What a great year we had last year!
Do you agree with that? I think it was an amazing year for military families. We saw some reductions in deployments, better pay and benefits (most notably the Post 9/11 GI Bill), got tax-free relief for homeowners who had to give up their underwater homes for PCS moves, and had the opportunity to purchase real estate at 50% of previous high values.
For the American economy, we’re seeing “green shoots” of recovery, and the stock market it way up from its low in March 2009. If you were with me and kept investing throughout the year you’re very happy with the way things ended up. Listening to personal finance experts like Ray Lucia, I “skimmed some of the cream” moving a percentage of my extraordinary gains out of the stock market and into my fixed income accounts.
Now, I’m focusing on measureable goals for 2010. As you do the same, think about what is called “value averaging.” The idea is this:
- Calculate your desired return to achieve your goal (perhaps 8-12%/Yr for a stock account)
- Choose a time window (bi-annual, annual, quarterly but not monthly or weekly, it’ll make you crazy)
- At that time, see where you stand. If your return exceeds your target, “skim the cream” and move your excess gains into your guaranteed accounts
- If, however, your returns are less than the target, buy more “shares” to get your account on track
In this way, you’re forced to buy low and sell high. A criticism of this technique are that it is conservative. Many experts think you should sell losers and let the winners run. Unfortunately it’s just tough to know when the losers are about to turn it around and when the winners are spent. I recommend you maintain a balance in your stock allocations, and in your overall stock market investment account.
So my goal for 2010 is a contribution of $26,500 to our family’s retirement accounts, $15,000 to our emergency savings, and $10,000 to our taxable savings. For returns, I’m looking at 10% for our stock market account balance.
All the best to you and your family in the new year!