Should I Roll Over My 401K To An IRA?

After four years with a Big 5 IT consulting company, I am leaving for a small IT company.

In many ways, I am getting back to my roots working in a fast growing IT firm doing the things I love most, Network Operations and Network Management.

I will be starting my new gig this coming week.

I originally hoped to write a post about negotiating a new salary but as things turned out, there was not all that much negotiation done.

Basically I got most everything I asked for.

  • I got a career opportunity with a company and a CEO I am very happy to work for.
  • I got a salary increase I am happy with.
  • I got a benefit package . . . well to be quite frank, is just OK.

That is where what little negotiation there was really happened.

  • The health plan for me and my family doesn’t change but the cost is a bit more.
  • I get less life insurance, so I have to purchase my own plan.
  • There is no commuter reimbursement program either, so my commuting expense will increase.

Since I would need to spend a bit more money to “purchase” benefits and coverage I was losing, I countered by asking for a signing bonus to help make up for this difference. Normally I would ask for more salary but I already priced my salary request on the high end of my range simply because I was expecting to receive a lower offer and then “negotiate” back up.  But as I said, they gave me what I was asking for so I asked if there was a signing bonus plan available.

Recruiters and HR departments sometimes keep this out of the initial offer.

I was told by the CEO they do not offer signing bonuses. Reason being that it is basically giving money for work that hasn’t been done yet. So he countered by including me in the management incentive plan which basically states that if the customer is happy, the company gets a bonus which gets divvied up on a quarterly basis. If we exceed our contract goals, this would make up for any added expense I am incurring.

Did I mention I really like the way this CEO thinks. Countering with a pay for performance management bonus instead of handing out a bonus for not really doing anything. He seems to be tough and fair with a good dose of practicality.

So that left me with the decision of what to do with my 401K.

I am an active investor with my regular investment fund (non-retirement money), but when it comes to my 401, I am as hands off as one can get. I try to diversify and then basically look at it once a year to see if I need to do any rebalancing.

The new company 401k does not become eligible for 90 days and quite frankly is much like their other benefits. Not great but OK.

I took a snap shot to illustrate and show where I am now.

 

Overall, I cannot complain with my current 401k allocation.  Though from what I have read, most financial advisors might say my allocation does not match my age (55). Maybe when I retire I will look to be more conservative but until then this has pretty much been my retirement investment strategy for the past 20 plus years and over all it has served me pretty well.

So what are the advantages and disadvantages of keeping my money where it is vs rolling it over?

  • The advantages are that performance has been really pretty good and I don’t think I am getting killed with fees.  For the moment, I have good access to the money.  401K accounts are better protected from law suits than IRA accounts.  (not that anybody ever plans on getting sued, but you never know)  You can, in moments of desperation, take a loan out against a 401K.  And 401k’s have the option of taking money out without penalty at 55 instead of 59 and 1/2 which is the age set for IRA.
  • The disadvantages are that if the management company or funds changes I may not have the easy access I currently experience and may not like the allocations available to me.  I cannot continue contributing to my former employers plan. And, though the investment selections are good, there are not as many as I would have with an IRA.

My other concern is that I do not want to start spreading around my retirement monies into several 401k’s.

I like keeping things as simple as possible. So my choices seem to be:

  1. Wait 90 days and roll over the money to my new employers plan even though it is not as good as my current one.
  2. Keep what I currently have where it is.
  3. Roll it over to an IRA (I would probably choose TD Ameritrade simply because that is where I do most of my investing now) I know there are other players out there like Betterment and Wealthfront but that would mean being less simple and having multiple brokers.

What do you think?
Which option would you choose?

Advertisements

Swing Trading

IBD has a relatively new investment service called Swing Trader.  Now, to be fair, there is nothing new about swing trading.  What makes this slightly different is that their swing trades are based on IBD CANSLIM investing.

What is CANSLIM?

It is an investment system based on both fundamental and technical analysis.  CANSLIM is an acronym for the seven traits winning IBD stocks have before they breakout.

  • Current Quarterly Earnings – increasing quarterly sales
  • Annual Earnings Growth – at least 25% or more for the past 3 years.
  • New Product, Service, Management or Price High
  • Supply and Demand – high demand for limited supply of shares.
  • Leader or Laggard – industry leaders with superior earnings and sales.
  • Institutional Sponsorship – funds account for 75% of all market activity.
  • Market Direction – 3 out of 4 stocks follow the market’s trend.

IBD has a 30 day free trial for their Swing Trading service.  I decided to sign up.  Not necessarily to spend even more of my hard earned money but rather to see exactly how well they are doing.   To be honest, one could consider some of my trades swing trading.  My style of investing is quite similar to IBD in that I look for good technical setups and momentum trends of well-run or popular companies; but above all, when it comes to truly short term trades, I look for opportunity.

