November 1st, 2022 paycheck

Created:

Given I have the extended market and S&P 500 in my 401k I’m hoping the taxable account will be limited to the total market and multi-factor funds moving forward. My initial intent was to only have the total market fund in the taxable account. Unfortunately, I couldn’t contribute enough to small- and mid-caps via the Roth IRA and HSA to keep the portfolio in balance.

At the fund-level, the portfolio is in balance. The total market fund is at its high end, the extended market is edging its way there, and the S&P 500 fund is just above its minimum threshold. So, for now, I’m continuing to contribute to the multi-factor fund, which is just above its low threshold.

I changed the settings for what to do with capital gains and dividends in the Traditional IRA. Instead of reinvesting automatically, they’ll go into the settlement fund, which affords me the opportunity to choose how to reinvest them.

I realized a flaw in my spreadsheet; more on that below. I changed how I plan to update the Morningstar data for each fund in my portfolio; going from annually to quarterly. In July 2022 I put the data in. Then, on a whim, I decided to update the data this paycheck and realized the numbers shifted enough to impact the portfolio.

When I did my regular contribution toward the multi-factor fund using the 15, 35, 50 limit order setup, the funds (and the market) rallied a bit and none of the orders executed. I did the 40-60 setup over the next three trading days, and none of the orders executed. I decided to modify the setups again; these changes are described in the investing section of the personal budget.

The Fear and Greed Index started tilting toward the greed side of neutral around October 26. Feels good at the moment. Of course, the values of things could go back to falling, but I believe I’ve learned a lot from this experience and I’m appreciating the updates to the personal budget and systems I use.

401k rollover

Section titled 401k rollover

The rollover was completed in the previous paycheck.

If you don’t know, the taxable brokerage account is there for me to use between the 50 year old or so mark until about 60, when I’ll start drawing down on the tax-deferred accounts (401k and Traditional IRA) and letting the taxable account “cool off.”

With that said, having the extended market fund in the taxable account will kick off dividends and give me added flexibility, so, no plans to remove it from the taxable brokerage account; especially not while we’re going through this downturn.

It’s worth noting that the value of the Traditional IRA after the 4 day rally in prices is almost back to where the value of the 401k was at its peak; that’s despite the fund prices being down 15 to 30 percent from their 52 week high.

The experiment of selling and buying back described in the previous two paychecks seems validated.

Closing M1 Finance

Section titled Closing M1 Finance

Starting to think this won’t happen in 2022.

Update on the dip

Section titled Update on the dip

Didn’t put anything toward the dip this time.

With that said, because I wanted to participate in buying the dip as much as possible (and all things medical that happened this year), I let the runway account get reduced a fair bit by not putting in the minimum from the spreadsheet; a risky move, but I don’t think I have a rule in place that stops me from doing it.

I won’t let the runway account drop below 3 month’s of expenses, however, prior to the dip, the balance was much higher.

As the value of the equity funds dropped, the allocation to cash increased (as expected) and I decided to capitalize on that by purchasing more based on my current context:

  1. stable income,
  2. minimal fear of that income going away near-term,
  3. striving to add the multi-factor fund to the portfolio, and
  4. trying to get the portfolio close to the targets for each fund.

With that said, if the rally continues, the amount I’ll be putting toward cash will need to increase in order to keep the portfolio in balance. Again, this would be expected given that the cash portion is measured as part of the portfolio; not as a set aside.

Changes to diet and spending

Section titled Changes to diet and spending

Did two more self pedicures. Removed a fair amount of the big toenail on my right foot. It was kinda strange. I removed more of the dead skin under the nail and trimmed to the attachment point.

Had an impacted toenail on the left and did what I could remove dead skin and trim to the attachment point there as well.

My feet feel much better from that perspective.

Diet change is going well.

