It was nine months ago today that I started this blog, and as I recall, I introduced a new fund at that time into my 401(k) assets to help leverage against the receding market. As it turned out, my timing kinda sucked -- if I raised my 401(k) contributions and invested that money solely into the stock market, then my return would be in the ballpark of 50% on that new money. But in the long-run, I am better off with a focus on the overall asset allocation. Plus, I personally never want to get too involved in the market to the point that it becomes a second job or a glorified casino.
There are two things that are inevitable in the market: it's going to rise, and it's going to fall. There will be market booms and there will be other recessions. During either case, every investor will feel the need to do something, during which most novice investors will usually do the wrong thing. Next time the market moves substantially, I can simply adjust my assets across more funds based on this handy chart:
Fund # - Real / Current / Target
Fund 29 - 10% / 5% / 5%
Fund 84 - 10% / 10% / 10%
Fund 24 - 22% / 25% / 25%
Fund 113 - 14% / 10% / 10%
Fund 85 - 44% / 50% / 50%
As you can see, I have changed my current allocations (i.e. direction of new money) to match my target. Now, when the funds in the "real" column (which reflect the actual balance in my portfolio) are skewed, it is because one or more of these five funds is over- or under-performing, which is an indication that I should redistribute the money somewhere else. If a fund is under-performing, then I want to add more money to it to buy at a discount. If a fund is over-performing, then I want to remove money from it to sell at a premium. Bear in mind, this technique works best with indexed mutual funds - and it does not apply to ownership of individual stocks!
Contrariwise to my strategy, what novice investors often do is see that the market is on the rise, so they put all of their money in the greener pastures (no "green" pun intended). There are market horror stories of investors that held off on the tech stock boom of 1995-2000 until the Y2K fears had gone away, at which point they dumped money into the sector. March 2000 is when its bubble popped, so all of that money was practically lost as soon as it went in. (Yes, this is what qualifies as horror in the financial world.)
Conversely, when novice investors see that the market is in rapid decline, they pull all of their money from the market into a money market fund (which is on par with a savings account at the bank). This prevents them from losing anything, but when the markets rally back, they miss out on the returns. If they could pull out at the first signs of a massive retreat, such as August 2007 or even October 2008, and then buy in that the first signs of market recovery, such as March 2009, then their portfolio will be awesome!
Unfortunately, there is not enough information to forecast when to move your money. So in reality, novice investors will stomach the losses as long as they can until they finally say, "enough is enough and its time for a change!" Or some variation of that, and they move their money into stable investments right before the market turns around. Having been burned by the fire, they hold off as long as possible before buying into the market again. A common result is to watch them buy in at $10, sell at $6.50, and then buy back at $10.20.
In either case, going "all-in" or "all-out" requires perfect timing. The pitfall stems from the old adage: "what's good for the goose is good for the gander," but in reality the modified adage of "you can have your cake, and eat it too" is more appropriate. When it is time to look at your portfolio, the trick is to hedge the best possible outcome with the worst case scenario. Asset allocation is the most effortless way of doing it.
As well as making the change to incoming assets, what I also want to do for tomorrow is move 5% from my Hi-Yield Corporate Bond Fund #29 to the Total Stock Market Index Fund #85 and move 3% from the International Index Fund #113 to the Explorer Fund #24 (this will put 98% of my portfolio within my target) based on the chart below:
Fund # - Real / Current / Target / Future
Fund 29 - 10% / 5% / 5% / 5%
Fund 84 - 10% / 10% / 10% / 10%
Fund 24 - 22% / 25% / 25% / 25%
Fund 113 - 14% / 10% / 10% / 11%
Fund 85 - 44% / 50% / 50% / 49%
If only courtship & dating were so simple.
DISCLAIMER: Although many of you know that I work in finance, please be aware that I am neither licensed nor permitted to give advice and if you want to get specific recommendations, then you should consult with a financial advisor or reputable financial sources, my favorite website is CNNFN.com and my favorite radio station is KFNN 1510 AM. Many financial plans are at no cost to you (because the advisers are paid by the investments where your money is placed).
Tuesday, November 10, 2009
Tuesday, November 3, 2009
The Full Motley: 4Q 2009 Part 1
Ok, it is getting time for my 4Q review, and things are looking good!
The other day or so, I heard on the radio how this market recovery has outpaced experts' opinions, which is good because it has definitely outpaced everything I've said. I expected it to raise above 10,000 by the end of the year, and it did that a few weeks ago. I also expected it to retreat below 9,000, and it blew right into 10,000, and then retreated down to 9,750, but I don't think it's been back to even 9,500, so that is really a lot better than I expected.
There are a couple thoughts I have about that: one being that all these minor retreats that we have not been seeing will compound into one massive retreat for February or March (or based on how far off my expectations have been thusfar, maybe it will happen in early January instead). Alternatively, I think it could be that many people are holding large portions of cash, and they're reinvesting more and more cash each time we hit these major benchmarks. It would be a great strategy honestly, albeit the ideal would have been for them to dump it all into the markets in March when the DOW was scaling down to 6,500.
Regardless, I can change my allocations from my current to my target since my Total Bond Market holdings are nearing 10% now, but I still have a few days to consider it.
Fund # - Current / Target
Fund 29 - 0% / 5%
Fund 84 - 55% / 10%
Fund 24 - 15% / 25%
Fund 113 - 5% / 10%
Fund 85 - 25% / 50%
The other day or so, I heard on the radio how this market recovery has outpaced experts' opinions, which is good because it has definitely outpaced everything I've said. I expected it to raise above 10,000 by the end of the year, and it did that a few weeks ago. I also expected it to retreat below 9,000, and it blew right into 10,000, and then retreated down to 9,750, but I don't think it's been back to even 9,500, so that is really a lot better than I expected.
There are a couple thoughts I have about that: one being that all these minor retreats that we have not been seeing will compound into one massive retreat for February or March (or based on how far off my expectations have been thusfar, maybe it will happen in early January instead). Alternatively, I think it could be that many people are holding large portions of cash, and they're reinvesting more and more cash each time we hit these major benchmarks. It would be a great strategy honestly, albeit the ideal would have been for them to dump it all into the markets in March when the DOW was scaling down to 6,500.
Regardless, I can change my allocations from my current to my target since my Total Bond Market holdings are nearing 10% now, but I still have a few days to consider it.
Fund # - Current / Target
Fund 29 - 0% / 5%
Fund 84 - 55% / 10%
Fund 24 - 15% / 25%
Fund 113 - 5% / 10%
Fund 85 - 25% / 50%
Tuesday, October 27, 2009
CNNFN: Best Time to Invest? Now!
The best time to invest in a 401(k)? Now
Don't try to time your retirement contributions based on market swings. Contribute as much as you can until you retire.
-By Walter Updegrave, Money Magazine senior editor
NEW YORK (Money) -- Question: I'm 47-years-old and would like to begin participating in my company's 401(k) plan. But I don't know if this is the right time to do so. Do you think I should start now or wait until the economy gets better? --Frank, Brighton, Mass.
