The first month of net worth gain came rather late in 2008. Helped by continued strength in my day job and sideline business, our net worth edged up 0.7% in March. While we are $62,100 off where we started the year, we still increased our wealth by over $150,000 in the last 12 months.

Again, the market is testing the patience of every participant and spectator. If anything, I'm getting very good at dealing with market turbulence -- daily five-figure portfolio loss doesn't bother me much these days.

Now I don't think I'm a role model when it comes to investing -- some can easily discount me as market timer by keeping a big cash reserve, or being on the fence between stock picker and fund investor -- but I'm glad I'm true to myself and put my money where my mouth is. There are and will continue to be hits and misses, and it will surely take a long time to get better in the game. I won't mind people giving me more criticism or feedback along the way.

It seems that our distance to the seven-figure net worth milestone only increased in the first 60 days of the year. With another 25 grand retreat in February on the heels of the $42,790 net worth decline in January, our net worth took a 7.6% nosedive so far this year.

I can blame this to the stock market, or MSFT's unsolicited bid for Yahoo!. But either case, it just makes it much harder to achieve the net worth growth goal for the year.

I'm back to PFBlog! I know it has been a long hiatus since the last time I posted, but the last couple of months hasn't been easy. I was asked to take over a billion dollar P&L that had been poorly run and turn it around. While PFBlog is always an important source I find the meaning of life from, in this circumstance, I have to answer to the call to devote 100% of my bandwidth on this important career-lifting opportunity.

Anyway, after 6 weeks on the road traveling around the world in the last three months and countless hours of overtime poured into the work, I'm finally getting some work/life balance. This doesn't mean the hard work has been completed in my day job, but I'm satisfied that solid foundation has been built to put the business back to the right track.

So, I'm back to the blogging, and I'm starting by putting together some long-overdue monthly updates:

SUMMARY

Though the daily price change still suggested a lot of volatility in the market, the market almost ended the month where it started. My portfolio hasn't been that lucky: the heavy exposure on financial stocks still dragged the overall performance of my portfolio. It ended the month with a 1.30% haircut, versus the benchmark performance of minus 0.20%.

It is worth noting that March marks the fifth back-to-back month of portfolio decline, not something easy to swallow. During the five months' timeframe, my portfolio lost 8.36% while my benchmark index retreated 10.46%.

On a year-to-date basis, my portfolio bested benchmark by 1.70%. Still, not exactly something to brag about since I still lost dearly in the market.

SUMMARY

$54,134 is a big amount to lose in a single month, and it doesn't make life any easier when it comes immediately after another $60,000-down month.

Most of the damage is done by the untimely Microsoft bid for Yahoo! The bid, which was made public in the first day of February, immediately pulled MSFT back to the 20s, almost halved the value of my employee stock option account.

On my self-managed portfolio side, my heavy exposure to financial stocks penalized my performance -- it was a complete reversal of fortune compared to January, when these bank stocks lift the

TRANSACTIONS

Flying to safety is probably the best summary of my several trades for the month. I downsized my equity holdings by closing my positions in FSTMX and KBE.

With the reopening of Dodge & Cox's domestic equity stock, I started an initial position on DODGX before the famous fund gets closed again.

Earlier this month, Morningstar announced the winners of Fund Manager of the Year award for the past year. Here are the winners:

Domestic-Stock Manager of the Year: Will Danoff, Fidelity Contrafund and Fidelity Advisor New Insights

International-Stock Managers of the Year: Hakan Castegren and Northern Cross Team, Harbor International

Fixed-Income Manager of the Year: Bill Gross, PIMCO Total Return and Harbor Bond

Coincidentally or not, I actually own the two stock funds, Fidelity Contrafund (FCNTX) and Harbor International (HIINX), that helped their respective managers make to the list. I used to own PIMCO Total Return (PTRRX) in my 401(k) account too, but now I have better place to park my fixed income position -- that is, China-based money market funds that will benefit from the continued appreciating Yuan while earning handsome interest.

Suffering the biggest-ever loss in our portfolio -- a total of $60,000 -- our net worth took a nosedive again in January. That is, the second month in red in the last three months. For the month, our net worth declined by 4.8%, or over $42,000. I would be lying if I say I don't miss the good old days when we can count on consistent net worth improvement month after month.

