Tuesday, January 6, 2015

Follow-up to 2014 Results

There was a great follow-up question yesterday about the Rescue My IRA annual results I posted – a colleague wanted to know a few more details about the returns.  Although I answered the question directly, I’ve decided to post a follow-up here with additional information.

I report the totals for dividends, capital gains, and covered call premiums on a monthly basis in a wrap-up post, but I hadn't totaled them for the year - I haven't come to terms with how to use that as a metric to improve managing the account, since I feel that the statement value is the best gauge of progress. 

At my broker, that accounting goes like this - cash and stock values is positive, and covered call values negative.  I simply use the starting value and the ending value as the way to calculate growth.  If any readers have thoughts on how to reconcile the two, I'd love to hear them.

That said, the following are the total itemized returns in the account: 
  • Dividends:  $3,473
  • Cap Gains: $15,166
  • Premiums $3,200
  • Total:  $21,838

That percentage is 14.13% - but the increase in account value was only 8.5%. I attribute this variance to the fact that since I won’t need the funds from Rescue My IRA for 7 to 10 years, everything is reinvested – and so market ups and downs don’t translate to equivalency of cash flows. 

As a second note, I will often unwind my transactions early when the delta reaches 1.00, which has the effect of offsetting premium revenue for capital gains on the shares. My justification is to take those profits as soon as possible and then get the funds reinvested.

That’s all for today, just a little additional information on how Rescue My IRA operates.

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