Reader Profile: WW

The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.

If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.

Next in the series is FMF reader WW. He answered my questions (in red below) as follows:

Please tell us a bit about yourself.
 
I’m in my early thirties, married (just 2 months ago), and work in consulting.  I grew up in the West, attended a small private university in the Northeast for free due to scholarships ($130k worth of tuition) and so graduated with no debt.  I’m happy I had the freedom to get a true liberal arts education, as I’ve been able to apply ideas from the various disciplines to completely unrelated areas of my life.  My wife emigrated to the U.S. in her teens and attended an Ivy school, and we met through working in the same industry.  I have lived in 5 different countries, and have had the opportunity to travel to 50 or so more for both work and pleasure.  I feel very fortunate to have been able do this, as well as to have found my wonderful wife.  We’re both grateful for the opportunities we’ve had in life and certainly don’t take what we have and our experiences for granted.

Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
 
Currently, my wife and I both work.  Our monthly income pre-tax is ~$25k, which according to a post on FMF puts us in about the top 3% in terms of income.  My wife makes slightly more than me, which I’m quite happy about, and would be even happier if she were sizably outpacing me.  Our income has grown steadily over the years, but only in the last few years did either of us hit 6 figures individually.  The last couple of years and this year we will max out our 401(k)s as well as Roth IRAs (contributing via back door conversion).  We also both have company stock plans that allow discounted stock purchases, which we buy the maximum of $30k combined each year.  This is generally sold immediately so as to diversify stock holdings from the companies providing the paychecks.  We’re just settling into married life, so it remains to be seen how much we’ll save in taxable accounts outside of what’s already mentioned.  We live in the Bay Area for work opportunities and to be close to family.  Currently, rent is $3k, utilities and such run ~$300 a month.  We also pay a mortgage for my wife’s parents at $1,500 a month.  Our income allows us to be more lax on other budget items; I have no idea how much we spend on food, gas, etc. per month and I generally don’t care.  Giving is variable, but has probably averaged $20k a year the last few years (taking advantage of giving appreciated shares when possible).  
 
Our wedding was great, but it ended up costing substantially more than I would have liked (about $35k in total).  We’re far and away in the best shape financially in our families, so we provided a lot in terms of flights, hotels, and meals for other people that ballooned the cost.  I negotiated everything vigorously and the actual ceremony and reception were probably ~$20k.  We also went on a very nice long honeymoon that cost us ~$15k, but I regard as well worth it since we got to do things that we likely won’t get to do again in our lives.
 
A few years back I kept a budget and for 6 months I recorded every penny I spent; it turns out I was already spending on things that made me happy and there wasn’t a lot of waste, so I stopped with it.  We don’t carry any monthly credit card debt, my wife has long since paid off her student loans, our cars are both paid for, and we don’t carry any other debt currently.

What are the current financial issues you're facing (saving, paying off debt, etc.)?
 
Our net worth is ~$1M.  Roughly half of this is in retirement accounts with the other half in taxable accounts.  Our assets are currently in stocks (40%), bonds (10%) and cash/short term instruments (50%).  We have the cars and some other hard assets but I don’t regard these as significant to our overall financial picture.  There are two issues facing us currently. 
 
The first is whether to buy a place to live or not.  A nice 2 bedroom place with good schools would run upwards of $800k in this area, unless we want our commutes to swell to 1-1.5 hours, which I regard as an unacceptable lowering of quality of life.  This would obviously require a significant portion of our net worth and future income tied up in a mortgage.  As mentioned, I have lived in several countries in the last 10+ years, and it’s been great to have the flexibility that comes with renting to be able to move around.  Being married and likely needing more stability changes this, but I’ve found it hard to change that mindset in myself that owning a place would be like an anchor on me both financially and geographically.  Owning both real estate and a mortgage could also be a helpful hedge against inflation, which is my next issue.
 
The other thing we’re currently facing is what is happening with the broader macroeconomic picture, and how to best position our money to continue growing our net worth (saving is a given).  Being a net creditor, I would love some solid deflation or increase in strength of the dollar, but neither of those is going to happen with the current system in place.  I’m very worried about the purchasing power of our savings being inflated away by the government and Fed – I don’t think there’s any other option for them, as the U.S. economy is never going to generate enough growth to bring down the debt, and the politicians will continue business as usual (deficit spending) until a collapse/crisis (see Europe for example A, which is far from over).  Everyone likes to claim “this time it’s different!”, but it’s my belief that we are in the midst of something very different from our usual business cycle recession, this is a once-every-other generation deleveraging cycle that is far from over.  It’s unlikely but possible (I’m giving it a 10% chance or so) that our current system is unsustainable that we’ll see a significant issue with the dollar in the next few years.  Even without this, the low interest rate / growth environment make it difficult to keep ahead of inflation (even the low official number).
 