Case in point, some of my more recent trades were based on what I thought was opportunity.

  • When Amazon announced buying Whole Foods, and selling SEARS Appliances; Home Depot, Walmart, and Best Buy took a price hit yet recovered quite nicely.
  • When Disney announce they were leaving Netflix, NFLX took a price hit, and interestingly enough, filled the gap from their recent quarterly report breakout and found support.
  • And more recently Hurricane recovery trades with Home Depot, Restoration Hardware, Lumber Liquidators, Owens Corning, Generac Holdings and General Motors.

None of these stocks, except NFLX, made it on to the IBD Swing Trader alerts.

Looking back over the IBD Swing Trader alerts for the past year, I am less than impressed with the overall average return of .50%.  However their two currently active trades are based on classic setups and are performing quite nicely.

So, do you ever make short term trades, and if so, what are some of the triggers you look for?

The Amazon Effect

Amazon is, and has been, transforming the way we do business.  They have been doing this for years.  At the core of this transformation is what I will say is the Online World.  Yes it is a generalization, but from being able to buy books online to a cloud service provider to a mobile payment platform and even a one click buy it now system to most recently high profile deals with NIKE, SEARS, and Wholefoods; Amazon is transforming the way we do business from traditional brick and mortar to online.

According to Millennial Marketing, Amazon rates highest in satisfaction and experience not only with Millennials, but across other generations because of “its consistent ability to reduce friction in the consumer journey and stay at the forefront of market innovation.”

It even beats out other brand names such as Apple and Netflix in customer satisfaction and both Apple and Netflix do an excellent job with online marketing and innovation.

And how has practically the whole retail sector, and investors, reacted?

The retail sector has taken a nose dive.  Both investors and publicly traded companies have stuck their heads in the ground and proclaimed that Amazon is taking over the world and the end is near.

Grocery stores such as Kroger and even Walmart took a dive when Amazon bought Whole Foods.

Blue Apron IPO took a beating because Amazon now has a potentially huge food delivery network.

Home Depot and other similar stores took a dive when Amazon agreed to sell SEARS Appliances.

Even NIKE has agreed to add Amazon as a delivery channel for their product.  But NIKE is smarter than some of the other retailers.  Part of their agreement is for Amazon to crack down on fake NIKE knock offs.  Not only do these cheap imitators take revenue away from NIKE, but they also damage the NIKE Brand and the NIKE reputation.  So the NIKE deal with Amazon is actually a good thing for them.

Home Depot does sell appliances.  So does Lowes and Best Buy.  HHGregg went out of business because they failed to adapt and could not compete.  But stores like Home Depot and Best Buy are more than just appliances and they happen to have good online presence and customer loyalty.  A fellow blogger recently wrote about this here.  Check it out.

I think the entire retail sector has over reacted and the recent Amazon effect on the retail industry has created some good potential bargains.

The key to retail success today is how well do you market to and retain the mobile online consumer?

A company basically has three options.

  • Agree to be bought out by Amazon.
  • Develop a successful one stop shop and buy mobile campaign and customer loyalty program similar to Amazon.
  • Or join Amazon to make your product and your brand stronger and more available to the online world making it easier to buy.

I’ve already mentioned how NIKE has taken advantage of Amazon.  Here is another company which I have written about in the past and has done remarkably well recently.

GRUBHUB.

They make online ordering, and reordering, quick, simple and easy.  It fits the millennial mobile mode of online shopping perfectly.

However, on the surface, their business could appear to be threatened by Amazons move into the food and food delivery business much like Blue Aprons.   But they too have “joined” Amazon in a very interesting way.

You can use Alexa to order food from GRUBHUB.  They have taken advantage of the Amazon effect and incorporated it into their business model with hands free ordering.   This is not without possible risk.

Amazon has been accused of poaching sales from retailers.

“A study by Upstream Commerce, a retail intelligence firm that tracks pricing, suggests that Amazon will use the pricing data from outside merchants who sell through it to ultimately compete with them.  In women’s apparel, 25 percent of the top products initially offered by marketplace vendors were sold by Amazon within 12 weeks, according to the report.”

Other retailers have directly and indirectly acknowledge “competition” as a future risk and as a result, many good quarterly reports have sent stock prices down instead of up solely because of this “competition” in the market.

GRUBHUB reports this week.  They had an outstanding report three months ago.  It will be interesting to see if the Amazon effect is viewed as a boost or a bust for their business.

Disclaimer:  This post is meant for informational and conversational purposes only.  It should not be viewed as a recommendation to buy a particular stock or fund.  As always, please do your own additional research before buying stocks.

