The Time in the Market savings rate report – January 2018 – winter hibernation, Netflix and adult coloring books

[This post about winter hibernation may contain affiliate links at no cost to you]

Winter is not my favorite season. Cold weather, icy roads and snow fill the forecasts and going outside becomes a drag. It’s very easy these day to fall into a state of winter hibernation. Winter, in my mind, is a season for staying in and I actually like that part of it.

I’m an introverted person and staying in to read, watch Netflix or write is right up my alley. I might not like the weather but I don’t mind the fact that it forces me to stay in more often. The fact that I’m likely spending less money by not going out doesn’t hurt either.

Thankfully, this doesn’t mean we become hermits that never go out, hiss at the sight of the sun and have no social interaction. We still go to work, still take walks when the weather allows it and still see friends and family. However, on snowy weekends with stinging frigid wind, it’s certainly much easier to just say, “eh, let’s stay in today.” Even when we do go out and see friends, half the time we’re staying at their place and playing board games since who wants to go out in this weather?

As with most people, weekends are an easy time to spend money and staying in helps keep that at bay. The best part is that we’re not unhappy when we have to stay in any given weekend. We are those types of people. The wide variety of entertainment provided by services like Hulu, Netflix or Prime Video means you can do a lot of things at home at a fraction of the cost. I’ve been making huge use of Overdrive to read a lot of books lately. It’s not just investing books but also a ton of fiction.

There’s been some fluff like the YA series, The Reckoners by Brandon Sanderson. Sanderson is one of my favorite authors but Steelheart and the latter books in the series were a bit dull. I do recommend a lot of his other work like Mistborn and Way of Kings. I’ve also been re-reading The Wind-Up Bird Chronicle by Haruki Murakami, another great author. I recommend that book but be prepared for a lot of weirdness.

That’s one of the things I love about winter even if the weather sucks. Staying in often allows me to read a ton and there’s really nothing better than curling up in bed and reading a bit before or just after waking up in the morning.

My fiancee luckily is cut from the same cloth. She actually prefers staying in more than I do and reads at a ridiculous clip often going through a few books every week. Than god Overdrive exists to satiate her thirst for audio books because those are expensive. I know I’m talking about Overdrive a lot but seriously check it out because it’s an awesome resource if you like reading or listen to books.

One of things she loves to do to wind down in color and the recent influx of adult coloring books has been great for that. She’s an artistic type and sometimes designs her own pages to color like the one below. If anyone likes coloring then you can check out the item below in full size on this new page I created.

coloring page

It’s great that she can do that but sometimes it’s much easier to just color sheets from a book. I always try to keep an eye out for books she might enjoy. Recently I saw a lady coloring one at a doctor’s appointment. The book caught my eye because it seemed high quality and the patterns were cool. I spent some time online looking for it and bought it for her as a gift. It’s always nice to give gifts especially when they’re well received. One has to remember that a gift doesn’t have to be expensive as long as it’s well thought out.

I know winter isn’t the favorite season for many people. That’s why little things like that help make an otherwise drab season a more enjoyable one. Winter seems a lot easier now with the bevy of entertainment options you can have at home. There’s entirely too much good television to watch between the three subscription services and it’s very easy to fill the free time with something like reading, writing or other forms of entertainment.

Reading books borrowed via overdrive and staying in means we’re spending less on entertainment and food which should mean good things for the savings rate.

We’re starting the year this month so I’m hoping to see good results. As a comparison, last year started with a 26.4% gross savings rate and a 34.1% savings rate. Continue reading “The Time in the Market savings rate report – January 2018 – winter hibernation, Netflix and adult coloring books”

Time in the Market’s book club – Deep Value and The Millionaire Next Door

Finance books are COOL

Finance books are on the menu!

Deep Value and The Millionaire Next Door are the first books in my book club!

Finance is the topic at hand and will likely be for the foreseeable future.

I read a good amount of books about investing. My problem is that don’t have many people who would be interested in hearing what I think of them.

There’s where you come in gang! Hopefully we can get a discussion started on some of these books.

