Thanks for the warm welcome alfredsokol ! I dont go for individual stocks and personally prefer index based ETF's and IMO following are the best ETF's in each asset class LARGE CAP = SPY LARGE VALUE = IWD SMALL CAP = IWM SMALL VALUE = IWN INTERNATIONAL = EFA Real Estate/REIT = ICF As you know Bonds provide a highly effective tool for mitigating the risks of stocks since they often perform well when stock market go south , This is the reason i will allocate 40% for the Fixed income part . Actually a new ETF is coming in Q4 from ishares which tracks the Lehman U.S. Aggregate Bond index . I believe that is a convenient way to capture the entire return of the Fixed Income Asset Class . Gopinath Subbaraj http://www.geocities.com/rsgopi
Hello Gopinath, I think your ideas are pretty good for managing risk.
MrAstute , When it comes to protecting one's "Nestegg" Risk management is inevitable and one cannot blow all the money in some single hot stock :) I 'aint trade, just Invest :) Gopinath Subbaraj http://www.geocities.com/rsgopi
However, if the investor is very young he should be willing to take SOME risk, at least with a portion of his portfolio.
Not bad, Go! But I am a big fan of individual stocks! I like owning bits and pieces of companies.
Alfredsokol , I am still proposing a larger percentage of the portfolio to stocks , but instead of a single stock its the broad stock market indexes. HappyHarry , I hear you ... but i like owning bits and pieces of the entire american economy than individual corporations :) Gopinath Subbaraj http://www.geocities.com/rsgopi
Mr Subbaraj makes a valid point: Even owning index and tracking funds still represent ownership in companies, albeit a smaller and more diversified ownership than in one common stock. Why not take advantage of these truly unique financial instruments. They couldn't have dreamed up something this sophisticated years ago. It's a boon for the modern investor.
Well said KennethPenn , ETF's are the dream come true for a sophisticated investor . You can buy them , short them , buy in margin as if if its a single stock Even for the short term speculative investors here i will suggest do sector bets with the help of ETF's rather than individual stocks thus minimizing the risk that a single company will screw up :) ... For example you would have made money by betting in the entire airline industry some time ago Gopinath Subbaraj
Okay GS, I will conceed most of your excellent points. However, I want to caution of the possibility of opportunity cost. If your whole portfolio consists of market tracking instruments, you can only do as well as the whole market and you can never match the extreme profits the true overperforming stocks. This could add up to a considerable sum. I know that's IF you picked only the best stock, but let's face it, it can happen :)
If you believe you have ability/time to pick individual winners that will outperform the market then i will suggest allocating 70% of the equity part of your portfolio to a total stock market index ETF like "VTI" and allocate the remaining to your hot picks . Remember i said 70% of the equity part only , you still should have your portfolio diversified into bonds and REIT Gopinath Subbaraj
When you say bonds, do you mean individual bonds, which are notoriously difficult to pick, or bond funds? And are you suggesting a REIT fund or individual REIT stocks?
HappyHarry, what makes you so sure you can outperform the market? Do you have some special ESP which gives you deeper insights than the average professional?
HappyHarry I would prefer Bond Funds and to be specific Bond ETF's . But at present there are no good Bond ETF's . But as i said ishare is going to introduce an ETF in Q4 which will track the Lehman U.S. Aggregate Bond index which would be a perfect addition for the Fixed income asset class to any portfolio. For REIT also i prefer funds rather than individual companies . Actually ishare has a REIT ETF (ICF) which tracks the 'Cohen & Steers Realty Majors Index' ... This consists of geographically diversified REIT's operating in different fields of realestate ( appartments , malls ,resorts, industrial facilities etc) . Studies have showed that a 10%-20% REIT allocation boost returns as well as minimize the risk Also as KennethPenn said what makes you think that you will consistently outperform the market when many legendary fund managers failed :) Gopinath Subbaraj
I want to interject a stunning fact: only Bill Miller of Legg Mason has outperformed the S&P for the last 12 years. That's it! He's the only one of thousands of professional fund managers!
I will conceed that point, also! I am one of the few people who will outpace the S&P! :D
Still seems to conservative to me! Stocks are still where its at. I bought Yahoo 2 years for $10.50 a share. I figured, hey, its over priced but so what. The "greater fools" will appear en masse anyway. Now I'm sitting on a triple. How hard was that?
Very interesting info on that guys!!
I keep 10 % of my money in cash and 90% in stocks!