On the other hand, it is probably not a bad thing if one takes a long-term perspective. After all, it could be much worse if this happens after I finally bid good-bye to my corporate life -- that extreme early retirement scenario has been in our plan for many years and all we wait for is we hit a certain net worth number. If anything, the recent market turbulence serves as a timely wake-up call in our last stretch toward millionaire club that early retirement is only the means to an end, and risk management is more important than ever in our ride toward financial independence.

Fortunately, our core income streams are still well-oiled machines. My daily job is still generating five-figure monthly cash flow even after paying all taxes and living expenses. Our sideline business also delivered a big surprise in January with monthly net proceeds topping $10,000 again.

All together, our family is little affected by the paper losses (or gains) in our portfolio. Bottomline is, even with the market slide in recent months, we still added more than $190,000 to our net worth in the last 12 months.

SUMMARY

With the S&P 500 dropped more than 6% and the international market performed no better, January sees perhaps the most brutal start of the year in recent memory.

For three months in a row now, my portfolio lost money. This time, for a total of 60 grand in one month, including more than $26,000 in one month in self managed portfolio, and about $34,000 in my employee stock option account.

There is little to celebrate, except that my self-managed portfolio is actually performing better than the general market. My finance-stock-stuffed individual stock portfolio was helped by the aggressive rate slashing of the Fed, and one of my stock pick returned over 50% in this past month. All in all, my portfolio lost 3.02% in the month when my benchmark lost 5.77%.

Back in August, I noted in this blog that Bill Gates was replaced my Mexican tycoon Carlos Slim as the world's richest person. Although both Mr. Gates and Mr. Slim have seen their stocks appreciated lately, they are now dwarfed by a new name from India.

According to The Boston Globe:

Indian businessman Mukesh Ambani's fortune rapidly rose from $20.1 billion in March 2007 to $63.2 billion in October 2007, thanks to India's booming stock market.

The other names on the list:

- Bill Gates and Carlos Slim tie for the 2nd place with $62.3 billion each.
- Warren Buffet, the Oracle of Omaha, cling to his fourth place with $55.9 billion.
- And then there is Lakshmi Mittal, the steel giant with Indian origin, who is worth $50.9 billion.

I don't even both to count the number of 0s in their money. Only if I can triple my net worth in seven months!

Yesterday I shared my grand plan to thoroughly review my portfolio management again in 2008. My first stop is to drill down to my 2007 results, and understand where the benchmark-beating results come from. Yes, I beat my benchmark index by 1.77%, and that's what is called alpha in portfolio management.

To refresh some memory, earlier in 2007 I set my target asset allocation as follows:

• 50% Domestic Equity
• 35% International Equity
• 15% Cash & Equivalent

Furthermore, I built the following benchmark portfolio to measure my relative performance:

• 50% in Vanguard Total Markets ETF (VTI)
• 35% in iShares MSCI EAFE Index (EFA)
• 15% in Cash (assuming yielding 5% every year)

I first realized that the game rules of my personal finance journey have permanently changed back in the summer of 2006. First, one day I woke up in the morning and found out my portfolio was worth half a million. Then, more frequently, my portfolio started to generate five-figure monthly ups and downs, replacing my savings as the main theme of my monthly net worth fluctuation.

In the spirit of holistically reviewing my portfolio management practice and determine course of action, one year ago, I published a series of 9 articles called "Reengineering My Portfolio Management" over a course of 2 weeks. In retrospect, the thought exercise worked out great. I finally put my portfolio management onto the right track by setting up target asset allocation, declaring a benchmark, and reporting to the audience about my success and failure on a regular basis.

To some extent, I guess I'm subject myself to external scrutiny so that I can consciously spend more time in getting this right. After all, if early retirement is what I'm after, I will have to master portfolio management so in the decades after I bid goodbye to the corporate career ladder, my family and I will continue to live a happy and stress-free life.

Therefore, I decide to take my investing practice to the next level by kicking off a new series of "Portfolio Review 2008," in which I plan to reflect on what I learned in the past (especially in the last year), look into the future, and solidify my portfolio management approach.