Every now and then I’ll drop a post here about the things I’ve read. Maybe these thoughts will help you in your investing journey or aid you in finding something new to read.

I’ll try to keep these short and to the point. After all, there’s a book to be read if you want to know more.

My long term goal is to have a page that aggregates all these reviews in one area. That way readers can just go to that page for suggestions!

Note that this series of posts may include affiliate links to Amazon. For additional information, please read my disclosure policy.

As always, I suggest using your library and especially Overdrive if you’re interested in reading any of these books as free is always better than not free!

In this month’s edition, I’ll be talking about two books. Deep Value by Toby Carlisle and The Millionaire Next Door by Thomas Stanley and William Danko. Continue reading “Time in the Market’s book club – Deep Value and The Millionaire Next Door”

Time in the market’s 2017 goal review

Time in the market’s 2017 goal review

The year is over, my 2017 year in review is done so it’s time for my annual goal review.

Last year, when I designed these goals, I thought it’d be nice to tier them and give myself stretch goals. I set up three separate medals for each goal mirroring the Olympics. I made a bronze tier, a silver tier and a gold tier.

It’s good timing that I’m writing this up just as the Olympics are happening.

These goals were created with the idea that bronze is reachable and anything beyond is more of a stretch. It’s just like the Olympics, you need a lot of hard work to get a gold medal! That means if I do well, I can be just like this guy.

gold medal

Imagine that’s me. Ignore the fact that I don’t have any actual medals, have much less talent and am in much worse shape. Beyond that if I get a bunch of golds here, we’re pretty much exactly the same. Also, I can’t swim. Still, almost the same.

In reality I’m not sure I can hit many golds this year. That’s not the point here anyway because golds should be rare if I set the goals correctly.

Reviewing these goals during Q3 showed me that I was a bit behind. That made me realize that I had to put in some extra work to even have a shot at bronze this year in many categories. Q4 was a big one for me as I cut back on spending and boosted my savings rates to make sure I could hit these goals. That’s the benefit of setting goals and keeping regular track of them. The Q3 review made me realize I was behind so I took action.

You might as well call me Action Jackson.

The reality is that I wouldn’t have done anything without the review and it was the goals that pushed me to act. It’s exciting to see that the goals are impacting me which means that there’s value in doing all this!

I set a ton of goals in 2017. Some of them weren’t related to financials which I quickly found was a bad idea due to how difficult it was to track them. That’s why my 2018 goals are solely related to finances and I’ll do separate short term goals for personal things. That’s enough said about the why so let’s get to the actual goal review. Continue reading “Time in the market’s 2017 goal review”

Portfolio Review – February 2018 – Stock market volatility makes a comeback

Stock market volatility came roaring back in a big way this week. We saw days where the stock market moved more in an hour than it moved on a weekly basis in the past year. It wasn’t wholly unexpected given the flat stock market volatility we’ve had for such a long time. As an example of these calm investing waters, my portfolio has gone up 16 straights months before this one. That’s a big testament to how good we’ve had it as investors.

The S&P hasn’t had a monthly loss of -1% or more since October 2016. That’s a crazy run of solid returns that had to end eventually. One has to look all the way back to January/February 2016 to find a month like this one. Back then the stock market fell over 5% and my own personal portfolio was down 4.5%. The good part was it rebounded in a big way the month after with my portfolio growing over 11%. Will the same happen here or are we due for a longer correction?

During times like these, it’s important to remember that the stock market is often volatile. Returns won’t always come as easily as they have since 2008. The recent week may seem horrendous but the S&P 500 is only down 4.8% since my last update. 4.8% seems like a lot but it wouldn’t even crack the top 20 of the worst S&P 500 losses in a DAY.

Losses on paper are just that if you’re a long term investor. History has proven that holding tight and buying more in times like these has rewarded investors. We’re still far from what could potentially happen as stocks have historically had a max reduction of 50%. If this month bothered you then know that it’s far from the worst that can happen if you’re fully invested in stocks. Keep that in mind going forward and maybe revisit your asset allocation if 4.8% sends you running towards the sell button.

