On another positive note I signed up a for a new service called SigFig which is a really cool service for tracking your investments and it makes me feel good because my percentages that I calculate in these monthly reports actually matched up with what SigFig calculated. It gave me great insight into my investment accounts and gives me a really clear picture about how my individual stock accounts have soundly trounced the SP500 and how my 401k has trailed it pretty miserably so it has me thinking I may at some point in the future just follow my own advice with mutual funds and stick all of my money in a vanguard target retirement index fund.

Traditional Rollover IRA – $18,018.35 (-5.34%)
My Roth IRA – $57,899.65 (+7.03%)
Wife Roth IRA – $29,611.21 (+2.77%)
Traditional 401k – $109,073.32 (+0.05%)

Roth/Traditional % = 40.96% (tax free)

Total Retirement Nest Egg $213,640.35 (+1.76%)

Monthly Contributions $715.28 (401k) $2,000 (Wife Roth IRA) $5,000 (Jeremy Roth IRA)
SPY Performance -0.68%
My Monthly Investment Performance -1.91% (-1.23%)
My Monthly Individual Stocks Performance -3.33% (-2.65%)

Another exciting fact is that I made my first contribution to a Roth IRA since 2008! We had put this off as we were saving for a house/land, but our house savings has now hit a point where I think we have more than ample money for a purchase so now we will start amping up the retirement contributions again which is exciting for me as I need more money where I can buy stocks where I have been relatively successful thus far.

Traditional Rollover IRA – $18,018.35 (+3.48%)
My Roth IRA – $54,096.30 (+3.60%)
Wife Roth IRA – $28,812.16 (+13.68%)
Traditional 401k – $109,015.85 (+4.46%)

Roth/Traditional % = 39.49% (tax free)

Total Retirement Nest Egg $209,942.66 (+5.32%)

Monthly Contributions $3,515.46 (401k) $3,000 (Wife Roth IRA)
SPY Performance +2.81%
My Monthly Investment Performance +2.05% (-0.76%)
My Monthly Individual Stocks Performance +3.02% (+0.21%)

Traditional Rollover IRA – $17,412.62 (+10.21%)
My Roth IRA – $52,221.31 (+3.61%)
Wife Roth IRA – $25,343.99 (+0.91%)
Current Traditional 401k – $104,361.29 (+10.43%)

Roth/Traditional % = 38.91% (tax free)

Total Retirement Nest Egg $199,339.21 (+7.28%)

Monthly Contributions $6,089.78 (401k)
SPY Performance +4.31%
My Monthly Investment Performance +4.00% (-0.31%)
My Monthly Individual Stocks Performance +4.01% (-0.30%)

Total Retirement Nest Egg $200,487.68

Fell kind of dorky doing this 2 days before the end of the month but wanted to celebrate a mini milestone the day after it happened. Just 28 months ago I wrote my post celebrating that I had broken 6 figures for the first time and as of yesterday I broke $200,000 for the first time.

A couple things to point out. Just a little over three years ago the market was in turmoil and my retirement nestegg had dropped nearly in half. Everything was doom and gloom and even the most ardent long term financial advisers were second guessing the stock market. I kept my cool and stuck with my plan and now have a nestegg that has nearly quadrupled from lows just 3 years ago.

I started investing in 2004 and it took me about 5 years to grow my nestegg to $100k. It took me less than half that time to grow my next $100k, which is starting to show the power of compound interest. No longer am I doing the majority of the heavy lifting with my saving and contributions, now I have the ball rolling downhill and my money is making me money – which is such an awesome thing. Now yes the market has been going gangbusters the last three years, but its still pretty obvious that the longer you are invested the easier it is to make money. Compound interest it is your friend.

When I wrote my breaking $100k post 28 months ago the DOW had just broken through the 10,000 mark for the first time in a year. So exactly 1 year before I broke through $100k the DOW was at 10,000 and my Retirement Nestegg Report was at $69,300. 1 year later my nestegg was at $100,000 and the DOW was still at 10,000. Now 28 months later the DOW is up 30% to 13,000 and my retirement nestegg is up 100% to 200,000. So in the last 40 months the DOW has grown by 30% and my retirement nestegg has grown by 189%. Which means I am doing something right with my investments – which supercharges the compound interest power.