Answer: Most issues in personal finance aren't digital -- yes or no, do this or that. There's usually more gray than pure black or white. Which means I don't often get a chance to be totally unequivocal. So I'm going to take full advantage of this opportunity:
Don't wait, Frank! Start contributing to your 401(k) pronto. Do the max if you can. Throw in catch-up contributions once you reach 50 if you can manage it. And don't stop until you retire.
I know that the events of the past year have rattled plenty of retirement investors. Even some people who have been participating in their 401(k) for years have begun to wonder whether it makes sense to hold off for a while and see how things play out.
But contributing to a 401(k) -- or any other retirement savings plan -- is a long-term discipline that you should adhere to throughout your career regardless of what's going on in the economy and the financial markets at any given moment. It's not an activity that you turn on and off in hopes of capitalizing on a soaring market or avoiding a bad one.
Why? Well, even though we know that the financial markets will have their ups and downs, we can't predict when they'll occur with enough precision for us to time our 401(k) contributions to exploit them.
Just look at this past year. Back in March, stock prices had hit a 12-year low and many people were worried that the wheels were coming off our economic and financial system. By your rationale, that would have been a terrible time to put money into your 401(k), since no one knew when, or for that matter if, the economy would get better.
But if you had followed your gut then -- which, come to think of it, you probably did, since you're still not participating in your 401(k) -- you would have missed out on the 50%-plus surge in stock prices that's occurred over the last eight months.
Fact is, when the economy is going through one of its periodic convulsions, it's impossible to tell when it will get back on track. And if you hold off investing during economic downturns and wait until you're absolutely positively sure that the economy is on the mend, you're going to miss the opportunity to do a lot of saving.
Let's take the last recession as an example. According to the National Bureau of Economic Research, the group that dates economic contractions and expansions, the recession before this one lasted eight months, starting in March of 2001 and ending in November of that same year.
But NBER didn't determine that the recession had ended and officially announce it was over until July of 2003, fully 19 months after the recovery had already begun.
It doesn't always take that long to get the official nod that the economy is in recovery mode again. But my point is that by the time you get hard evidence that the economy has turned a corner, the rebound will likely have already been well underway. And chances are the financial markets will be even further along since they typically lead the turnaround. Which means you'll probably miss opportunities to buy investments in your 401(k) while they're selling at attractive "pre-recovery" prices.
The other reason you don't want to focus on the short-term ebbs and flows of the economy is that such an approach is antithetical to retirement planning. Only by saving and investing regularly throughout our working years will most of us accumulate a nest egg large enough to maintain our pre-retirement standard of living. The 401(k) makes that sort of regular saving and investing possible in large part because of the ease and convenience of payroll deductions (the tax breaks don't hurt either).
Yes, your 401(k) balance will fluctuate as the financial markets go through their inevitable gyrations. But hanging in there and contributing regularly gives you your best shot at boosting the value of your account over the long term.
A recent study of 401(k) plans by the Employee Benefit Research Institute bears this out. EBRI found that the balances of workers who participated consistently in their 401(k) plans from 2003 through 2008 dropped 24.3% on average in 2008 due to the market rout.
But the study also showed that because of a combination of employee and employer contributions and investment gains before the crash, the average account balances of these consistent participants actually increased at an annual rate of 7.2% over that time period, even after factoring in the market crash.
Clearly, there are no guarantees of how much you or anyone else will eventually end up with by saving and investing through a 401(k). But the sooner you get started, the more sensibly you diversify and invest and the longer you stick with your 401(k) saving and investing regimen regardless of what's happening in the economy and financial markets, the better your chances of accumulating enough dough to support you in retirement.
http://money.cnn.com/2009/10/26/pf/expert/401k_contributions.moneymag/index.htm?postversion=2009102711
I wanted to reprint this article, because (A) Walter Updegrave is one of my favorite financial reporters in terms of his philosophies, and (B) his philosophy in this article reminded me of exactly what I wrote in my June 15th entry: But (I remembered) one of the clichés that I would tell callers when the younger people would inquire "when is the best time to start investing?" My answer was always "Now," with the explanation that "once you start investing, you can change things around and learn what you don't know as you play, but if you're sitting on the sidelines the whole time and hoping to learn everything before you begin, then you can miss the whole game."
The markets may do a lot of unpredictable things, but this truth is one that you can always fall back on as a standard. If you can afford to invest, then you cannot afford to not invest.
Don't try to time your retirement contributions based on market swings. Contribute as much as you can until you retire.
-By Walter Updegrave, Money Magazine senior editor
NEW YORK (Money) -- Question: I'm 47-years-old and would like to begin participating in my company's 401(k) plan. But I don't know if this is the right time to do so. Do you think I should start now or wait until the economy gets better? --Frank, Brighton, Mass.
Answer: Most issues in personal finance aren't digital -- yes or no, do this or that. There's usually more gray than pure black or white. Which means I don't often get a chance to be totally unequivocal. So I'm going to take full advantage of this opportunity:
Don't wait, Frank! Start contributing to your 401(k) pronto. Do the max if you can. Throw in catch-up contributions once you reach 50 if you can manage it. And don't stop until you retire.
I know that the events of the past year have rattled plenty of retirement investors. Even some people who have been participating in their 401(k) for years have begun to wonder whether it makes sense to hold off for a while and see how things play out.
But contributing to a 401(k) -- or any other retirement savings plan -- is a long-term discipline that you should adhere to throughout your career regardless of what's going on in the economy and the financial markets at any given moment. It's not an activity that you turn on and off in hopes of capitalizing on a soaring market or avoiding a bad one.
Why? Well, even though we know that the financial markets will have their ups and downs, we can't predict when they'll occur with enough precision for us to time our 401(k) contributions to exploit them.
Just look at this past year. Back in March, stock prices had hit a 12-year low and many people were worried that the wheels were coming off our economic and financial system. By your rationale, that would have been a terrible time to put money into your 401(k), since no one knew when, or for that matter if, the economy would get better.
But if you had followed your gut then -- which, come to think of it, you probably did, since you're still not participating in your 401(k) -- you would have missed out on the 50%-plus surge in stock prices that's occurred over the last eight months.
Fact is, when the economy is going through one of its periodic convulsions, it's impossible to tell when it will get back on track. And if you hold off investing during economic downturns and wait until you're absolutely positively sure that the economy is on the mend, you're going to miss the opportunity to do a lot of saving.
Let's take the last recession as an example. According to the National Bureau of Economic Research, the group that dates economic contractions and expansions, the recession before this one lasted eight months, starting in March of 2001 and ending in November of that same year.
But NBER didn't determine that the recession had ended and officially announce it was over until July of 2003, fully 19 months after the recovery had already begun.
