Friday, November 29, 2013

November investing update

I'm calling these "investing updates" now instead of "net worth updates", because it's more accurate.

My last update was October 6th, so this is very nearly two months in between updates. I don't think this is a big deal. I've never claimed to be as disciplined as Dividend Mantra, and I don't think I'm capable of it either. I'm happy as long as these investment updates don't lapse for more than a few months.

Here are the current totals, along with the differences from my last update:

  • 401k - $26,924.21 ($1,510.63)
  • Lending Club - $2,294.49 (-$79.83)
  • Schwab - $5,147.70 ($2,201.40)
  • I-bonds - $1,401.92 ($400.64)
  • Total - $35,768.32 ($4,032.84)
All in all, a pretty solid two months.

My monthly contribution to my 401k was (!) around $680 per month, so my 401k gains were two months of contributions plus about $150 in capital gains. I have to say, I'm very excited to roll over my 401k. After the dust settles from one or two more pay stubs at my old job, I'm going to roll over my 401k into an IRA, almost certainly with Vanguard. Most likely I'll put it all in VDIGX, Vanguard's dividend growth fund. Before I decide, though, I'm going to ask someone at Vanguard about the managed payout fund. I know it's intended for retirees or people who need income right now, but I'm thinking that there could be some advantage in monthly compounding, rather than the (for example) twice-annual compounding of VIDGX. That and it's more balanced, holding many different funds as a coherent portfolio whose goal is to basically embody the 4% rule. Then again, I might split it between the dividend growth fund and the short-term bond fund, and try to time the market. We'll see. I'm a loose cannon sometimes.

My Lending Club portfolio is performing well compared to my expectations. The drop in value of around $80 reflects a withdrawal of around $100, so I must have collected $20 or so in interest over the past two months. Not too shabby for money I didn't have to work to earn. So far, I have collected $131.72 in interest from notes on Lending Club. I have 114 notes that are issued and current, with 2 that have been fully paid, and zero in any stage of delinquency. I plan on slowly reinvesting or withdrawing the money as my short-term financial situation warrants, and currently I don't plan on adding more money to my Lending Club account. Lately I have been buying notes listed for sale on the trading platform. I look for notes offered at a discount (of around 1-2%) that have fewer than 10 repayments left. I figure there's a good chance it's less risky than originating new notes, and it seems like there are some deals out there.

My Schwab brokerage account is still 100% Corning shares. I own 301.3878 shares, only 300 of which I bought. The other 1.3878 shares are the result of the miracle of dividend reinvestment and Schwab's awesome dividend reinvestment plan (it's free by the way). I have a cost basis of $13.75/share, and I made my last purchase before Corning announced its deal with Samsung to buy out their joint venture, which sent the share price up around 15%.

Finally, my I-bond portfolio is chugging along. I'm still buying $200/month of I-bonds and I plan to continue doing so indefinitely. My first bond won't be available for redemption until April of 2014, but time keeps marching on and now that's less than half a year away. Over time my I-bonds will keep growing and act as my emergency fund of last resort, as a back stop to my checking account and my savings account and my springy debt instruments. You can't beat an emergency fund that's perfectly liquid, backed by the full faith and credit of the US Federal Government, and pegged to the rate of inflation.

I'm very happy with how my investments have been doing. More and more, I'm seeing investing not just as a means to an end, but as an interesting pursuit in and of itself. I'm enjoying finding the right balance of investments that match my particular goals, both short- and long-term.

I think I can appreciate the sentiment of people who enjoy fine wine, or expensive jewelry, or fancy cars. But for me, I'm interested in investments: whether they're mutual funds, consumer debt, partial ownership in high-quality companies, or government bonds. Technically we're all just spending our money on things that we like, right? :)

Saturday, November 23, 2013

I got a new job

I am happy to report that I accepted an offer of employment at another company. Yesterday was my last day at my old job.

As I wrote in September, it has been a while since I've been happy with my job. It has also been a while since I decided that I needed to leave my job. I got an interview on November 1st, an offer of employment the following Monday, and completed some negotiation that week, just in time to give my notice by the weekend. I got a big raise and I'm even shaving half a mile off my already short commute (it will be down to 2.5 miles).

I feel excited, and happy, and relieved. Much of my unhappiness at my current job stems from feeling trapped. I don't have the stash of screw-you money that I need to feel secure in quitting my job when conditions warrant. This is a huge deficiency that I have identified in my life, and in the coming months I will develop (and share with you) a comprehensive plan to remedy the situation.