Practicing the second habit of highly effective people, I'm starting by laying out the framework of this series upfront. I envision this series should include the following chapters:

Our generations of lawmakers truly don't want to make our financial life easy, and that's why every year there are a long list of tax rule changes that affect everyone's life. To this end, Tom Herman, the tax columnist at the Wall Street Journal, provided a great summary of major personal income tax changes for 2008.

Without repeating the every single bullet in the long list, I just want to highlight one change that may have profound impact on many's investment strategy or portfolio management. Do you know the rules of capital gains are becoming much more favorably starting this year for those in 10% or 15% tax brackets?

Yes, for the next three years (2008 to 2010), taxpayers in those two tax brackets won't have to pay anything for long-term capital gains and qualified dividends. The tax rate on such income for those of higher income, will stay at the prevailing rate of 15%. For short-term capital gains and disqualified dividends, all taxpayers still have to pay tax at the marginal tax rate just like other ordinary income.

Starting in 2004, I have always published my annual financial goals at the beginning of each year, and reviewed the result when the year wrapped up. It is a great practice that allows me to keep a record and learn from past experience.

Having spent most of my December to complete my 2008 Financial Plan, I found it might be time to summarize and publicize my financial goals for 2008 in this dedicated post.

Measurement #1: Net Worth Growth

Goal: Net Worth of $1,120,000 by the end of 2008 ($225k annual growth)
Stretch Goal: Net Worth of $1,150,000 by the end of 2008 ($255k annual growth)

Comments: Net worth growth always comes at the top of my annual financial goals and this year will be no different. We are anticipating a challenging year and our net worth improvement in 2008 is likely to be smaller than that of 2007. However, I still want to assign myself a stretch target that exceeds our detailed plan by over 10%.

Robert Frank's column The Wealth Report at the Journal is all about the rich people's financial life, or anything related to the riches. You will read about how the riches use MySpace-like portals to get connected, how someone can have an A-380 as a private jet, and what the truly rich buy for Christmas gifts.

His recent article on a research about how much people will ask to marry for money provides some fancy figures:

According to a survey by Prince & Associates, a Connecticut-based wealth-research firm, the average "price" that men and women demand to marry for money these days is $1.5 million.

The survey polled 1,134 people nationwide with incomes ranging between $30,000 to $60,000 (squarely in the median range for nationwide incomes). The survey asked: "How willing are you to marry an average-looking person that you liked, if they had money?"

I started to use personal finance software like Microsoft Money to track my finance as early as 1998, but admittedly I have a broken track record -- in my first few attempts to gain control to my finance, I was always too lazy to keep doing the bookkeeping after a few months. Still, I'm proud of my latest streak: since 2002, I have been religiously tracking where my money comes and goes, and I have six years' of history in my Microsoft Money file now. Of course, opening the book to public eyes in this blog is an important motivator (or pressure) to extend the streak.

While I can easily give a detailed breakdown of how much we spent for our earthy needs, I have never asked myself the question: how much did I spent on investing my money?

That is, until today, when I have both the inspiration and time to get to the bottom of this question. So below is my attempt to add up all investing cost, direct or indirect, in the year of 2007.

First component of my investing cost is, of course, commission.

Since I keep good track of all my investment transactions, I easily got the line-item details from Microsoft Money's built-in report. I grouped total commission for different investment vehicles for clarity:

Stock: Total Commission = $170.66 from 21 transactions (average per transaction is $8.13, including the usual $8 commission from Fidelity, and SEC fees on stock sales). Yes, I only traded 21 times in my individual stock positions -- I'm not really a trader.

I am a frequent traveler and I love to collect miles. Over the years, I have been using these miles to bring the family to many nice places with reward tickets. It is a bit addictive if you love to travel: the more you travel, the more free tickets you get, which brings to more travel.

Now you can earn miles not only from flying, but also from shopping using a co-branded more miles. Plus, many of such frequent flier program co-branded credit cards offer amazing sign-up mileage bonus miles that sometimes almost amount to a free reward ticket itself.

Some cards do come with annual fee for the extra perks like travel discount and lower redemption level, but if your family travel at least once a year, you can easily recoup the annual fee from the additional benefits tailors to travlers.

