Author Topic: What can be added to this investment portfolio to improve it?  (Read 5293 times)

joer1212

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What would be a good addition to my portfolio of investments?
I currently have the following assets:

* $74,000 in 4 individual corporate bonds (Sara Lee, Goldman Sachs, Selective Insurance Group, Teneco Packaging).

* About $5,000 in my employee 457b and Roth 401K.
I will be contributing $34,000 a year to these plans, the maximum allowable.
This money is allocated as follows:

20% Bond Index Fund
20% Stable Value Fund
25% Large-Cap Index Fund
10% Mid-Cap Index Fund
10% Small-Cap Index Fund
15% International Index Fund (All-World ex-US)

* About $25,000 idly sitting in my local bank earning virtually no interest.
I will need about 5k of this money in my savings and checking accounts at all times. Where should I invest the rest?
I was considering buying another corporate bond with a minimum yield of 6%.
Or maybe I could get a REIT index fund?
What about purchasing one or more individual stocks, like Berkshire Hathaway, to round off my portfolio?
Should I do a little of all these?
What do you think would provide diversification, and make my portfolio more dynamic?

FYI- I am 42 years-old, and I want to retire in 8-10 years, possibly by 50, but no later than 52.
My risk tolerance is moderate.
« Last Edit: May 09, 2012, 04:26:00 PM by joer1212 »

astadt

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Re: What can be added to this investment portfolio to improve it?
« Reply #1 on: May 10, 2012, 01:51:13 AM »
VIG - Vanguard Dividend Appreciation Fund

Its got good return with medium risk.
It might seem similar to your Large Value Fund but VIG invests in companies that have a track record of raising their dividends over the long term. You end up yielding a lot more than its NAV yield in the end.

And while I'm no 457b expert Im pretty sure you cant contribute the max to both... Anyone know for sure?

joer1212

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Re: What can be added to this investment portfolio to improve it?
« Reply #2 on: May 10, 2012, 03:09:27 PM »
Quote
And while I'm no 457b expert Im pretty sure you cant contribute the max to both... Anyone know for sure?
Quote


Yes, you can.
The 457b is tax deferred, while the ROTH 401k is after-taxes, but I'll be able to withdraw the money tax-free when I need it in the future.
I will look into VIG.

AdrianM

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Re: What can be added to this investment portfolio to improve it?
« Reply #3 on: May 17, 2012, 09:39:14 PM »
Talk about being over invested in one sector

100% equities.
You even have a 85% home country bias.

An idea is to think outside the box you live in.
Foreign property in Asia or South America or both.

Same thing with equities.
There are some great companies out their that are not listed on the NYSE.


arebelspy

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Re: What can be added to this investment portfolio to improve it?
« Reply #4 on: May 18, 2012, 07:53:25 AM »
Talk about being over invested in one sector

100% equities.
You even have a 85% home country bias.


An idea is to think outside the box you live in.
Foreign property in Asia or South America or both.

Same thing with equities.
There are some great companies out their that are not listed on the NYSE.

You say these  as if they're negative.  100% equities is good for someone young.  For OP looking to retire in 8-10 years I might back that off to 90/10 or something, but 100% is much better than something like 50/50.  And 85/15 domestic/international seems a perfect mix.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

JoeK

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Re: What can be added to this investment portfolio to improve it?
« Reply #5 on: May 18, 2012, 05:37:49 PM »
Talk about being over invested in one sector

100% equities.

How would the following be considered 100% equities?

Quote
* $74,000 in 4 individual corporate bonds (Sara Lee, Goldman Sachs, Selective Insurance Group, Teneco Packaging).

grantmeaname

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Re: What can be added to this investment portfolio to improve it?
« Reply #6 on: May 18, 2012, 07:51:23 PM »
Not to mention the 20% in a diversified bond fund.

AdrianM

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Re: What can be added to this investment portfolio to improve it?
« Reply #7 on: May 19, 2012, 12:12:28 AM »
1. You have 100% invested in financial bits of paper = 100% equities.
You haven't diversified, you have just spread your risk around the same sector.

2. Region bias is 85% US so why bother with 15% in the rest of the world?
There is 193 sovereign states in the world and you choose to put 85% of you money in just 1 and spread 15% to the rest.

3.Where are your tangible assets?
For example a rental property.

4. Sovereign Risk
You have all of your investments in the same country.

What I would call a diversified portfolio of investments.

