indexfundfan @ indextown

Portfolio Return for June 2010

indexfundfan — Sat, 24 Jul 2010 04:58:40 +0000

Comments: Portfolio outperforms the benchmark by almost 2%, primarily due to Precious Metal equity and the MLP allocation. At first I thought this was a mistake until I did a rough verification with the following performance information (for June 2010):

Portfolio Return for May 2010

indexfundfan — Sun, 18 Jul 2010 15:22:44 +0000

Portfolio Return for April 2010

indexfundfan — Sun, 18 Jul 2010 15:21:00 +0000

Comment: My portfolio caught up with the benchmark due to the heavy dose of PrecMetal equity, which outperform significantly in the month.

Portfolio Return for March 2010

indexfundfan — Sun, 18 Jul 2010 15:05:40 +0000

Reducing income during retirement to qualify for healthcare subsidy

indexfundfan — Sat, 27 Mar 2010 15:56:23 +0000

The recent passage of the healthcare overhaul has prompted me to look closer at the issue of early retirement. There is a choice to work less and spend more time with family. Or even retire early and have the government subsidies your health care insurance by keeping income levels below 4x the poverty rate (see this Health Reform Subsidy Calculator).

The following is a list of items to reduce income:

If you have kids, and you want to help to pay for their college, plan to have more of it funded by 529 accounts. If you have to sell investments or draw down from tax-deferred accounts, that increases your MAGI.
Pay off mortgage if possible to eliminate income requirement. Again, same thing as college funding, if you have to sell investments or draw down from tax-deferred accounts, that increases your MAGI. Without a mortgage, you have less need to realize capital gains or draw down from tax-deferred accounts.
Derive income for ongoing expenses from tax exempt bonds (tax exempt income does not figure into MAGI).
Use a short term tax exempt fund to hold non-immediate cash needs instead of a high yield savings account. Perhaps top up the checking account once or twice a month. This reduces the amount of interest payments reported in MAGI.
Shift equity investments into lower yield equivalents, while still keeping the general composition of the portfolio reasonably unchanged. One potential candidate would be to invest in US LargeCap Growth instead of US LargeCap Blend. Does not work for US SmallCap (US SmallCap Growth has a poor historical record).
Invest in rental property and use rental income to fund ongoing expenses (rental income is typically offset by property depreciation).
Look into MLP investments that shield income for as long as the investment is not sold (you can control when to sell if necessary).
Delay signing up social security.

Even though it looks like I could potentially benefit from the healthcare reform if I retire early, I don’t agree with the changes. They simply penalize people who are successful and are a disincentive to work. This can’t be good for the economy. But that is another story.

Portfolio Return for February 2010

indexfundfan — Tue, 02 Mar 2010 15:55:32 +0000

Comments: Rebalanced into INT EAFE. Moved 1% allocation from US SmallCap to US Timber.

Portfolio Return for January 2010

indexfundfan — Mon, 01 Mar 2010 01:37:11 +0000

Comments: PrecMetal equity fell about 12% in January. This contributed to a fall of about 0.5% to the portfolio. International equities, EAFE & EM, both also fell more than domestic stocks. These explained the under performance of the portfolio with respect to the benchmark (-3.23% versus -2.26%).

Junk fees in AT&T landline service

indexfundfan — Tue, 19 Jan 2010 15:58:44 +0000

Like many people, I find myself using less and less of the land line phone. A few years ago, I reduced my land line with AT&T from the “unlimited local” service to “measured” service. The current AT&T bill amount is $15.01 a month.

When I examine the bill closer recently, I find lots of fluff and taxes in the bill. Of the $15.01 bill, $7.28 is the cost of the “measured” service (I do not pay any additional toll charges) and $7.73 is the cost of taxes and all the other fluff, including

federal subscriber line charge,
rate surcharge,
state regulatory fee,
federal universal service fee,
CA high cost fund surcharge-A,
CA high cost fund-B,
CA advanced service fund,
California teleconnectFund surcharge,
CA relay service and communications devices fund,
local government fee,
9-1-1 emergency system,
federal fees and tax, and
local fees and tax.

That’s right, 51.5% of my payment went towards paying taxes and junk fees; only 48.5% is the actual payment for the service. Except for the 9-1-1 fee of $0.04, I consider the rest junk fees. Something is wrong here.

I have identified my land line replacement and I am now testing out the service. The replacement is essentially a VOIP (voice-over-IP/internet) service. Once I am happy with it, I would port my existing number over and rid myself of these junk fees!

