personal finance

Whether you are a do-it-yourself investor or use a financial advisor, everyone needs an investment plan. Otherwise you are just playing G&G, guessing and gambling.

The simple version of my investment plan was to invest aggressively, which meant 100% stocks, until I hit “my number.” That happened about 4 years ago, at which point I downshifted from an aggressive allocation to a more moderate one. Currently that is a 75/25 stock/bond asset allocation. I don’t invest in real estate (other than owning my house outright) and I don’t include the value of my pension or the equity in my house in my overall asset allocation.

At its most basic, this means that what I’m doing during the COVID-19 pandemic is sticking to my desired asset allocation of 75/25 stocks/bonds.

Rebalancing When My Asset Allocation is Off By > 5%

With all of this market volatility, similar to what happened in 2008-9, I see stock market declines as an opportunity to purchase more stocks when they are on sale. The market will eventually recover. It always has. And if it doesn’t, we have bigger problems and my portfolio probably won’t be the biggest thing I’m worried about.

When do I buy? I’m not a market timer. I just follow my plan, which says that I rebalance whenever my current asset allocation has deviated from my desired asset allocation by more than 5%. For example, a few days ago the declines in the stock market had moved me from 75/25 stock/bond to 68/32 stock/bond. I was > 5% off, so it was time to rebalance INTO the decline. This 5 minute video from Vanguard talks about rebalancing into a stock market decline, if you are interested in watching it. Was my timing perfect? Probably not, but that probably doesn’t matter very much in the long run.

How did I buy? I exchanged 7% of my bonds for 7% of stocks on the TSP and Vanguard websites. I did this all within my TSP and Vanguard IRAs so that none of the transactions would have any tax costs associated with them. You should always try to rebalance within retirement accounts unless you have taxable losses you can harvest. That said, I don’t tax loss harvest because now that I’ve hit my retirement number I just don’t care that much. I choose life over tax loss harvesting.

That’s It!

It is as simple as that. I stick to my plan and rebalance when I’m off by 5%. That’s what you should do. Stick to your plan.

If you don’t have a plan, you better get one. Here’s my stuff that might help or go to the White Coat Investor. He also offers a course to help you do it and recommended advisors if you want help. He also re-posted this article entitled, “How To Survive the Coming Bear Market.” Read it if you think my advice to rebalance into the decline is crazy.

This entry was posted in personal finance, Uncategorized and tagged personal finance.

Finance Friday Articles

Posted on March 20, 2020 Updated on March 19, 2020

Here are my favorites this week:

5 Ways To Make Lemonade Out Of A Lemon Market

An Ill Wind

Lock In Good CD Rates Before They Disappear

Here are the rest of the articles:

3 mistakes to avoid during a market downturn

Coronavirus Sell-Off Presents Tax-Loss Harvesting Opportunity

Different Ways to Make Five Million Dollars in Real Estate

Fear Not

Grab the Wheel to Deal With Market Volatility

Happiness Economics: What Actually Makes us Happy?

Harder Than It Looks – 3 Alternative Ways to Deal with the Stock Market Decline

How Real Estate Gets Impacted By A Decline In Stock Prices

How to Turn Your Financial Life Around

Lessons From Japan’s Lost Decade(s)

Perspective in a challenging time

Retired Not Retired

Returns From the Bottom of Bear Markets

The Benefits of a Bear Market

The Work From Home Survival Guide: Because Your Sanity Is Important

What’s Causing All the Panic Buying & Selling of Stocks?

What’s Different For Dual Income Couples?

What Does the Trump Student Loan Interest Waiver Mean?

What’s Coming Next? (And What to Do About It?)

This entry was posted in personal finance, Uncategorized and tagged personal finance.

Simple Steps I Take to Protect My Credit and Identity

Posted on March 18, 2020 Updated on March 17, 2020

My personal information has been stolen at least twice. As a result, I think it is important for everyone to consider taking basic steps to protect their information. Here are the simple steps that I recommend you use to try and protect your identity and credit:

Open all mail. If someone opened a fraudulent account in your name, you might start to get mail that makes absolutely no sense to you. Don’t just chuck stuff that looks like junk mail.
Use two factor authentication for all financial account logins. This is now required by the TSP, and it is for good reason.
Use a password manager. I use Dashlane, although there are others. This ensures that your passwords are cryptic but that you don’t have to remember them.
Consider establishing active duty credit alerts on all of your credit reports with all of the credit agencies.
Check your credit report every four months, checking one from each of the three credit agencies. Some people check all of them at the same time once a year, but I think that by staggering them and doing one every four months it is more likely you’ll pick up something fishy sooner rather than later. Check for mistakes and accounts you don’t recognize. Both could be a sign of identity theft. Just go to AnnualCreditReports.com to get your free credit reports.
Set up alerts so that you get notified whenever a transaction occurs without a credit card being present. Contact your credit card companies to get this set up. You can usually set dollar thresholds above which you want to be notified, or you can get notified about all transactions. When our credit cards have been hacked it has often been for modest amounts and things like gas purchases, so worrying only about high dollar purchases is probably not the way to go.
Based on the Equifax hack and others, we have reported to the IRS that we are potential victims of identity theft. This means that we cannot file our taxes without a special pin that is mailed to us each year. This prevents others from fraudulently filing taxes in our name and stealing a fraudulent tax refund. Consider doing the same if this is applicable to you.

There are other steps you could consider taking that I have not personally adopted. For example, instead of an active duty alert you could place a freeze on your credit accounts. This prevents anyone (including you) from getting a credit card or loan in your name. It will also prevent you from doing things that require a credit check, like switching cell phone carriers or renting a house/apartment. Since I am still in the Navy, I decided to go with the active duty alert instead of the freeze due to the lower amount of hassle when we have to PCS in the future. Here’s a good post that explains the difference between the two options.

Websites like CreditKarma offer free, real-time credit monitoring. In the past I used their services, but don’t anymore. I honestly don’t remember why I turned it off, but I may consider signing up again now that I think of it.

Cyber incidents and identity theft are just par for the course nowadays and the price you pay for on-line convenience. Make sure you set up your own plan to limit the chances you’ll be personally affected by identity theft or cyber crime.

This entry was posted in personal finance, Uncategorized and tagged personal finance.

What is an Active Duty Credit Alert?

Posted on March 14, 2020 Updated on March 13, 2020

One option that military personnel have to protect their credit is to use an active duty alert. What exactly is an active duty alert?

A 12 month active duty alert is available if you are active duty in the US military. In addition to the normal fraud alert that civilians can use, your name is removed from prescreened credit or insurance offers you get in the mail for 2 years. It is designed to protect your credit while you are deployed, but you don’t have to be deployed to use it. We have this placed on our credit on a continuous basis to prevent fraud.

It forces businesses to take reasonable steps to verify your identity before issuing credit in your name. If you provide a telephone number when you place the alert, a business must either contact you at the telephone number you provided or take other reasonable steps to verify your identity. This helps them confirm that the credit application is really from you and not from someone who has stolen your identity. If you actually are deployed and are difficult to reach, you can assign a personal representative to answer for you, place, or remove the alert.

You can end the alert before 12 months, or request another one when the initial one expires.

You can place a fraud alert or active duty alert by visiting any one of the three nationwide credit reporting agencies – Equifax , Experian , or TransUnion. The one that you contact must notify the other two. You also can find links to their websites at IdentityTheft.gov/CreditBureauContacts.