|
Posted by StarWulf on May 15, 2009, 5:16 pm
Hello everyone.
For years we have heard and been told to 'diversify' our investment
(s). Yet everyone who says it seems to have a slightly different twist
on it or altogether different take in what it means. I would like
people to answer the question for themselves before reading my view on
it and then comment on my take, if you wouldn't mind.
What does diversifying your investment (s) mean to you? How do you
diversity?
---
My take is: despite many investment recommendations on diversifying
look at stock only investments, I look more broadly. I look at keeping
some ready emergency cash in a money market account, while investing
the rest in more long-term investments. I like DRiPs (dividend
reinvestment plans/programs), a SRI mutual fund, bonds, and
international stocks (a separate mutual fund). I'm looking to add in
the future some precious metals and an index fund (both in mutual fund
form).
I chose mutual funds because I don't have the time to examine all the
stocks or investment vehicles out there, nor do I have the necessary
knowledge to be able to make good choices.
What do people think of my view on diversification and choices?
Thanks.
|
|
Posted by John A. Weeks III on May 15, 2009, 5:34 pm
In article
> My take is: despite many investment recommendations on diversifying
> look at stock only investments, I look more broadly. I look at keeping
> some ready emergency cash in a money market account, while investing
> the rest in more long-term investments. I like DRiPs (dividend
> reinvestment plans/programs), a SRI mutual fund, bonds, and
> international stocks (a separate mutual fund). I'm looking to add in
> the future some precious metals and an index fund (both in mutual fund
> form).
Good idea, but eject the DRIPS and metals. Metals are worthless
and cost money to get in and out, plus they have no rate of
return and are not backed by anyone. DRIPS are too much hassle,
and the first share of stock is too expensive to buy. Stick
with expense-efficient funds, and you will do at least as well,
and not have to jump through any hoops.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
|
|
Posted by Default User on May 15, 2009, 9:31 pm
StarWulf wrote:
> Hello everyone.
> What does diversifying your investment (s) mean to you? How do you
> diversity?
In general, diversification means dividing your money into various
types of investments, usually ones that have different risk levels and
characteristics. This is usually called "asset allocation". The exact
manner in which you achieve the allocation is less important that the
classes you select, or so the theory goes.
The classic method is to determine your overall risk tolerance, and
need for risk. That is geared towards deciding your broad division
between fixed income and equity investments. Portfolios with higher
amounts of fixed income are less volatile, but have a lower expected
return over the long run. Of course, sometimes the long run can be
rather long. That's why determining when the proceeds will be needed
factors in.
>From that point, how you "slice and dice" varies considerably. Some
people take a very simple approach, with a few broad index funds. An
aggregate bond fund, a total US market suit many, and maybe add a broad
international fund. Others like to use finer gradations, or overweight
certain subclasses. This topic fills entire books, so I'll keep it
short.
> I like DRiPs (dividend reinvestment plans/programs),
If you mean individual stocks with reinvestment, I wouldn't bother. You
can get reinvestment with most mutual funds, and most brokerages will
reinvest at no charge. DRiP programs used to be a way for small
investors to get in without fees. Now there are inexpensive brokers and
mutual fund companiew where you can invest for little or nothing in the
way of fees.
It's hard to judge your proposed program without knowing a lot more.
Like, how big a portfolio, how old you are, when you will need money
along the way (plan to buy a house in five years? Have a kid or two?)
Do you have a 401(k) plan available from work? For many that will
constitute a big portion of their investments, so the fund choices will
be important.
Brian
--
Day 102 of the "no grouchy usenet posts" project
|
|
Posted by Don on May 15, 2009, 11:39 pm
> For years we have heard and been told to 'diversify' our investment
> (s). Yet everyone who says it seems to have a slightly different twist
> on it or altogether different take in what it means. I would like
> people to answer the question for themselves before reading my view on
> it and then comment on my take, if you wouldn't mind.
>
> What does diversifying your investment (s) mean to you? How do you
> diversity?
Before accepting advice to stay out of DRIPs, I would suggest you
research that topic a little more. Have a look at some of the internet
sites that discuss DRIPs, such as
http://www.dripinvestor.com/index.asp
A Google search should turn up a lot more. Perhaps read one of Charles
Carlson's books.
I would also suggest you take the idea of diversification still further
and explore real estate. Owning rental property, as well as second
homes or vacation homes, can be very profitable in the long run. If
managing property is not your cup of tea, at the very least you should
strive to own your own home as soon as possible, and that will add a
lot to your diversification and security.
|
|
Posted by on May 16, 2009, 7:08 am
Diversification, dollar cost averaging and buy and hold for the long
term are sales pitches used to generate broker commissions. People
doing all three have been recently punished.
I particularly like the last one because the person who loses you a
bunch of money can say "you'll thank me in ten years (now go away)".
I've seen terms of 6 - 8 years, 8 - 10 years and 10 - 15 years. I've
never really understood it. What if you invest $100,000 at age 40.
How old are you when you take the money out if you want to retire at
66? What if the day before that happens the stock market drops 50%?
Do you still take the money out? Of course the day after you take the
money out the stock market could go up 50%.
The cruel truth is that you make money buying stocks that go up (and
generate dividends).
|
| Similar Threads | Posted | | IRA question | January 8, 2007, 5:00 am |
| 529 question | January 11, 2007, 4:41 pm |
| TVM Question, please help | February 8, 2007, 4:33 pm |
| S.S. Question, Please | September 1, 2007, 8:40 pm |
| 403(b)/457(b) question | October 3, 2007, 4:24 pm |
| Re: Another Soc Sec question | October 30, 2007, 11:29 am |
| RMD question | January 17, 2008, 1:04 pm |
| SEP question | May 16, 2008, 8:17 am |
| annuities question(s) | October 24, 2006, 8:33 am |
| Another gifting question | December 14, 2006, 9:14 am |
|
|
Yahoo! 
Google 
Windows Live 
del.icio.us 
digg 
Netscape 
XML Sitemap