Hypster , congrats for that killing in Yahoo ... Actually the "Greater fools" theory is the one which lead to the bubble in 1999-2000 ... At that time everyone know the stocks were overpriced but at the same time they thought someone down the road will buy it in a higher price and that lead to insane valuations like 300-400 times the earning ! IMO , picking an hot stock and timing the market is no better than a slot machine ... You may win some times but overtime you loose or perform poorer than the overall stock market ( if you need proof just check the track record of the top 100 professional fund managers for the last 20-30 years )... When it comes to my life savings my only goal is to grow it at a better rate then money market or bond (like 12-15%) and at the same time protecting it ... If you have the guts and want to play in hot stocks alocate like 5-10% of your portifolio for it but investing the entire saving in a few stocks looks insane to me ! ... And even for speculative investing (as i posted before) i will suggest sector bets than individual stocks ... Gopinath Subbaraj
[quote:02f1a16e9b="Paulie"]I keep 10 % of my money in cash and 90% in stocks![/quote:02f1a16e9b] A brave man indeed :)
[quote:76c0c7a5ae="alfredsokol"][quote:76c0c7a5ae="Paulie"]I keep 10 % of my money in cash and 90% in stocks![/quote:76c0c7a5ae] A brave man indeed :)[/quote:76c0c7a5ae] No guts no glory!
I am a big fan of ETF's and was intrigued by the real estate ETF mentioned here (ICF). Morningstar indicates a dividend yield of less than 3% for ICF. This seems exceptionally low given that REIT's and closed-end real estate funds are producing div yields of more than double that. Any insight? 8O
Yarm ,I think the current yield for ICF is 5.2% ... But you have to take into account the capital appreciation of the stock also ... According to etfconnect.com the total YTD market return for ICF is 12.78% - not bad for a very very safe investment ! . With this rate i may more than double my investment in 6 years ! ...Im my opinion this is the safest investment next to T-bonds ! I accept many induvidual REITs make more than 5.2% ...but they are subjected to risks in the geographical region they are operating ...In my opinion ICF is the most diversified and safe REIT you may get ! Gopinath Subbaraj
[quote:eb462cc454="Hypester"]Still seems to conservative to me! Stocks are still where its at. I bought Yahoo 2 years for $10.50 a share. I figured, hey, its over priced but so what. The "greater fools" will appear en masse anyway. Now I'm sitting on a triple. How hard was that?[/quote:eb462cc454] Nice work. $56 now and a split! I hope you're still holding!
Here's a simple portfolio that would be based on your favorite mutual funds. It can be done in most 401k's,IRA's etc.. You put your money in a fund, or funds when it is above its 200 day simple moving average and put it into cash when it cuts below. Let any money additions accumulate in whatever side your currently on. Check a five - ten year chart and see how it would have performed. Personally I'd stick with small cap funds as they historically outperform other types of funds.
Okay here's and example of using the 200 dma on a mutual fund. I use PCVAX in one of my accounts so that's why I picked it. It came to life back in 1997 at about 14. Now I'm eyeballing numbers on a chart, so don't hold me exactly to the numbers. This first set of numbers are the beginning and current numbers. 14 - 26.65 gives $19.03k on an initial $10k investment The next set of numbers are crossing above and below the 200 dma. 14 - 18 15 - 15 14 - 17.8 17.8 - 20 19.5 - 26.65 Which gives $25.1k starting initially with $10k Now I would guess that the more volatile the Fund the larger the gains will be.
How did you handle the trading? Did you buy and sell at certain points?
Did you actually do the trading for those gains? Or are you just seeing it looking back now?
No, I didn't trade those numbers. As an example, I was looking at a chart to give the approximate figures where PCVAX acutally moved back and forth over the 200 dma. The account that I use PCVAX in is a 401k and I simply put in a buy or sell order in before the end of the Market day, moving between PCVAX and a cash type fund that pays interest while I'm out of PCVAX. This 401k is really boring and is loaded with low risk, low volatility funds and PCVAX has the most volatility. Right now I use ^VXO to move in and out but it's very hard to interpret. I think using the 200 dma is going to work better. Currently PCVAX is falling toward the 200 dma and ^VXO is rising which tells me not to be in PCVAX.
Does it cost you anything to trade in and out?
No, not in the 401k. But if I had been trading the 200 dma strategy in my Ameritrade account, trade expenses for moving in and out would still be low considering there were only maybe 11 trades over the 8 year period. Although I don't think Ameritrade has been around for 8 years. I've got plans to develop several articles on different strategies but for now I'm busy with the Q3-04 earnings season.