Kind of related to that previous point but I have been doing an absolutely crappy job saving for my retirement the last three years. I contribute the bare minimum to my 401k to get full matching and have not contributed a penny more to my 401k or our Roth IRAs. Instead we have been aggressively saving to purchase a large parcel of land out in the country and build a house. In fact our house/land savings has surpassed our existing $120k mortgage and is growing at a good rate each month.

One thing I have said in the past is I absolutely wanted to concentrate on saving for our retirement as absolutely soon as possible after I got my first job and to completely ignore other things such as our kids college savings. I knew how important it was for us to get our retirement savings on the right track to take advantage of compound interest and always said once I was sure that was on the right track I could worry about those other things such as kids savings in the future – I think the exact quote was “I could just turn my income spigot at their college education if I so chose.”

Well we aren’t worrying so much about the college savings yet but I did move the “income spigot” towards our house savings and was able to save a large amount of money in a short time and I have not seriously set back our retirement goals because I already got that ball rolling. You can never make up the lost time when savings for retirement and those first chunk of years are so vitally important when it comes to the power/value it gives you in compounding that if you just take care of that right away its really hard to mess things up in the future if you do something dumb like save for an extravagant house or your kids college education.

Anyway I hope to be here less than 28 months from now to celebrate hitting $400k and hopefully will be writing this from our dream house out in the country.

As I’ve mentioned earlier I really don’t track my stocks or my portfolios that closely and I really only do these monthly reports for my own benefit so I can look back at periods like 2008-09 or the end of 2011 where things may have looked so doom and gloom and be able to take that data point and pull it out into a longer term view and show just how trivial those movements are in the long term and how there is no reason to get excited over these short term fluctuations. I don’t alter or judge my investment strategy just because it performs poorly for a few months or a year or two. I look at the larger picture and tune out all of the short term noise and look at where I want to be 20 years down the road and what investments are going to take me there.

Anyway here is my monthly report.

Traditional Rollover IRA – $15,799.88 (+7.23%)
My Roth IRA – $50,401.28 (+11.97%)
Wife Roth IRA – $25,116.39 (+13.75%)
Current Traditional 401k – $94,502.14 (+6.60%)

Roth/Traditional % = 40.64% (tax free)

Total Retirement Nest Egg $185,819.69 (+9.00%)

Monthly Contributions $699.08 (401k)
SPY Performance +4.64%
My Monthly Investment Performance +8.59% (+3.95%)
My Monthly Individual Stocks Performance +11.60% (+6.96%)

MAKO Surgical Corp (MAKO) +65.64%
Chipotle Mexican Grill (CMG) +58.82%
Buffalo Wild Wings (BWLD) +53.96%
Starbucks (SBUX) +43.20%
United Health Group (UNH) +40.35%
Panera Bread Company (PNRA) +38.80%
Whole Foods Market (WFM) +37.54%
Green Mountain Coffee Roasters (GMCR) +36.49%

It definitely looks like restaurants, food, and medical care was in for 2011 looking at my best performing stocks. Also noticed that this performance is quite a bit different than last year where I had 3 stocks that were up at least 100%. Overall though I feel very good about having these good performers last year and it shows you that despite the market being relatively flat if you find the right companies you can make significant performance gains no matter what the market is doing. Looking at these stocks I really feel good about the whole group long term and while some like MAKO, GMCR, and CMG may have some pretty lofty valuations currently I think they are all good long term companies that are pretty well run. MAKO and GMCR are probably the riskiest of the bunch.

