Not much change in my trailing of the S&P 500 index this week. I thought for sure that the pullback would begin this past week, I was wrong. Here’s the performance chart to date.
I’m making the following changes on Monday morning:
- Increase holdings of GLD by 25% to 3% of portfolio overall.
- Take some profits on holdings AMCN and GE which are up 31% and 65% respectively. Sell 10% of each position.
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This is not necessarily a finance-related post, but indirectly it could be perceived that way. I’ve been reading and listening to a lot about attitude and how it affects success and wanted to share a few thoughts with you… a summary of what I’ve absorbed so far.
Your attitude is your own so make sure you own it.
No one controls how you view the world other than you. If you have issues with something, deal with your perceptions of it first and chances are it’s not as big of deal as you thought. If you find nothing but faults in something or someone, look within yourself to find out why you cannot see the positives.
You can control how successful you are because your definition of success is individual.
Whether your goal is to retire a millionaire or to give endlessly to charity, it doesn’t matter. What matters is that you have goals. Your success is entirely defined by how well you’ve accomplished the goals you’ve laid out for yourself.
You’ll see it when you can believe it.
William Arthur Ward once said, “If you can imagine it, you can achieve it; if you can dream it, you can become it.” Everything starts with an idea and once you have that idea, you have the power to make it real.
Success and happiness come from within.
I think this one is self-explanatory and it relates to what has been mentioned above. It is within your power to be successful and happy because it is you who creates those definitions for yourself.
So how does all this relate to personal finance… just take these thoughts and apply them to whatever your financial situation happens to be. Easy for me to say, especially since I get to be as vague as I want, but remember that it’s all about attitude. If you’ve read what I wrote and immediately felt that you disagree, (”oh, I can’t do that”) I would invite you to check your attitude.
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Life insurance needs are different for everybody, but unless you have no dependents and no big financial obligations, life insurance is a good thing to have.
The Problem With Needs Calculated Based on Income
When trying to determine just how much life insurance is needed, often some multiple of income is used. For example, some insurance experts might suggest that a ‘rule of thumb’ is 10 times the income of the person being insured. If the head of a household brings home $60,000 per year, then this ‘rule of thumb’ would suggest a policy of $600,000.
I don’t necessarily agree with this method of calculating your needs. Yes, the math is easy, but it may cause you to be over-insured. I think a more prudent method is to try and estimate the expenses that would need to be taken care of after this income is lost. Maybe you have a kid who need to go to college in 10 years, maybe you have a mortgage, maybe you have other debts that require payments over time.
Expenses-Based Calculation of Insurance Needs
If college savings is $2,000 per year for 10 more years plus an additional $20,000 at the time the kid starts college, and a mortgage is requiring payments of $20,000/year for 15 more years, those obligations total $340,000. Perhaps once the kid is out of college and the mortgage is paid off, the surviving spouse’s income could support the household. In this example, a 15 year term policy of $340,000 is much more appropriate than a term policy with a $600,000 benefit. This difference could save you nearly half your annual premium.
Looking at your expected expenses instead of the lost income due to the death of a wage earner gives you a clearer picture of your insurance needs and will allow you to save/invest the money you’re not plunging away into unnecessary insurance.
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I’ve had a 1.1% increase in my portfolio so far in June. Too bad that hasn’t kept pace with the S&P 500 which has had a 2.3%. Here’s the latest performance chart.
I’m still waiting for a big pullback… Since March, the S&P has run up 39%. I don’t understand this. The economy is still ailing. We lost 345,000 jobs in May (yes, it’s not the 500,000 or 600,000 we’ve been seeing, but it’s still a big loss). The big consumer credit problems arising from defaults, etc. have not really made as much news, but I think they will by the end of this year. I suppose that investors are just pleased that the economy is not ‘on the brink’ any longer.
I don’t think we are going to have a quick recovery. After 20+ years of growth founded on serious debt, economic growth will have to be more honest going forward. Without debt, there is no quick way to make a buck, so once the honesty and realism hits investors, we’ll see that downturn I’ve been waiting for.
But back to the S&P… We are now at levels last seen in early January and then before that, November 5th. It seems there is some resistance at these levels so I’m going to say that this week will be a loser for the S&P. I’m doubling my short position on the index. No other position changes this week.
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I’ve made a little progress with the portfolio, increasing the value one percent this week, unfortunately the S&P still outpaced me. The position I took in AMCN is largely the reason why I had solid gains this week - that stock is up 19% since I bought it on Tuesday. I’ve already skimmed some from that position. Here is the performance chart thus far.
I need to think about how I want to proceed with my holdings. I am still a little amazed that the rally has lasted this long and I feel like a turnaround/pullback is on the horizon, but every time I say that, the market goes higher. (”If every instinct I have is wrong, then the opposite must be right.”)
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