Q1 2007 Portfolio Review

At the end of Q1 2007, I performed a comprehensive review of my personal balance sheet. As part of this review, I “realized” that I have an inordinate amount of risk due to the misalignment of my assets and liabilities.

Through a combination of savings and a gift from my grandfather, I have set aside some money to be used for grad school tuition. I expect to need this money in Fall of ’08 or ’09. Up to now, I have had the entire amount invested in the stock market. This has leveraged up my networth and has been a source of excess returns for the past year or so.

Notwithstanding the benefits I have derived thus far, it is not smart to put money in the stock market which you will need in the next 1-3 years. So today I liquidated the stocks and bought a Short Term New York AMT-Free Municipal Bond Fund which pays about 3.1%. I have to completely segregate the money into a separate account so that I’m not tempted to trade with it!

For Q1 ’07, my portfolio returned 1.07% compared to .64% for the S&P 500:

Q1 Portfolio Returns*

My Return

S&P 500 Return

Jan – 07

-0.41%

1.51%

Feb – 07

-0.22%

-1.96%

Mar – 07

1.66%

1.12%

1.01%

0.64%

* Includes retirement & non-retirement accounts. Also includes interest earned on cash balances.

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