Portfolio Return for December 2009

indexfundfan — Mon, 18 Jan 2010 23:25:37 +0000

Comments: The portfolio gains 1.95% in December. The overall gain for 2009 is 29.49%. This is commendable considering the 28.2% loss in 2008.

However, when 2008 and 2009 were taken together, the portfolio’s performance is at a value of only (1-28.2%)x(1+29.49%) =0.930, i.e. there is a loss of around 7%.

2008 & 2009 proved to be a very good reminder of the need to stay the course. If an investor were to sell out at the bottom during Feb 2009, (s)he would not be able to participate in the rally starting from Mar 2009.

Portfolio Return for November 2009

indexfundfan — Mon, 18 Jan 2010 23:03:09 +0000

Comments: Portfolio made a huge gain of almost 4.5% in the month.

Refinance Completed

indexfundfan — Mon, 18 Jan 2010 06:33:25 +0000

My refinance was completed last month. My mortgage was refinanced from Bank of America (30-year fixed at 5.25%) to Star One Credit Union (30-year fixed at 4.75%). Because of the very attractive rates during this time, the entire process took a long time. In fact, from application to final funding, it took more than 12 weeks. This is well beyond the 60-day lock period. Star One honored the rate without any issues.

The following is the timeline:

Week 1 :9/28 Mon: Applied for Star One’s 20-year fixed loan at 4.75%.
Week 1: 10/2 Fri: Star One’s 30-year fixed mortgage dropped from 4.875% to 4.75%.
Week 1: 10/3 Sat: Instead of re-locking the rate, I applied for a new 30-yr 4.75% mortgage with Star One. This cost an additional $12 for the new credit reports. Re-locking the rate would have cost me $250.
Week 2: 10/6 Tue: Sent off the check to Star One to pay for the appraisal. Also faxed in some supporting documents.
Week 2: 10/7 Wed: I wanted to use an online title company EntitleDirect.com. However, the processing officer from Star One informed me that Star One’s policy is that the signing must be done in a title company office. Consequently, I dropped the idea of using EntitleDirect and picked Chicago Title, the title company which closed my previous refinance with Bank Of America.
Week 2: 10/10 Sat: House appraiser called to set up appointment for the house appraisal.
Week 3: 10/14 Wed: The house appraisal was done.
Week 4: 10/22 Thu: Appraisal report was posted online. Valuation is slightly higher than I expected.
Week 5: 10/30 Fri: Emailed the underwriter. She said that they were swarmed with applications and were currently processing applications from the first week of September.
Week 6: 11/02 Mon: I raised my concerns about the 60-day rate lock. The underwriter replied that the rate would be kept for me if they were unable to fund by the rate lock expiry date.
Week 10: 12/01 Tue: No additional progress were made in the month of November. On 12/1, Underwriter informed me that they would be processing my loan the coming week.
Week 11: 12/07 Mon: Received email from underwriter that my loan was approved.
Week 11: 12/11 Fri: Loan processor informed me that they were requesting the list of fees from the title company.
Week 12: 12/14 Mon: Escrow officer sent the list of fees to Star One for approval. Loan docs prepared and sent to the title company.
Week 12: 12/15 Tue: Received closing statement, revised it and set appointment for sign-off on the next day.
Week 12: 12/16 Wed: Sign-off the refinance in the title company’s office. I requested that the funding and closing dates not to straddle over a weekend. For the reason, read this post by TFB.
Week 12: 12/19 Sat: End of three-day refinance rescission period.
Week 13: 12/22 Tue: Star One funded the loan.

In total, the closing costs came up to be around $2100. The title charges (escrow + title insurance) were about $1400, loan fees (appraisal + loan application) were around $600, and about $100 was charged by Bank of America to close out the old loan.

Overall, I am happy with the new rate but wished that the entire process could have been much shorter than the 12 weeks it took.

Unlike some who suggest to pay down the mortgage whenever possible, I plan to keep this mortgage to the full term. At the fixed rate of 4.75%, I am pretty sure I can find better opportunities elsewhere for any excess money that I have.