It doesn't always take that long to get the official nod that the economy is in recovery mode again. But my point is that by the time you get hard evidence that the economy has turned a corner, the rebound will likely have already been well underway. And chances are the financial markets will be even further along since they typically lead the turnaround. Which means you'll probably miss opportunities to buy investments in your 401(k) while they're selling at attractive "pre-recovery" prices.
The other reason you don't want to focus on the short-term ebbs and flows of the economy is that such an approach is antithetical to retirement planning. Only by saving and investing regularly throughout our working years will most of us accumulate a nest egg large enough to maintain our pre-retirement standard of living. The 401(k) makes that sort of regular saving and investing possible in large part because of the ease and convenience of payroll deductions (the tax breaks don't hurt either).
Yes, your 401(k) balance will fluctuate as the financial markets go through their inevitable gyrations. But hanging in there and contributing regularly gives you your best shot at boosting the value of your account over the long term.
A recent study of 401(k) plans by the Employee Benefit Research Institute bears this out. EBRI found that the balances of workers who participated consistently in their 401(k) plans from 2003 through 2008 dropped 24.3% on average in 2008 due to the market rout.
But the study also showed that because of a combination of employee and employer contributions and investment gains before the crash, the average account balances of these consistent participants actually increased at an annual rate of 7.2% over that time period, even after factoring in the market crash.
Clearly, there are no guarantees of how much you or anyone else will eventually end up with by saving and investing through a 401(k). But the sooner you get started, the more sensibly you diversify and invest and the longer you stick with your 401(k) saving and investing regimen regardless of what's happening in the economy and financial markets, the better your chances of accumulating enough dough to support you in retirement.
http://money.cnn.com/2009/10/26/pf/expert/401k_contributions.moneymag/index.htm?postversion=2009102711
I wanted to reprint this article, because (A) Walter Updegrave is one of my favorite financial reporters in terms of his philosophies, and (B) his philosophy in this article reminded me of exactly what I wrote in my June 15th entry: But (I remembered) one of the clichés that I would tell callers when the younger people would inquire "when is the best time to start investing?" My answer was always "Now," with the explanation that "once you start investing, you can change things around and learn what you don't know as you play, but if you're sitting on the sidelines the whole time and hoping to learn everything before you begin, then you can miss the whole game."
The markets may do a lot of unpredictable things, but this truth is one that you can always fall back on as a standard. If you can afford to invest, then you cannot afford to not invest.
Friday, September 18, 2009
Dow Breakpoint
The DOW closed this week above another breakpoint: 9,800. Just for sake of history, the first time the DJIA (a.k.a. "The DOW") closed above 9,800 was March 1999 (in fact, it started shy of 9,700 and it closed at 10,006.78 that month) and I believe it closed below 9,800 most recently on October 6, 2008, so depending on your definition of "recovery," the recovery of the aforementioned Lehman Brothers bankruptcy only took one year (the financial definition of "recovery" is technically when we set a new high, but I think that's a misnomer because it assumes that the market is never over-inflated, and everybody knows that is possible).
Monday, September 14, 2009
CNNFN: Events That Broke Wall Street
The events that broke Wall Street: A shocking series of events that forever changed the financial markets
http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/
A year ago, the collapse of Lehman Brothers set off a series of stunning events from which Wall Street is still recovering.
Seemingly every day for about month, a different legendary financial company teetered on collapse. Stocks recorded some of their most dramatic drops in history, including the Dow's epic 778-point drop on Sept. 29 -- the biggest ever single-day slide. And lawmakers worked overtime in an effort to stem off a failure of the financial system.
The solution: a series of unprecedented and expensive bailouts to save systemically significant institutions from failing and to loosen the tight grip on credit.
Today is the one-year anniversary of the biggest event to shake Wall Street to its core in the most recent market downturn: the bankruptcy of the Lehman Brothers. The DOW tumbled as far down as 6500 in March 2009 before it has made a steady recovery (although most analysts feel as though the "recovery" has been backtracking lost ground because the investors in large over-reacted to the news). Regardless, this 33-date timeline from the above link is interesting from a historical perspective (granted, it's no fall of ENRON but somewhat interesting nonetheless).
http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/
A year ago, the collapse of Lehman Brothers set off a series of stunning events from which Wall Street is still recovering.
Seemingly every day for about month, a different legendary financial company teetered on collapse. Stocks recorded some of their most dramatic drops in history, including the Dow's epic 778-point drop on Sept. 29 -- the biggest ever single-day slide. And lawmakers worked overtime in an effort to stem off a failure of the financial system.
The solution: a series of unprecedented and expensive bailouts to save systemically significant institutions from failing and to loosen the tight grip on credit.
Today is the one-year anniversary of the biggest event to shake Wall Street to its core in the most recent market downturn: the bankruptcy of the Lehman Brothers. The DOW tumbled as far down as 6500 in March 2009 before it has made a steady recovery (although most analysts feel as though the "recovery" has been backtracking lost ground because the investors in large over-reacted to the news). Regardless, this 33-date timeline from the above link is interesting from a historical perspective (granted, it's no fall of ENRON but somewhat interesting nonetheless).
Thursday, August 27, 2009
CNNFN: Market Watch
Tomorrow will be a very interesting day in the market considering it is going to follow this round of headlines:
- Friday rally lands Dow industrials, S&P, Nasdaq at 2009 highs; oil also ends at '09 high (8/21/09) Hardly a news-worthy story at that time, but it kept the wheels in motion for more interesting headlines.
- Dow industrials' winning streak hits seven as U.S. equity indexes eke out gains (8/26/09) And that verb was on the money! The DOW closed up by a mere 4.23 points, i.e. .04%. "Eked out" indeed.
- U.S. stocks close higher; 8-session Dow winning streak is longest in 28 months (8/27/09) The past longest "winning streak" was in April 2007, and the markets peaked that October. Obviously, there is no way the markets will peak within the next year or two, but at the same time, these are promising signs.
Saturday, August 15, 2009
The Full Motley: 3Q 2009
This week was when I was slated to re-evaluate my allocations, which I somewhat missed but that's not too upsetting because July 2009 was the best single month of the DOW since 2002, so I was probably best off to just let things sit as they were.
But aside from the market boom, Vanguard.com had some restructuring since my last personalized update, so now I can track the progress of my account much easier. Keep in mind that the most important focus of an active portfolio is the asset allocation, so it matters less whether the current balance in the portfolio is $10,000, $100,000, or $1,000,000, than how the 100% is split.
Here are my current allocation:
Vanguard Total Stock Market Index Fund (fund 85) = 44.5%
Vanguard Explorer Fund Investor Shares (fund 24) = 23%
Vanguard Total International Stock Index Fund (fund 113) = 14%
Vanguard High-Yield Corporate Fund (fund 29) = 10.5%
Vanguard Total Bond Market Index Fund (fund 84) = 5.5%
Vanguard GNMA Fund Investor Shares (fund 36) = 2.5%
So, the first step is to compare these real numbers to my current and target allocations:
Fund # - Real / Current / Target
Fund 29 - 10% / 0% / 5%
Fund 84+36 - 5% / 55% / 10%
Fund 24 - 23% / 15% / 25%
Fund 113 - 14% / 5% / 10%
Fund 85 - 45% / 25% / 50%
At this point, I could simply flip 5% from Fund 29 to Fund 84 and another 5% from Fund 113 to Fund 85, and then set my current allocations to my target allocations. This was the goal that I had prepared back in February, and it would make future re-evaluations very simple because any change will reflect the performance of the holdings (unless there is a change in my target allocation).
