Tuesday, April 08, 2008

Revising Annual Goals (Up)

Following yesterday's post about what alpha really means I've been thinking to revise a couple of our annual goals. Specifically, the first two:

1. Net Worth Goal While I was in my trading slump late last year and the markets were going downhill the goal of just increasing net worth in 2008 seemed ambitious enough. But as I pointed out then even, Snork Maiden's employer will contribute around $A10k in retirement contributions and between the inheritance from Germany and my Mom's wedding gift, we got another $US10k. So, an easy hurdle would be to add $20k to last year's net worth. This takes us to $US470k. The contribution from alpha would be another $US40k taking us to $US510k. Allowing for taxes, some spending from investment income, and assuming the markets are pretty much flat for the year gives me a goal of $US500k.

2. Alpha Goal I'm going to revise the alpha goal to state that alpha must provide roughly the average wage. Assuming that is around $US40k alpha needs to be around 8.5% (40/(450+.5*40)). According to the time series model I'm a little above that at the moment. The previous goal was simply positive alpha.

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