The Unfamiliar Names Among The World’s Five Richest People
Back in August, I noted in this blog that Bill Gates was replaced my Mexican tycoon Carlos Slim as the world's richest person. Although both Mr. Gates and Mr. Slim have seen their stocks appreciated lately, they are now dwarfed by a new name from India.
According to The Boston Globe:
Indian businessman Mukesh Ambani's fortune rapidly rose from $20.1 billion in March 2007 to $63.2 billion in October 2007, thanks to India's booming stock market.
The other names on the list:
- Bill Gates and Carlos Slim tie for the 2nd place with $62.3 billion each.
- Warren Buffet, the Oracle of Omaha, cling to his fourth place with $55.9 billion.
- And then there is Lakshmi Mittal, the steel giant with Indian origin, who is worth $50.9 billion.
I don't even both to count the number of 0s in their money. Only if I can triple my net worth in seven months!
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Portfolio Review 2008, Part 1: Where Is The Alpha?
Yesterday I shared my grand plan to thoroughly review my portfolio management again in 2008. My first stop is to drill down to my 2007 results, and understand where the benchmark-beating results come from. Yes, I beat my benchmark index by 1.77%, and that's what is called alpha in portfolio management.
To refresh some memory, earlier in 2007 I set my target asset allocation as follows:
• 50% Domestic Equity
• 35% International Equity
• 15% Cash & Equivalent
Furthermore, I built the following benchmark portfolio to measure my relative performance:
• 50% in Vanguard Total Markets ETF (VTI)
• 35% in iShares MSCI EAFE Index (EFA)
• 15% in Cash (assuming yielding 5% every year)
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Portfolio Review 2008: The Introduction
I first realized that the game rules of my personal finance journey have permanently changed back in the summer of 2006. First, one day I woke up in the morning and found out my portfolio was worth half a million. Then, more frequently, my portfolio started to generate five-figure monthly ups and downs, replacing my savings as the main theme of my monthly net worth fluctuation.
In the spirit of holistically reviewing my portfolio management practice and determine course of action, one year ago, I published a series of 9 articles called "Reengineering My Portfolio Management" over a course of 2 weeks. In retrospect, the thought exercise worked out great. I finally put my portfolio management onto the right track by setting up target asset allocation, declaring a benchmark, and reporting to the audience about my success and failure on a regular basis.
To some extent, I guess I'm subject myself to external scrutiny so that I can consciously spend more time in getting this right. After all, if early retirement is what I'm after, I will have to master portfolio management so in the decades after I bid goodbye to the corporate career ladder, my family and I will continue to live a happy and stress-free life.
Therefore, I decide to take my investing practice to the next level by kicking off a new series of "Portfolio Review 2008," in which I plan to reflect on what I learned in the past (especially in the last year), look into the future, and solidify my portfolio management approach.
Practicing the second habit of highly effective people, I'm starting by laying out the framework of this series upfront. I envision this series should include the following chapters:
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2008-2010: The Upcoming Golden Age for Investors in Low Tax Brackets
Our generations of lawmakers truly don't want to make our financial life easy, and that's why every year there are a long list of tax rule changes that affect everyone's life. To this end, Tom Herman, the tax columnist at the Wall Street Journal, provided a great summary of major personal income tax changes for 2008.
Without repeating the every single bullet in the long list, I just want to highlight one change that may have profound impact on many's investment strategy or portfolio management. Do you know the rules of capital gains are becoming much more favorably starting this year for those in 10% or 15% tax brackets?
Yes, for the next three years (2008 to 2010), taxpayers in those two tax brackets won't have to pay anything for long-term capital gains and qualified dividends. The tax rate on such income for those of higher income, will stay at the prevailing rate of 15%. For short-term capital gains and disqualified dividends, all taxpayers still have to pay tax at the marginal tax rate just like other ordinary income.
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2008 Financial Goals
Starting in 2004, I have always published my annual financial goals at the beginning of each year, and reviewed the result when the year wrapped up. It is a great practice that allows me to keep a record and learn from past experience.
Having spent most of my December to complete my 2008 Financial Plan, I found it might be time to summarize and publicize my financial goals for 2008 in this dedicated post.
Measurement #1: Net Worth Growth
Goal: Net Worth of $1,120,000 by the end of 2008 ($225k annual growth)
Stretch Goal: Net Worth of $1,150,000 by the end of 2008 ($255k annual growth)
Comments: Net worth growth always comes at the top of my annual financial goals and this year will be no different. We are anticipating a challenging year and our net worth improvement in 2008 is likely to be smaller than that of 2007. However, I still want to assign myself a stretch target that exceeds our detailed plan by over 10%.
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How Much Will You Marry For?
Robert Frank's column The Wealth Report at the Journal is all about the rich people's financial life, or anything related to the riches. You will read about how the riches use MySpace-like portals to get connected, how someone can have an A-380 as a private jet, and what the truly rich buy for Christmas gifts.
