Archive for January, 2007

And now for the big news…

Career, Corporate finance

Welp, all those interview rounds I’ve had the past several weeks paid off in the end, and I received and accepted a very nice job offer with a new company this week! I’m pretty excited and will start in just a little over a week’s time.

Not to worry, my new position is still in corporate finance, so I’ll have plenty of practice working with Excel and all the typical finance tools to create how-to posts aplenty.

Whereas my past finance positions focused mainly on scrutinizing costs related to manufacturing and operations, the new one is more focused on the revenue side of things, with a greater connection to the end-customer. The position’s scope should also be greater and offer more opportunities than did my past jobs. Always a positive.

That’s about it for now. More to come after I actually start!

BonaVista Microcharts: a very cool Excel charts add-in

Corporate finance

One of the side perks of running this site is that I occasionally get invited to review products and services. Since I suppose I write so much about using Excel, the creator of contacted me in December about his Excel add-in, and from Germany, no less! In the interest of full disclosure, I am not being paid to write this review; however, he did provide me with a professional license key to test out the product.

You might have noticed that I’ve been using it in a couple of my posts (like here and here) that include MicroCharts built using Excel 2003. What can I say? I love the application, and even if I’d stumbled upon this product on my own, I’d be inclined to get it to use at work, anyway. MicroCharts offer a slew of different types of charts (pie, line, column, bar, bullet). For such a simple application, I find them pretty powerful. Here are some example column charts (click to enlarge):

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My long list of financial and investing to-dos

Personal finance

Recently, . Well, rather than set goals, I find that along with the new year always comes a spate of financial decisions I (as the main financial manager of our family) I need to doublecheck, reassess, and make anew. I thought I’d share these instead, because I’m sure there are plenty of others out there who find themselves in similar situations.

Re-evaluate those retirement plans

  1. Adjust 401(k) payroll contribution percentages to meet new limits: Not everyone contributes the maximum to 401(k)s, but if you do, you might know that the contribution limit has been increasing in recent years. For 2007, the limit on your own contributions is set at $15,500, so if you do aim to contribute up to this maximum, you might need to adjust your payroll deductions appropriately.
  2. Reassess 401(k) allocations and choices: Now might be a good time to decide whether you need to rebalance or change your 401(k) investment choices. Sometimes companies will provide new offerings, and depending on how your portfolio performed over the previous year, you might want to change or reallocate your money. For example, one of the funds in our 401(k), NBGEX, a small-cap fund, underperformed my expectations. It’s a 4-star fund, but I realized that the plan also offers some other small-cap funds and will be looking into one or more of those as potential replacements.
  3. Decide on which 401(k) plan to use, if you have a choice: Ever heard of a ? Some employers are now offering this as a choice to employees. Like its cousin the Roth IRA, contributions into it would be after-tax, but they would be tax-free upon withdrawal. We might have the option of choosing a Roth 401(k), but I have yet to determine whether it’s right for us.
  4. Decide whether to contribute to a Roth IRA vs Traditional IRA: You might want to contribute to both, but remember that there are, as usual, , as well as income limitations on how much of a deduction you can take for contributing to a traditional IRA if you’re covered by an employer retirement plan (like a 401k). There are also limits on how much you can contribute each year. For 2007, the contribution limit is $4000 for those under 50 years of age.

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Hmm…one example of the risks of investing in emerging markets

Current events, ETFs

News broke earlier today that , including CANTV (VTN), whose trading was halted on the New York Stock Exchange (though not before dropping 15%), and Electricidad de Caracas owned by US-based AES Corporation (AES).

Regular readers of this site probably remember that I own a few ETFs and find them a convenient way to get exposure to foreign markets. In fact, ILF is an ETF specializing in Latin America, and I’m curious to see how the news about Venezuela will affect it tomorrow, if it will at all.

The truth is that I’ve stayed away from investing in Latin America, largely due to my husband’s influence and opinion about the region. He grew up in the and has plenty of experiences to share about how things work in many Latin countries. That doesn’t mean that Latin America’s a place to avoid — in fact, it’s very possible that because of our lack of objectivity, we’re missing out on good investment opportunities.

Still, news like today’s is a good example of the risks of investing in emerging markets, regardless of region. When investing in them, it’s easy to focus on the high double-digit growth rates and forget about underlying risks. Even though I don’t have any direct exposure to Latin America in my investments, I’ll still be watching how things develop in Venezuela with great interest.

Watch out when using compounded average returns

Mutual funds, Personal finance

Toward the end of December, I received some questions from readers asking about how to calculate average returns on investment portfolios using Excel. In previous posts on this site, you can read about using , Excel’s , and simple averages, but they all come with one big warning, which is that your previous average performance may not necessarily be a good way to set your expectations about your future performance.

In other words, let’s say that you did your calculations of your return over some number of years and found out that you averaged a 5% annual return. That doesn’t necessarily mean that you should expect a 5% return next year. I thought it might be worth delving a little further into the potential pitfalls of using averages.

Let’s say we have three hypothetical portfolios and data on their performances over a 10-year period. Suppose that in each one, we started off with $100 to invest and ended after 10 years with $110.

Using to calculate their returns, we find that all three portfolios averaged 0.958% over the 10 years. Paltry performance, but hey, this is for illustration purposes only!

Even though we know that all three portfolios all averaged the same 1% return, the key point is that we don’t know what went on between the 10 years merely by looking at the 1% figure.

Take a look at the data and graphs below, and you’ll see three porftolios that behaved very differently indeed (click image below to enlarge):

(Note: the graphs above were generated using BonaVista Microcharts, an Excel add-in)

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