I’ve stepped back the anti-inflammatories to be around every other day. On days I don’t take an anti-inflammatory, I can feel the pain coming back slightly. I’m developing what appears to be a slight hematoma at the joint on my right foot and at the top of the toe. I’m also starting to feel slight pain in the left big toe. Both toes shift more than they used to; almost like they’re trying to find where they’re supposed to be. I can still the tendons and ligaments in the right ankle more than normal for me.

I’ve decided to look into sports medicine service providers to see what they can determine from examining my gait and whatnot.

Personal Capital

Section titled Personal Capital

I’m debating on closing my Personal Capital account.

The allocation breakdown seems off.

My current 401k is categorized as unclassified, which means it’s not being used as part of the equities portion of my portfolio. This makes sense to a certain degree as the funds are institutional, not publicly available. However, they do have public equivalence, which I use for my personal tracking.

Further, some of the funds I use for small- and mid-cap are being listed as real estate and similar alternatives, which is throwing off the matrix compared to what I have in the spreadsheet.

Buying funds at Vanguard

Section titled Buying funds at Vanguard

Vanguard sent a notice through their app, which indicated that the dollar-based (fractional shares) functionality was rolled out to all investors (see Vanguard article); I don’t know if this extends to non-Vanguard ETFs.

When you place your buy order, you can pick number of shares or a dollar amount. Then for the order type, choose market.

Using a market order for a specified dollar amount results in dollar-based ordering (including the potential for fractional shares).

I was silently opted in to the pilot program and started using it a lot before switching to the latest iteration described and linked to in the introduction. For market orders, I’ll be taking advantage of the dollar-based investing; for limit orders, you can’t, because you are specifying the number of shares and the highest price you’re willing to pay.

Spreadsheet update

Section titled Spreadsheet update

I recently updated the Morningstar data for the funds I use. Some of them are shifting away from growth, toward blend and value; the joys of market-cap weighting. What I realized after updating those numbers was the graph I use adjusted in an undesirable way; specifically, for the 9 factors (or styles) of:

  1. small-cap value,
  2. small-cap blend,
  3. small-cap growth,
  4. mid-cap value,
  5. mid-cap blend,
  6. mid-cap growth,
  7. large-cap value,
  8. large-cap blend, and
  9. large-cap growth.

Basically, the targets ended up adjusting based on the current Morningstar numbers, which is not what I want to do. I want to be able to establish targets that don’t change based on other variables. Then I can adjust allocations accordingly to achieve the targets; the way the spreadsheet was initially set up would achieve the opposite.

The first chart and tables looks at macro-allocation; the information at the opening of each of these entries. The second chart and table breaks equities down into the 9 factors listed above. The third chart and table focuses on individual funds.

The first chart has two tables. The first table breaks equities into small-, mid-, and large-cap. The second table breaks equities into value, blend, and growth. All I do with these tables is make sure the targets and current allocations are roughly 30 percent for each.

The second chart has one table. It breaks equities into the 9 factors listed above. I’ve changed this table to be a data entry table, where I input the targets for each factor. This way, no matter what changes in the Morningstar data, the values for this table won’t change automatically.

The third chart lists the individual funds to calculate the current percent they occupy in the portfolio. Those percentages form the basis for the calculations of the other tables and charts to get the current numbers. Here’s where it gets weird.

There are 8 other tables to help with the Morningstar data.

One set of 4 tables is used to calculate the current percentages for each of the 9 factors. The way it works is the table takes the current percent the fund occupies and breaks it down based on the Morningstar data. Let’s say a fund is occupying 10 percent of the portfolio and Morningstar says that 5 percent of the fund is in small-cap value, the percent in the box would be 0.5 percent. Let’s say another fund occupies 20 percent of the portfolio and Morningstar says 10 percent of the fund is in small-cap value, the percent in the box would be 2 percent. The number in the second table representing the current, small-cap value proportion would be 2.5 percent.

The other set of 4 tables is used to populate a fifth, related table. The 4 tables take a projected target percent I enter and uses the Morningstar data to populate the 9 factor boxes. Then there is a fifth table that shows what the percent for each factor would be if each fund was at the given total target percent. These tables establish the fund targets for the previous chart.