Clearly, this doesn’t square with having such a large cash position currently, but it illustrates one of the “tough” parts of being near, but not at the top of wealth.  The very wealthy are connected enough that if something is about to go down, they get a call to clear out from those on the inside.  No one from Goldman will ever be giving me a call.  I have to either a) figure out my own strategy for protecting and growing wealth in a very difficult environment, or b) pay someone better than me to do so.  I’m not convinced the people who would be willing to work with an investor of my size are any better at this than me, or at least my potential for being a good investor.  
 
Along with bond prices being at an all-time high, corporate profits at an all-time high, real estate not yet returned to long-term norms, and who knows what in the precious metals market; it is a very, very challenging environment to invest in right now (I particularly liked Bill Gross’s description in his letter at the start of the year around two very divergent potential paths) and I find the need to become much more educated and diligent as an investor.  I’ve not yet figured out what is the driving force, but the benefits of asset diversification have significantly dropped since 2007 (more correlation between classes), further complicating matters.  So I’m trying to update my skills and figure out a comprehensive strategy currently, as I don’t like my old one and realize lacking one is not going to be sustainable for any period of time.
 
At the boundaries investing is easy; if I’m 22 and have $10k to invest I just put it in the Vanguard Total Stock and forget it.  If I’m Old Limey and already rich and retired I just put it all in muni bonds and forget it.  In between, though, it’s difficult to figure out the optimal or even near optimal strategy for maximizing growth and minimizing risk.  I know FMF is in a similar situation and chooses to buy and hold index funds in the stock market.  Which has worked great for a lot of people in the past, but I don’t regard as a particularly good strategy going forward as the market is changing in terms of technology, who’s invested, and the very different macro picture now vs. over the last 40 years.
 
I’ve learned a lot here from Tyler, Mike Hunt, Old Limey, and lots of others, so thank you all for sharing.
 
What are your plans for the future (retire early, build your career, etc.)?
 
I feel having ~$4M net worth in today’s dollar purchasing power is the “right” number for us to be free from working and throw off enough income to not ever touch principle while living a pretty great lifestyle.  If we want to get there soon, it’s going to take investment gains more so than savings just because of the math with bigger numbers (saving an additional $20k a year only increases a $2M portfolio 1%), which is going to mean being on the winning side of some significant bets or being exceedingly lucky.  
 
I realize that this is higher than most people shoot for, but for me money = freedom of action and time, both of which I value very highly.   When I was 21 I was diagnosed with a terminal illness and given 2 years to live.  It turned out to be an incorrect diagnosis; and while that period was certainly awful, it did give me a full appreciation for every day I have here, and resulted in a strange mix of living for the moment and immediate gratification with long-term saving goals to become wealthy enough to not have to spend any minutes doing work I don’t want to do.  It also has made my risk tolerance nearly off the charts – as long as the reward matches or exceeds it I’m willing to take the gamble.
 
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
 
I used to be a buy-and-holder in the stock market, but I’ve updated my thinking based on additional research.  There are lots of sources of material, but a particularly influential book for me was “Unveiling the Retirement Myth” by Jim Otar, which I actually only read because it was a free ebook download one day (maybe mentioned on FMF?).  There are a few minor quibbles with the book, but on the whole he takes a great approach to the math and conventional wisdom of personal finance and I think a lot of the crowd here would really appreciate it; it’s a lot better than most of the personal finance canon.
 
Philosophically, my viewpoint on personal finances is just a part of my larger view of life.  You have to determine what your priorities are, and then take action based on that.  For example, a lot of people in my company say things like “I wish I could live overseas like you did…”, when in fact they could.  They just aren’t willing to make the tradeoffs necessary, or haven’t prioritized it highly enough.  I personally value friends and family, my health, and having free time to travel, hike, or pursue other activities I enjoy.  My personal finances reflect these as I spend my money on these things (and virtually nothing else) and invest so I can do more of them in the future.
 
