Comments on: A Peek At My Investment Portfolio

By: Brian

Brian — Wed, 10 Dec 2008 10:03:53 +0000

I have a question Trent, it my sound impolite, but I don’t mean anything bad by it:
1)What is the point of reading hundreds of books, writing daily about saving and finances when at the end all your investment ends up in 2 similar index funds? Does that really require so much learning/reading?
2)How is it that a person so intelligent, frugal, informed, educated, aware, green, etc. is overweight?

By: John

John — Tue, 12 Aug 2008 01:41:00 +0000

I don’t agree with you about putting your money in asaving acount, but it’s our money and no one cares for your money like you do. I personally am retired and have 35 to 40% in stock funds. I to like vanguard & have had them for several years. index is a good way to go.

By: Macinac

Macinac — Wed, 26 Mar 2008 05:17:05 +0000

Thanks Rob! But, it seems to me that everyone buys in anticipation that the market, or a fund, or a stock, will go up. (OK, other than short sellers or bond investors . . . and it’s pretty clear that shorts are timing downward) At the very minimum we want our equity to keep up with inflation which, alas, is a predictable trend.

By: JD

JD — Tue, 25 Mar 2008 06:54:41 +0000

This is a fine strategy but you should add the caveat that this is fine for someone with a small portfolio who does not want to be too involved in their investments. First, just right off the bat, if you have a large portfolio putting it into any 2 funds is stupid just from an operational/counterparty risk point-of-view. Second, you are taking pure equity risk, just because its half in the US and half int’l doesn’t diversify you. As we’re seeing now, there is no decoupling in the markets and all equity markets are getting hit at the same time. The problem with using the “long term” market results is it is still very volatile over rolling 10-year, 20-year, 40-year periods. On average global equity markets are down about 20% from their peak in Oct 2007. If you were retiring soon and you were still invested in a wide range of stocks you’d be hurt pretty bad. If you have a decent sized portfolio you should be more diversified than just 2 equity products, but include other things like maybe a commodities fund, a bond fund, sectoral specific ETFs, etc. This doesn’t require the time and due diligence you need to make stock specific bets but it will still be much better than just putting all your eggs in 2 funds.

By: Rob

Rob — Sun, 23 Mar 2008 13:58:34 +0000

Macinac,
Here is a typical definition of Market Timing (Investordictionary.com) It is “an investment strategy that is based on predicting market and economic trends. The purpose behind market timing is to anticipate future trends before they happen in hopes of making a profit.” The timeframe in not specified. Hope this helps.

By: Sharon

Sharon — Sun, 23 Mar 2008 12:15:57 +0000

I don’t think that Baby boomers are going to cause the market to fall. First, I don’t think that boomers have invested in the market the way workers younger than them have. When they were in their twenties and thirties, they have assumed that “SS will be there”. People in their twenties and thirties are far more invested in the stock market than they were. Second, because of the state of SS, (and their better health) many of them will continue to work into their retirement. My mother, no stocks, is still looking at part-time jobs at 73. The boomers, which admittedly are younger than her, will be doing the same. They will be leaving the money they have in the market there and continuing to add to it. Maybe a bit of a dip, but not that much.

By: laketrout

laketrout — Sat, 22 Mar 2008 02:51:22 +0000

Sid: Look into “TD e-Series Funds”. They are only available online through TD. They have the lowest MER of any index fund I know of in Canada.

By: imelda

imelda — Fri, 21 Mar 2008 22:30:10 +0000

Would you consider explaining the math behind rebalancing? I’m not sure I get exactly why that increases your returns over the long run.

By: AJC @ 7million7years

AJC @ 7million7years — Fri, 21 Mar 2008 21:30:10 +0000

Cramer makes mistakes, all the fund managers do, we ALL do. That’s why rich people put their money into just a few assets that they understand and love (a business here or there … a property here or there … 4 or 5 underpriced stocks) ALL to buy and hold for the long-term.

Only speculators (who can stand the risks) and fools try to time the market. The only alternative is to do what I suggested above:

Buy and hold low-cost index funds like Trent suggests … buy now … add to it whenever you have more cash … cash out as soon as you reach your target $$ and move the funds into bonds etc.

By: Oliver

Oliver — Fri, 21 Mar 2008 19:25:48 +0000

that sounds good man. Instead of taking the money out 2 years before, why not leave it in for the full 12 years. The longer you have it in, the better your average return will be. Although if the high savings will give you a return high enough to meet your goal amount by the end of those two years, you should take it out then. Good luck with it!