The truth is that the Schiller PE ratio is still elevated and may give credence to further downward movement if worries about interest rates persist. The plus as I see it is that after years of stalled earnings, earnings growth is emerging again. According to factset, earnings increased 13% from 2012 to 2016. That’s not per year, that’s the total earnings growth for that time period! That’s a terrible rate any way you slice it and is one of the big reasons why the P/E 10 has expanded so much. Stock prices have soared despite earnings staying pretty flat. That changed in 2017. 2017 growth is nearly 11% and 2018 is slated to grow at nearly 19% due to the new tax law.

So why is the stock market dropping now?

Earnings growth is great news for sure but it doesn’t always mean growing stock prices. One of the reasons the stock market has returned so much over the past years are expanding P/Es. Low treasury yields and the lack of alternative investments have mean investors have flooded into the stock market sending valuations through the roof.

Now, we that we see growing earnings, we’re also seeing growing yields. Growing earnings mean a good economy and growing salaries and potentially inflation as well. On top of that, the fed is unwinding their QE program which impacts yields as well.

All that is causing yields to rise and giving investors another place to hold their cash. If yields on treasuries are suddenly more appealing then investors may not be as willing to pay such high P/E ratios for stocks anymore. I talked about this effect in a post before where I argued that low yields meant that the stock market isn’t expensive.

Now that the yield is rising, is the stock market expensive? Growing earnings SHOULD indicate high stock market returns but not if the market P/E shrinks closer to historical norms. P/E expansion has driven the stock market returns of the past few years. It’s possible that the shrinking of the P/E may mute the stock market returns of the future even as earnings grow.

As always, it’s impossible to say where the stock market goes from here. I’m not worried if they go up or down. As I recently on twitter, it may get worse, it may get better, as long as you’re sleeping fine, what’s it matter?

From the perspective of a long term investor, months like this aren’t bad. They allow me to buy securities at a better price and higher yield than I was going to buy them for last month. That’s not a bad deal.

From the perspective of someone who likes to see my portfolio growing every month, months like this aren’t great. I was $500 away from 500k last month and I’m pretty sure I’m even further away this month.

As a reminder, my portfolio was at $499,535 last month.  Continue reading “Portfolio Review – February 2018 – Stock market volatility makes a comeback”

Rising mortgage rates, mortgage payments and home prices

Rising mortgage rates are on my mind as a potential home buyer. When we first started looking for a home last year, rates were below 4%. Since then, they’ve risen to an average of 4.25% as of last week and have continued to rise this week.

This doesn’t mean that rates will continue to rise. Rates have a tendency to move up and down rather quickly as evidenced by the graph below. Recent fed actions have taken the rates higher.

average mortgage rates

The possibility exists that this doesn’t change anytime soon if the solid economic news is any indication.

Mortgage rates are loosely tied to the 10 yr treasury rate and that has been creeping up. That’s mainly driven by recent fed actions. They’ve taken a policy of raising the short-term fed funds rate and have begun unwinding their bond portfolio. The end of quantitative easing in the form of tightening has sent the rates up.

Rates going up are usually a sign of a good economy and may seem like great news but often those rates can have a negative impact on a variety of things. The recent volatility in the stock market has shown that the market isn’t sure what to make of the rising rates. A solid economy is good but it may turn around if rates keep rising and demand for goods drops. The problem is that rising rates especially without corresponding income increases lead to higher payments.

Higher payments are not great news for anyone looking to buy a home. That’s also potentially not great news for anyone looking to sell a home.

There are two direct impacts of rising interest rates. Mortgage rates drive your monthly payment. That means even small bumps in interest rates can mean a big increase in the lifetime cost of the loan. The second impact is that higher rates may mean lower home prices for those looking to sell their home.

It’s important to put these rates in a historical context. A 4.25% average rate is still well below historical averages. Still, rising mortgage rates will impact your home search. The affordability and home values might change and it’s important to keep that in mind.

I wanted to take a look at where a mortgage payment might go if this trend continues or if it reverses. At the same time, I wanted to see the impact this may have to home prices if this is the new normal. Continue reading “Rising mortgage rates, mortgage payments and home prices”