Figure out what you really value in life, and spend your money and time there, whether you have a lot or a little.  It doesn't have to be that hard.

Comments

[Mark]

I have had some similar experience to yourself. I have lived in 4 countries and worked or vacationed in around 40. I think many who have actually had this exposure are much less confident in the US system than those who have not. But not in the paranoid far right (or left) fringe way. We have simply seen other systems work well. It is difficult to ever be completely satisfied living anywhere when you know some elements are better somewhere else.

I am 20 years ahead of you though and have close to $4 million stashed.

My thoughts are as follows:
1. You say you don't know or care how much you spend on gas, food, etc. I think you should at least know your total monthly spending. You're obviously doing well financially, but I question whether $4 million will be enough for you to live the way you do now - although you haven't actually told us how much you spend, so I could be wrong. I know it is boring, but I still keep track of everything in Quicken.

2. I also question some of your statements about investments - the very rich having inside information for example. Or Old Limey and poor 20-yearolds having it easy. Are you sure you are not just paralyzed by doubt? Or feeling that somehow things must be more complicated?

If you doubt the future of the US economy then invest elsewhere, and diversify within the US economy. My own investments/assets consist of a house I live in (with a 30 year mortgage I will pay off as slowly as I can - my little inflation hedge), plus a condo and a townhouse - both fully paid for, and almost everything else in stocks - less than 50% in the US and a good weighting towards China and other markets outside the US and Europe.

Perhaps this time is indeed different, as you seem to think. However, I think you are a classic example of the recency effect. You are focused on the last 5 years, not the last 100 nor the next 50. People who were in their mid-20's during the Great Depression had the same types of doubts you have. They had lived through a period of financial turmoil when they were very impressionable and it affected their thinking for the rest of their lives.

I think we are simply seeing the natural maturing of the US - perhaps followed by a gradual decline just as Britain and Europe experienced a hundred years earlier. At the same time, we are seeing the rise of the Asian economies - dominated by China. But just in case I am wrong, I keep around 50% in the old and 50% in the new.

I believe that there are too many other smart people expoiting inefficiencies in the major developed markets and I don't think I can beat them, so I use index funds exclusively for my US and European holdings. Around 20% of my stock funds are in actively managed finds invested in Asia.

I love your statement about priorities and try to do the same myself. "You have to determine what your priorities are, and then take action based on that." Very few people actually live that even though they say the words.

[Pop]

How old is your wife if you don't mind my asking.

[Mike Hunt]

Hi WW,

It sounds like you are doing well and have some well defined goals. I would suggest a good retirement strategy would be to set up a portfolio of international large and stable companies that pay steady dividends. Many of these companies have income streams around the world and have some hedge against being only focused on the USD (which will cut both ways depending of if the USD strengthens or weakens)...

But the key strategy is to start the portfolio with a good starting valuation, and there are some ratios (Shiller P/E 10 for example) that test this. The trouble is that earnings have jumped quite a lot recently at the same time as there has been massive gov't borrowing and supporting of the economy- if this is not sustainable (and I think that is the case) earnings will go down back to historical levels and share prices will come down. This is why I believe it is good to not have all cash tied up into such a portfolio at this time. Like you, I am saving up and thinking about the strategy.

Keep reading and researching, there are definitely some good websites and ideas out there.

-Mike

[Eric]

Hi WW,

You're obviously in a great position. Congratulations on your success so far.

I think Mark left an awesome first comment. He pretty much articulated what I was thinking in a much better way though. I especially like his inclusion of the recency effect and the nagging feeling that "somehow things must be more complicated." It seems that is the money area stressing you the most (understandably), but it also seems some of that stress may be overly induced. The thing with investing is information is a double edged sword. You need it to help you learn but too much of it can lead to unnecessary doubts and conflicts. At least that's how I've felt sifting through the nearly endless investing advice online and offline. Everyone has an opinion and many times you just need to filter out a lot of it and develop your own investment philosophy. More important, stick with it. The K.I.S.S. school of thought isn't so bad really!

[Old Limey]

WW:
You have a problem that the majority of people your age would love to have. My investment portfolio didn't reach $1M until 1997 when I was 63 and 5 years into retirement.

