2014 Financial Independence Progress Report

12/31/2014
Emergency Fund ($72K) 100.0% 100.0%
College Fund (80K) 30.83% 31.04%
Passive Income Streams ($4000 pm) 5.66% 7.36%
Retirement Fund ($900K) 51.74% 53.91%
Roof for our Family($1 mil) 00.00%
Medical Fund 00.00%
Life Insurance Done (term life insurance payments initiated)
11/30/2014
Emergency Fund ($72K) 100.0% 100.0%
College Fund (80K) 30.03% 30.83%
Passive Income Streams ($4000 pm) 5.35% 5.66 %
Retirement Fund ($900K) 50.86% 51.74%
Roof for our Family($1 mil) 00.00%
Medical Fund 00.00%
Life Insurance Done (term life insurance payments initiated)
10/31/2014
Emergency Fund ($72K) 100.0% 100.0%
College Fund (80K) 28.98% 30.03%
Passive Income Streams ($4000 pm) 04.27% 5.35 %
Retirement Fund ($900K) 46.00% 50.86%
Roof for our Family($1 mil) 00.00%
Medical Fund 00.00%
Life Insurance Done (term life insurance payments initiated)
09/29/2014
Emergency Fund ($72K) 100
College Fund (80K) 28.25 28.98
Passive Income Streams ($4000 pm) 3.72% 4.47%
Retirement Fund ($900K) 46%
Roof for our Family($1 mil) 0%
Medical Fund 0%
Life Insurance Done (term life insurance payments initiated)
07/25/2014
Emergency Fund ($72K) 100%
College Fund (80K) 28.25
Passive Income Streams ($4000 pm) 3.72%
Retirement Fund ($900K) 46%
Roof for our Family ($1 mil) 0%
Medical Fund 0%
Life Insurance 0% (term life insurance to be initiated)
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Design Principles behind Passive Income Streams

There are a few core design principles I have used in designing my version of the Passive Income Streams. These principles guide me in deciding where to invest the money in my taxable accounts. Here goes.

  1. Spread the money into different risk buckets
    1. Vanguard has a risk rating scale of 1-5 for all the investment vehicles it provides….1 being the most conservative/least risky and 5 being the least conservative/most risky.
    2. My design principle is to invest money in all risk buckets.The percentage of investments in each bucket varies depending on how the market is doing.
      1. For example, as of today (09/02/2014), the stocks are highly overvalued….don’t take my word for it…the experts thinks so too 🙂 So, more money towards buckets 2 and 3 and less in 4 and 5 risk buckets. If the market tanks, then change the skew more towards buckets 4 and 5.
      2. I can hear comments about market timing already 🙂
  2. For each risk bucket, have a minimum of two investment vehicles.
    1. Each fund manager may go through his/her own mistake prone period. By having two different investment vehicles, I am betting on the fact that both fund managers do not have their respective bad times at the same time.
  3. Almost every dollar has to provide some income in return.
    1. I want assets and not liabilities 🙂
    2. Almost all the money is spent in dividend producing vehicles: muni bond funds and dividend stock funds.
  4. Invest some money in Capital Appreciation (high risk) buckets
    1. I call this the lottery ticket investments.
    2. I.e. small cap and mid cap investments.
  5. All the investments coming from taxable accounts have to be TAX-EFFICIENT.
    1. I will talk in detail about Tax-efficient investing in another post.
    2. The basic idea is to postpone paying taxes to a more opportune time when the tax bracket is low, invest in tax-friendly investments like muni bonds, etc.
  6. Automate as many investments as possible
    1. I have no time, no knowledge, no patience, etc etc to spend a lot of time doing stock tracking and investing.
    2. So, automatic investments and hence mutual funds are my best friends.

In a subsequent post, I will talk more about the actual funds where I have invested money in, based on the above design principles.