Sunday, May 13, 2007

One-year anniversary of my ShareBuilder monthly investment plan

This past week I completed the first year of my small monthly dollar-cost averaging investment plan with ShareBuilder which has been investing a small monthly amount 100% in Microsoft stock on the second Tuesday of each month. Is has actually done reasonably well for a "dead" stock. Now, I am contemplating whether to continue this small plan since I am now rather top-heavy with Microsoft stock and accumulating more on a regular basis with my 401k plan (every two weeks) and employee stock purchase plan (every three months.)

My default choice will be to continue the plan since I do like the fact that it mindlessly accumulates "wealth" and gives me at least a modest sense of discipline.

One alternative is to switch to another stock or maybe an index fund. Personally, I do not have the time or interest in researching the fundamentals of companies or sectors.

Another alternative is to suspend my Sharebuilder plan and simply raise my Roth 401k contribution rate since the stock appreciation and dividends would then accumulate tax-free. The advantage of my Sharebuilder plan is that I can sell the stock any time and use the proceeds immediately. A year ago this was a high priority for me since I had a virtually empty rainy-day contingency fund. Today, since I now have a fully-funded rainy-day contingency fund, I simply don't need that extra flexibility that the Sharebuilder investment provides. Besides, I know have a substantial amount of stock from my ESPP plan which I can sell, if needed.

A minor consideration is that if I suspend the plan, I can use the money in June and July to make up for a modest budget shortfall, or to fund my next trip to New York City. On the other hand, I do hate the thought of abandoning a disciplined investment mechanism simply to fund expenses. Yes, this is an option, but not high on my priority list.

I am tempted to shift this investment plan to my 401k Roth plan, if for no other reason than to simplify my investment activities. Also, there is a $4 monthly fee for each Sharebuilder investment, so I would clearly be earning more for the same amount of money.

The Sharebuilder plan was a great idea a year ago and even six months ago, and I would certainly recommend it to others, but my financial situation has significantly changed over the past year, so my plans should adapt to my current situation.

Still, I haven't decided what to do yet.

-- Jack Krupansky


At 12:11 PM EDT , Anonymous Anonymous said...

If you compare MSFT to broader indexes using ShareBuilder's "What If I Had Invested" tool, you see it actually beat the S&P500, largely because of the dividend. You shouldn't stop, but might consider building a position in something Non-MSFT. Sounds like you have too much concentration of assets there. Maybe an index like the QQQQ or SPY?


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