My Current Asset Allocation and Net Worth Growth – January-March 2011

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This post was selected for inclusion in the April 2011 Carnival of Passive Investing at A Rich Life

Overall, the 1st quarter of 2011 has gone very well.

The financial markets have been recovering fairly well, I have been enjoying my classes in my Chemical Engineering PhD program, Spring is just around the corner, and I just discovered that I’ll be getting a 30% pay raise starting June 1 due to being accepted for fellowship I applied for.

Side Note: Even with this 30% pay raise, I’ll still be making less than half of what I was making while working as a full time engineer. You got to love graduate school!

Let’s take a look at the pertinent details….

Net Worth Growth (not including condo)

From December 28th, 2010 (when the last portfolio update was published – see link below for more information) to April 1st, 2011, the S&P 500 index went up by 5.95%. Pretty nice little run for a quarter! Let’s hope it keeps up!

My Personal Finance Journey – September-December, 2010 Portfolio and Net Worth

During that time period, my net worth (excluding condo ownership) increased by 9.1%

The reasons that I am slightly out-pacing the market growth are that 1) my asset allocation is very well aligned with my target percentages and 2) I’ve received some extra money recently from blogging and from my 2010 tax returns. Let’s hope I can keep up the good progress!

Condo Equity Growth

Currently, I have 10% home ownership in my condo (up from 9% at the end of December, 2010), with this accounting for 26% of my real net worth (so net worth subtracting the condo loan – this is different from the net worth above).

Update on Financial Goals for 2011

I have now achieved the following financial goals in 2011. I have done quite well I think – thanks to everyone’s help for keeping me motivated and accountable!

  • Am maintaining a my target of 6-9 months of expenses in a cash reserve fund in my Dollar Savings Direct high yield online savings account.
  • Have rebalanced my mutual fund portfolio to meet my asset allocation target %’s (75% equity, 25% fixed income overall) 
  • Have donated $1,150 to Multiple Sclerosis Foundation in 2011 (5% of income).

For a detailed list of my short term, mid term, and long term financial goals, click on the link below:

My Personal Finance Journey – Financial Goals

Review of Current Asset Allocation (excludes condo)

  • Overall Fixed Income / Equity Allocation
    • Currently, 24% of my net worth is invested in fixed income instruments (cash or bond funds), and 76% is invested in equity.
    • This is almost perfectly aligned with my targets for these categories of 25% (fixed income) and 75% (equity).
  • Equity Allocation
    • In the equity portion of my portfolio, 74% is invested in US Domestic Equities with the remaining 26% being held in international equities. 
    • This is almost perfectly aligned with my equity breakdown targets of 71% and 29%, respectively, for US Domestic and international holdings.

While the overall percentages for these categories looks pretty good, a detailed look (table below) at the allocation breakdown reveals the real story and provides for better analysis of the current state.

Remember: a red flag goes off if your current % allocation in a category is greater than +/- 5% off of the target allocation. This is my trigger that I need to rebalance that aspect of my portfolio.

% Cash (money market target 5%) 7%
% non-inflat Bond Funds (target 15%) 14%
% TIPS Bonds (target 5%) 3%
% International Equity (Target 11%) 10%
% International Emerging Markets (Target 11%) 9%
% Domestic Large Cap (Target 8%) 9%
% Domestic Small Cap (Target 8%) 9%
% Domestic Small Cap Value (Target 14%) 15%
% Domestic Large Cap Value (Target 13%) 13%
% REIT (target 10%) 9%

Analyzing my current asset allocation percentages, it appears that I am lucky enough to be exactly on target with all of my asset classes (within +/- 5% banding) .Therefore, no rebalancing is required. Always a good thing!

My next moves for the April-May, 2011 time frame will be to do the following:

  • Continue contributing to my Roth IRA for the 2011 year. I only need to contribute $2500 more to fully fund it for 2011.
  • After fully funding my Roth IRA, any extra money I have will most likely go towards paying off my condo loan and obtaining even more equity in that investment. The only other option I would have is to invest in my individual mutual fund (taxable) account. But, I feel that it would be a more efficient use of my time to build up more equity in my condo. What do you all think?
  • Continue investing $41.67 each month in microloans to help the working poor in Peru. This is part of my 2011 goal of having $500 in microloans.
  • Try to reach my $5000 fundraising goal for the Multiple Sclerosis bike ride I am doing in June of this year. Currently, we have reached $3,800. If you are interested in making just a $10 donation, click here.

Wish List 

  • At some point, purchase the Vanguard Total Stock Mkt Idx (MUTF:VTSMX) to replace S&P 500 index fund. This gives better, broader diversification to the US stock market.
  • Install a stacked washer/dryer combination unit in to my condominium. This one will be a long shot, but it just may be possible!

How about you all? After fully funding your Roth IRA, would you either 1) gain more equity in your home ownership or 2) purchase additional investments in a taxable index mutual fund account? 

Share your experiences by commenting below!

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