Netflix (NFLX) -60.56%
Dolby Digital (DLB) -54.26%
Exelixis Corporation (EXEL) -42.33%
Infinera Corp (INFN) -39.21%
Southern Copper Corporation (SCCO) -38.08%
PACCAR Inc (PCAR) -34.65%

And here is the flip side – top performer of 2010 Netflix was absolutely crushed in 2011 and did some serious damage to my investment performance in 2011. Another big dagger for me was the implosion of Dolby Digital that I had always felt was one of the titans in my portfolio and not a really risky stock, Netflix I knew had some room to fall, but Dolby caught me by surprise. The main reason for Dolby’s fall this last year was that it looks like Microsoft is going away from using Dolby technology in Windows 8 which is currently a good chunk of their licensing revenue.

Netflix on the other hand was forced to make some pretty strategic decisions this last year to compete in the streaming arena long term and in the process did about as poor of job as possible making this transition palatable for their customers. It’s almost like Reed Hastings was abducted or lost his mind or was shorting his own company and spent about 2 months doing everything possible to completely tick off an alienate his customer base which as we have found out is not good for business.

Long term though assuming Reed has not gone completely insane I still like Netflix’s chances though their recent actions have given me a much large pause for concern – Netflix’s magic was all about making their customers experience a seamless and enjoyable one and they have taken a number of actions recently that has gone completely against that – hopefully they learned their lesson. Netflix and Dolby were my two largest stock holding at the end of 2010 and still represent a large component of my portfolio.

In the last year I have actually entirely sold off about 10 stocks. I did have many small positions buying small increments when I had free trades with Zecco and the market was falling so nicely in 2008-2009. When Zecco announced they were getting rid of free trades I decided to use all 10 of mine up and clear out some smaller speculative positions before I transferred my accounts away to TradeKing. I also had a few companies get bought out and have made a few decisions to cull positions I maybe no longer felt as strongly about, but in general it is extremely rare for me to sell a stock.

Looking at my current allocation I feel pretty good about it – in fact I feel like in the last year I have done a good job refining my portfolio to reflect my ever evolving investment philosophy and knowledge base and for the first time I really feel somewhat comfortable that I might know what I am doing (scary scary thought).

My four largest positions are the mutual funds I hold in my 401k, after that I feel very good about my 15 biggest stock investments that account for over a third of my retirement nestegg. If there was one stock that I felt the absolute best about going forward it would definitely be Amazon which is currently my 7th largest position. I just feel that they do so many things right, have so many long term trends going their way, have a visionary leader, and innovative company spirit, and an absolute focus on making their customers happy. I think they will one day dwarf competitors such as Walmart and Apple.

Anyway here is the list 47 total investments, 5 mutual funds, 42 stocks, and a cash position.

Another observation is that I only contributed $16,782 to my retirement nestegg this year and even a bulk of that came from vested employer matching contributions. This is the lowest amount I have contributed to my retirement nestegg since 2005. The reason for this is I am currently saving a boatload of money for our next house and have been putting all of our excess cash flow towards this endevour. Heading into 2012 this is something I will have to reconsider as my house savings account is now at what I think is a pretty sufficient amount.

Overall my retirement nestegg shrunk by over 1% in 2011, but as I pointed out above I don’t have any worries that I am on the wrong path or employing the wrong methodology. The stock market gyrates back and forth in the short term, but long term I like the trend that I am seeing.

Anyway here is my monthly and annual report

Traditional Rollover IRA – $14,731.10 (-0.97%)
My Roth IRA – $45,012.64 (-3.40%)
Wife Roth IRA – $22,080.12 (-0.23%)
Current Traditional 401k – $88,653.17 (-0.18%)

Roth/Traditional % = 39.36 % (tax free)

Total Retirement Nest Egg $170,477.03 (-1.13% 1 month) (+4.78% 1 year)

Monthly Contributions $693.10 (401k)
SPY Performance +0.31%
My Monthly Investment Performance -1.53% (-1.84%)
My Monthly Individual Stocks Performance -2.14% (-2.45%)

My Contributions for 2011 $16,782.97
SPY Performance for 2011 -0.18%
Investment Performance for 2011 -5.53 (-5.35%)
Individual Stock Performance for 2010 -2.29% (-2.47%)
Total Investment Return -$9,000.84

My wife and I have never paid extra on our mortgage and currently have it locked into an 5 year ARM at 4.0% that I think has three years before it adjusts. Our savings is currently sitting in an ING checking account earning us a paltry 1%. So even while our mortgage is tax deductible even a 1st grader can probably figure out that I am losing money every single day I do not pay off my mortgage free and clear.

