investment.   It does greatly depend on how fast tuition goes up in the future.   If you expect tuition to go up 2-3% faster than  other investment returns then the plan would work out for you.   Say for example if you expect tuition to go up 7% annually then you'd have to get better than 4-5% returns on your own to beat the prepaid plan.  Beating 5% isn't hard but it takes some risky investments whereas the GET plan is guaranteed.     So in this measure its an OK investment.   Nothing great but OK.

If your child is in their teens then it is unlikely that the plan would pay off.   For example if your child was 17 years old you'd be paying $17,200 for one years worth of tuition which currently costs $11,782.   Unless you think that U. of Washington tuition will go up over 46% next year then this is not a good buy.   In fact its unlikely that a child within 4 or 5 years of college would benefit financially.
 Bottom line :  It may be an OK investment for young children but for older children it does not pay out well versus investing on your own. 


Are there any state tax benefits?
Washington state has no income tax and there are no state level tax benefits for the plan.   Investment growth is not taxed at the federal level.

Can you use the funds anywhere?
Yes the plan money us usable at other schools.   From the GET FAQs :
You can use your GET units at nearly any public or private college, university or vocational school in the United States and at selected colleges in other countries. A college is eligible if it participates in federal financial aid programs through the U.S. Department of Education. For a list of participating schools, visit the Free Application for Federal Student Aid (FAFSA) Web site.

Is there a state guarantee?
Yes the plan funds are guaranteed by Washington state law.

Is it financially solid?
Yes the funding level is currently very good.   The 2013 annual report for GET says that the actuarial report determined the program is 94% currently funded  and on track to be fully funded by 2018.


Summary:   The plan is in good financial shape and guaranteed by state law.  It may be a good idea if your child is young, but the return would be poor if your child is in their teens.
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July 6, 2014

Is the Florida Prepaid Tuition Plan a Good Deal? (UPDATED)

I'm doing a series of articles looking at the prepaid tuition plans for the individual states that currently offer such 529 programs.   Today I'll look at the Florida Prepaid College Board plan.

[edit updated 8/11 :    When I first wrote this I was unaware of recent law change in FL that makes this plan significantly more affordable.   They've actually cut the cost of buying into the plan by about 30-40%.   That makes the plan much better deal. ]

How does the plan function?
Florida has a few options within their prepaid tuition plan.  You can buy 4 years at a college, 2 years at a college, 4 years at state university or 2+2 with 2 at college and 2 at state.   I'll focus on the 4 year state plan.   Basically for a newborn child you'd be paying current amount of  about $35,000 $53,729 and then get 4 years worth of tuition.   Currently 4 years of tuition at University of Florida runs about $26,400.  You can pay in a lump sum or make equal payments over 5 years.   Also apparently if you move out of state you still qualify for the instate tuition rate in Florida which might be a good benefit for certain people in particular situations for that benefit alone.  Like for example if you are moving to a state without a good public university system or with relatively high instate tuition.

Is there a good return on investment?
Not really.    Lets assume that tuition goes up 7% a year.   To beat the prepaid plan on your own you'd only have to make over 5% 3% on your investments.  Thats not very hard to do really.   You should be able to get 4% on muni bonds for example.    Getting 5% returns guaranteed is not easy so this isn't a bad deal at all.

Are there any state tax benefits? Can you use the funds anywhere?
Florida has no state income tax so there is no tax benefit at the state level.

Is there a state guarantee?
Yes the plan is backed by state law.   If the plan is terminated then anyone within 5 years of college is guaranteed all promised benefits.

Is it financially solid?
Yes the FL plan is pretty solid.   It has an actuarial surplus.  From the last annual report :
"the Trust Fund has 12.1 billion in assets and liabilities of 11.6 billion resulting in an actuarial reserve of $569 million as of June 30,2012"


Summary :   The plan is in good financial shape and backed by the state government but the up front cost is too high and you're better off investing on your own.    With the new cost structure the plan is a fairly good deal financially.   Yes I'd consider enrolling if you want guaranteed paid benefits.


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July 4, 2014

Best of Blogs for Week of July 4th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week


Dough Roller answers DR 082: How Much Should You Be Saving for Retirement?
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July 3, 2014

Is the College Illinois! Prepaid Tuition Plan a Good Deal?


I previously discussed  Pre-Paid Tuition 529 Plans in general.  I'm going to start a series of articles looking at the prepaid tuition plans for individual states that offer them.   Each state that does a prepaid plan has different rules and they all work differently so you really have to look at them individually to know if they're worth using or not.

First up I'll look at the College Illinois! prepaid plan.

How does the plan function?
Illinois has a few options to buy semester credits at community college or university level.   You can also combine community college and university.    You can pay with a lump sum, monthly or annual payments.


Is there a good return on investment?

You can use their calculator to figure costs.  For the University Plus plan buying 8 semesters for a newborn would require a lump sum payment of $99,720.   Current tuition rate at University of Illinois is $16,898.   If you assume that tuition goes up by about 7% a year then you'd have to beat 5% a year on your own to out perform the IL prepaid plan.   This is an OK benefit.

Are there any state tax benefits?
Yes you can deduct $10,000 a year ($20,000 for a couple) from your IL taxes.   However you get that same benefit from traditional 529 plans in IL.

Can you use the funds anywhere?
Yes

Is there a state guarantee?
No.   The plan is NOT guaranteed by the state.   They have a rule requiring the state legislature to consider helping with shortfalls but no mandate to do so.

Is it financially solid?
Not really.    The plan is a bit short on its assets.    The last actuarial report said it was 73% funded as of June 2013.   So its about as good as Social Security funding which everyone assumes is doomed.

Summary:    I would probably avoid this one.   The return is OK for a guaranteed investment however there is no backing by the state and the plan is currently underfunded.

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July 1, 2014

Accidentally posted some Unfinished Articles

If you're a frequent reader you may have noticed several half finished articles were published earlier today.    I accidentally allowed those to go from draft out to published status.   I've reverted them back into draft mode.   Sorry for any confusion...

I've still been pretty busy at work and my personal life.   I'm working on turning over a vacant rental (the topic of one of the barely half written articles).    So sorry that I haven't been publishing regularly.     I hope to get back up to speed on some articles soon.  

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