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We'll show you how to get a better understanding of the markets and become a confident, competent investor. And we lay it all out for you in plain English (well, a Southern variety of English, anyway). Hey, you work hard for your money - learn how to make your money work hard for you!
Saving Time on Your
End-of-Year Investment To-Do List
‘Tis the season…for rushing around like crazy people! In addition to our already busy schedules - work, household chores and tending to the young ‘uns - this time of year brings on an entirely unique set of chores. Holiday decorating, shopping, festivities and family gatherings: as much as we love Christmas, finding the time to get everything done can be stressful.
As if we didn’t have enough to do, the financial gurus start slamming us in early December with reminders that we need to take care of our year-end money chores. Planning for the upcoming year’s taxes, budgets and investments is an important, necessary task without a doubt. But if we happen to find 30 minutes of free time during this busy season, most of us would rather hunker down on the couch in an eggnog-induced coma than comb through our finances.
Here’s some good news: for folks who use a simple “trend following” method (like we do here), the time spent on the investment part of the typical year-end financial to-do list can be drastically reduced. Let’s break it down by picking a typical to-do list and looking at its bullet points:
> REBALANCE YOUR PORTFOLIO: No argument here - time needs to be taken for this chore. In fact, the end of the year is not the only time we should rebalance. While many gurus say we should do this twice a year, studies have shown that rebalancing quarterly can add as much as 1/2 percent to our bottom lines annually. That may not sound like a lot, but over 30 - 40 years of investing…wow!
> CHECK YOUR BENEFICIARY DESIGNATIONS: Sounds like a no-brainer, but when actually going through emotional, life changing events, pulling out beneficiary forms is the last thing on our minds.
> REVIEW YOUR INVESTMENTS: For trend followers, this is an ongoing task. Using price charts, we can - and do - quickly review each investment in our portfolio every couple of weeks. The fact that we only have 2 or 3 index funds in our entire portfolio helps to keep this a 5-minute task.
> CONSIDER SELLING LOSING INVESTMENTS: Consider? Seriously?? Trend followers not only give the quick boot to poorly performing investments, they are unlikely to buy them in the first place! Hey, life is short - especially our investing life! Don’t waste time with losers!!
> MAX OUT YOUR CONTRIBUTIONS: This is suggestion is a real gem. Now, don’t get us wrong - contributing all that you possibly can to your 401(k) is extremely important. But who has a couple of extra thousand to throw in there this time of year? If we have any moolah left in the sock drawer after the holiday expenses, it probably goes towards the kids’ braces, a new set of tires for the family car, something like that.
> PLAN FOR THE COMING YEAR: The gurus want us to take time to review our investment outlook, namely our portfolio’s diversification and our own risk assessment. Again, these are things that us trend followers practice throughout the year. We don’t alter or adjust our investment outlook based on the calendar - we base it on current market trends. Those trends don’t pay attention to the calendar, either. While there are often “seasonal tendencies” to the market’s price action, major trends - whether up or down - last for months, even years. That’s how we plan.
Year end “to-do” lists can add stress to an already stressful time of the year. Using a basic trend following method for our 401(k) investments keeps us on top of things year-round, so we don’t have to scramble to get that part of our financial house in order before New Year’s Day. We’ll have more time for those eggnog toddies, too!
* By the way, to help you with that little rebalance chore, be sure to grab a couple of our Rebalance Worksheets right here.
NEWS YOU CAN USE:
"Dividend ETFs Have Their Appeal, but
Don't Dismiss Mutual Fund Rivals"
from The Globe & Mail
"Strong Dollar Clobbers Returns of
from Wall Street Journal
"Bond Index Funds Drawing Billions of Dollars"
from Fox Business
"China Overtakes Japan as World's
2nd Biggest Stock Market"
"A Step Closer to Fixing a Serious 401(k) Flaw"
from CBS MoneyWatch
VIEWS YOU CAN USE:
"Following Stock Market Trends When Investing"
from Wall Street Sector Selector
"Why Vanguard Total Stock Market Isn’t
the Best Fund in the Fleet"
"5 Investing Tips for People Who
Don't Have a Lot of Money"
"When to Invest in ETFs and
When to Invest in Mutual Funds"
from US News & World Report
"4 Ways to Increase Your 401(k)
Contributions in 2015"
from US News & World Report
Here's one good thing you can do during these long, cold, dreary weeks of winter: bone up on your investment know-how!
Throw a couple of logs on the fire, grab a cup of something hot and dive into any of these excellent reads. Your 401(k) will be glad you did!!
<<<<<<<< Clicking on these book images takes you to Amazon.com via our affiliate link. You won't pay a penny more for what you buy, but we do get a little moolah for sending you there - and that helps us cover the costs of keeping our website running free!
Here are a couple of very simple retirement calculators courtesy of our friends over at Calculator Pro.
Here are the figures we used:
> Required Annual Income: we put in what we're making now (we don't buy into that "plan to spend 70% of your working income in retirement" idea!)
> Years until Retirement: we shot for age 65, but who really knows, right?
> Years after Retirement: we sure hope to have 20 good years of doing what we want to do!
> Annual Inflation: we used 3.5% (maybe go a tad higher to be safe?)
> Annual Return on Balance: we used 7% (maybe go a tad lower to be safe?)