Also, some cards' generous bonus mile offer also includes first year waiver of annual fee, making it more attractive for people who want to try out the program (or the airlines). After all, with the bonus miles, cardholders usually only have to charge another $5,000 on the card to get enough miles for a free reward ticket, a much better deal than even the best cashback cards!

Here are some attractive offers by major airlines. Enjoy!

	Credit Card	Bonus Miles after 1st Purchase	Terms	Annual Fee	Apply
	Continental Airlines Business MasterCard®	20,000	2 miles for every $1 spent on Continental airlines tickets, dining, gas, etc.; 1 mile for every $1 spent elsewhere	$85	Apply Now
	Continental Airlines World MasterCard® from Chase	20,000	2 miles for every $1 spent on Continental airlines tickets, dining, etc.; 1 mile for every $1 spent elsewhere	$85	Apply Now
	Citi® Gold/AAdvantage® World MasterCard®	12,500	1 mile for every $1 spent up to 60,000 miles a year; no blackout dates for reward tickets	$50 (1st year waived)	Apply Now

My life is complicated and one of the complication is I have to deal with two currencies: my investment income and most business income are received in dollar, whilst 95% of my cost structure is denominated in Chinese Yuan (or called Renminbi -- "people's money"). Worse, Yuan is appreciating quicker and quicker against the dollar.

In the past year, I managed to book an annualized rate of return of 8.77% in my self-managed portfolio, but this just barely beat the Yuan's 6.9% appreciation against the dollar in the year. So I asked myself the question in December, should I just buy some money market fund in China for safe return instead of risking my principal in the U.S. equity market?

As the first step, I moved $50,000 to China and bought a load of money market funds here. While I'm still contemplating the magnitude and timing I should continue to do this, here is a quick step-by-step process of how to do the Dollar/Yuan carry trade for those who want to try:

Step 1: Open A Banking Account in China

Everyone with an identification card (for local people) or valid passport (for foreigners) can open an account at any banks in China. Reputable domestic banks in China includes Bank of China, Bank of Communications, ICBC and China Merchants Bank, the latter is what I use primarily. Foreign owned banks like Citibank and HSBC also have branches in major cities in China. One will need to open a Renminbi account and an US Dollar account. It is worthwhile to set up e-banking in your first visit too (it won't be automatically set) because the long queues at major banks can sometimes keep you waiting for hours.

Have your bank ever promoted the new generation of overdraft service to you? If you occasionally write a check that exceeds your checking account balance, your bank will gladly pay on your behalf to avoid your embarrassment. Of course, there will be a "convenience" fee.

But do you know consumers paid $17.5 billion fee in such "convenient" overdraft protection arrangements?

Bankrate.com's exclusive 2007 courtesy overdraft study can be a good resource to help you understand the situation. Simply put, banks are growingly seeing the overdraft protection as a profit center. Your bank is more than happy to pay an otherwise-will-be-bounced small check for you, for an average of $29 per-item fee. Some banks will only slash you with a per-day fee for every day your account is in deficit.

Even more aggressively, some banks will include the overdraft credit limit into your checking account balance when you inquire via an ATM machine, thus fooling more customers to withdraw money they don't have. Worse, customers who don't reconcile their account regularly won't notice the overdraft until the next statement.

When it comes to the cycle of setting up financial goals and achieving them, oftentimes a good post-mortem analysis gives more insight than mere celebration of another mission accomplished.

As we are quickly bidding farewell to 2007, I took some time to revisit my 2007 plan -- I did a fairly sophisticated model a year ago to set a net worth growth goal of $230,000 -- and I overachieved it by about $34,000. But what really happened?

In order to complete the exercise, I took the original numbers from my 2007 planning financial model (which I did in December 2006), and compared them against actual results in 2007 in the income statement format I introduced lately. Here is the comparison:

The beginning of a year can be a good time to perform a 401(k) check-up. And before that, a timely reading will be this recent feature from USA Today on a study of how American employees invest their retirement fund in 401(k) accounts.

The biggest finding from the survey of 1.8 million 401(k) account holder is: 21.9% of 401(k) balance is invested in company stock. Considering that the Enron debacle that wiped out the lifetime savings of thousands is still in recent memory, it is surprising to see many people are still committing a good portion of their retirement fund to their employers' fate.