Alternatively, I could continue to direct a higher percent to Fund 84 and Fund 85 than I have going to Fund 29 and Fund 113, respectively, which is what I am doing now.
I don't think we are going to see a big gain until 4Q ("fourth quarter," i.e. Oct-Dec) in the stock market again, so I believe whatever money I add there may be nullified in the next few months, so I would just as soon keep new money going in than I would be to rearrange my existing amounts. Plus, I have a curiosity to find out how long it will take for me to build up 10% in Fund 84 without dumping new money to it.
But aside from the market boom, Vanguard.com had some restructuring since my last personalized update, so now I can track the progress of my account much easier. Keep in mind that the most important focus of an active portfolio is the asset allocation, so it matters less whether the current balance in the portfolio is $10,000, $100,000, or $1,000,000, than how the 100% is split.
Here are my current allocation:
Vanguard Total Stock Market Index Fund (fund 85) = 44.5%
Vanguard Explorer Fund Investor Shares (fund 24) = 23%
Vanguard Total International Stock Index Fund (fund 113) = 14%
Vanguard High-Yield Corporate Fund (fund 29) = 10.5%
Vanguard Total Bond Market Index Fund (fund 84) = 5.5%
Vanguard GNMA Fund Investor Shares (fund 36) = 2.5%
So, the first step is to compare these real numbers to my current and target allocations:
Fund # - Real / Current / Target
Fund 29 - 10% / 0% / 5%
Fund 84+36 - 5% / 55% / 10%
Fund 24 - 23% / 15% / 25%
Fund 113 - 14% / 5% / 10%
Fund 85 - 45% / 25% / 50%
At this point, I could simply flip 5% from Fund 29 to Fund 84 and another 5% from Fund 113 to Fund 85, and then set my current allocations to my target allocations. This was the goal that I had prepared back in February, and it would make future re-evaluations very simple because any change will reflect the performance of the holdings (unless there is a change in my target allocation).
Alternatively, I could continue to direct a higher percent to Fund 84 and Fund 85 than I have going to Fund 29 and Fund 113, respectively, which is what I am doing now.
I don't think we are going to see a big gain until 4Q ("fourth quarter," i.e. Oct-Dec) in the stock market again, so I believe whatever money I add there may be nullified in the next few months, so I would just as soon keep new money going in than I would be to rearrange my existing amounts. Plus, I have a curiosity to find out how long it will take for me to build up 10% in Fund 84 without dumping new money to it.
Wednesday, August 5, 2009
Record Highs
Here's the power of investing & timing, by the way: I happened to check my portfolio tonight and, knowing the market was up BIG, I was expecting BIG things! But I was more than pleasantly surprised when I saw that my month-end balance for July 2009 was higher than my portfolio had ever been.
That means in September 2007 when the market was at its current peak, and when the DOW was sitting around 14,000, I had less money than my portfolio is worth right now, when the market is impressively within the 9,000's, but still another 2-3 years from full recovery.
Granted, we are not talking about a huge starting balance of $1,000,000, but we're not talking about a balance of ::shakes head:: $3, either.
As soon as the market tumbled, you might have heard how a lot of people were putting money into falling stocks at a discount, and this is the reason. Once the market reached its low, which I believe it was when the DOW was at 6,500, I increased my paycheck deductions by another 2-3%, so not only was more money going in, but it was buying more at a lower price per share, and when the market recovered, the worth of each share increased.
The easy way to determine when I should buy and when I should hold off was -- well, luck played a big part, especially in not buying when the market was too high, and when the market went below my existing average cost basis (i.e. the average price of each share I have purchased), I knew that I would be getting a bigger discount than I had up until that point, so I made the most of the opportunity.
There are two schools of thought for the market recovery at this point: one, "easy & steady" and the other, "rough & rocky." Personally, I am expecting the former but I have stated a couple times that I would not be surprised to see the market retreat this month or next month, maybe even back down to 8,500 or lower, but October through December should see another strong rally like we saw recently.
Probably not as strong as the month of July 2009, though. That was the best single month in the market since 2002.
New for 2011 Note: the $3 joke was in reference to an old reader who had asked how much he could earn off $3 invested for 7 hours. Not much, if you didn't know already.
That means in September 2007 when the market was at its current peak, and when the DOW was sitting around 14,000, I had less money than my portfolio is worth right now, when the market is impressively within the 9,000's, but still another 2-3 years from full recovery.
Granted, we are not talking about a huge starting balance of $1,000,000, but we're not talking about a balance of ::shakes head:: $3, either.
As soon as the market tumbled, you might have heard how a lot of people were putting money into falling stocks at a discount, and this is the reason. Once the market reached its low, which I believe it was when the DOW was at 6,500, I increased my paycheck deductions by another 2-3%, so not only was more money going in, but it was buying more at a lower price per share, and when the market recovered, the worth of each share increased.
The easy way to determine when I should buy and when I should hold off was -- well, luck played a big part, especially in not buying when the market was too high, and when the market went below my existing average cost basis (i.e. the average price of each share I have purchased), I knew that I would be getting a bigger discount than I had up until that point, so I made the most of the opportunity.
There are two schools of thought for the market recovery at this point: one, "easy & steady" and the other, "rough & rocky." Personally, I am expecting the former but I have stated a couple times that I would not be surprised to see the market retreat this month or next month, maybe even back down to 8,500 or lower, but October through December should see another strong rally like we saw recently.
Probably not as strong as the month of July 2009, though. That was the best single month in the market since 2002.
New for 2011 Note: the $3 joke was in reference to an old reader who had asked how much he could earn off $3 invested for 7 hours. Not much, if you didn't know already.
Sunday, July 26, 2009
Surprise, Surprise!
Wasn't this week a nice surprise? The DOW closed above 9,000 again! Well, I'm not sure if "surprise" is the right word, but there were enough cynics to say that the collapse of the American dollar is forthcoming and a whole lot of other bunk that made this week almost like a moment of truth for them, in that their "sky is falling" heresy is a vast over-reaction. In fact, my friend at work was spouting off those claims as early as Monday, and he had to shut up by Thursday's impressive close.
Cynicism definitely weighs more, which is how the markets fall faster than they rebound, but this road to recovery has gone amazingly smooth (albeit the real test will be that 11,000-14,000 range). If you've taken notes & memorized everything I've said (or if you just read my May 8th entry), then my expectations might be a bit too conservative, which is fine by me! I like being wrong when the end result is better than expected, especially when I have a large hedge against my expectations.
