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Do You Have an Out-of-Whack Portfolio?

By Posted on In Asset Allocation, Investment Strategies, Retirement, Rule of Thumb, Uncategorized

Research out of Investment Company Institute found that 11% of investors have not rebalanced their investments in the last five years.  As the US stock market continues its bull run, the value of US stocks represent a larger and larger portion of the portfolio.

All of a sudden, a portfolio that was balanced five years ago could be taking on more risk than you originally planned. Money Magazine states that a portfolio in 2009 invested 60% in stocks and 40% in bonds may have a current mix of 75% stocks and 25% bonds.  If you’ve not looked at your portfolio over the last few years. Now is a great time to get started.  Here is a summary of steps to take:

1)      Gather all of your statements – Investments accounts with us, accounts held elsewhere, 401(k) statements, etc. Tally up your overall asset allocation.

2)      Find what looks out of line – Does one mutual fund represent more than 25% of the portfolio? Does one stock represent more than 10% of the portfolio? Is one asset class accounting for a large portion of the portfolio?

3)      Look to rebalance – identify the appropriate asset allocation (primer found here).  You may also want to spend some time developing an asset location strategy, if we haven’t guided you already.

Your Pot Of Cash Has A Hole In It.

By Posted on In Cash, Investment Strategies, Rule of Thumb, Saving, Uncategorized

You, like many Americans, may have a sizeable pot of cash just sitting in a bank account earning next to nothing.

The goal in keeping cash in a bank account is safety.

But what if I were to tell you that you that there was a hole in your pot and you are losing 2-3% each year and not even realizing it? You might think twice about keeping high levels of cash in the account.

In a sense, that’s what is happening. Every year, the cost of goods and services increases by 2-3% but the cash stays the same. This cash in your pot has ability to buy a little bit less than it did the year before and the year before that. This is the conception of inflation.

$50,000 today will buy more than $50,000 5-10 years from now.

One option to get around this harsh reality is to invest excess cash in a balanced diversified portfolio.

What Cheap Oil Means For The Shale Boom

By Posted on In Investment Behavior, Investment Strategies, Politics & the Economy, Trend Updates, Uncategorized

Shale oil production is more expensive than traditional oil production – It costs more to get shale oil out of the ground. So when the price for oil drops, like it has, it hurts shale oil production a whole lot more than with other production methods. Bloomberg estimates that the price of oil needs to be over $80 a barrel for US drillers to make any profit. Oil is hovering right around that figure now.

For more reading:

Bloomberg’s Quick Take

Oil at $80 a Barrel Muffles Forecast for US Shale Boom

You Can’t Predict the Next Black Swan Event

By Posted on In Finding Confidence, Investment Strategies, Rule of Thumb, Uncategorized

What’s wrong with this chart?

Give up? The folks that created the chart are trying to predict the next Black Swan – the next significant event that could derail the economy. The problem is, that by definition, black swan events are unpredictable and exceptionally rare. Much of what’s listed here has been dissected and extensively analyzed. They are serious concerns but may already be baked into the current price of the markets. Just look at how the S&P 500 has responded due to the tensions in Russia and Ukraine

Sometimes the biggest risks are the ones that do not appear on anyone’s Black Swan chart!

What’s the best investment?

By Posted on In Investment Behavior, Investment Strategies, Retirement, Rule of Thumb, Uncategorized

In a recent Gallup poll, Americans were asked what they thoughts was the best investment to make over the long term. Their choices:

Real estate
Gold
Stocks
Savings Accounts
Bonds

The average American incorrectly believes that Real Estate is the best investment over the long term.

The following article presents a good argument for why Stocks may be the best investment over the long term. And I’m glad that they made note that investors should be shifting to lower risk assets the closer they get to retiring.

Less Than a Quarter of Americans Get the Most Important Investment Right