April 1st, 2022 paycheck

Created:

Bumped the 401k contribution back up to 17 percent.

Cash

Section titled Cash

Before I shifted to using the risk parity portfolios for things like electronics I started down the same cash path I had used for years. This meant opening share certificates with a credit union that I could continue making deposits to.

One matured and I took that money and moved it to savings.

I debated buying the extended market index fund per the buying a dip protocol for spending cash reserves, however, I decided to hold until after speaking with the accountant about my taxes.

Taxes

Section titled Taxes

The accountant was wonderful and easily managed getting through my documents.

I qualify for a refund.

This means, once I receive the refund, I’ll perform the distribution as described in my budgeting protocols. So, cash reserves will go down soon, especially if the market stays down. With that said, over the course of this year the cash on hand will be high as I am planning to backload the Roth IRA for the 2022 tax year.

401k

Section titled 401k

My 401k doesn’t have the two equity funds I’d like to use (I’ve asked my employer if they can be added). Therefore, to get the mix I want from the investment policy I need to have a total small-, mid-, and large-cap fund.

The short of it is that I initially started with a target retirement fund with 2060 retirement year. I sold out of that position in favor of the large-cap fund. Since then, I’ve had contributions going into the small- and mid-cap funds to move slowly toward the desired allocation in each.

The large-cap fund has a capital gain of a few thousand dollars and it’ll take roughly two years contributing up to the limit to achieve the target allocation. Because there’s a dip in the market and these funds have a time horizon of about 20 years, I’ve decided to start manual rebalancing.

The small-cap fund is hovering at being about 1,000 USD down from the cost basis. I’ve put 1,000 from the large-cap to small-cap twice. I did the same thing with the mid-cap, which was only down a few hundred dollars.

I’m going to see if I can get to the target allocation before the end of 2022. With that said, it’s my understanding I can’t take advantage of tax loss harvesting in a 401k account, so, I’ll only move the gains. The benefits, as I see them:

  1. not paying capital gains taxes because it’s not a withdraw (and the dollar amounts for the year would fall into the 0 percent tax band),
  2. I’m taking advantage of buying low and selling high despite being limited in what I can contribute each year (this benefit is because there’s more than one fund), and
  3. I can continue dollar-cost-averaging through contributions and slowly rebalancing.

I’m also considering setting up automatic notifications when the target allocation is off; not automating the rebalancing yet. I’ve set a calendar event a couple months from now to revisit that consideration.

Buying the dip

Section titled Buying the dip

I saw a video the other day entitled: Why Buying the Stock Market Dip is Bad Advice.

Given that I am currently buying the dip, so to speak, I decided to give a listen. The arguments seem to be as follows:

  1. Blindly continuing to buy a stock because it’s cheaper is a bad idea. The price could be dropping because it was overvalued to begin with. Therefore, individual stock investors should reevaluate their holdings regularly.
  2. People haven’t defined for themselves what a dip is in terms of percentage and time horizons.
  3. All buying the dip is, is sitting on the sideline with cash trying to time when to actually deploy the money; therefore, it’s timing the market, which is bad. Psychologically there’s a belief that the market will dip a little bit more, so, you keep waiting for the deeper dip instead of throwing in all the cash sitting on the sidelines. Therefore, dollar cost averaging is a better approach.

I think this is an unfair assessment of the situation.

First, totally agree that blindly continuing to buy something just because it’s dropping in price is a bad move and any investment should be reevaluated regularly. My preference for reevaluating is every time I’m about to buy it. If it were more expensive, would I still buy it? If yes, buying while cheaper makes sense. If no, maybe I still shouldn’t buy it.

Second, again, totally agree we should be defining percentages and time spans. My range as of this writing for deploying more than what I normally do is a dip of 3 to 30 percent. If one of my holdings drops more than 3 percent I can buy out of my normal sequence and timings. If one of my holdings drops more than 30 percent, then I can’t. The timings are a bit different though. Instead of focusing on how long the drop has been, I look at how long it’s been since I deployed money out of the normal cycle and rotation.

Third, this is where the video kinda goes south for me. Because it adds more detail to what it means to buy the dip. Specifically, the presumption that folks are only buying the dip. I would be interested to see data related to this; like the number of people sitting around waiting and watching for a dip before buying. For me, buying the dip is in addition to, not instead of, my dollar cost averaging approach.

Every time I get paid, I put enough into my 401k to get the full employer match and contribute the max allowed by the end of the year. I have a target allocation for holdings in the 401k, which means I’m buying the cheaper holdings; dollar cost averaging style. Would I be willing to pay more to buy the holding that’s down from its 52 week high (and isn’t occupying the desired proportion of the mix)? Yes. Which is why I’m doing internal exchanges of the gains; rebalancing style. Im not doing it in a single exchange either, so, still dollar cost averaging.

Every time I get paid I put money into my taxable brokerage account as well; dollar cost averaging. I also save a bit to possibly go into my Roth IRA once I know if I can max that out or not before filing taxes. Every quarter I can take some of this money and buy more. Or, when there’s a dip, I can take a portion equal to the dip of a single holding and buy it. Of course, this might mean at the end of the year I might need to save more to put toward the Roth IRA, and that’s okay.

Lastly, because I look at my portfolio as a whole, which includes cash, I don’t think of it as money sitting on the sidelines; it’s just money in my portfolio which I can move around to purchase things and keep the portfolio in balance.

Anyway, so, yeah, still buying the dip per the investor policy and spending cash reserves budgeting strategy.

Odd place

Section titled Odd place

The longer, and more in-depth, I go with van life the more impatient I find myself growing. I’ve never been particularly ambitious when it comes to my career. Things changed a bit when I found myself homeless and in a crazy amount of student loan debt.

The best description I have for where my mind is right now is burned out.

I love what I do. I do believe you can design a life you don’t need to runa way from. What I’m feeling isn’t trying to run from where I am, but run toward something different.

With that said, given my lifestyle, chances are van life won’t actually be a money saving move. No car payment. Minimal insurance cost. No car-related expenses. All of that changes the moment I get a vehicle and those costs may equal rent and utilities. So, I don’t think the running toward something is financial, it’s just different.

I’m waiting to see if this is just a passing thing or a more general, long running sense of ennui and malaise. If it’s the latter, I’m not sure how I might go about expediting the plan, without endangering the potential for joy in that path.

I think Becca has the right of it though when she said:

I’m trying to not make any life altering changes while there’s still a pandemic going on.

Im hoping to be able to set aside a certain amount of time each day toward researching and reflecting on the van life question and working toward and marketing my other work and projects.

FI experiments

Section titled FI experiments

Details are in the January 15th, 2022 paycheck.

The hypothesis is when the Mark 0.0 mix is down, it’ll be down more than the others. Further, when the Mark 0.0 is up, the others will be up and not too far behind the Mark 0.0. We will track the change since the previous paycheck as well as the change since we started tracking January 2022.