The real lesson to be learned is that the "all-in, all-out" approach is best saved for Vegas with the rest of the craps. Proper investing is a (at times, delicate) balancing act with calculated exposure to all parts of the stock and bond markets. While my expectations are that the DOW will be above 10,000 by the end of this year, I am not going to direct all of my new money into the Total Stock Market Index fund for a variety of reasons, including the fact that I believed bonds would experience above-average growth this year (highly unlikely given the market recovery, but not altogether impossible), the International Markets are recovering as strongly as (at times, stronger than) the domestic markets, and there is nothing moving this portion of our recovery along aside from the disproportionate freefall from the end of last year into this year.
My day to rebalance my 401(k) investments is August 11th, assuming I find it necessary next month to redistribute my assets, but I have not checked in a little while (geez, where have I been? My rock-and-roll vampire lifestyle shouldn't disable me from staying up on these things) so I need to take a serious look at them this weekend or next weekend, and start honing in on what my options are. Most likely, though, I will be making no (or limited) changes. Most likely, I will rebalance my existing money and leave my incoming allocations alone.
Cynicism definitely weighs more, which is how the markets fall faster than they rebound, but this road to recovery has gone amazingly smooth (albeit the real test will be that 11,000-14,000 range). If you've taken notes & memorized everything I've said (or if you just read my May 8th entry), then my expectations might be a bit too conservative, which is fine by me! I like being wrong when the end result is better than expected, especially when I have a large hedge against my expectations.
The real lesson to be learned is that the "all-in, all-out" approach is best saved for Vegas with the rest of the craps. Proper investing is a (at times, delicate) balancing act with calculated exposure to all parts of the stock and bond markets. While my expectations are that the DOW will be above 10,000 by the end of this year, I am not going to direct all of my new money into the Total Stock Market Index fund for a variety of reasons, including the fact that I believed bonds would experience above-average growth this year (highly unlikely given the market recovery, but not altogether impossible), the International Markets are recovering as strongly as (at times, stronger than) the domestic markets, and there is nothing moving this portion of our recovery along aside from the disproportionate freefall from the end of last year into this year.
My day to rebalance my 401(k) investments is August 11th, assuming I find it necessary next month to redistribute my assets, but I have not checked in a little while (geez, where have I been? My rock-and-roll vampire lifestyle shouldn't disable me from staying up on these things) so I need to take a serious look at them this weekend or next weekend, and start honing in on what my options are. Most likely, though, I will be making no (or limited) changes. Most likely, I will rebalance my existing money and leave my incoming allocations alone.
Friday, July 3, 2009
Breaking News!
I couldn't help thinking of Mo Ansari when I got on CNN.Money.com right before the market closed to see the most unique "Breaking News!" that I've witnessed in my career: "The market will remain open until 4:15PM!"
The market had been facing downward since the opening, brought on of course by the jobs report, which was exactly what Mo Ansari said to expect, but keeping the market open the day before an observed holiday for 15 minutes was too bizarre. We found out that it was due to "connectivity" issues, as in the freakin' New York Stock Exchange had computer problems!! This is a first in my career, and I am going to start searching the financial websites to find out if it had happened before.
I had the presence of mind to set up an exchange into the Total Stock Market fund for the remainder of the money that I had planned a while ago (see 6/15 entry), thinking it might be the closest to 8,000 we're going to see again, but the market had already passed 4PM (its regular close) and the website did not provide me a guaranteed trade date. Why? Because Vanguard hates day-traders, which is what I was doing. If you want to make an exchange, make the exchange. If you want the lowest possible price, then go somewhere else because they're not going to help you! While it served me no good, I had to respect it. It protects long-term investors (including me) as a whole.
Then, it turned out that we stayed late to change the trade date on every transaction submitted between 4 and 4:15PM (with a nice little OT for the next payday) so I guess I should have gone ahead and dumped the money into it during that 15-minute grace. If nothing else, it would have made for a good story! But we'll see what happens Monday. If the unemployment reports scared the market down 2.5% today, then I don't know what is going to give investors the confidence to buy on Monday (or at least throughout the whole week).
The market had been facing downward since the opening, brought on of course by the jobs report, which was exactly what Mo Ansari said to expect, but keeping the market open the day before an observed holiday for 15 minutes was too bizarre. We found out that it was due to "connectivity" issues, as in the freakin' New York Stock Exchange had computer problems!! This is a first in my career, and I am going to start searching the financial websites to find out if it had happened before.
I had the presence of mind to set up an exchange into the Total Stock Market fund for the remainder of the money that I had planned a while ago (see 6/15 entry), thinking it might be the closest to 8,000 we're going to see again, but the market had already passed 4PM (its regular close) and the website did not provide me a guaranteed trade date. Why? Because Vanguard hates day-traders, which is what I was doing. If you want to make an exchange, make the exchange. If you want the lowest possible price, then go somewhere else because they're not going to help you! While it served me no good, I had to respect it. It protects long-term investors (including me) as a whole.
Then, it turned out that we stayed late to change the trade date on every transaction submitted between 4 and 4:15PM (with a nice little OT for the next payday) so I guess I should have gone ahead and dumped the money into it during that 15-minute grace. If nothing else, it would have made for a good story! But we'll see what happens Monday. If the unemployment reports scared the market down 2.5% today, then I don't know what is going to give investors the confidence to buy on Monday (or at least throughout the whole week).
Wednesday, July 1, 2009
The Full Motley: Believe The Market
Mo Ansari had a real good show today! I wish I could've heard more of it, but it was interesting to hear him talking about the markets in terms of politics, because he made the comment that they're not really as intertwined as most people think. Not that the markets aren't intertwined to politics, but the part about people thinking. Most people want the market to move in the way that their political thinking is going, but they don't. You cannot will the markets into going down, or going up, because the markets are reacting to so many different factors all at once that attempting to predict the markets in advance is pointless.
My investment company Vanguard has nine "We Believe" statements, and I did a presentation on them this year. I forget the exact statement, but my summary for one was "beating the market returns is not worth the effort or the risks involved," and it's true. When the stock market as a whole averages 9%-11% over its lifetime, then you can just learn to expect that as a return, and do the simple things to keep pace with it. Otherwise, beating the market becomes this full-time job where for every percent you outperform the market, there is an equal percent of under-performance, and which side you end up on is really just 50:50 chance. That's where the phrase "let your money work for you" comes from. If you're doing all the work, then you might as well just consider the gains a paycheck. Then, good luck finding freetime to enjoy that bonus pay if you get any! Chances are you'll lose those gains before that happens.
