I left work late on Friday because I got distracted running Monte Carlo simulations on our 401k accounts. I’m on a quest to refine my retirement plan of achieving Financial Critical Mass, something I heard about from Bob Brinker many years ago.
Financial Critical Mass is defined as the capital you need in your retirement accounts that will continue to grow after you retire and start withdrawing from it. In other words, your living off the interest of your investments. The trouble is trying to find the right mix of funds of stocks, with the right mix of contributions and savings to pull it off.
Most of my time after work was spent looking on the Internet for the median historical returns and standard deviation of those returns (no easy task) for the mutual funds and stocks we hold. Once I found them, I plugged them into the retirement example spreadsheet that came with Risk Amp and ran the simulations.
The result of my simulations are promising but I did identify some holes in my 401k strategy. For one, we’re not saving enough with our 401k’s alone; we must start contributing to our Roth IRA’s again. Second, we’re not being aggressive enough with our investments; I need to identify more funds with higher historical returns to add to our investment pool.
Although my market timing model helps me a great deal when it comes to making a higher return at the end of the year, I can do more to supercharge the returns on our account.
So what’s the first part of the new strategy now? First I’m going to schedule a monthly deposit of $200 into my Roth IRA and then add to my Noble Corp (NE), ExxonMobil (XOM), General Electric (GE), and Emcore Group (EME) positions!
Talk a look at http://www.aaii.com and evaluate the screens. Pick one that suits you and follow it for 10 yrs. Why on earth did you pick GE? The are floundering with a weak dollar that should be driving their exports and have two hidden secrets being massive commercial real estate and financial loan holdings. Far better to apply to intelligence to a “system” that will sustain your ambitions and I believe the aaii.com is the place to start and then we can datamine the data build a screen that crushes the market.
sc, thanks for your tip on aaii.com. I picked GE because of their decent dividend yields and their infrastructure business. Yes they have lots of bad loans and RE on their sheets but that too shall pass. Good stocks on sale are always a good thing but sometimes my timing is off! :)
Tom,
There has got to be a better way dude ;-) Your looking for dividend yields? OMG!!!
Do something unorthodox!!!
Have you ever considered learning how to trade??? 8^)
aaii.com is worth a look…
Cordially,
-Digital Dude-
DD: I’m a civil engineer by trade and the global infrastructure play is here to stay. GE is a big player, EME is a big player, and lots of others. GE sucks right now, I know, but its a good long term earner.
GE is the market due to its diversification and reliance on financing… thus it will not likely beat the market long term. They are top heavy and Immelt is not shedding the lagging businesses fast enough. I vote for cash in this ‘negative return environment’ and then would suggest when the bull starts you get long O’Shaughnessy’s Tiny Titans for the first year of the bull, then into a growth screen of your choosing. You want principal protection now and potential for capital gains, not dividends and chance for 10-15% principal loss. Dividends have never been so at risk in my opinion and the market is a mess. With rising rates, GE will have a tougher time advancing. My 2cents worth (which is currently on the sidelines or short right now.)
Thanks for your work on RapidMiner. I am trying to learn it.
sc: you make all valid points but I’m sticking with GE. Its a small position relative my overall investments, I hope you like my three other stocks! :)