His recent article on a research about how much people will ask to marry for money provides some fancy figures:
According to a survey by Prince & Associates, a Connecticut-based wealth-research firm, the average "price" that men and women demand to marry for money these days is $1.5 million.READ FULL POST ...
The survey polled 1,134 people nationwide with incomes ranging between $30,000 to $60,000 (squarely in the median range for nationwide incomes). The survey asked: "How willing are you to marry an average-looking person that you liked, if they had money?"
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What’s My Total Investment Cost in 2007?
I started to use personal finance software like Microsoft Money to track my finance as early as 1998, but admittedly I have a broken track record -- in my first few attempts to gain control to my finance, I was always too lazy to keep doing the bookkeeping after a few months. Still, I'm proud of my latest streak: since 2002, I have been religiously tracking where my money comes and goes, and I have six years' of history in my Microsoft Money file now. Of course, opening the book to public eyes in this blog is an important motivator (or pressure) to extend the streak.
While I can easily give a detailed breakdown of how much we spent for our earthy needs, I have never asked myself the question: how much did I spent on investing my money?
That is, until today, when I have both the inspiration and time to get to the bottom of this question. So below is my attempt to add up all investing cost, direct or indirect, in the year of 2007.
First component of my investing cost is, of course, commission.
Since I keep good track of all my investment transactions, I easily got the line-item details from Microsoft Money's built-in report. I grouped total commission for different investment vehicles for clarity:
Stock: Total Commission = $170.66 from 21 transactions (average per transaction is $8.13, including the usual $8 commission from Fidelity, and SEC fees on stock sales). Yes, I only traded 21 times in my individual stock positions -- I'm not really a trader.
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Supercharge Your Frequent Flier Mileage Account by Applying for Co-Branded Credit Card
I am a frequent traveler and I love to collect miles. Over the years, I have been using these miles to bring the family to many nice places with reward tickets. It is a bit addictive if you love to travel: the more you travel, the more free tickets you get, which brings to more travel.
Now you can earn miles not only from flying, but also from shopping using a co-branded more miles. Plus, many of such frequent flier program co-branded credit cards offer amazing sign-up mileage bonus miles that sometimes almost amount to a free reward ticket itself.
Some cards do come with annual fee for the extra perks like travel discount and lower redemption level, but if your family travel at least once a year, you can easily recoup the annual fee from the additional benefits tailors to travlers.
Also, some cards' generous bonus mile offer also includes first year waiver of annual fee, making it more attractive for people who want to try out the program (or the airlines). After all, with the bonus miles, cardholders usually only have to charge another $5,000 on the card to get enough miles for a free reward ticket, a much better deal than even the best cashback cards!
Here are some attractive offers by major airlines. Enjoy!
| Credit Card | Bonus Miles after 1st Purchase | Terms | Annual Fee | Apply | |
 |
Continental Airlines Business MasterCard® | 20,000 | 2 miles for every $1 spent on Continental airlines tickets, dining, gas, etc.; 1 mile for every $1 spent elsewhere | $85 | Apply Now |
 |
Continental Airlines World MasterCard® from Chase | 20,000 | 2 miles for every $1 spent on Continental airlines tickets, dining, etc.; 1 mile for every $1 spent elsewhere | $85 | Apply Now |
 |
Citi® Gold/AAdvantage® World MasterCard® | 12,500 | 1 mile for every $1 spent up to 60,000 miles a year; no blackout dates for reward tickets | $50 (1st year waived) | Apply Now |
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How to Play the Dollar/Yuan Carry Trade
My life is complicated and one of the complication is I have to deal with two currencies: my investment income and most business income are received in dollar, whilst 95% of my cost structure is denominated in Chinese Yuan (or called Renminbi -- "people's money"). Worse, Yuan is appreciating quicker and quicker against the dollar.
In the past year, I managed to book an annualized rate of return of 8.77% in my self-managed portfolio, but this just barely beat the Yuan's 6.9% appreciation against the dollar in the year. So I asked myself the question in December, should I just buy some money market fund in China for safe return instead of risking my principal in the U.S. equity market?
As the first step, I moved $50,000 to China and bought a load of money market funds here. While I'm still contemplating the magnitude and timing I should continue to do this, here is a quick step-by-step process of how to do the Dollar/Yuan carry trade for those who want to try:
Step 1: Open A Banking Account in China
Everyone with an identification card (for local people) or valid passport (for foreigners) can open an account at any banks in China. Reputable domestic banks in China includes Bank of China, Bank of Communications, ICBC and China Merchants Bank, the latter is what I use primarily. Foreign owned banks like Citibank and HSBC also have branches in major cities in China. One will need to open a Renminbi account and an US Dollar account. It is worthwhile to set up e-banking in your first visit too (it won't be automatically set) because the long queues at major banks can sometimes keep you waiting for hours.
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If You Need to Refinance, The Sooner You Do It, The Better
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