My investment company Vanguard has nine "We Believe" statements, and I did a presentation on them this year. I forget the exact statement, but my summary for one was "beating the market returns is not worth the effort or the risks involved," and it's true. When the stock market as a whole averages 9%-11% over its lifetime, then you can just learn to expect that as a return, and do the simple things to keep pace with it. Otherwise, beating the market becomes this full-time job where for every percent you outperform the market, there is an equal percent of under-performance, and which side you end up on is really just 50:50 chance. That's where the phrase "let your money work for you" comes from. If you're doing all the work, then you might as well just consider the gains a paycheck. Then, good luck finding freetime to enjoy that bonus pay if you get any! Chances are you'll lose those gains before that happens.
Monday, June 15, 2009
The Full Motley: Mid-quarter Check-up
It has only been just over one month since my last adjustment to my 401(k) allocations, so it is way too early for me to reconsider my choices (or second-guess them) but if this past month has been any indication on what to expect in the next two months, then I did some very, very poor guesses! LOL, which is a good thing because I am not taking an "all-in, all-out" approach.
Regardless, I never would have expected the market recovery to be as stable as it has been. It did not surprise me when it crossed the 8,000 threshold at the time it did, but I honestly expected it to pop up to as high as 8,300, then immediately retreat down past 8,000 again, and the market has done no such thing! It feels as though there is an understanding that 8,000 is not going to be broken again, and even little retreats such as today (which was no "little" 2%) will not spurn a larger drop like the one that would take it below 8,000 again. But, as always, I could be wrong!
Honestly, I was ready to put some money into the Total Stock Market Index fund several weeks ago when it was sitting in the low $20's, except I felt the market should dip below 8,000 (which would most likely knock it down past $20), but I had enough doubt in my judgment to put an amount in that day (not as large as I had initially considered, because I was thinking I'd just toss in the remaining amount when/if the market fell under 8,000) so at least I got that upswing; plus is lowered my Average Cost per Share!
But it reminded me of one of the clichés that I would tell callers when the younger people would inquire "when is the best time to start investing?" My answer was always "Now," with the explanation that "once you start investing, you can change things around and learn what you don't know as you play, but if you're sitting on the sidelines the whole time and hoping to learn everything before you begin, then you can miss the whole game."
Regardless, I never would have expected the market recovery to be as stable as it has been. It did not surprise me when it crossed the 8,000 threshold at the time it did, but I honestly expected it to pop up to as high as 8,300, then immediately retreat down past 8,000 again, and the market has done no such thing! It feels as though there is an understanding that 8,000 is not going to be broken again, and even little retreats such as today (which was no "little" 2%) will not spurn a larger drop like the one that would take it below 8,000 again. But, as always, I could be wrong!
Honestly, I was ready to put some money into the Total Stock Market Index fund several weeks ago when it was sitting in the low $20's, except I felt the market should dip below 8,000 (which would most likely knock it down past $20), but I had enough doubt in my judgment to put an amount in that day (not as large as I had initially considered, because I was thinking I'd just toss in the remaining amount when/if the market fell under 8,000) so at least I got that upswing; plus is lowered my Average Cost per Share!
But it reminded me of one of the clichés that I would tell callers when the younger people would inquire "when is the best time to start investing?" My answer was always "Now," with the explanation that "once you start investing, you can change things around and learn what you don't know as you play, but if you're sitting on the sidelines the whole time and hoping to learn everything before you begin, then you can miss the whole game."
Sunday, May 10, 2009
The Full Motley: 2Q 2009, Part 2
I just submitted my new allocation, and it was funny because I went against my instincts, but at the same time, I felt better for it because half of my contributions are already going to Fund 84, so it was only 5% going to this fund in question and I think my instincts might be wrong. This fund is the Total Int'l Stock Index Fund (Fund 113) but I think the Nikkei is outpacing the Dow and I've heard China has epic growth opportunities, so 5% won't make too much of a difference either way, and it is worth the risk to have this exposure.
Below are my future allocations for the next three months, followed by what I have earmarked for my allocations three months from now:
Fund 29 - 0% / 5%
Fund 84 - 55% / 10%
Fund 24 - 15% / 25%
Fund 113 - 5% / 10%
Fund 85 - 25% / 50%
Additionally, I moved some money from Fund 84 to try out another bond fund: GNMA, aka Fund 36. This won't affect my overall allocation because they're both bond funds, and I moved an even amount, so I can keep a lazy eye on it. I am basically giving it a try-out potentially to replace my exposure in Fund 29 (Hi-Yield).
As mentioned above, no new money is going to Fund 29 and depending how Fund 36 performs in the next three months, I may redirect the expected 5% earmarked for Fund 29 into Fund 36.
One fund that I have not discussed yet is Vanguard Explorer fund (Fund 24) which is a high-risk fund. I don't expect high-risk, aggressive stocks to perform better than the blue chips during the rebound, but once the market has topped 10,000, then I think that opportunity exists, so if the market recovery outpaces my expectations, I have 15% (or 25% for third quarter) going to the fund to hedge against my expectations.
DISCLAIMER: Please remember that I am neither licensed nor permitted to give specific advice, so if you want investment recommendations, then please consult with a financial advisor or reputable financial sources; my favorite website is CNNFN.com and my favorite radio station is KFNN 1510 AM "Radio That Makes You Money." The investment decisions presented above were tailored to my risk-tolerance and my financial goals. Many financial plans are at no cost to you (advisers are often paid by the investments where your money is placed).
Below are my future allocations for the next three months, followed by what I have earmarked for my allocations three months from now:
Fund 29 - 0% / 5%
Fund 84 - 55% / 10%
Fund 24 - 15% / 25%
Fund 113 - 5% / 10%
Fund 85 - 25% / 50%
Additionally, I moved some money from Fund 84 to try out another bond fund: GNMA, aka Fund 36. This won't affect my overall allocation because they're both bond funds, and I moved an even amount, so I can keep a lazy eye on it. I am basically giving it a try-out potentially to replace my exposure in Fund 29 (Hi-Yield).
As mentioned above, no new money is going to Fund 29 and depending how Fund 36 performs in the next three months, I may redirect the expected 5% earmarked for Fund 29 into Fund 36.
One fund that I have not discussed yet is Vanguard Explorer fund (Fund 24) which is a high-risk fund. I don't expect high-risk, aggressive stocks to perform better than the blue chips during the rebound, but once the market has topped 10,000, then I think that opportunity exists, so if the market recovery outpaces my expectations, I have 15% (or 25% for third quarter) going to the fund to hedge against my expectations.
DISCLAIMER: Please remember that I am neither licensed nor permitted to give specific advice, so if you want investment recommendations, then please consult with a financial advisor or reputable financial sources; my favorite website is CNNFN.com and my favorite radio station is KFNN 1510 AM "Radio That Makes You Money." The investment decisions presented above were tailored to my risk-tolerance and my financial goals. Many financial plans are at no cost to you (advisers are often paid by the investments where your money is placed).