In the current environment with some European countries teetering on the brink of disaster and the USA facing deep financial trouble in the years ahead, especially when you add in all of our unfunded liabilities, it is exceedingly risky to stick your neck way out and try to obtain annual portfolio gains in the mid teens. What you don't want to do is to take significant losses on any investments. A good friend of mine runs a small hedge fund and sends me his bi-weekly $1200/year newsletter free every month. Currently the ETF that is at the top of his rankings is THD (Thailand) but I would never dream of buying any. Between 8/1/11 and 10/3/11 it dropped 30% in just 2 months and then between 10/3/11 and 5/2/12 it gained 52%. That's incredibly volatile and not something that I have any stomach for.

If you take a 50% loss you then need to double your money just to get even again.

[Luis]

Hi WW,

You didn't mention what your expenses are in a typical month. You don't need to budget every penny, once a year is what I do and what I think should be the minimum. Also you didn't mention what you have in liquid savings unless I am to assume nothing based on your net worth report.

I'd first work on an emergency savings based on 6x monthly expenses. Determine your x (expenses) at this time by doing a rough budget.

Second, start a home fund and be ready to put 20% down. Use FMF's guideline of 2x combined salary for determining how much house to buy. When you are finally ready...go and buy a home. If you are not ready, mentally speaking, keep the home fund until you are ready to settle for at least 5 years.

There are other ways to hedge against the dollar and inflation. You can alternatively invest in REITs if you want. Also, invest in international stocks such as BRICs. Brazil has a nice ETF called "EWZ".

Don't worry about the insiders gain. Those inside Goldman et al. are in the 1% anyway and so no one will "pass" you. If anything should happen, you have your intelligence to fall back on and continue your success in life.

Regarding your money fears....I used to think in the same lines when I was younger. My fear had me pondering moving all my assets to gold. (i'd be rich if I had actually done that!)Money is just a medium, and we are temporary stewards.

Ever consider becoming an expatriate one day? Whatever you do, do not open a bank overseas such as Cayman Islands!

[Leigh]

Call me crazy, but I didn't keep a budget during college (though I did know what my spending looked like) and I started keeping a budget after I graduated from college, starting out with a six figure income. I'm really glad I did because even though I don't spend a ton, keeping track helps to keep my spending low. I don't keep super detailed track, but it prevents me from just randomly spending $500 on an iPad without thinking about the fact that that would reduce my positive cash flow for the month.

I wouldn't say that at 22, investing is easy. You (most likely) have no idea how to invest at 22. I certainly didn't have any idea how to invest when I graduated from college. I didn't know what a 401(k) was or an IRA or what index funds were. Investing with knowledge of the systems is far easier, so I'm going to disagree with you on that point.

[GranTorino]

First, thanks to FMF for this series. It truly is nice to hear how others are doing and to hear your own concerns echoed (yes Mark, that technically would be confirmation bias but I digress..)
FWIW, here is some very brief info on myself so you can then judge for yourself any pros/cons of my input. My spouse and I are both 37, we have one child less than 1 year old, and our total monthly pretax income is basically the same as yours (we are in the 3%- you have a large amount to care about but not enough to influence any policy makers:)). Net worth including mortgage for a home that we will likely move out of in 5-7 years is $990k. I am not Jewish but I have always liked the ancient advice of (sorry if wrong name) the Talmud- 1/3 cash, 1/3 real estate, 1/3 businesses/stocks/bonds etc. As such, although not a perfect match our current portfolio (for the record, no inheritances) is 50% stocks, 10%bonds 20% timber ( I am a farm child from a rural area and have an independent forester so I am comfortable with this holding as opposed to traditional investment real estate like rentals), 15% cash and 5% physically held gold/silver bullion. The 50% stock portion is 30%foreign, which includes a 10% emerging market portion. I use the "core and explore" where about 2/3 of my stocks/bonds are index funds, and the rest is "active management". Current investment goals are to increase cash, resume saving for cash purchase of another timber tract in 10-15 years, and savings for our "lifetime final home" that I plan on dying in 60ish years from now. We live in a medium expense area- not the Rust Belt but not Silicon valley either.
As far as your 2 issues, here are my replies. Let me say your concern (?fear) were palpable in your writing. I totally concur and have empathy as in the last 3 years I have been having the EXACT same thoughts. I mean exact.
1. With the home, especially if you are concerned about inflation, focus your splurging and resources not on the the physical structure of the home itself (square feet, countertops, cabinetry, etc), but also land. In other words, in a million dollar home purchase I would lean towards a 1 or 1.5 acre lot with a "plain" 2500-2800 square foot home over a 0.25 acre lot and a 4000 sq foot home. Many FMF readers will concur with the lament, "I bought too much house". Conversely, you rarely hear, "I bought too much land with the house". Most agree, especially post 2007, with the "millionaire next door mantra that a house is a depreciating asset. I would not say the same about land.
2. Use your expendable (non investment) income, hobbies, etc, to focus on not just financial independence, but Benjamin Frnaklin like "self sufficiency". You can never go wrong with being self sufficient. Note I am not talking about a root cellar, a home bunker with potable water and a legions of guns. For instance, use your family income and instead of yet another stock, purchase solar panels. I say this not for an environmental stance, but from a self sufficiency stance. Political tensions and debts can turn off the Saudi oil pipelines, but no one (yet) can turn off the sun. If you like gardening, plant a small orchard and learn freezing. I cannot control the US Congress- but my family CAN control how much it depends on others. To echo Mark's first comment too, he suggests reviewing your expenditures to further widen "the FMF" gap between income and outgo to increase not your bank account, but your self sufficiency.
3. Last, don't forget to factor in family. You currently provide a mortgage to your inlaws, which is commendable. What happens in 15-30 years (or sooner) when a nursing home is needed? Will you and your wife be expected to foot a $4-7k per month (in today's dollars) nursing home bill? Weighty issues, but again, explore and contemplate self/family sufficiency. Health is always the first wealth, so form and continue a regular exercise plan for you and your spouse.
Sorry about the long post, but you hit a chord with me WW. Thanks again.I lack all the answers, but maybe we can learn together...Gran Torino

