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General Category >> Long Term Saving and Investing >> Investment plans
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Message started by ruicarlov on 26th Sep, 2013 at 4:34pm

Title: Investment plans
Post by ruicarlov on 26th Sep, 2013 at 4:34pm
We all know that most deposits and CDs pay miserable interest. What kind of financial market investments do you know and what have you tried?

For me, I already invested directly in the bond market, tried some bond mutal funds and rather recently initiated and ETF portofolio based on strategic asset allocation.
Never went for single stocks, as it's a bit above my risk tolerance.

Title: Re: Investment plans
Post by moneymarketing on 26th Sep, 2013 at 8:17pm

ruicarlov wrote on 26th Sep, 2013 at 4:34pm:
We all know that most deposits and CDs pay miserable interest. What kind of financial market investments do you know and what have you tried?

For me, I already invested directly in the bond market, tried some bond mutal funds and rather recently initiated and ETF portofolio based on strategic asset allocation.
Never went for single stocks, as it's a bit above my risk tolerance.


It definitely depends on your risk tolerance. I trade stocks, options and ETFs. If you are concerned about stocks you can always go the preferred stock route. They have a higher set of rights that normal shareholders. Plus they usually pay dividends.

That is another thing you might want to look at is dividend stocks. They usually give a better return than a bank and many companies will raise their dividends over time. So your yield on your original cost basis goes up over time.

To explain that, say you buy a stock for $10 and it is paying a 5% dividend yield or 50 cents per year. In two years time your dividend could be raised to a dollar but your original cost is still $10 so your yield on your original outlay is 10%. You won't get this in a bank. a bonus of course is that as they raise the dividend, this, over the long term, usually boosts the stock price.

Say your same $10 stock goes to $1 dividend. Many funds will find that a 10% dividend is nice but they will be willing to bid the stock  to $15 for that same $1 dividend. That gives you a $15 stock and your yield is still 7.5%. So this is where dividend stocks can really compound the earnings. You've made $5 in capital gains on your $10 stock plus you have $1 in dividends for a 10% yield against your original cost basis.

If you have anything like a dividend reinvestment plan, your compounding increases all the more

edit: Also, they protect you from downside risk

Title: Re: Investment plans
Post by ruicarlov on 27th Sep, 2013 at 1:52pm
Yes, I've already taken a look at preferred stocks. They are indeed an interesting class, but it seems to be quite overbought. It's precisely because the dividends are good that many investors have flocked to them, which renders them expensive. And you propably know the risks of going for something that's really popular to the point of a small bubble being formed.
The opinions I read said that this was a bad time to enter preferred stocks, as they're overpriced. I should wait until a correction happens.
However, they might be a good way to fruther diversify a portfolio. They don't have very high correlation with neither bonds nor normal stocks. I even asked in a forum about their opinion on including preferred stocks but I never got any reply.
By the way my current ETF allocation is:

  5.49% XEMB.MI - db-Trackers Emerging Markents Eurobonds
14.40% IAU - iShares COMEX Gold Trust
  5.10% DBC - Powershares DB Commodity Index Tracking Fund
12.96% TLT - Barclays 20+ Year Treasury Bond Fund
  4.97% ITE - SPDR Barclays Capital Intermediate Term Treasury
  5.35% VSS - Vanguard Small-Cap ex-US
  9.18% VNQ - Vanguard REIT ETF
11.32% VBR – Vanguard Small-Cap Value ETF
11.09% VGK - Vanguard Europe
13.01% VPL - Vanguard Pacific
  7.33% VWO - Vanguard MSCI Emerging Markets ETF

Unfortunately I suffered with the treasuries tumble and my portofolio is slightly negative for the time begin. I learned what it means 'sell in May and go away'.  :P
I've been wondering about some of the choices I made, namely buying VGK and VPL instead of a single ETF for developed markets. The two indexes are so correlated that it's almost meaningless to have two separate ETFs. Same goes for USA small cap and ex-USA small cap. There's not much diversifying at work in there.
Having too many ETFs can be costly in terms of transaction costs, particularly when you work with an European broker. But if I eliminate VSS and VPL, I should have room for two other ETFs. The classes I had in mind were, like I said, preferred stocks, and possibly TIPS, treasury inflation-protected securities. I read in ETFtrends that short term TIPS might be more useful than regular TIPS due to the very likely rise in interest rates of US debt.
If only I could solve the problem of double taxation of dividends when working through my broker....