Friday, May 8, 2009
The Full Motley: 2Q 2009, Part 1
This weekend is 5/10, which is when I make the changes in my portfolio allocations. Unfortunately, I have learned that I made a mis-step in allocating money to the Vanguard Hi-Yield Corporate Fund because it has a 1% fee on shares sold in less than 1 year, and those bonds really reflect the nature of stocks more than bonds, so they don't capture the real diversification that I want when I establish my automatic rebalancing. I still like the idea of bonds at 10% of the portfolio, but there are several subclasses for stock to mix up the remaining 90% (of course, like I indicated previously, I will direct 50% to Fund 84 and the other half will be a reflection of my overall target allocation mix in three more months).
Once I make the change, I will show my new allocations here, but I know I have notes at Amy's place on what I was planning to do, so I can review those to increase my comfort level with what I want to do over the next three months and what I think will happen until August.
Amazingly, the market closed above 8,500 today (up 2% today), which is a phenomenal rebound -- almost, too phenomenal since there was nothing to indicate that "everything" is on the right track for a quick recovery. This rebound may be somewhat superficial (or artificial) but the market free-fall was very much unwarranted, so I don't expect it to take long to get back over 10,000, but I was thinking it would be around the turn of the year -- not a couple months from now.
Once I make the change, I will show my new allocations here, but I know I have notes at Amy's place on what I was planning to do, so I can review those to increase my comfort level with what I want to do over the next three months and what I think will happen until August.
Amazingly, the market closed above 8,500 today (up 2% today), which is a phenomenal rebound -- almost, too phenomenal since there was nothing to indicate that "everything" is on the right track for a quick recovery. This rebound may be somewhat superficial (or artificial) but the market free-fall was very much unwarranted, so I don't expect it to take long to get back over 10,000, but I was thinking it would be around the turn of the year -- not a couple months from now.
Thursday, April 23, 2009
The Full Motley: Mid-quarter Check-up
Ok, I am almost two weeks away from reorganizing my 401(k) investments! If you recall, I added the Vanguard Total Bond Market Index fund (Fund 84) to my portfolio in February and I directed 75% of my incoming assets to that fund (I didn't go with 100% at the time, because I didn't want to miss a market rally, which we saw for six weeks in March and April) and my goal was to get it up to 10% of my overall balance*. I am happy to report that it is currently at 5% of my overall balance! Therefore, I will most likely keep 50% going to Fund 84 and decide on my proposed mix for after Fund 84 is 10%, then use the remaining 50% to reflect that breakdown. If I want to continue to have 10% of my incoming money in Fund 84, then I will have the first 50% like I said, and 5% from the planned 10% mix, so in reality 55% will be going to Fund 84. But that's what I have to consider over the next couple weeks.
I have been listening to Market Wrap with Moe Ansari most evenings on the drive home, and while he is typically bearish, he has made a few bullish statements to make me think that I should be more bull-ready. But as noted above, only 65% of Money.CNN.com readers thought the markets would be above 8,000 at the end of June, and they are hovering at that mark now, so a sharp retraction could be expected.
Additionally, I will look at my recent returns in the bond markets and if they are greatly above 8%, then I would consider scaling back on money going into those funds. I think the stock markets are pretty much shot right now, so their recent returns will not be reliable indicators at this point. Common sense would be more useful.
Again, I like to examine my 401(k) money quarterly and my portfolio annually. I have found it best to use your birthday as the starting date because you're typically thinking about your future then anyway, so if you were born in February, then May, August, and November are your other "quarter" months. As such, I will wait until May to make my actual move, but it's good to keep in on your mind in the meantime.
* - overall balance in my 401k plan, not including retail investments outside of my 401k.
I have been listening to Market Wrap with Moe Ansari most evenings on the drive home, and while he is typically bearish, he has made a few bullish statements to make me think that I should be more bull-ready. But as noted above, only 65% of Money.CNN.com readers thought the markets would be above 8,000 at the end of June, and they are hovering at that mark now, so a sharp retraction could be expected.
Additionally, I will look at my recent returns in the bond markets and if they are greatly above 8%, then I would consider scaling back on money going into those funds. I think the stock markets are pretty much shot right now, so their recent returns will not be reliable indicators at this point. Common sense would be more useful.
Again, I like to examine my 401(k) money quarterly and my portfolio annually. I have found it best to use your birthday as the starting date because you're typically thinking about your future then anyway, so if you were born in February, then May, August, and November are your other "quarter" months. As such, I will wait until May to make my actual move, but it's good to keep in on your mind in the meantime.
* - overall balance in my 401k plan, not including retail investments outside of my 401k.
Tuesday, February 10, 2009
The Full Motley: 1Q 2009
The market is on track to close below 8,000 again (say, didn't the Senate approve the stimulus plan today as well?), so it is time to pity the sellers in a buyer's market! Luckily, I have all my bills paid and enough cushion to raise my 401 contributions comfortably. But it's not money that I plan to let go to waste in the market. Today, I am going to reallocate my 401(k) investments and I expect to do this periodically. The strategy of "buy & hold" might be outdated and ineffective, but at the same time, if you're only 30 years old, what choice do you have? Timing the market like a ridiculous casino game is unwise, so the key is to start from the top-down.
Establish goals, wants, and needs, and then from there, create an asset allocation as your guide. The difference between 20% and 30% return in one given year is far less meaningful than the average return of 2% to 8% (bonds) to 11% (stocks) over the course of 10 years or more.
Once you have spent enough time with that figure, then you have your go-home number which your overall mix should reflect at all times. For example, let's say your target as an investor aged 25-35 is 90:10 stocks-to-bonds, then 90% of your existing money should be in stocks and 10% should be in bonds. As you get older, you would want to shift your bonds to a higher percentage, and as you near retirement, you will want to introduce stable value options (money markets) into the mix.
If you're under 25, then why not have all your money in the stock market? Because if you started investing at age 25 and you're now 27, and the market took its hit, the Vanguard Total Stock Market fund is posting a 3-year return of -8.45%. Meanwhile, the Vanguard Total Bond Market fund is posting 5.41% for the same period. So, if you had balanced (even an insignificant amount like 90:10), then your return would be far greater, maybe -3.77% -- which happens to be the 3-year return of the Vanguard STAR Fund (by far, my favorite investment).
To revisit the question, why not have all your money in the stock market if you're under 25? Hedging! Experts will differ on this issue, but in my opinion, if buy & hold is outdated, then allocation mixes are the only way to go. If your stock portion is greatly outperforming bonds, then your target mix will be off. Let's say you want 90:10, but it's currently at 92:8, simply move 2% from stocks to bonds. That's called "rebalancing," but in this case, we know that the only way the mix will get skewed is if stocks or bonds are over-performing or under-performing, so you invest in those that are under-performing while they're under-performing and you drop those that are over-performing while they're over-performing. In practice, that's enabling you to "buy low, sell high" without having to don a genie hat (or worse, to chase returns).
Myself, I am introducing a new fund into my portfolio today: the aforementioned Vanguard Total Bond Market fund. As such, I am going to put a larger than desired portion of my incoming contributions to this new fund. In average market conditions, I would consider putting 100% to the new fund to build it up (until it is at least 10% of my mix) but I don't want to miss on any market recovery in the next three months either, so I am going to split my incoming investments evenly between this new fund and the Vanguard Total Stock Market fund.
