| |
| |
|
Investing Information |
|
|
|
Makin The Sauce
Let's face it, you're on a roll. After getting down to your attorney's office to sign the new Living Trust and then diligently tracking down your assets to fund the trust, you should be congratulated. You're one of the responsible ones - 70% of the people who die each year in the United States haven't even bothered to get a will. Frankly, you're an inspiration to us all. But to seal the nomination for the financial Oscars, a little work on your investments could go a long way. Asset Allocation anyone? Does this term sound familiar? It should - financial planners, mutual fund companies, trust companies and stock brokers have drilled this into our heads for the last decade or so. It's the latest and greatest. (Actually, Harry Markowitz was playing around with this back in the 1950's but, until the advent of powerful PCs, Modern Portfolio Theory was only used by the big institutional investors). For the most part, asset allocation also works. As long as we keep it in perspective and understand that our most important investment objective is our "well being" and not some bonehead's "optimum portfolio allocation"; we'll be okay. Our money is meant to work for us, not the other way around. Basically, Asset Allocation divides investments into three major asset classes: Growth, Income, and Cash. Like making spaghetti sauce, combining the ingredients in different ratios is going to give us different results. Ultimately, we will stay with the ratio that suits us best. Don't worry about the neighbors' tastes. They can peel their own garlic. Like any good recipe, though, it does help to have some guidelines. Here's three common growth allocations: 1. The Aggressive Growth Portfolio - 100% Growth / 0% Income and Cash. In the short term, these portfolios should come with a warning label. The volatility can upset all but the strongest constitutions. Historically, this is a long-term strategy. If you want to smooth out the ride, time horizons of at least 10 years are often suggested. Returns over the long term should equate to overall stock market returns. The pattern of return will also reflect the various up and down years of the market. This should be obvious, but you shouldn't be looking for much income from this allocation because it's not going to be there. Sure, you may be able to go into principal for income needs, but growth allocations generally don't like to be tampered with. If you need income, other allocations will probably suit you better. This portfolio is best for those with a high risk tolerance and a time horizon of some duration. 2. The "Classic" Growth Portfolio - 80% Growth / 20% Income and Cash. Like the Aggressive Portfolio, this places a high priority on long-term investment growth. It just does it without quite the extreme volatility, which of course is accomplished by adding some bonds and cash to the mix. The time horizon to enjoy the results are also shortened. There may be some give up in overall return, but many people will readily trade return for lessened volatility. Income yield typically can approach 1.5%. This still isn't for the meek, but does start to define mainstream investing in the United States. 3. The Balanced Growth Portfolio - 60% Growth / 40% Income and Cash. This portfolio seeks both long term growth and income. Because the optimum time horizon is cut to 7 years or so, it doesn't demand a lifetime commitment prior to enjoying its rewards. Again we continue to trade risk for return, but with an average income return of a little over 2%, we begin to shift the focus off pure growth. For those following the "prudent person" rule, the 60/40 allocation is a favorite. Often seen in trusts, this model can serve both income and principal beneficiaries. Although other models are allocated toward income, the above models are the major allocations appearing in most financial readings. As guideposts to putting together your portfolio, you should become comfortable with how each of these models operates in determining both risk and return. Common Sense Investing Glenn "Chip" Dahlke has 28 years of experience in investing and is a principal of Dahlke Financial Group. He maintains a private investment clientele and is also a Senior Contributor to The Living Trust Network and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY. Contact him at dahlkefinancialgroup@sbcglobal.net.