[Steve Mertz]

Interesting profile WW. I don't see you buying a home in the near future-it seems that your love of travel and adventure would preclude you from being strapped down. When I was married, we always owned homes and they suck a lot of money for the privilege of home ownership.
When it comes to investing you are fortunate to have such a vast knowledge of the world and investing opportunities. Hopefully you can use that knowledge and look at different ETF's that are global. The same goes for currencies and metals-frankly many Americans are pretty naive when it comes to global opportunities.
I do agree with your assessment on inflation-it's coming but in between global recessions. Continued success!

[jim]

WW and his wife are clearly doing fabulous financially.

I agree with Mark's first comment.

You say your risk tolerance is off the charts but that 50% of your money is in cash. Frankly, that doesn't jive.

Personally I wouldn't feel compelled to buy in S.F. $800k is a lot of money and if you can rent an equivalent place for $3000 a month then renting is likely a much better choice financially. You can always buy a REIT if you want real estate assets.

I don't see anything about insurance coverage. So I'll add the obligatory comment that you should make sure you have a nice big life insurance policy for both of you, a disability coverage and a good umbrella policy.

[jim]

A side point about employee stock purchases, WW said :

"We also both have company stock plans that allow discounted stock purchases, which we buy the maximum of $30k combined each year. This is generally sold immediately so as to diversify stock holdings from the companies providing the paychecks."

When I read the first sentence there I was worried. But then I read the 2nd sentence.

In my opinion this is the best way to utilize a company stock purchase program. You should buy it to capture the discount then dump it as soon as possible.

I was worried at first because there are a lot of people who will buy that $30k of stock a year and then sit on it because they work for a great company and have faith the stock will go up. Thats a bad idea for a couple reasons. For one you're investing a lot of money in a single stock and thats putting a lot of eggs in one basket. Secondly you're already heavily invested in your employer through your job itself. Think about the double whammy that people suffer if their employer abruptly fails. (think Enron or Lehman Bros. implosions)

[WW]

It amazes me how many great contributors there are on this site.

@Mark, we don't track expenses closely but I would describe both of us as "frugal". There isn't really much going out the door on "lifestyle".

I've definitely been affected by the .com bust and the 2008 meltdown. The first time, I was caught up in it and holding a bunch of individual stocks. Some (thanks, Global Crossing) went to 0. I didn't have a lot at that point, but it was still an expensive lesson. When 2008 came around, I was almost entirely in diversified index funds and still suffered a huge drawdown (though only on paper as I rode it out), as assets that previously hadn't moved in tandem suddenly converged. So from this I've learned a) if you're going to be in individual shares, you better do your homework, b) diversification is not a panacea anymore and can't be counted on in tough times. It's the "so then what" that I'm struggling with.