So why haven’t I done it? Well the main reason I have not made the smart financial move is that if I were to pay off my home mortgage I lose the flexibility I may need if a piece of land comes available that I need to purchase. Most lenders require a significant amount of money down to by vacant land and the rates for vacant land are likely to be quite a bit higher than the interest rate I currently have my mortgage locked in at. So as soon as I make the purchase I am then losing money on the higher interest rate between my existing mortgage and the land loan.

If I were to pay off my house I would also possibly need to wait to sell my house before I could purchase the land which would put a big kink in things and potentially cost me losing out on a piece of property and while it didn’t seem quite so obvious when I originally wrote this post during the housing boom – its pretty obvious now that you might have trouble just turning around and selling your house right away. So I am willing to take a 3% hit on a pretty significant chunk of money every day for the flexibility it is affording me in my pursuit for a large chunk of land to build a house on.

Another ironic note is that even if paid off my mortgage it would save me my $589 mortgage payment each month but I as I pointed out in the post referenced above I still have to drop about $400-$500 a month on taxes, insurance, heating/cooling each month so its not like you write the check and live for free the rest of your life. The cost of a home goes far beyond your mortgage payment and for some of these dufusses who build extravagant houses their tax bill is the biggest liability they have on their balance sheet going forward.

When we purchase our property and build our next house I will have two big financial considerations on the forefront of our decision making process – property taxes and heating/cooling costs. These are two costs that can be significant and are guaranteed to go up exponentially every year for the rest of your life. The mortgage itself does not scare me because that is a fixed cost at a fixed rate that eventually over time inflation will eat away at and it costs you less and less each year and is also potentially offset by a gradual increase in real estate value. Taxes and energy costs on the other hand go up hand in hand or exceed the cost of inflation in many cases so every year you own that house it costs you more and more.

So you might be asking MFJ what is the deal man – you talk like some frugal dude that thinks owning a house is a waste of money and you’d be a dufus to build an extravagant house – yet here you are with a 6 figure savings account “downpayment” for your next house are you a crazy hyporcit? The answer is maybe.

First things first we are going to spend a crapload on our next house compared to what we would really need. We could live in our current house forever and it would be more than adequate. For the record we currently live in a less than 10 year old 1800 sq ft ranch house in a nice subdivision with an unfinished basement that could easily house our family of 5 even with some incremental family growth.

However life is all about balance and we need to balance between saving for tomorrow as we are with our retirement nestegg and enjoying some of our financial blessings now. It’s always important to give myself a reality check and making sure I’m being frugal and not being cheap – there is a big difference. So is a big fancy house going to make me and my wife anymore happy or our lives any better – the answer is no. We don’t need shiny new things to make us feel more important or make our lives more exciting. We enjoy living relatively simple lives and don’t spend much of any money at shopping malls, on new cars, or on other things that seem to excite other people.

The main reason we are saving so much money for our next house is that we want to purchase a large chunk of property (20+ acres) out in the country to build a house and start a fruit orchard. All in all I expect the cost of the land to be pretty close to the cost of the actual house which explains the large price tag for the combined purchase.

Overall I don’t expect our house to be that extravagant and one could actually view the additional land and fruit orchard as an investment, but to be honest I’m not even sure if I can grow anything so I’m not going to mix the two. This will be strictly for personal enjoyment and some place where my family will grow and where my wife and I will live for the rest of our lives. Because the land will be put to agricultural use the taxes will be very affordable and like I said if I’m able to grow a few things there could be the opportunity where the land could actually pay some dividends back to me.

Now off to find some land…