About three months from now, I will revisit my incoming contributions and redirect the incoming money to play a direct role in my asset allocations.
DISCLAIMER: Although many of you know that I work in finance, please be aware that I am neither licensed nor permitted to give advice and if you want to get specific recommendations, then you should consult with a financial advisor or reputable financial sources, my favorite website is CNNFN.com and my favorite radio station is KFNN 1510 AM. Many financial plans are at no cost to you (because the advisers are paid by the investments where your money is placed).
Establish goals, wants, and needs, and then from there, create an asset allocation as your guide. The difference between 20% and 30% return in one given year is far less meaningful than the average return of 2% to 8% (bonds) to 11% (stocks) over the course of 10 years or more.
Once you have spent enough time with that figure, then you have your go-home number which your overall mix should reflect at all times. For example, let's say your target as an investor aged 25-35 is 90:10 stocks-to-bonds, then 90% of your existing money should be in stocks and 10% should be in bonds. As you get older, you would want to shift your bonds to a higher percentage, and as you near retirement, you will want to introduce stable value options (money markets) into the mix.
If you're under 25, then why not have all your money in the stock market? Because if you started investing at age 25 and you're now 27, and the market took its hit, the Vanguard Total Stock Market fund is posting a 3-year return of -8.45%. Meanwhile, the Vanguard Total Bond Market fund is posting 5.41% for the same period. So, if you had balanced (even an insignificant amount like 90:10), then your return would be far greater, maybe -3.77% -- which happens to be the 3-year return of the Vanguard STAR Fund (by far, my favorite investment).
To revisit the question, why not have all your money in the stock market if you're under 25? Hedging! Experts will differ on this issue, but in my opinion, if buy & hold is outdated, then allocation mixes are the only way to go. If your stock portion is greatly outperforming bonds, then your target mix will be off. Let's say you want 90:10, but it's currently at 92:8, simply move 2% from stocks to bonds. That's called "rebalancing," but in this case, we know that the only way the mix will get skewed is if stocks or bonds are over-performing or under-performing, so you invest in those that are under-performing while they're under-performing and you drop those that are over-performing while they're over-performing. In practice, that's enabling you to "buy low, sell high" without having to don a genie hat (or worse, to chase returns).
Myself, I am introducing a new fund into my portfolio today: the aforementioned Vanguard Total Bond Market fund. As such, I am going to put a larger than desired portion of my incoming contributions to this new fund. In average market conditions, I would consider putting 100% to the new fund to build it up (until it is at least 10% of my mix) but I don't want to miss on any market recovery in the next three months either, so I am going to split my incoming investments evenly between this new fund and the Vanguard Total Stock Market fund.
About three months from now, I will revisit my incoming contributions and redirect the incoming money to play a direct role in my asset allocations.
DISCLAIMER: Although many of you know that I work in finance, please be aware that I am neither licensed nor permitted to give advice and if you want to get specific recommendations, then you should consult with a financial advisor or reputable financial sources, my favorite website is CNNFN.com and my favorite radio station is KFNN 1510 AM. Many financial plans are at no cost to you (because the advisers are paid by the investments where your money is placed).
Thursday, January 1, 2009
Wiser Time: The Introduction
Two years ago, I started my first financial blog. It wasn't on this website, and it didn't have any title (I think it was simply titled "Market Review" to differentiate from my movie reviews and books reviews under the same blog) but since that website has now closed down, I have shifted it to Blogspot.
I decided to copy all (or most) of my entries from that blog over to this website so I can create a more complete view of my financial lifestyle. When reviewing what I said earlier or at different points in the market movement, it will be easier to reference with everything on the same website.
While a semi-creative title wasn't obligatory, I felt inclined to find one that fit. Music is a big part of my life, and not surprisingly, that was where I found my answer. "Wiser Time" is a song by The Black Crowes called "Wiser Time," with a chorus which I felt adequately describes the day-to-day grind of the markets:
On a good day,
No, it's not every day,
We can part the seas.
But on a bad day,
No, it's not every day,
Glory beyond our reach.
The song itself was written of their lives on tour: the constant travels, the thrill of a great show contrasted against the inner turmoil of a bad performance, basically the up's and down's together as one. It reminds me of the markets. While we have bull markets and bear markets, the determination of them is only made after the fact. At any one point, can we say we are in the middle of a bear market? Never, we could be at the end of one or the beginning of a bull market. I think the emotional dichotomy of investing echoes those of the band's tours.
Plus, it's my blog and The Black Crowes are one of "my" bands, so it is important for me to embrace that crossover and maintain a personable touch.
Ideally, my goal is to make this blog interesting to professionals in the industry and useful to novice investors who know nothing of the industry. I won't just comment on the proverbial bottom line but I will attempt to break it down one step further. This may either give something for everyone, or just alienate this blog from anyone. I have a sister whose tolerance and interest in financial education matches the duration of a hiccup. Hopefully she can be a barometer for how well I am doing in those entries.
I have comments activated, so feel free to pose any additional questions. I despise the usage of comments on most websites (the breeding ground of cowardice), so please keep any additions relevant and respectful.
-Kay
January 10, 2011
I decided to copy all (or most) of my entries from that blog over to this website so I can create a more complete view of my financial lifestyle. When reviewing what I said earlier or at different points in the market movement, it will be easier to reference with everything on the same website.
While a semi-creative title wasn't obligatory, I felt inclined to find one that fit. Music is a big part of my life, and not surprisingly, that was where I found my answer. "Wiser Time" is a song by The Black Crowes called "Wiser Time," with a chorus which I felt adequately describes the day-to-day grind of the markets:
On a good day,
No, it's not every day,
We can part the seas.
But on a bad day,
No, it's not every day,
Glory beyond our reach.
The song itself was written of their lives on tour: the constant travels, the thrill of a great show contrasted against the inner turmoil of a bad performance, basically the up's and down's together as one. It reminds me of the markets. While we have bull markets and bear markets, the determination of them is only made after the fact. At any one point, can we say we are in the middle of a bear market? Never, we could be at the end of one or the beginning of a bull market. I think the emotional dichotomy of investing echoes those of the band's tours.
Plus, it's my blog and The Black Crowes are one of "my" bands, so it is important for me to embrace that crossover and maintain a personable touch.
Ideally, my goal is to make this blog interesting to professionals in the industry and useful to novice investors who know nothing of the industry. I won't just comment on the proverbial bottom line but I will attempt to break it down one step further. This may either give something for everyone, or just alienate this blog from anyone. I have a sister whose tolerance and interest in financial education matches the duration of a hiccup. Hopefully she can be a barometer for how well I am doing in those entries.
I have comments activated, so feel free to pose any additional questions. I despise the usage of comments on most websites (the breeding ground of cowardice), so please keep any additions relevant and respectful.
-Kay
January 10, 2011
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