Thanks for stopping by the only investing website on the 'net designed by working folks for working folks. As more and more companies dump their old guaranteed pension plans and move their employees into 401(k) retirement plans, it's more important now than ever to learn how to manage your own investments. Come on in and get started!
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!
Our Take on Portfolio Diversification
Nothing makes the average working man’s eyes glaze over with boredom quicker than discussions about ‘portfolio diversification.’ The sheer number of methods, strategies and concepts of diversification are overwhelming: Google found 22,300,000 results (in 0.49 seconds!) on the topic. That’s a lot of weekend reading!
The main theme of diversification is this: spreading our investment moolah over a wide range of investment types protects our portfolio from the normal ‘ups and downs’ of market sectors. The thinking is that if some sectors are performing badly, others will be performing well, thereby offsetting overall portfolio losses. Well, that sounds pretty logical, right? Hmmm…
How did portfolio diversification work for investors during our most recent market downturn - the gruesome decline of 2008? Not too good! With the exception of bond funds and the dollar, every sector/asset class of the market was hit hard by that sell-off. In fact, bond funds didn’t show any gains until the last part of 2008 (see the chart below).
Now, the market gurus out there are quick to say that diversification did work during this market drop. They point out that well diversified portfolios lost less money than ones that weren’t. Lost less money…think about that. They are thumping their chests because their methods helped investors lose less of their hard earned money? Really?
One of the greatest investors ever - Warren Buffett - has 2 simple investment rules:
RULE #1 - don’t lose money
RULE #2 - don’t forget RULE #1
The reason why is easy to understand. If we lose 10% on an investment, it has to grow 20% to get us ‘back to even’ on that money. That kind of growth takes time. After the plunge of 2008, it took the S&P 500 almost 5 1/2 years to get back to its 2007 highs. That’s a long time to get ’back to even.’
Mr. Buffett has another opinion: “Diversification is the tool of the lazy.”
We agree. To get the best returns on our investment money, we want to be in the best investments - the ones that are making money! Life is too short (especially our ‘investing life’) to have our moolah tied up in investments that aren’t making money, in the hopes that eventually they will. We want our money working for us 24/7.
To do that, we use a basic trend following investment method, like the one we describe here on our website. It helps us choose investments that keep our portfolio growing during bull markets and protects it from losses during bear markets. This method makes a big difference in our 401(k)’s bottom line over time. And it keeps our eyes from glazing over, too!
NEWS YOU CAN USE
"Investors Drive Expense Ratios Down"
"Investors Pull $7.3 Billion from Pimco
Total Return Fund in March"
from The Wall Street Journal
"Do Any Mutual Funds Ever Beat the Market? Hardly." from The Washington Post
"BlackRock's New Breed of Exchange-Traded Fund
Prizes Stability Over Swagger"
from The New York Times
"How Does a Stock Split Affect Cash Dividends?"
VIEWS YOU CAN USE
"This Man Showed that Investing isn't a Competition"
"Small-Cap Indexing: Popularity Can Be a Pain"
"Great Index Funds for a Dirt-Cheap Portfolio"
from US News & World Report
"For Millennials Goal is Financial Freedom"
from USA Today
“Tips to Help Millennials Save & Invest for Retirement” from USA Today
Spring Reading List
Spring is a busy season for most of us working folks. In addition to our never ending list of everyday household chores, now we've got to start working in the yard!
That's why we keep shorter books on our Spring List. You'll get a ton of useful info from these 3 quick reads & still have time to plant those petunias!! >>>>>>>>>>>>>
<<<<<<<< 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?)