It's easy for people, especially myself, to think about an emergency fund in abstract terms. Oh, you want six months of living expenses. It's in case you lose your job, or a tree falls on your house. But honestly, the biggest risks I now worry about are: what if my boss or my company expects me to do something unethical? What if I see and raise security lapses that my company is unwilling to remedy? I want to be able to escalate the situation. I want to be able to say, "This needs to change, or you'll need to find another engineer."

I'm also looking forward to being excited about my job again. Months ago I got disillusioned with the work we were doing and office politics. In that time, I had not been putting in my best effort or producing my best work. I've found that apathy is contagious, and so is excitement. When I come home from a day of doing the minimum amount of work to get by, I find I don't have this great urge to be effective in my home life. Conversely, the days I was really productive at work were also the days I found I had the urge to dive into house work and hobbies.

In the short term my finances shouldn't be affected much. I think there will be an extra week in between pay checks in December. Because of my uncertainty around timing of my new pay check, I'm being a little cautious about new investments. I think there are some good opportunities even in this market, but it's better to be safe. I have about $2500 in my checking account, and that will hold me over until my new pay checks start coming in. Once that happens, expect to hear all about the companies I'm buying.

The last big benefit of switching jobs is that I took next week (which happens to be Thanksgiving week) off. That means more time for my hobbies, more time for chores, more time for planning my future, and maybe even more time for blogging. I like to think of my vacations, no matter how short, as a dry run for retirement. I don't know that I'll ever understand the mindset of people who think "Why would I ever retire? What would I do all day?".

I have a lot to look forward to.

Sunday, November 10, 2013

Investing in Magic: the Gathering cards

In early September I mentioned that I had found another opportunity for speculation. It's time I came clean.

I've been buying sealed boxes of Magic: the Gathering cards on eBay, with the plan to hold on them for months or years and then sell them at a profit when they're out of print. For those of you who never encountered this particular strain of nerdiness, Magic is a trading card game (the first, in fact). It has been around for 20 years now. Of note, there exists a robust secondary market for Magic cards.

I have a number of friends who play casually, as I do myself. In addition to casual play, Wizards of the Coast (the company that owns Magic), puts on various tournaments and events. This is where much of the demand for Magic cards comes from. To play in a tournament, your cards can't be faked or proxied. There is also demand from collectors. In addition to the cards themselves, there is some additional value in sealed packs for two reasons: 1) there is a format of play called "drafting" where a group of players make their decks from a limited pool of cards from opening sealed packs, and 2) some sets have very valuable cards in them, and the market adds a premium to packs from those sets.

I started thinking about this idea when I found a few sealed packs I kept around from when I started playing again around 2010. The most recent set at the time was called Zendikar. On a whim I looked up the price of Zendikar packs and noticed that they had greatly appreciated in value. Right now, Zendikar packs are selling for $9-$12 a pack. Magic booster packs usually retail for $4, and buying boxes of them can get you a price of closer to $3/pack. That is a pretty impressive increase in value.

I did some research on recent Magic expansions, and looked at the prices that sealed boxes of booster packs are selling for on eBay. Using conservative assumptions about initial prices, factoring in eBay sellers fees, and using only listings that have sold, I found that the compound annual growth rate (CAGR) averaged between 7% and 15%. This isn't a gold mine by any stretch, but by my estimation there's a reasonable chance to beat the stock market's historical average, and invest in something that's uncorrelated with any other asset class.

Here's a listing of what I bought and when:
NamePurchase priceShippingTotal costPurchase date
Return to Ravnica$89.99$0.00$89.998/11/2013
Dragon's Maze$89.99$0.00$89.998/11/2013
M13 x3$172.58$15.25$187.838/24/2013

Here are the current prices for these products:
Return to Ravnica1$88.00
Dragon's Maze1$80.00

As you can see, I'm not doing too well. That's alright though, because I was planning on holding on to most of these for a few years. You can see where I went wrong with buying a few "From the Vault: Twenty"s too soon after they came out. "From the Vault"s are special collectors edition products with a known set of tournament-legal reprints of various cards. Demand was high for FTV:20 when it came out and since then the price has dropped. The rest of the boxes have basically stayed static, which is what I was expecting. You can also see what kind of a bite fees are going to take.

Anyway, I want to be open and honest about how my alternative investments are going. I am planning on posting updates every few months.

I think it's important to realize that there are a lot of opportunities out there that you could be interested in, if only you open your eyes to them. When you're on secure financial footing you can take advantages of opportunities that come your way. In this case I decided it would be fun and interesting to try a different kind of speculation, one that not many people do. Who knows, maybe I'll lose a bunch of money, or maybe I'll hit the jackpot.