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Old 11-24-2007, 11:08 PM
sublime sublime is offline
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Default goal setting; the short term

my life always seems to be at its best when i am working toward easily defineable goals. sadly, i very often forget that and just muddle thorugh life. those times suck and i am tried of them. i want to set some financial goals for the short term (monthly basis) and on one of the blogs i read i saw a good suggestion.

the blogger (the simple dollar) aims to increase his net worth every month. now this seems simple enough to strive for, but i wonder as both a professional gambler*, and more importantly somebody who has 75% of their net worth in diversified index funds (i would say 90% of my index fund assets are stocks of some sort) is this a wise monthly goal? i mean i could have a GREAT month financially (cut spending, invest a ton) and lose money overall or have a HORRIBLE month (spend a ton) and yet make money overall due to variance in the market.

thoughts and/or suggestions?



*online poker mostly, and lots of it so losing months aren't likely really
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  #2  
Old 11-27-2007, 05:03 AM
MatthewRyan MatthewRyan is offline
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Default Re: goal setting; the short term

in regards to poker, a great goal is to play X number of hands

also, u could set a budget and try to stay within that
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Old 11-28-2007, 05:19 AM
pig4bill pig4bill is offline
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Default Re: goal setting; the short term

If you're just going to leave your money sit in index funds, then no, that is not a reasonable goal. Unless you can control the market, how can you say you're doing well or lousy if you're at the mercy of the whims of the market?

Now, if you're going to trade your money amongst various index funds, then yes, you can set a goal like that.
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  #4  
Old 11-28-2007, 08:12 AM
Mook Mook is offline
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Default Re: goal setting; the short term

[ QUOTE ]
i mean i could have a GREAT month financially (cut spending, invest a ton) and lose money overall or have a HORRIBLE month (spend a ton) and yet make money overall due to variance in the market.

[/ QUOTE ]
I assume these assets "in the market" are being held for the long term (i.e. retirement accounts) and not serving as a back-and-forth holding place for your poker bankroll / living expenses. If I'm wrong, get any such $$$ out of index funds immediately and put it in a highly liquid source of funds that will keep up with inflation (ING, money market account, or the like).

Having said that ... You want to set both an income goal and an assets (or net worth) goal - realizing that the former is really just a component of the latter. Tracking your income on a monthly basis makes sense. I assume you have some sort of handle on your monthly expenses, so while I eschew hard-and-fast budgets (life happens, ya know) you should def. know your average monthly "net" (average poker income minus average expenses) and should be targeting this number to invest each month - track this number closely. Know whether you're running ahead or behind "trend" in terms of $$$ invested for the year, and don't let it be influenced by swings in the market itself (that is, don't fall into the trap of thinking, "eh, the S&P's up 12% this month, I could really skip this month's contribution and I'll be all right" - of course, as a pro poker player I'm sure you know about the Kelly criterion, so this is not news to you).

As for your assets, monthly is waaaaay too short a time frame to worry about "coming out ahead" if you're mainly an index-type investor (not trading for a living). The quarterly statements I receive from my 401k / IRA's are plenty good enough for me and even then I realize that I'm going to have 1, and sometimes 2-3, losing quarters a year. Your goal with your assets should be annual organic growth (independent of your contributions) at a rate equal to or better than a broad diversified index such as the Wilshire 5000. (Your total assets will, of course, be growing significantly faster than this, since you're regularly adding to them. Which is the whole point.)

It's true that "you can't eat relative performance", but if these assets are being invested over a 20, 25, 30 year time frame then it doesn't really matter and if you're consistent about moving money from the income side to the assets side (and not the other way around) then 25 years is enough to provide anyone with a 7-figure nest egg. Good luck!

Mook
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  #5  
Old 11-28-2007, 11:28 AM
chisness chisness is offline
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Default Re: goal setting; the short term

[ QUOTE ]
in regards to poker, a great goal is to play X number of hands

also, u could set a budget and try to stay within that

[/ QUOTE ]

This is right on. Set goals for things you should be controlling.

You have a long term market plan, so let it do its own thing. You have a poker skill set, so let it do its own thing. (Studying both of these areas could of course make these even better.)

Setting a hand goal is a great idea -- increasing the EV of your net worth by a certain amount, but not focusing on a strict dollar amount (trend would be to play less when winning and more when losing if you did this).

Also, a budget isn't a bad idea. My idea of a budget is not wasting money on ridiculous luxury items, but also never hesitating to do something fun because of cost (like eating at a nice restaurant or golfing). The in betweens that could use some definition are random gadgets like new speakers or a gaming system.
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