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
How to Choose the Right Share Class You'll want to opt for the no-load or institutional share class instead. If you're a no-load investor who is determined to buy a fund that's primarily broker-sold, go through a supermarket and opt for the D shares. The Three Legged Stool My paternal grandparents were born near Lake Como, Italy. My grandfather learned how to farm, and he did just that until he died chopping wood at age 88. Index Trading Weekly Update Here is a sample of the last newsletter:SP500 Last Signal Comment We just had a new sell signal last friday on june 10th 2005. As expected we faced strong resistance at 1200 and it ended up with a double top as stated in previous issues. The American Age of Inflation is Over "The American Age of Inflation is finished." So says economist Robert Samuelson in his December 2nd Washington Post column. Ask The SEC Who is the SEC and why should I ask them anything? The Securities and Exchange Commission in Washington, DC is the government bureau that regulates the securities industry. They make the regulations that all stock exchange listed companies, brokerage houses and mutual funds must follow. Copy Cat or How to Use a Successful Trading System How many books have you read about successful traders? How they did this or that and made a fortune and are still doing it. You say to yourself, "I'm going to follow his method and get rich". My Way Or The Highway: Give Your Financial Professionals A Good Talking To! All this talk about Investing is encouraging lately. Over the last few years, more people have become interested in the duty to invest there money, then ever before. What Is A Fair Market Value, Really? If Youre Going To Trade, Be Sure Its Worth It! I've been involved in online trading, specifically with stock and index options, for several years. In this time, I've spent a great deal of time thinking about value and the fact that anything, be it a stock or currency or even a house, is worth exactly whatever someone else will pay for it. Just what is Arbitrage Investment? In the simplest of terms, Arbitrage means to exploit price differential.Usually it meant looking at differing sources of an investment, and if there was a price difference between Source A and Source B - then the investor / dealer / broker / manager would buy from the lower priced source, and sell on the higher priced source. The Basics of Tax-Free UK Financial Spread Betting Financial Spread Betting (or Trading) offers a tax free method of speculating on financial markets.Quite simply, if you think a particular index, share, commodity, currency or sector will rise, you place an UP bet. Options Education : Opinion versus Fact! The most basic aspect of trading is learning to differentiate between what is FACTUAL and what is OPINION. If you stay interested in the financial markets long enough you will discover that there are a lot of sharks out there who have become expert at making that task very difficult. Art Investing for a Financial Future When we think of investing we probably conjure images in our minds of the New York Stock Exchange, suited stock brokers making deals, bonds and treasury bills, and all manner of financial matters. The last thing we probably think about is art. Sell Discipline for Investors: Importance and Execution Investors usually don't have an aversion to buying an asset. The real gut wrenching decision is when - and if - to sell. Planning for Retirement Almost without exception, people don't start planning for their retirement early enough in their lives. Young people leaving High School or College and going into their first paid position find it difficult to look or see ahead to age sixty or sixty-five. Asset Allocation Lessons: The 70% Inflation Solution For investors only.. Investing and Asset Allocation Sometimes you spend sleepless nights worrying about which stocks to buy and which to sell, which funds to own and which to dump and whether to get into bonds.All of these are legitimate concerns, but the greatest determinant of your success as an investor will not be your sagacity in selecting specific stocks, bonds or funds for your portfolio. Property Investment Just Got Exciting There is an area in Brazil that has lower crime & lower property prices than where your are probably sitting right now!Demand from the increasing retirement population and from those who have benefited from their own property markets are now pushing overseas property prices up. Brazilian property prices are still very low and offer the overseas property buyer quality real estate in stunning locations. Straddle Strategies in Option Trading The straddle strategy is an option strategy that's based on buying both a call and put of a stock. Note that there are various forms of straddles, but we will only be covering the basic straddle strategy. Have Analysts Gotten Honest? It caught my attention when I heard an analyst on a popular financial news program tell investors to sell a stock because too many analysts liked the company, citing the fact that there were no sell ratings.It seemed perfectly logical to me that analysts wouldn't be telling investors to sell 3M (MMM), which has one of the most consistent positive earnings records in the history of the stock markets. The Perfect Mutual Fund The Perfect Mutual Fund is the one you build yourself!The perfect Mutual Fund you build should have the objective of owning no more than 12 to 15 companies; owning shares in 12 companies would allow the diversity needed to sleep well at night and would provide a cash dividend every week of the year.The 12 companies (with staggered dividend payout dates) in your perfect Mutual Fund should not only provide a cash dividend every week of the year, the companies should also have a historical record of raising their dividends every year for at least the past 8 years (to eliminate risk).
|
| home | site map |
| © 2006 |
