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Saturday, July 12, 2008

* 2008-Q2 Progress Review

On the second Saturday after each quarter-end I review my asset allocation and year-to-date total returns by category. The attached PDF contains my actual asset allocation as of 2008-Q2 (alt.1).


Asset Allocation

There are three areas that I am focusing on from an asset allocation perspective.

I. Employer/Company Stock
As discussed in the 2008-Q1 Progress Review and in "My Dirty Little Secret", I am way over-allocated in my employer's company stock. On May 31st, my company stock holdings made up 39.7% of my total portfolio, and as of June 30, 2008 that amount was down to 32.1%. The good news is I sold a sizable block near the quarter's high. The bad news is I still hold significant position and the stock dropped 28% from where I had sold it. The drop in my company's stock helped me to experience my largest single day loss.

II. International Holdings
This was a bright spot. I increase my international holdings to 9.9% from 8.0%. My initial target is 20%. As discussed in "International ETF Dividend Investing", I hope to accelerate this allocation by identifying and purchasing an International ETF for inclusion in my Income ETF portfolio.

III. Financial Holdings
Have you ever been on a diet where you showed self-discipline, limited your calorie intake and exercised everyday, then got on the scales to find you hadn't lost any weight. That's how I feel with my efforts to reduce my financial allocation to 10%. Against all my inner desires, I didn't buy any individual financial stocks during the quarter, but my allocation in financials stayed flat at 10.8%. I am working on a strategy that will hopefully allow some relief in this area.

As noted under target allocations in the attached PDF, I am over-allocated in mutual funds, under-allocated in in ETFs and slightly under-allocated in income stocks. Progress was made in each of these categories. I will not sell securities for allocation purposes, but will bring this in line with future purchases.

2008-Q2 Performance

As I noted in last Saturday's post, the second quarter was dismal from a total return standpoint. Below are the YTD performances of various categories along with my S&P 500 benchmark (VFINX):
  • Income Stocks Q2:-12.4% Q1:-3.6%
  • Income ETFs Q2:-12.8% Q1:-4.7%
  • Asset Allocation Q2:-4.7% Q1:-3.7%
  • Mutual Funds Q2:-10.8% Q1:-8.8%
  • S&P 500 (VFINX) Q2:-12.8% Q1:-9.9%
I am pleased that each category is equal to or ahead of my benchmark. However, I am looking to beat the S&P over the long-run, so I don't pay a lot of attention to short-term performance either positive or negative.

Passive Income

For Q2/2008 my passive income averaged $877/month, up from the $663/month in Q1. This amount includes all sources of passive income in my taxable accounts, primarily interest and dividends. It excludes my Roth IRA, 401(k) and blog income (which is not passive).

The next update will be on Saturday October 11th.

(Photo: sanja gjenero)


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