[WW]

@Mike, that's exactly what I'm seeing with some of the historical measures. Even if you don't take 100 years of stock history and take instead the post-Bretton Woods numbers, we're still historically high if there is a true mean established. If you have other websites / forums with like minded people I'd be happy to hear about them.

[WW]

@Eric, I think you've put well one of the things I'm struggling with - what is the investment strategy I want to stick to? I have enough of a finance and economics background to understand the theories, but struggle to assimilate that into one of my own, which may be a personal failing of trying to do too much instead of "probably good enough."

[WW]

@Old Limey, as mentioned the drawdowns on paper don't scare me emotionally so I'm OK with volatility, but as you point out rationally you have to double your way back from 50% losses, which is what I really want to avoid. If there were investments I knew could give double digit gains, on average, but I had to ride out huge swings I could do that without panic, but I'd have to believe it was the right path for the long term.

@Luis, a lot of the cash is sitting outside of retirement accounts right now. One of the metrics I keep is if I had no income, how long could I afford current expenses. Right now that's at about 5 years for non-retirement funds.

@Gran Torino, it's a great point about the parents. My parents are (fortunately) in pretty good position through their retirement, even if something catastrophic were to happen to their health. My wife's parents, not so much, so this could be a substantial outlay in the near future. We'll have to factor that into any house buying, thanks a lot for that thought.

@Jim, we do have pretty full insurance and a $2M umbrella policy. The big cash position isn't due to risk intolerance, it's more of a) holding out money from volatility while we figure out whether to buy a house or not, b) taking a pause from holding assets while I figure out what the assets I really want to hold are. My only concern with continuing to rent is that if inflation really takes off, in a few years that could be $5k rent while if I buy the bank is on the losing end of my fixed interest loan.

[Mark]

@GranTorino - good point about too much house versus too much land. Another way to do that without buying a large lot is to buy close in to the city. I would guess that in S.F., land is a huge part of the cost. I am in Houston, Texas and I paid $500K or my house at the end of 2009. The houses around me are being sold for $500K and then the bulldozers move in to make room for a new multi-million dollar home. So I am effectively sitting on a $500K lot with a free house.

@WW - I also lost around 50% from peak to trough in 2008/2009. But I stayed in and I am now ahead of where I was at the peak. I can assure you it was stressful, and I seriously considered going to cash near the bottom, as I know many people did. But now I like to say that both I and my portfolio have been stress-tested!

I still say you need to track your expenses though. How do you know what percentage of your income is being spent versus saved, over a 12-month period.

[Luis]

WW,

I have to disagree with you in that diversification is still key. You have to stick it through the lows as you are young but then when you get within 10 years of your target retirement you should start pulling out of the stock market. You can buy and hold index funds and then rebalance them yearly or semi-yearly to maintain your target asset allocation. This is not your typical buy and hold because it requires action and some knowledge, but it's probably your best answer to "so now what?"

[Old Limey]

WW
The only mutual fund that I own is BCHYX. It is an American Century hi-yield California muni-bond fund so it's tax free both California and Federal. You may be surprised to know that for the current 12 month period it has gained 15.34% with a maximum drawdown of 1.05%. It's hard to find that kind of return with that kind of low volatility. What it will do over the next 12 months is anyone's guess. I think why muni bonds have done so well is that people trust their state governments more than they trust the federal government. For one thing states are not allowed to have deficits whereas we all know that the federal government runs on huge deficits.

If you need to examine its graph you must be sure that it is adjusted for the monthly interest that arrives on the last day of each month. The interest accounts for about 4.8% of the 12 month gain.

I actually have this fund in my IRA which is rather unconventional since IRAs are already tax deferred. I use the fund to accumulate interest during the year and then use it to make my mandatory required redemption (MRD) and tax witholdings as I move the MRD money from my IRA into our taxable account.

[Cherleen @ Barbara Friedberg Personal Finance]

Congratulations! Your financial status is indeed in an excellent position. Though I suggest you need to determine how much you are spending on gas, food, groceries, and others.

[Mike Hunt]

@WW, check out Dividend Monk for some great write ups on dividend paying stocks...

Besides the P/E 10 also take a look at the historical values of another metric called Tobin's Q- it is a ratio of stock price to book value. By that metric the market is still valued over the mean of historical standards, so statistically that means expected returns will be lower.

Old Limey really has a great approach but one that I don't have the time to replicate and learn, unfortunately.

-Mike