Current Stock Investments

Its been over a year since I last published a full list of retirement and taxable investments. Since then I got married and am merging finances with my wife, our net worth has increased significantly, and more and more of our net worth growth has been coming from our investments. I have said it before, but more regular attention and fine tuning of our investment strategy is needed. I may begin publishing regular updates on our investments to help me focus on this priority.

Investment	Symbol	Basis	Value*
International Stock Market Index	N/A	401(k) Unknown	$34,236.59
Large Company Index	N/A		$ 6,460.98
Large Cap Growth Index	N/A		$ 8,909.84
Pacific Stock Index	N/A		$19,083.13
Small Cap Value Index	N/A		$ 26,524.93
Total Stock Market Index	N/A		$31,847.42
Vanguard Windsor II	VWNFX	$ 34,284.08	$33,350.20
Vanguard International Value	VTRIX	$ 1,931.08	$ 1,698.51
TRowePrice Equity Income	PRFDX	$ 922.61	$ 862.74
TRowePrice Retirement 2025	TRRHX	$ 4,356.38	$ 4,077.80
IBM	IBM	$ 27,504.34	$33,146.07
Pfizer	PFE	$ 19,987.51	$15,758.78
Wachovia	WB	$ 8,915.45	$ 8,242.35
Merck	MRK	$ 4,907.41	$ 6,070.13
Vanguard Extended Market ETF	VXF	$ 5,122.88	$ 4,926.10
Anheuser Busch	BUD	$ 4,655.02	$ 4,887.06
Vanguard Emerging Market ETF	VWO	$ 3,587.34	$ 4,179.48
ExxonMobil	XOM	$ 2,015.72	$ 4,130.04
Duke Energy/Spectra	DUK/SE	$ 2,310.36	$ 3,986.93
Medtronic	MDT	$ 4,102.03	$ 3,968.78
USG	USG	$ 4,660.00	$ 3,718.49
General Electric	GE	$ 2,986.45	$ 3,063.04
Proctor & Gamble	PG	$ 920.04	$ 1,932.07
Marsh Mclean	MMC	$ 1,514.76	$ 1,496.48
Connocco Philips	COP	$ 1,255.46	$ 1,437.57
Lowes	LOW	$ 943.54	$ 1,030.92
Chevron	CVX	$ 575.83	$ 997.10
CMS Energy	CMS	$ 1,141.08	$ 942.30
Edison International	EIX	$ 169.67	$ 643.65
Johnson & Johnson	JNJ	$ 530.60	$ 551.34
Ebay	EBAY	$ 504.00	$ 531.25
Pepco Energy	POM	$ 454.87	$ 512.49

Notes:
*Value as of 2/10/2008
Retirement holding are listed in red
Cost basis includes reinvested dividends
Dividends and/or distributions are not included in value column hence you can't compute profit from this investment snapshot
I have opted not to include investments with a current value < $500.

Significant investment changes over the past year:
A quick scan point out some significant changes since the last published investment lists

An invesment postion in USG although we are no longer adding money to this position as earning estimates for USG have dropped significantly
An investment position in Wachovia - we are still actively adding to this postion as this is the first time in years that I thought financials were a compelling value investment
We are still adding to our Pfizer investment which I still believe has a compelling value
We are making regular contributions to ConoccoPhilips DRIP as a small hedge against rising energy prices
Increased positions in Vangaurd Emerging Markets ETF and Extended Market ETF to better diversify our holdings beyond large cap holdings
My wife's Roth IRA investments have been added to the list

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Comments (6)

The table you put together is very informative but it also raises some questions. For the taxable investments for which you have a basis ($140,259) and a mkt value ($146,142) your gain is a paltry 4.19%. By any measure this is a very small return. The further bad news is that the taxable position appears to be 53% of the total investment assets.

47% of investment assets appear to be tax-deferred in the 401k and we cannot know the return without the basis. You can get this information in total by going to all of your paystubs and adding all of your contributions, minus withdrawals and loans if any.

In any event, it seems like you were calculating monthly NW growth in the 2-3% range monthly in the past. This should be reconciled with your rather lower investment return. I suspect that with NW, you were including your salary/savings contributions and these had a large impact in a smaller NW figure. As NW incresases this investment return becomes more important. (Aside: Did you figure in investment dividends and distributions?). Figuring out accurate consistent rates of return is difficult and bears a little bit of thought.

The tenet of max income, savings, min expense applies to the road to financial independence, but also you need to have accurate measurements along the way to gauge progress.

Posted by ETFnerd | February 11, 2008 6:04 PM

ETFnerd, Thanks for the comments. Not sure I follow what you are saying here "The further bad news is that the taxable position appears to be 53% of the total investment assets." - Why is that necessarily bad news? -- Oh this reminds me that my cash balance pension is not included in this list so my pre-tax retirement assets are higher than what is stated here.

As I noted in the very small print dividends/distributions are not included however those that were reinvested are included in the basis so this doesn't give you the right data to calculate a return. Taken as they are they are kinda scary -- very little return.

Posted by 2million | February 11, 2008 8:55 PM

I wasn't knocking the size of the investments, you've done a great job with savings.

I was just noting that a large portion of your investments are taxable (53%) and they have been generating pretty low returns if your investment period was over 2-3 years.

A better way to calculate returns is to use a method to normalize the holding period by using a time weighted, geometrically linked rate of return calculation methodology like modified dietz.

Methodology here: http://www.russell.com/ca/Investor_Services/Personal_Rate_of_Return.asp

Posted by ETFnerd | February 11, 2008 11:50 PM

ETFnerd, Thanks for the clarification although I am still slightly confused. I am not sure why 53% of the total invesments being taxable is a bad thing? I have maxed out retirement contributions from day one (Roth IRA, 401k, SEP IRA) so there is no way for me to contribute more (at least yet).

I agree my investments have been generating a lower than hoped for return for the past couple years - I do an annual assessment around this time each year see 2005 and 2006. Still working on in for 2007 -- once its done we wil see how good or bad it was for '07.

I have used the modified Dietz method to calculate my rate of return in the past -- see here for example. I didn't bother trying to calculate it on this post -- too much work :-).

Posted by 2million | February 12, 2008 3:07 AM

Sorry. To clarify I wasn't saying that having 53% of investments in the taxable bucket was a bad thing. Just pointing out that such a large % of investments earned such a low rate of return.

If you wanted more tax deferred income, annuities defer income from gains. Low cost options are offered by Vanguard. Most people prefer the do-it-yourself deferral of index funds and some ETFs because these have low turnover and thus distribute fewer capital gains. Because you invest in DRIPS, if you never sell your investments, you'll never realize a gain and trigger a taxable event.

Remember that annuities have a few benefits in that they mitigate the risk that you'll outlive your money. Most Monte Carlo simulations of returns assume that you'll live to 92 years old or so. Some people live to 100 and beyond, and with advances in science, who knows.

You'll have 529 plans, will, trust and estate plans to make for when you have children. Insurance issues, asset protection issues, etc. Maybe incapacitated parents or siblings. Obviously you'll have to decide to plan for these efficiently, but there'll be many fun things coming down the road for you.

Posted by ETFnerd | February 12, 2008 9:44 AM

Have you considered doing your table by sectorial bias? In the most obvious case, Pfizer and Merck are both going to overlap in terms of pharma exposure. But you've probably also got a slug of your large cap portfolio in big pharma, too. You might find your slightly less diversified than you thought (or indeed you might find the opposite!)

Just an idea - I investors underestimate asset allocation as a rule.

Posted by Monevator | February 13, 2008 8:19 AM