Every year we follow a simple process for our re-investment in the fund.
– I contribute $500 / year.
– Each beneficiary contributes $500.
– Then I match $500.
For a total of $1500 / year of incremental additions.
Given that there ultimately will be 8 beneficiaries with separate trusts, it is good to have a process that is transparent and fair. They all start having a plan of their own at the same age (the age is set by when I started the plan for the oldest niece or nephew, 10 years ago).
For stock selections – I choose 6 stocks and then each one who has an active plan picks 2, and we make the investment. This gives us about $750 or so to buy each stock with, which seems to be a good level. I need to leave some cash in each fund in case the price moves the day when the stock is purchased (I buy very liquid stocks at market price, but you never know) and then some new cash comes in through dividends over time. Interest income used to add up but now it is completely nominal with our super-low interest rates.
We try to do all of this in late August or early September – the kids usually have some sort of summer jobs and it allows them to work through the summer to accumulate their $500. Then we try to get the stocks selected and the funds deposited (after which I do the match) before they go back to school or college, although sometimes it extends out a bit just due to logistics.
So now I am looking for my 6 stocks. I usually try to select half US and half international (the international ones are ADR’s). I also try for a balance between growth and value. All else being equal I try to pick stocks with some dividends because over time this is a key component of wealth and I like the relative price stability of a dividend paying stock.
The market has been hammered recently but since we are talking about funds with a decade or more long time horizon from the perspective of new stocks, this is a “buying opportunity” (although a bit painful when you review the recent performance of your existing stocks).
I also update each of the portfolios on buys and sells and they are over under performance on the right hand of the blog list by the links. Since I actually calculate returns by individual stock (including dividends) AND performance on the stocks I’ve sold (which is usually a good thing, sometimes painful) as well as including dividend yield (which is surprisingly hard to get sometimes for ADR’s) it takes me a while to do this. For realized gains and losses I also calculate the gain and loss for tax perspectives.
At this time we also look through the portfolio for any stocks that I recommend to sell. We aren’t quick on the trigger but if a stock isn’t going anywhere for years or appears to be on a dying downward run (i.e. Nokia) then I recommend a sell. I guess one item I should start to calculate in the longer-duration portfolios is the turnover rate of the stocks we’ve bought and sold. I will need to look at a metric for that.
As of now we are about back to where we started the year. I calculated performance in April and we are about flat for that with my portfolios. There were some gains but the market recently gave them all back.