Adios to Wells Trade

indexfundfan — Fri, 15 Jan 2010 08:57:37 +0000

As I was reviewing some old notes I had of Wells Trade, the investment arm of Wells Fargo, I see a trend that Wells Fargo has been trying hard to make some money out of these “free-trade” accounts:

02/2008 : Introduced 100 free trades for PMA package with $25k or more.
08/2008 : Eliminated the respectable money market sweep funds and replaced them with a crappy bank account sweep.
12/2008 : Eliminated RMMXX, a relatively high yield MMF at that time, for purchase.
01/2009 : Close out fee increased from $50 to $75.
03/2010 : Close out fee to increase to $95.

In addition, Wells Fargo has been “cracking down” on people who did not actively use the checking account of the PMA package. These accounts are marked as “dormant” and quite a few people reported having to jump through some hoops to re-activate them again.

With the talk of additional tax on big banks, I won’t be surprised to see another round of fee increase on the horizon. The money for the taxes has to come from somewhere.

Wells Trade did have some good points. Their reps are quite friendly and helpful, and the trading system, while nothing fancy, generally works. They also introduce a good online feature, which is the capability to track and specify specific tax lots for trading, very helpful for a taxable account.

Anyway, because of my upcoming Roth conversion, I am done with Wells Trade. I will be contributing $75 to them for the free trades they have given me over the past three years or so when I close out my accounts later this month. Good luck to all those sticking with Wells Trade.

Reverting back to using checks instead of ACH

indexfundfan — Mon, 16 Nov 2009 19:14:47 +0000

ACH transfers (or better know as electronic funds transfer) is supposed to be the new method of money transfer in the 21-st century. But strangely enough, I find that I am reverting back to using checks for some of my transactions instead of using ACH. The following are some examples.

Depositing money at brokerages

TD Ameritrade offers a very fast ACH system for funds transfers. Recently, after setting up two new links to my bank accounts, I used the system to move some money from one account to another. That however seemed to trip them up and their compliance department sent me a secure message telling me not to use their ACH system to transfer money. In addition, they pointed out that, at their discretion, money pulled in using their ACH system can be held for up to 60 days before I can withdraw it.

Funds deposited electronically may be withdrawn three (3) business days after settlement date. However, all electronic deposits are subject to review and may be restricted for 60 days.

If I sent them a check, the funds can be withdrawn in six business days; there are no further restrictions after six business days. If I use ACH, there could be restrictions for up to 60 days.

Transferring money

My current paycheck goes into the Fidelity mySmartCash account. I had setup the mySmartCash account a few years ago for its very good BillPay system and availability of market rate money market funds. But now that the market rate for money market funds is very low compared to online savings accounts, I have been pulling out any excess money and moving them to the savings account (I am using Alliant Credit Union’s savings account) whenever my paycheck is credited. (I know I know, I should update my direct deposit instructions…).

To transfer the money, I do not use Fidelity’s ACH system. Instead, I write a check against the mySmartCash account and deposit into one of Alliant CU’s network of ATMs. The result: I start earning interest on the day of deposit (say Thursday). The mySmartCash account is debited only on the following Monday.

Similarly, when I have money to transfer out from TD Ameritrade, I write a check against that account and deposit it into the Alliant’s network of ATMs. I no longer use TD Ameritrade’s ACH system.

Paying for taxes

To pay for state and federal taxes, I used checks instead of ACH. This gives me additional float of the funds before the debit.

Conclusion

On surface the ACH system is a very efficient means of money transfer, however because of its relatively lack of security for the bank “pulling” the money, many financial institutions have chosen to impose limits on these transactions. Some of the liability issues are discussed in the following post on BankDeals:

If a bank initiates an ACH credit to another bank, that ACH credit cannot be recalled. So if a bad guy somehow got into a Provident account and transferred all the money out, Provident would be liable to the account holder (assuming it was a consumer — not a business — account) and it would have no easy way to get the money back from the bank to which it was sent.

On the other hand, if another bank initiates an ACH debit from a Provident account, then NACHA rules allow Provident to reverse the transaction — no questions asked — for 60 days if they can produce a Written Statement Under Penalty of Perjury (WSUPP) from the account holder. They are under no obligation to investigate the legitimacy of the WSUPP.

Portfolio Return for October 2009

indexfundfan — Fri, 06 Nov 2009 15:22:21 +0000

Comments: Portfolio was on track to gain for the fourth month in a row until the last week of October. In the end, the portfolio had a small loss of 1.66%. Took the opportunity to rebalance out of US LargeCaps and PME into US SmallCaps, US Timber/REITS and International EAFE equities.