Will Prime Day Be A Good Day For Amazon Stock?

What is Prime Day?

Amazon started Prime Day in 2015.  It is typically a one day special event of deals and discounts on just about everything available to amazon prime members. This year, It will be held July 11th.

However, as it is with most special commercial celebrations, and yes – Prime Day was started to celebrate the anniversary of Amazon, this year Amazon Prime Day starts at 6pm the day before, July 10th.

Of course the real reason for Prime Day is to generate more Prime memberships, to build a base of consistently returning customers and, therefore, reoccurring revenue. Amazon is even expanding their event to more international customers to the count of 13 countries around the world.
Many consumers will use this day to test Amazon’s Prime service, and many of those customers will remain Prime members once their trial membership is done.

Studies have shown that Prime customers spend more than twice what nonmembers do, so it’s no wonder Amazon is trying to spread the Prime love as much as it can.

I’m sure Jeff Bezos would say it is a “Win + Win” deal.

How popular is it really?

Amazon doesn’t disclose precise numbers, but some analysts estimate that Prime Day 2016 may have generated $525 million in sales for Amazon, up 26 percent from Amazon’s projected sales of $415 million in 2015.

According to Amazon, the company sold more than 90,000 TVs, over 1 million pairs of shoes, 200,000+ headphones, 23,000+ iRobot Roombas, and more than 14,000 Lenovo laptops on Prime Day alone. That beats the number of sales the retailer generated on Black Friday, which for most retailers is considered to be the biggest shopping day of the year.

How easy is it to find deals, shop and buy?

This year, with the added global access and even greater push for trial access to Prime, the Amazon App (which is always free) and Amazon gadgets (Echo – Echo Dot w/Alexa, Kindle, Audible, Dash, etc) there promises to be yet more Prime Day records broken. Amazon will be running specials not only online but through their mobile channels (Echo, Kindle, Audible) with specific deals targeted for users of these devices.

How easy is it? Just ask Jeff Bezos . . .

Just kidding, but it is getting easier and easier to purchase not only what you need for day to day living but for all those impulsive moments as well.

The power of ecommerce has even forced the worlds largest sport and leisure shoe manufacturer, NIKE, to re-think their strategy and start selling directly to consumers thru Amazon and Instagram. It’s an online world and most consumers have mobile devices which they care with them for instant online access.

Mobile ecommerce only makes sense.

I wonder if NIKE will be “online” in time for Prime Day? As of this writing (July 4th) I did not see their direct link listed on Amazon yet.

Are there Prime Day issues?

Yes, with this popularity there have been issues with finding good deals on products you actually want as well as general supply and demand. There have been many instances of consumers complaining that many of the special deals are not always on things they want, or are of cheaper quality than they expect, and for the items they are searching for, difficult to find and then when they do find them the deal is either over or sold out.

This year Amazon is helping you out by suggesting to download their app from which you can look up the schedule of daily deals and place a watch on the ones you want. This way the app will alert you when the special is about to start.

You can even download an Amazon Assistant to your desktop to help you stay up to date on your wish lists and orders.

How does Amazon stock react to Prime Day?

This one is a bit more difficult to answer. For one, this is just the third year that Amazon has hosted Prime Day. And two data points, or data sets, does not a pattern make – other than a straight line.
However, in 2015 the stock price increased the week before and kept increasing the week after.

In 2016, the stock price increased the week before but then went down the following weeks.

So what will happen this year?

Lately tech stocks, including Amazon, have been beaten down by the market. Will Amazon’s stock price continue its downward trend or will prime day provide the opportunity for investors to look at Amazon stock as another online bargain and reverse the trend?

My personal opinion is that Amazon, as well as many other tech stocks, has a bit more to fall. There may be a few fake reversals but to date the stock is only down 5%. Hardly the correction needed to inspire investors to scoop up a bargain.

What are your thoughts?

Time Travel

I don’t usually do a lot of traveling for work, but lately I have been playing the role of part time road warrior.  All of my travel has involved long flights to the west coast.  Strangely, jetlag doesn’t bother me too much.  The biggest issue I have with the time difference is the fact that the markets open just when I am waking up and close by 1 pm.  Which is often one of the busiest or most time crunched periods of the day for me.  I’m used to reading up on investment news while having a leisurely breakfast, having all day to see if I get any alerts, or not, for possible trades at the end of the day.  This traveling between time zones has totally thrown off my routine, changed the way I follow the markets and even the way I post on my site.  I am using the wordpress android app for the very first time.  

My question to readers is this.  Are the any road warriors out there who actively follow the market and their investments?  If so, what tips, tricks and tiolsbof the trade do you have in your arsenal?