Title: Re: Investment plans
Post by moneymarketing on 27th Sep, 2013 at 6:19pm
You do seem to be over allocated. My ideal portfolio (which could take me years to build) that I'm building towards consists of these categories (an equal amount in each category):

(I'm a trader BTW and not an investor so I buy into stocks/ETFs that I expect to move on a somewhat shorter time frame)

Gold/precious metals
(this is to offset currency/government risk)

Energy (for obvious reasons)

Technology (QQQ because that is where industrial innovation comes from)

I have trading structures in the above three. the Qs aren't quite built yet. When that gets done then I build in these next groups

Industrial(S&P 500 or the SPY ETF)

World market ETF (this is to offset currency/country risk)

Bonds/cash (this is very fluid so it won't necessarily be 'built' until the full port is complete)

This will take a long time to build and I use the principles of rebalancing on either a quarterly or yearly basis (and maybe some day monthly  :money) depending on how out of proportion a sector can get. The benefits of that is that it forces you to buy low and sell high and does not take a lot of emotional discipline (which is the hardest part of investing/trading....fighting the fear and greed emotions).

I've tried to get the port down to as simple a group while covering as broad an area of the economy as possible. The S&P is also very much a world index and thus I'd give it about a half world markets rating. So that, along with a world markets ETF gives you plenty of worldwide exposure.

It could be argued that the Russell 2000 is a better substitute than the S&P and I would agree with that. I am definitely thinking about swapping out the SPY for a r2k ETF

Title: Re: Investment plans
Post by moneymarketing on 27th Sep, 2013 at 6:26pm
BTW, one trick I learned when hunting for dividend stocks (or stocks in general for that matter) is to look up a dividend mutual fund or ETF and then look at their top holdings. This is a good place to start. You can see what these guys have already done the due diligence on. That saves you a lot of footwork. If they are holding 50 or 60 million shares, then they have done their homework. So you can start there and then your research gets a little easier and you can determine if they are still a good hold.

I'm definitely trying to steer away from individual stocks myself. Indexes are just a lot safer (especially for trading) and you aren't subject to company surprises or news that the company is spending all its money to buy back shares(which usually benefits the CEO and his stack of shares) etc.

Title: Re: Investment plans
Post by ruicarlov on 27th Sep, 2013 at 7:03pm
We clearly follow different strategies. I don't consider myself a trader. I'm more of a "Lazy portfolio" kind of guy, meaning a buy-and-hold strategy with annual rebalancing. It's a bit more broken down in regions than those kinds of 4-ETF portfolios. But as you said, I've been noticing that some ETFs are too closely correlated.
Still, I believe in having at least one for US stocks, one for other developed countries and a third for emerging markets. True, the rest of the developed world and the US market indexes may be closely correlated, but that doesn't mean it will remain that way. Since these lazy portfolios aren't built based on trends, but for being prepared to a multitude of possible developments that may come, having a bit of geographical diversification may be (or not) beneficial in the long term.
In any case, I think I'll kick out VSS and fuse VPL and VGK into VEA when the next time for rebalancing comes. It's a good idea to buy/sell as few times as possible. For me, each transaction costs $15. And when the portfolio isn't big enough, it will gradualy eat away a bit of the profits.

