Home > Archive: July, 2008

Archive for July, 2008

Finally applied for life insurance for myself

July 29th, 2008 at 12:32 am

When I was working full-time I always had life insurance through my job benefits. I don't remember if I took the basic 2x or 3x salary or bumped it up enough to cover the mortgage. When I became a SAHM that of course ended.

DH has insurance for 3x salary through work, and also a group term policy through IEEE (a professional organization for engineers.) The IEEE insurance is a great bargain, only $77 every six months for $500k coverage.

DH originally felt funny about taking insurance out on me, because he felt he'd be able to provide for our son on his own with no problem. Then we attended a will and trust seminar where they made the point that if both parents die you should leave enough insurance to pay for the guardian to raise your kids, and that provided a rationale he felt good about.

So I've had adding spousal insurance on the to do list for a long time now. IEEE actually called one day and instead of blowing off the salesperson like I would normally do I asked for a quote. Since I'm working again (software contracting), I could join IEEE myself and take out an individual policy, or go on my husband's policy as a spouse, so I asked her to quote it both ways. She said she'd never been asked that before. Smile It turned out that it was about $15-$20 cheaper to be a spouse, plus I wouldn't have to pay dues (although I might rejoin someday anyway if I decide to use the club for networking purposes.)

I think my policy is about $67 every six months for $500k coverage -- what a no-brainer! I should've taken care of this years ago.

So if DH dies, there's enough to pay off the house and income replacement for 4 years, and if I die he can pay off the house and have an extra 2 years of my current income. Plus of course we'd inherit each other's IRA accounts. $2M (half from insurance, half from our current net worth) should be plenty to raise our son if we both die.

I really should get a quote on long-term disability insurance as well. I think DH has 66% replacement coverage through work. Not sure if I am able to get it while working as a contractor.

7 Books that Helped Me Learn About Investing

July 28th, 2008 at 09:42 pm

Books I've found useful, and the main topic covered. I've placed them in the order I would recommend reading them. You can click on my Booknotes catagory to read my summaries of numbers 1, 2, and 7.

1. All Your Worth (getting your basic financial picture in order so you have money available to invest)
2. The Complete Idiot's Guide to Getting Rich (helps with goal setting)
3. Bogleheads Guide to Investing (explains mutual funds and the indexing strategy)

Text is and Link is An online book abpuy impkementing the Bogleheads strategy,
5. The Intelligent Asset Allocator (how to structure your portfolio)
6. Morningstar Guide to Mutual Funds (how to analyze and pick funds)
7. Common Sense on Mutual Funds by John C. Bogle (highly technical analysis of index investing)

Attempting a quarterly portfolio review

July 14th, 2008 at 05:39 am

This has been on my "to do" list since paying estimated taxes in mid-June, and I finally had the time and inclination to sit down and make an attept at it. I'm still in the process of figuring out exactly what to look at in these quarterly reviews. As usual, I find that I end up spending the majority of the time creating a new spreadsheet and manually typing in details that I later decide aren't really what I should be looking at.

I've been slowly making my way through Morningstar Guide to Mutual Funds, and taking notes on each chapter. I find it to be far better than the "learning" information on the website, which seems to be generic handwaving.

So in an attempt to understand what I currently own, I created a spreadsheet wtih the following columns (picked from my notes from the book):

* fund
* symbol
* account
* style
* stars
* sectors
* % assets in top 10
* asset allocation
* benchmark
* trailing annualized return (3, 5, 10 year)
* benchmark return
* 3 yr standard deviation
* expense ratio

Then I looked up each fund I own and copied the info. Putting in the sectors and the returns took the bulk of the time -- what a lot of typing! Not sure this was worth the effort. I noticed a little bit of duplication -- two large-value, and two world large-value funds -- but the holding in the second fund in each case were fairly small.

The only conclusion I came to was that, yes, American Funds has low expense ratios. Smile

Next I made another worksheet for the current hodlings:

* fund
* symbol
* account
* shares
* current value
* amount invested
* amount withdrawn

My basis info isn't available on my brokerage website, probably because the funds were originally purchased directly from American Funds rather than through the brokerage. I later transfered them to the brokerage so everything would be on one statement. I need to call my broker and see whether the basis info can be obtained and added, or if I need to go back through 15-20 years of statements to figure out the basis for each fund.

Finally I went to Morningstar and used instant x-ray to get an overview of the whole portfolio (including DH's funds). The asset allocation is currently:
Cash 9.47
US Stocks 35.93
Foreign Stocks 43.51
Bonds 10.57
Other: 0.53

Next time, I'd like to work out a way to streamline transferring the current holding numbers from the brokerage to the x-ray tool.

I'm considering eventually putting a 5-10% stake into REITs, but that's another learning curve in itself! My thinking is that real estate is an asset class that moves independently of the stock market, and the current bust may make the next few years a good time to invest.

The stock style is currently
large: 24/29/23
mid: 6/4/7
small: 2/2/3

Going forward I think I want to add more small- and mid-cap exposure.

The Stock Sector percentages were mostly close to the numbers for the S%P 500. Nothing struck me as terribly high, although I have no real opinions on which sectors should be 5%, 10%, or 15%.

World Regions:
US & Canada: 48.44%
Europe: 27.84%
Japan: 2.39%
Latin America: 2.82%
Asia & Australia: 14.45%
Other (Africa): 4.06%

Average Mutual Fund Expense Ratio: 0.68%

Stock Stats (ratio to S&P 500):
Price/Prospective Earnings: 13.27 (0.99)
Price/Book Ratio: 2.10 (0.91)
Return on Assets: 8.80 (1.03)
Return on Equity: 21.35 (1.00)
Projected EPS Growth - 5 yr% 13.00 (1.14)
Yield % 2.71 (1.25)
Avg Market Cap ($mil): 24,233 (0.49)

I'm not sure what to make of the Stock Stats section, but it seems to me to indicate that most stats are on par or a little better than the S&P 500.