Refinance Still In Progress

indexfundfan — Thu, 05 Nov 2009 18:58:06 +0000

This is a short update about my refinance, which was started about one month ago. It is still in progress. The appraisal has been done, value came up to be OK but the credit union is swamped with applications.

According to the loan officer, they are currently processing applications submitted in the second week of September. They will reach my case some time near the end of this month. I asked about the rate lock expiry (60 days). The loan officer told me that they will honor the rate if they could not process the loan by the lock expiry date.

I sure hope she is correct.

Portfolio Return for September 2009

indexfundfan — Thu, 05 Nov 2009 18:38:24 +0000

Comments: Sold off some PME to buy US LargeCaps.

Reduce your California tax withholding to avoid an IOU next April

indexfundfan — Mon, 02 Nov 2009 19:49:40 +0000

As far as I know, California state has raised the tax withholding rates twice this year. The first was for payrolls starting from May 2009 and the second is for payrolls starting from November 2009. The latest increase is reported in this LINK.

If I remember correctly, the increase in May 2009 was due to the increase in the tax bracket from 9.3% to 9.55%. This led to the corresponding increase in withholding from 9.3% to 9.55%. This is a reasonable change (I am just saying that the change in withholding is logical; NOT that the increase in tax rate is in any way logical in a recession).

Above: Tax withholding rates (before 11/1/09)

Above: Tax withholding rates (from 11/1/09)

In the most recent increase, the withholding rate was increased by 10%. For most people, this increases the withholding from 9.55% to 10.505%. There is no logical reason behind this; the only reason for this was that the state government wants an interest free loan from the tax payers.

Below are some comments reported in the LA times regarding this change:

“Many families are sitting at their kitchen table wondering how they’re going to make ends meet,” said state Sen. Tony Strickland (R-Thousand Oaks). “At the same time, the state of California is taking a no-interest loan.”

Such temporary measures as the withholding tax increase don’t really fix the budget gap, “they just more or less hid it,” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. “I call it a fraud.”

But there is a way out of this:

Savvy taxpayers can get around the state’s maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state’s Franchise Tax Board.

“People can get out of this,” she said, noting that most people would have to change their allowances through their employers. California’s budget leaders are banking on the hope that most won’t.

This is exactly what I did. I submitted the DE-4 form to slash my additional state tax withholding to zero and added the corresponding allowances as provided by the withholding guidelines. This will bring me very close to the 90%-mark for the amount of taxes to be withheld without paying an under-withholding penalty come April 15, 2010.

If you are in a situation to already receive a refund next year, take some time to update your withholding by completing the DE-4 form

http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf

For all you know, as it already happened this year, when it is time to get your refund, the state might not even have the money to pay you and you will get an IOU instead. I would rather owe the state money than the other way round.

Additional links

[1] http://www.bogleheads.org/forum/viewtopic.php?t=45134&mrr=1257174149

[2] http://online.wsj.com/article/SB10001424052748703932904574511923279377100.html

[3] Sign the petition to repeal this additional withholding — No to Sacramento!

Refinance Started

indexfundfan — Wed, 30 Sep 2009 02:09:06 +0000

I have been watching the mortgage interest rates diligently for the past two to three weeks. Yesterday, I kicked off the refinance process.

I had already obtained quotes directly from the big banks (Bank of America, Wells Fargo & Chase) but most of their rates included an one point fee (which I do not want). And even with that, their rates were not very competitive.

I also obtained several quotes from brokers using Zillow’s online mortgage quote system. One of the quotes actually looked promising and I got to talk to the broker who called back quite promptly. His quote (for 9/28/09) was:

30-yr fixed, “conforming” loan (<$625.5k) @4.875% with zero point. Fees $2800 ~ $3000 out-the-door.

By “out-the-door”, he meant that it included lender fees plus title charges and recording fees (but excludes prepaid items like home insurance or interest). This broker had a handful of reviews, most of which were good. But one negative was that the loan required impounding for property taxes and insurance. To waive this, an additional fee of $780 was required, bringing the total closing costs to $3600 ~ $3800 (note: my LTV or loan-to-value, is below 70% so a high LTV was not the reason for the impound).

I then looked at the credit unions in my area (San Francisco bay area). The most promising rates were from Star One credit union. Their rates yesterday were:

30-yr fixed “conforming” loan (<$625.5k) @5.00% with zero point.
20-yr fixed, “conforming” loan (<$625.5k) @4.75% with zero point.
15-yr fixed, “conforming” loan (<$625.5k) @4.375% with zero point.

