Posted by Robert on December 12, 2011
This is a guest post by Robert, who lives in Calgary and works as a financial advisor retired at 34. He is married, has three kids. Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.
When I first started trading stocks, with no knowledge or training, I was mesmerized by the market. I would sometimes watch the real time feed for hours, watching prices move up and down, jump from price to price and reverse direction. It was all mysterious, and I still don’t feel like I can adequately explain why stocks move as they do.
I do know, however, that I don’t need to “supervise” my investments for them to perform. In fact, they’ll move up (or down) whether I watch them or not. That doesn’t mean they should be ignored totally. When I worked as a financial advisor, the worst clients were the ones who repeatedly refused to return phone calls. Their accounts didn’t perform, they didn’t follow our advice for improvement, and they inevitably complained that they were disappointed with their returns. So how often should I check in on my investments?
I used to go into work every weekday. Working at the office is what produced the income that funded my paycheque. Now my monthly income comes from my investment portfolio. Maybe it’s force of habit that pushes me to check the market, and my stocks, daily. Each day I glance (just once) at whether the market is up or down, and whether my stocks have moved in the same direction. I’ve found, by doing this, that my holdings tend to move the day or two after the market, and some move more than others. Knowing this helps me when it comes time to buy or sell.
Now, I review the stock market performance each week. I talk about 30 minutes or an hour to review the performance of the market in general and the movement of each holding over the prior week. I also look to see if any news has come out that has an effect on the fortunes of my companies. But none of this, barring exceptional news, normally leads to a trade.
Each company produces a quarterly financial statement and holds a quarterly conference call. I read through the financial statements, especially the results of the prior quarter and the outlook for the future (which I take with a large grain of salt). It’s helpful to hear from the managers who are, after all, running the company on my behalf (not that my holdings are large enough to warrant personal attention). I also usually appreciate the questions from analysts, since they ask better questions than I could come up with.
During a volatile period in the markets, like the last few months, my net worth can fluctuate by $10,000 or more on a particularly bad (or good) day. Generally, it will reverse over the following couple days, so I don’t get too worked up. Trading is expensive, in transaction costs and in the potential for error, so my goal is to trade no more than 10 to 20 times per year. Watching my stocks too closely would not only be a waste of time, but would likely result in more trading than necessary.
If you own stocks, how closely do you watch their movements? How frequently do you trade? Why does that work well for you?
Posted by Canadian Dream on December 8, 2011
Well it was with a bit of shock last week that Jacob over at Early Retirement Extreme announced that he was unretiring and taking up a paid job again after being retired for a few years. Of course like any big decision like this some people consider it a betrayal and decided to call Jacob a hypocrite, which is well bloody stupid.
Perhaps people like that need a little refresher on terminology. Jacob is still financially independent, he has a enough income from his investments that he doesn’t need to work. While the term ‘retirement’ does typically indicate that you are no longer working at a paid job, it doesn’t prevent you from changing your mind and taking up a job. You don’t need the money, but you just might like the challenge of the work or perhaps the socialization.
Sydney over at Retirement: A Full Time Job took up a consulting job after a few years of full retirement as well and I don’t recall anyone calling her a hypocrite. Hell even for my own plans I’ve been honest that I will likely do some paid employment even when I no longer need to do so. Just likely not a lot of it.
In general there is a misunderstanding by some people that early retirement means they will never work another day of their lives at paid employment, which of course is an option. But the world isn’t divided into black and white, there is a lot of grey between full time work and full retirement. This can be a happy place for a lot of people, but again it doesn’t prevent a person from going back to full time work if they choose to do so.
The ultimate freedom of financial independence doesn’t limit your choices in life. Instead it grows those choices exponentially, including picking full time employment again. Nothing is off the table when you get to that point of your life. So if an unretirement works for you, go ahead and enjoy it. I personally like the grey world of part time work but that doesn’t prevent me from working three part time jobs (like I do now) after I quit my current day job. Heck, I might even manage to work out a further reduction of hours at my day job and stay on for a few more years. It’s a valid choice, even if you personally won’t make it.
So in the end, don’t judge other people’s choices. We rarely get to know everything that went into the choice, so while it might not make sense to you, it likely does to the person who made the choice. Jacob, enjoy your next adventure in life. While I won’t have picked that option, I’m not you. Good luck.
Posted by Gwen on December 6, 2011
This is a guest post from Gwen in Ontario, who is 39 years old with a grown daughter, and is trying to rebuild her retirement dream just 20 years too late for early retirement.
As I said before, I tracked every dollar I spent in November, using 3 different trackers (I started with 4, but it quickly became clear that one method was not what I was looking for).
November may not have been the best month to start doing this, as I had a week off work as vacation time, so my spending was not “usual”. I spent $297 on groceries (I did stock up on some sale items) but I also spent $200 dining out (which is I believe is about $150 more than usual) as well as $160 on entertainment (which is usually closer to $50).
I learned some other things while doing this as well. Firstly, it is a pain in the butt. It might not be so bad if I was only using one tracker, but by using 3, I tripled my work. I also am getting a clearer picture of what I want to see in a budget spreadsheet, and what I don’t really need. The nerd in me loves the idea of knowing how much I spent at each store, how much was on fresh produce versus how much on meats and grains, but the part of me I try to keep in reality now knows that I really don’t need to be that detailed.
Another thing I learned was that I can utilize laziness for this to a certain degree. The more I spend, the more work I create for myself. If I shop less, there is less admin time spent to log the expenses. As much as I love playing with spreadsheets, I don’t want to have to do it every day.
The trackers I used were:
Spenz – This is the one I stopped using, I wanted to like it, and if all I wanted to know was where I was spending my “blow” money, this would have been perfect.
Pear Budget – Very simple and easy to use. It doesn’t allow an abundance of categories, 10 Variable and 10 Irregular (which for me might be a good thing), and keeps track of the dollars only, not where I spent them, (although I can use the Excel comment to make notes such as who the gift I bought was for and why etc). I’m going to continue playing with this one as it has a lot of what I’m looking for.
SimpleDBudget – At first, this was my favorite, I could create all the categories, and sub-categories I wanted. I entered the date, and where, and why I spent, but at the end of the month, the analysis only showed me some pie and line graphs for each category I made, but didn’t cross reference that data with anything else (except for over or under budget, and percentage of budget.
Budget Tracker 3.1 by Duck Software – This one allowed for 13 categories in total, and I didn’t I found it labor intensive to use, for example, I had to click on every field I wanted to enter data in (a new field for each day of the month) as opposed to “tabbing” my way through it. It totaled my categories, but that was the extent of the analysis.
December is presenting it’s own challenges already. My boyfriend is now making less income than he was before, so we are living on less money, plus there are the added expenses of Christmas. I don’t buy for many people (mainly my daughter and a few other small gifts) so I’m confident I can get through the season without damaging my finances too much. I’m taking a break from tracking in December (although I will be looking at some other programs, or working on my own spreadsheet solution) but will resume in January when life gets back to “normal”.
