Investing 101

It is so easy to get down into the gears of investing and lose sight of the big picture.  Pulling back from portfolio management, necessary as that is, and laying out the long-range picture of investing is essential from time to time.  That is the situation today, so here are some fundamentals to investing.

  • Follow "The Golden Rule of Investing" by saving as much as you can as early as you can.
  • Determine if you are going to manage the portfolio on your own or seek outside help.  Each investor needs to make this decision.
  • Will the investment approach be active or passive.  Those terms are defined in great detail elsewhere on this blog.  While I stress a passive approach to investing, the act of developing an asset allocation plan places one on the semi-active team.  Once the Strategic Asset Allocation (SAA) plan is in place, temper active management and take a passive approach.
  • Diversify all over the world through the use of non-managed index funds or non-managed ETFs.  It is too bad one now needs to stress non-managed ETFs, but as this market grows, so will the desire to actively manage ETFs.  Such was not the case ten years ago.
  • Rebalance the portfolio.  There is an ongoing debate as to how frequently this should occur.  Instead of using a specific time frame, rely on the Dashboard of the TLH spreadsheet as a guideline when to rebalance.  The most recent version of the TLH spreadsheet includes a data table show how many shares of the ETF representing each asset class need to be purchased or sold to bring the asset class back into balance.
  • Read.  Educate yourself by reading books suggested on this blog. 

If any of the above ideas are not clear, post your questions in the comment section provided below.  For most readers this material is a review.

Blog Hint

Readers interested in looking over the portfolios listed under Categories/ITA Portfolios over on the right-hand edge of each page will find this hint useful.  Assume you are interested in examining the Schrodinger Portfolio.  Two methods are available to bring up all information on the Schrodinger. 

1) Move to the right-hand edge and click on the Schrodinger link under Categories.  When making that choice, the oldest entries show up first so you can read them in chronological order.  Due to the servers being hacked about a year ago, the first two years of blog entries were lost.  You can go back further by going over to to find older material.  Only very disciplined readers are likely to do this.

2) The second method is go near the upper right-hand corner of each page.  There is a box with a magnifying glass symbol off to the right.  In that "Search" box type Schrodinger.  That will bring up all references to Schrodinger with the newest blog posts showing up first.

These two choices give readers the option whether they want to read newest material first or old material first.

Kepler Portfolio Update

Once more it is time to update the Kepler Portfolio.  In an effort to bring the commodities asset class into balance, 30 shares of DBC were purchased last week.  This leaves two asset classes (excluding cash) outside our 25% threshold limit.  One limit order is in place for the Mid-Cap Blend asset class.  At this time there is insufficient cash to bring both asset classes into balance unless I sell shares from the developed international asset class.  Instead of selling shares, I will wait to see if any cash is added to the portfolio.

The Kepler is rounding into shape with respect to the asset allocation plan.  However, as Platinum readers will see in the second screen shot, the Kepler is lagging the benchmark by a very small percentage.  This is a good portfolio to watch to see if we can pull ahead of the VTSMX benchmark over the summer when a market correction is expected.

[Read more…]