Their estimated “out-the-door” closing cost is around $2000. This closing cost number is quite accurate according to a friend who closed a mortgage with them last year.

I crunched some numbers to compare the three options. This is illustrated in the figure below:

The 20-yr mortgage requires 20% more monthly payment than the 30-yr mortgage but gets paid off 10 years earlier. The 15-yr mortgage requires 41% more monthly payment compared to the 30-yr mortgage but gets paid off in half the time. Given the relatively high discount (25 basis points) in going from 30-yr to 20-yr yesterday, I decided to apply for the 20-yr fixed mortgage.

As I already had an account with Star One, it was a relatively painless process to apply for the mortgage. Everything was done online, and I was charged $12 for the credit reports (paid by credit card). I was approved instantly by the online system and I locked in the rate on the spot.

According to the warning in the online application, mortgage applications with Star One are taking an average of four to six weeks to close. We will see how it goes.

Addendum

By the way, the rates for Star One today are

30-yr fixed, conforming jumbo loan (<$625.5k) @4.875% with zero point.
20-yr fixed, conforming jumbo loan (<$625.5k) @4.75% with zero point.
15-yr fixed, conforming jumbo loan (<$625.5k) @4.375% with zero point.

On hindsight, there is a 50% chance that I might have picked the 30-year fixed mortgage if I were to lock today.

Portfolio Return for August 2009

indexfundfan — Fri, 04 Sep 2009 14:56:20 +0000

Comments

Portfolio continues to recover. Sold off some US REITs to rebalance after their huge run up over the past few months.

Moved my web hosting out of 1&1

indexfundfan — Fri, 21 Aug 2009 16:26:54 +0000

1and1 (1&1) webhost is increasing the hosting fees by 40% from $4.99 per month to $6.99 per month. I made good on my promise to transfer my website out. I have moved the website to Arvixe Personal’s Class hosting which offers “unlimited storage and bandwidth” and includes one domain name registration. I made a one-time payment of $72 for two years, which averages out to be $3 per month. The new price is less than half of 1&1’s new fee.

The following is a review of the process in moving this website (www.indextown.com) together with another of my domain away from 1&1’s webhost.

1&1 : Unlocked the domain from the 1&1 domains control panel (select the domain and click on Transfers -> Lock/Unlock).
1&1 : Take note of the Authorization Code (select the domain and click on “Info”).
1&1 : Made sure the email address under Contact -> Show Contact Details is reachable by test sending an email to this address. As long as this email address is reachable, there is NO need to disable private registration on 1&1 if you don’t want to. Note: some other registrars’ whois protection does not forward emails to the listed contact; in which case the only option is to disable the whois protection.
Arvixe : Signed up for the Personal Class hosting at Arvixe.com and specified that I am transferring a domain over. Provide the transfer authorization code obtained in Step 2 to Arvixe.
Arvixe : An authorization for transfer email will be initiated by Arvixe (eNom, Inc). This is sent to the contact information listed in Step 3, so a reachable email address in Step 3 is essential. Approved the transfer by following the instructions in the email.
1&1 and Arvixe : I installed the latest version of Wordpress and created an empty MySQL database on Arvixe. I then exported the Wordpress MySQL database from 1&1 and imported into Arvixe. I then transferred the site-specific files (images, theme files etc) over.
1&1 (this step is optional) : I changed the DNS away from 1&1 (e.g. ns57.1and1.com) and pointed it to those provided by Arvixe (e.g. ns1.bee.arvixe.com) (select the domain and click on DNS -> Edit DNS Settings). What this does is that while 1&1 still has my domain name, any request to the website would now go to the new Arvixe servers). It takes about 24 hours for this change to be propagated throughout the internet.
Five days later, the domain name was transferred successfully.
1&1 : Finally, go to cancel.1and1.com to cancel the 1and1 hosting. If you don’t do this, 1and1 will continue charging you, and if your credit card doesn’t go through, they will send your account to collection.

Keywords: review of domain transfer, 1&1, 1and1, Arvixe.

indexfundfan @ indextown

Portfolio Return for June 2010

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Portfolio Return for March 2010

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Reducing income during retirement to qualify for healthcare subsidy

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Junk fees in AT&T landline service

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Portfolio Return for December 2009

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Refinance Completed

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Adios to Wells Trade

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Refinance Still In Progress

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