What should I do with a spare $500 from my tax return?
Mutual funds are not, I repeat, are not a terrible idea for someone who is young and willing to take on significant risk in their portfolio by virtue of not having any major expenditures or life changing events planned for the near future. I would actually argue that if you don't know what you're doing when it comes to analyzing a stock (not just the company) then mutual funds are the way to go for someone who doesn't have the formal training or time to learn it themselves.
The second part of the above is, use an open-platform like Schwab, Td Ameritrade, Fidelity, etc... and get whatever you want. Don't open an account at Vanguard or T. Rowe Price and limit your selections; just open a brokerage account and get it there instead.
Also, FWIW, we've been hedging for the past month and just bought another large block of put options on the S&P 500 ending in September. Don't expect this rally to continue for much longer...
I think a sell off in equities is inevitable.
I agree with SkyDiving... I hold index and mutual funds in my largest account (my Roth IRA). I am fairly aggressive as far as asset allocation because I'm 26 and I have a long investment horizon, but my thinking is that I am not going to pick stocks better than investment professionals who are researching companies and trends full time so funds with low expense ratios are the way to go for me. I have a smaller, taxable investment account where I trade stocks but it is much smaller than my retirement accounts so I feel like I get any stock picking out of my system there, with low risk because it's not a huge amount of money.
Here is a question for SkyDiving and others: I just saw a CFP yesterday for the first time ever to make sure I'm headed in the right direction and have a good plan. He said my Schwab (IRA) account is more aggressive than he'd recommend, even if I am (hopefully) not going to need the money for a long time. He usually manages much larger accounts than what I have, but he said he recommends a 70/30 equity/FI mix. I was surprised at that and I figured I should be more aggressive than that since I'm young...
My current mix is 77% equity, 10% FI, and 13% cash (cash balance is not on purpose, it's basically waiting to be used). I was probably going to use the cash for more equities before I spoke to this guy.
Here's a more detailed allocation:
Large Cap Equity 43.7%
Small Cap Equity 14.2%
International Equity 18.7%
Fixed Income 10.3%
Cash Investments 13.1%
I was going to increase the large cap and small cap portions by about 5% each. What do you guys think about that... does it seem overly risky? I have/am building a cash emergency fund outside of this retirement account, so I don't really think I need to keep much of this account in cash. Thanks for any input... I was pretty surprised at the CFP's reaction so I'm interested to hear what others think.
Perhaps I was just put in the wrong funds by the broker I initially had. It was supposed to be a higher risk fund, but it was constantly being outperformed. I also had little interest in following the market or learning anything as it was being taken care of by a "professional". I now use Tradeking and have begun learning a lot more about the market as I'm more actively involved.
SkyDiving, thanks for the detailed response. Your point about cash flow is actually what caused me to seek professional advice, because I feel like I have my cash in checking/savings and my retirement funds, but nothing in between. Buying a house is definitely going to be on my mind in a few years, but not necessarily at this time...
To your point about investment mix and correlation, I invest in all index and mutual funds in my Schwab Roth IRA, so I'm not sure how I'd really be able to go about assessing the correlation since I can't control what stocks are in it. It seems like you like to focus on specific stocks (and presumably your client accounts are much larger than my IRA). I'll post the actual funds I'm in a bit later when I get a chance to give you an idea.
Even though it wasn't intended for me, thanks for the Permanent Portfolio reference also... I'm going to check it out.
I think a sell off in equities is inevitable.
Just out of curiousity, what is your plan to hedge against that risk? I've seen a lot of different ways to go about doing it, and I think there's a good amount of overlap with some of them. Any ETF's or Specialty type funds that might be of use that you know of?
I wish I had answers, there are storm clouds brewing and it's about to get bad. OVIX is an option, if demand tanks it's going to take it's toll on the oil markets and if the tinderbox in the middle east explodes oil's going to spike. I think that, barring a shootout with Iran, prices will peak around Memorial day.
The equity market is so overbought right now it's ridiculous. You show me data on homes, home pricing, durable goods, oil and unemployment and ask me to guess where the major indices are and I couldn't come within 30%.
I'm focused on currency trading, as I always have been, USD/CAD is at near record lows. The yen run up has been significant as a "risk off" trade. I expect to pare some gains on the yen trade while the AUD/USD is off 3.34% in the last month (huge in the leveraged forex market.) AUD/USD has long been a proxy for Chinese growth.
I've been able to wade myself through some difficult waters
I agree with SkyDiving... I hold index and mutual funds in my largest account (my Roth IRA). I am fairly aggressive as far as asset allocation because I'm 26 and I have a long investment horizon, but my thinking is that I am not going to pick stocks better than investment professionals who are researching companies and trends full time so funds with low expense ratios are the way to go for me. I have a smaller, taxable investment account where I trade stocks but it is much smaller than my retirement accounts so I feel like I get any stock picking out of my system there, with low risk because it's not a huge amount of money.
Here is a question for SkyDiving and others: I just saw a CFP yesterday for the first time ever to make sure I'm headed in the right direction and have a good plan. He said my Schwab (IRA) account is more aggressive than he'd recommend, even if I am (hopefully) not going to need the money for a long time. He usually manages much larger accounts than what I have, but he said he recommends a 70/30 equity/FI mix. I was surprised at that and I figured I should be more aggressive than that since I'm young...
My current mix is 77% equity, 10% FI, and 13% cash (cash balance is not on purpose, it's basically waiting to be used). I was probably going to use the cash for more equities before I spoke to this guy.
Here's a more detailed allocation:
Large Cap Equity 43.7%
Small Cap Equity 14.2%
International Equity 18.7%
Fixed Income 10.3%
Cash Investments 13.1%
I was going to increase the large cap and small cap portions by about 5% each. What do you guys think about that... does it seem overly risky? I have/am building a cash emergency fund outside of this retirement account, so I don't really think I need to keep much of this account in cash. Thanks for any input... I was pretty surprised at the CFP's reaction so I'm interested to hear what others think.
OVX sorry I get the symbol mixed up it's a play on oil volatility. Yea I spent about 8000 hours of my life staring at currency charts. It's fascinating and addictive.
It's interesting you say that. In my first summer internship I was on a variable annuities desk. Second summer-derivative products namely currency hedging. I went and talked to the annuity guys during the 2nd summer and they went on about how much their industry had changed so much in the last year in particular more premium to cover contracts. I had this great book, I'll look for it again later, which really went into depth about currency, commodity and option hedging. If I can find it I'll send it to you, it was from class I was mandated to take.