1. Financial investments, both in my home country and abroad.
Example NYSE:BRK.A shares and ASX:ASX

2. Property, both in your home country and abroad.
example: Rental property in you city of choice in the US and in Santiago, Chile.

3. Cash or equivalents, both in the US and abroad.
Example: Bank account in the US and in Singapore.
Singapore bank account can be denominated in non USD.
Also have a safety deposit box in Singapore to store Hard Currencies.

This would give you a truly diversified portfolio of investments.
It could quite easily withstand almost every kind of catastrophe be they economic, political or regional warfare.

AdrianM

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Re: What can be added to this investment portfolio to improve it?
« Reply #8 on: May 19, 2012, 12:20:56 AM »

100% equities.
You even have a 85% home country bias.



You say these  as if they're negative.  100% equities is good for someone young.  For OP looking to retire in 8-10 years I might back that off to 90/10 or something, but 100% is much better than something like 50/50.  And 85/15 domestic/international seems a perfect mix.

OK this is how I view investing.

There are 4 general ways to make money.
Work.
Property.
Equities.
Private Company.

You work to buy the others. Eventually you have enough others to stop forced work.

I say 100% Equities is bad because you are all in one area. You my have many different equities but they are still all equities.


arebelspy

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Re: What can be added to this investment portfolio to improve it?
« Reply #9 on: May 19, 2012, 08:27:27 AM »
You sacrifice returns for diversity.

I judge the risk of catastrophic events and decide that 85/15 domestic/international is sufficient, and I'd rather maximize my expected value.  Different strokes.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Mr Mark

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Re: What can be added to this investment portfolio to improve it?
« Reply #10 on: May 19, 2012, 10:39:38 AM »

I raised this before, but what is 'The Mustashian Portfolio/ Asset Allocation'? Is it exactly as MMM has his, or would it be different depending on time to ER, age, saving rate, ...?

Might be better as a new thread.

arebelspy

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Re: What can be added to this investment portfolio to improve it?
« Reply #11 on: May 19, 2012, 12:39:03 PM »

I raised this before, but what is 'The Mustashian Portfolio/ Asset Allocation'? Is it exactly as MMM has his, or would it be different depending on time to ER, age, saving rate, ...?

Might be better as a new thread.

I don't think there's any such thing.

As a slightly related aside, it surprises me how many market timers and individual stock holders (as opposed to index funds) there are on these forums.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Mr Mark

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Re: What can be added to this investment portfolio to improve it?
« Reply #12 on: May 19, 2012, 02:50:37 PM »
I think there are generic themes, at least in the final destination represented by MMM's current portfolio wrt FI, yield, volatility, etc.

I like the rental income and unleveraged property ownership part, for example. Diversifying income streams. Dividend funds, index funds [low cost, Vanguard], relatively low % of bonds, small Emergency fund, no student loans or any other debt, use of 401k matches and IRA/Roths, low tax exposure.

It would nice to have a 'reference' portfolio to assist many wanna-be ERs from the false promises of the market timers!

elysianfields

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Re: What can be added to this investment portfolio to improve it?
« Reply #13 on: May 21, 2012, 05:44:07 AM »

I raised this before, but what is 'The Mustashian Portfolio/ Asset Allocation'? Is it exactly as MMM has his, or would it be different depending on time to ER, age, saving rate, ...?

Might be better as a new thread.

I don't think there's any such thing.

As a slightly related aside, it surprises me how many market timers and individual stock holders (as opposed to index funds) there are on these forums.

Perhaps that's the DIY attitude of Mustachians showing through.

I personally don't believe the Efficient Market Hypothesis to explain market movements accurately, and I believe I can get an edge investing in equities through my own research.  But clearly individual stock investment isn't for everyone.

OTOH, I'm not very mechanically oriented, so buying a fixer-upper house wouldn't work to my strengths.  Different strokes, I suppose...

Mr Mark

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Re: What can be added to this investment portfolio to improve it?
« Reply #14 on: May 21, 2012, 08:33:35 AM »
Maybe that's true. Heck, it's your money. Let's compare returns after 30 yrs eh? ;-)

But generally I think the ideas [illusions?] of market timing & stock picking distract people starting out on building a stash. Many new investors may think playing the stock market means active trading, and haven't read a lot about it. It makes it seem investing to acheive FI is about lucky timing, catching bubbles early, and comes across as a 'get rich quick scheme'.

When we know it's about increasing savings rate and reducing expenditure. And long term steady dividends and  returns.