Portfolio rebalancing is often described as looking at one’s portfolio at the end of the year, selling some winners and buying some losers, so the portfolio goes back to the intended asset allocation. I don’t do that. I don’t sell anything unless I’m trying to simplify my positions. I rebalance throughout the year with new cash. Because stock funds usually grow […]
Investments I Don’t Have
I wrote about my asset allocation in a previous post. This time I’m writing about what I don’t have. 1. No individual stocks, except unvested employer stock-based compensation. I believe picking stocks is a waste of time. I had tried picking stocks in the past. I spent a lot of time reading 10-Q/10-K reports, studying Wall Street sell-side […]
Subprime Induced Correction Is Over
It’s not official yet, but I suspect it will be shortly. The summer 2007 subprime induced stock market correction is over. The emerging markets index already went over its previous peak by about 4%. The S&P 500 and MSCI EAFE indexes are about 1% shy of their previous high. Given the daily volatility, the stock markets can easily reach new […]
Cascading Asset Allocation Method
Some readers asked me to write about my asset allocation and rebalancing thresholds. Here I introduce my Cascading Asset Allocation MethodTM (CAAM). I googled and I found no evidence of anybody else using that term. So I’m claiming a trade mark on it. 🙂 The Cascading Asset Allocation Method involves answering a series of questions. The questions […]
The Missing Name on Forbes 400 List
Forbes released its annual list of 400 richest Americans last week. There is one prominent name missing on the list. His name is John Bogle, founder of The Vanguard Group. Mr. Bogle started Vanguard in 1975. Vanguard created the first index fund for retail investors a year later. Today, Vanguard manages over $1 trillion assets. [Update in 2015: $3 […]
They Did It
The suspense is over. The Federal Open Market Committee lowered the target federal funds rate by 0.5%, from 5.25% to 4.75%. The Board of Governors also lowered the discount rate by another 0.5% from 5.75% to 5.25%. The discount rate was already lowered by 0.50% last month. The market wanted a 0.50% cut. The Fed obliged. The full FOMC […]
More On Missing The 10 Best Days
Blogger Nickel at fivecentnickel.com made some great comments to my post about missing the 10 best days in the stock market. I showed in my post that the probability of missing the best 10 days in 10 years is one in 2.8 billion billion billion. Nickel disagreed. Because the comments require a long response, I’m […]
How Low Can It Go?
The stock market keeps dropping. The Dow closed under 13,000 yesterday. The recent decline tripped another wire for my rebalancing. This time it was for the small cap value asset class. I bought more iShares Russell 2000 Value Index Fund (IWN). This fund was down 8% since the beginning of this year. It was down 15% from its […]
Avoiding the Worst Days and Missing the Best Days
Two readers commented about avoiding the worst days on my post about the meaningless stats on missing the best days. The stock market had some bad days since then. I think some might be interested in reading about avoiding the worst days. First I want to emphasize that the whole point of my previous post […]
Rebalancing In Action: Bought More REITs
The stock market had a good year this year. Despite the 2% drop yesterday, the S&P 500 index is up 7.5% since January. When I looked at all the Vanguard index funds, everything is up, except REITs. REITs are Real Estate Investment Trusts, which invest in commercial real estate like office buildings, shopping malls and what […]
Personal Rate of Return: Dollar Weighted Or Time Weighted
After reading my post about estimating overall personal rate of return, a reader Brian asked: “I have a Fidelity serviced 401(k) and I had always wondered about how they calculated the personal rate of return. Do you know how/if other providers calculate personal rates of return? If I were to open a brokerage account, is […]
Out of the Market and Meaningless Stats
The stock market had a field day last Thursday (7/12/2007). The Dow rose 284 points, its biggest point gain in nearly five years. It reminded me of the stats about the risk of being out of the market. It goes like if you missed the best X days in Y years in the stock market, […]