On the Move

April 20, 2005


For the last few years, I have been working in a small, privately held, software company. In a few weeks, I will be transitioning to one of the biggest software companies in the world. I am excited about the new opportunity from a professional standpoint. It will also be a very advantageous move financially. I will be making more money and there are many significant fringe benefits.

The company matches employee contributions to retirement accounts. I already contribute the maximum allowed to my retirement account, so I plan to enrol in the new plan and get the “free” money.

My new employer also has a stock purchase plan. I am fully cognizant of the perils of holding too much company stock in a portfolio. I will be contributing the maximum allowed to the plan but don’t plan on holding the stock. As soon as the stock is deposited in my account, I will sell it immediately. I will make small gains most of the time, small losses occasionally and big gains every once in a while.

I will also receive a liberal number of stock options on joining the new company. Options may or may not be worth something in the future. I do plan to sell vested, in-the-money options anytime they exceed 5% of my portfolio value.

When I was evaluating my new job offer, I found the PayScale website to be very useful. It provides a comparison of your compensation with current industry standards.

2004 Review and 2005 Resolutions

January 2, 2005

Financially, 2004 was a very good year for us. We did a few things right:
1. Fully funded our retirement (RRSP) accounts. 2004 RRSP contribution limit is 18% of 2003 earned income subject to a maximum of $15,500.
2. Pre-paid our mortgage as much as possible. The way I see it, there is no investment option available that will provide me with the guaranteed, tax-free 5.27% interest that we currently pay on our mortgage.
3. Sold high-expense mutual funds like the TD Science and Technology Fund (MER: 2.79%. Ouch!). Mutual funds are now less than 2% of portfolio.
4. Started investing in ETFs like the i500R and iIntR funds offered by iUnits.
5. Sketched out an asset allocation plan: Cash (5-10%), Bonds (20-25%), Canada Equities (20-26%), US Equities (20-26%), EAFE (13-18%), Emerging Markets (10-15%), REITs (5-10%).

In hindsight, I should also have done certain things differently:
1. Not sticking to our asset allocation plan. Our portfolio has no exposure to bonds because I’ve been expecting bond yields to rise significantly. However, bonds returned a healthy 7.15% in 2004.

For 2005, my resolutions are:
1. Continue to fully fund our retirement (RRSP) accounts.
2. Continue to pre-pay our mortgage to the extent possible.
3. Initiate exposure to bonds, emerging markets and REITs and work towards bringing asset allocation to plan.
4. Remain consumer debt-free. Reduce mortgage-debt (resolution #2).
5. Plan to reduce expenses (e.g. convert monthly cellular plan to pre-paid).