By: 42

42 — Fri, 21 Mar 2008 19:17:47 +0000

Oh, and KC, Cramer’s yelping helped slaughter any shareholders who took his advice to stay in Bear Stearns the same week that they blew up.

Cramer’s job is to draw eyeballs and sell ads on CNBC, not to actually, you know, provide prudent advice.

just thought I’d point that out.

By: 42

42 — Fri, 21 Mar 2008 19:13:42 +0000

Of course few can time a bottom (or top). all I know is I haven’t lost a cent of my assets since I moved out of stocks and related ETFs last year and have made a small profit sitting in Treasury ETFs. next week I am buying actual Treasury bonds to further reduce my risk. if you think Bear was the only blow-up we’re going to see, then now is a good time to go long. That is not my thesis, which is “this ain’t over.”

good luck, and let’s compare notes in a year.

By: sharon

sharon — Fri, 21 Mar 2008 18:40:51 +0000

Bella,

If investing makes you nervous, I’d suggest reading “Why Smart People Make Big Money Mistakes and How to Correct Them.” It demystified a lot of the information we hear about risk vs. reward and will explain why stocks have historically been a good way to build wealth. It helped me understand the risks of NOT investing as well as investing.

Trent even reviewed it – click on my name for the link.

By: Sid

Sid — Fri, 21 Mar 2008 18:02:42 +0000

Does anyone know of similar types of funds like the (VTSMX)(VGTSX)that are offered through investment companies in Canada? Most of the Index funds offered by the investment companies and banks have fees close to 1% for a TSX or S&P 500 based index fund and more than 2% for funds that deal with anything international. Any help would be appreciated.

By: MilkYourMoney.com

MilkYourMoney.com — Fri, 21 Mar 2008 17:14:33 +0000

Trent,

I agree with this index fund strategy of investing.

An option others could consider that do not yet have the $3,000 minimum needed to get into the selected funds, is to buy ETF’s that track the same indexes.

By: jimbo

jimbo — Fri, 21 Mar 2008 16:05:08 +0000

I like your blog, and occasionally read it. So I am going to offer you a hint. You are going to take major, I mean MAJOR losses in the coming months with a portfolio like this. If you don’t understand what is happening right now in the financial world, and the EXACT reasons for Bear Stearns collapse, then get out. Completely out. 100% cash

By: LC

LC — Fri, 21 Mar 2008 15:55:58 +0000

I have the same 2 funds although I only have 30% in international and 70% in the total index. But maybe i should change that because the international has been doing much better!

By: Quinton

Quinton — Fri, 21 Mar 2008 15:20:11 +0000

I would agree with KC.

The MOST I would pull out of Stocks is to an 80% bond or cash /20% stocks, and that is when I am around 75+.

You will still need some money, since the average age of death is what 79 or 80 now?

So dropping it to 50/50 mix when I am 65 sounds right, then going to 75/25 when I hit 70, then 80/20.

By: KC

KC — Fri, 21 Mar 2008 15:04:35 +0000

I’d certainly consider a nice bond fund – especially as you get closer to retirement. I myself have been putting that off and I really shouldn’t. Even Jim Cramer (Mr. Stocks) says people in their 30s should have 10% of their portfolio in a bond fund and increase it by 10% each decade.

As for transferring it all to cash at your target date be careful. Although it is certainly a prudent move you need to consider how much longer you might live. Perhaps some of that nest egg needs to stay in the stock market.

I advise my parents on their portfolio and its been quite a learning experience for me (cause I’m too young to invest like a retired person). But one argument I’ve read in several places says that life expectancy should play a role in a person’s portfolio. My grandmother is still living at 90 yrs old. I fully expect my 64 yr old father to make it that long (or at least to 80 like his father). That’s 15 – 25 years of life left. What he has in cash probably won’t keep up with inflation. Dad has about half in cash and half in funds and dividend paying stocks. He’s also still working and has income from a pension.

Just some food for thought on when to convert it all to cash – good luck sounds like you have a good, workable plan.

By: Lauren

Lauren — Fri, 21 Mar 2008 13:38:56 +0000

For those that don’t have or don’t want to invest 6k right off the bat, these Vanguard funds an also be purchased at ETF’s for as little as $130 and $60 each respectively (approx.) An ETF portfolio might be a good idea for a person tryign to get their feet wet in the market. Brokerage fees can add up so a low fee brokerage account liek Zecco is a good way to go.

I have to same portfolio as you Trent, but have considered adding Vanguard’s total bond market fund for safety during these volatile times.