Tuesday, January 01, 2008

Goals for 2008

Yesterday, I reported on performance relative to my goals for 2007. I've discussed why I think my earlier goals for 2008 were unrealistic. So here are some thoughts on more achievable goals:

1. Increase Net Worth I'm not going to specify whether in Australian Dollars, US Dollars, or in currency neutral terms. Increasing net worth in all three would be nice but large fluctuations in exchange rates may make one of the goals hard to achieve. We can compute the change in currency neutral net worth by taking away the gains or losses for the month or year due to exchange rate fluctuation from actual net worth in either currency. Probably a gain in currency neutral terms should be the minimum goal here. We get a head start from Snork Maiden's employer's superannuation (retirement) contributions of around $A8.600 for the year. Failing to meet this goal means either that investment returns were -2% or worse roughly and we spent all of Snork Maiden's salary or that we are spending more than her salary and our after tax investment returns or some combination of overspending and/or poor investment returns.

2. Positive Alpha This goal says that our investment returns should on a risk-adjusted basis beat the MSCI World Index on a before tax basis. Beating the index (in a risk-adjusted sense) could be the only justification for trying to manage your money yourself (rather than buying a bunch of index funds) apart from educating yourself about finance through the process of managing your portfolio.

3. Increasing Non-Retirement Net Worth by More than the Index This is a much tougher goal to achieve. It requires substantially beating the index on a before tax basis and/or spending less than Snork Maiden's income. Again we can measure this in Australian Dollars, US Dollars, or in currency neutral terms.

4. Achieving Break-Even on Ameritrade and IB Accounts This was a goal for 2007. Though I made progress on it, I didn't achieve it. Things will have to be bad on the trading front in the coming year if I'm not to achieve this goal.

5. Making More Money from Trading I made more money from trading in 2007 than 2006, though not as much as I'd have liked. The goal for 2008 is just to make more again. I have two measures of trading income - the net non-investment gain on my Ameritrade and IB accounts (trading and net interest) and short-term capital gains reported on my tax return (which includes short-term gains or losses in Australia but excludes margin interest). Both numbers were about $US9,500 for 2007.


Rafi (S) said...

1 and 5 don't have a metric that you can use to assess whether you have met your goal.

mOOm said...

Increase net worth and make more money from trading have pretty simple metrics I think? 1,4,5 are all in dollars and 2 and 3 in percentage terms.