2007 is finally finished. I took a look at how my 401(k) did for the year and decided to post my holdings and gains/losses. It wasn’t a bad year considering I didn’t have any idea what I was doing. I started reading The Intelligent Investor by Benjamin Graham and realized I was lucky to finish where I did.


Summary:
Opening Value:
Employee Contributions:
Employer Contributions:
Investment Gains/Losses:
Reinvested Dividends:

Closing Value on 12/31/07:
Investment Performance:


$18,886.54
$6,308.88
$3,154.44
$1,991.51
$118.33

$30,459.70
8.99%

Holdings:
Vanguard Windsor (VWNEX):
American Century Growth (TWGIX):
Russell 3000 Index (IWV*):
MSCI EAFE Index (EFA*):
ESOP Fund:

$4,527.15
$6,277.09
$7,195.88
$6,807.30
$5,652.28
*Posted ticker symbols are representative of funds intent.


Right off the bat, there are problems. Almost 19% of my holdings are with my company’s common stock fund. This does not provide any protection against fluctuations for Wall Street's valuation of my work place. It can be considered wise to, “invest in what you know”, but not to this extent. It’s dangerous and I was lucky that our company’s stock had been rising steadily for over a year. Also, since I’ve been reading Graham, I noticed I do not have any holdings in bonds. Based roughly on what I’ve read, an investor should carry no less than 25% of their total holdings in bonds (government or corporate depending on your tax situation). This can be adjusted based on one's level of effort in research and not risk. Graham tosses out the (110 – age) or (100 – age) formula for bond holdings since it is dependant on an individual's financial needs. I also have a large percentage of foreign stocks and small cap industries and not enough in dividend providing stocks.

I’m still learning and have realized I’m going to make mistakes. I’ve also learned to not try and, “beat the market”. If I finish at around 8.99% every year, I’ve done pretty well. I’m still taking a look at where I want to go with 2008. Right now, I know I’m going to decrease my company stock holdings to less than 10% and include a bond fund to take up at least 25% of my holdings. I still don’t know what to do with the other funds. Part of me wants to open a “self managed account” and ditch the funds I have. I’m not exactly fond of them. Another part wants to go directly into Graham type common stocks and another part of me wants to pick a boring index fund and go on auto-pilot. We’ll see what happens.