Title: Re: Investment plans
Post by moneymarketing on 27th Sep, 2013 at 9:17pm

ruicarlov wrote on 27th Sep, 2013 at 7:03pm:
We clearly follow different strategies. I don't consider myself a trader. I'm more of a "Lazy portfolio" kind of guy, meaning a buy-and-hold strategy with annual rebalancing. It's a bit more broken down in regions than those kinds of 4-ETF portfolios. But as you said, I've been noticing that some ETFs are too closely correlated.
Still, I believe in having at least one for US stocks, one for other developed countries and a third for emerging markets. True, the rest of the developed world and the US market indexes may be closely correlated, but that doesn't mean it will remain that way. Since these lazy portfolios aren't built based on trends, but for being prepared to a multitude of possible developments that may come, having a bit of geographical diversification may be (or not) beneficial in the long term.
In any case, I think I'll kick out VSS and fuse VPL and VGK into VEA when the next time for rebalancing comes. It's a good idea to buy/sell as few times as possible. For me, each transaction costs $15. And when the portfolio isn't big enough, it will gradualy eat away a bit of the profits.



Yes, I agree, you need to take into account transaction costs and also taxes. My trade parameters won't let me trade unless the commission is paid for of course. The math is done for that before I make the trade. That takes the emotion out of the decision.

I always tell people (here we go Snake  :D) trading/investing is more about philosophy than anything else so it is very difficult to tell someone else what is best. People have different temperaments and also different situations and what will allow one person to sleep at night may put someone else in the loony bin with all the stress. So i tell people, if you can't feel comfortable about what you own then you are not in the right investment. With all the information on the web there is no reason why someone shouldn't have a perfect understanding of what they own and if it still makes them uncomfortable, then they shouldn't own it.

Trading/investing primarily, because of the money involved, is a mirror into our psyches. I learned more about myself when I started trading than in any other endeavor. Fear and greed, the two trading demons, are harsh teachers of what is in your heart and until you can master those two emotions, trading will be very difficult

Have you every traded commodities?

Title: Re: Investment plans
Post by ruicarlov on 27th Sep, 2013 at 10:16pm
Commodities? Once again, only with passive ETFs. I don't have many tools to trade actively. I have little knowloedge of the various analysis methods people use when trading, and though I try to keep myself a bit informed about the world economic situation, I find it very hard to invest confidently in a very volatile class. So I only use those as portfolio diversification, since unlike stocks, they don't possess the same trend to go up along the years.

Title: Re: Investment plans
Post by moneymarketing on 27th Sep, 2013 at 11:16pm
I got into trading via the commodities market. That was back in the 90's with a discount commodities broker. Boy, were those the days!  :phew Commissions of $50 per trade in a high octane market. Those were trades that kept me awake at night. I move from trading options on commodities to trading options on stocks. Like I told SS I have learned many ways to lose money  ;D

Title: Re: Investment plans
Post by ruicarlov on 28th Sep, 2013 at 5:25pm
I can only imagine.
In a finance forum that I usually read, somebody once said that most people didn't make money in markets because they went for the thrill, not for the money making. Not that they consciously admit it. They think they're doing it for the money, but in the end it's always about the excitement, about trying to beat the markets...

Title: Re: Investment plans
Post by SolidSnake on 28th Sep, 2013 at 7:53pm
I guess investing has always been pretty close to gambling.. not just consdering the risk included in each case,
but also the way people feel about it. Same thrill, same need of luck, and similar history in money loss..

(Sorry for being a bit away since yesterday.. I'm in bed with a high fever.. somehow got the flu :( )

Title: Re: Investment plans
Post by moneymarketing on 28th Sep, 2013 at 8:52pm

ruicarlov wrote on 28th Sep, 2013 at 5:25pm:
I can only imagine.
In a finance forum that I usually read, somebody once said that most people didn't make money in markets because they went for the thrill, not for the money making. Not that they consciously admit it. They think they're doing it for the money, but in the end it's always about the excitement, about trying to beat the markets...


I didn't go into it for the excitement. I was brought into it by a newsletter guy (that is a whole other topic of warnings for folks) and I responded because I was a natural options trader by nature. The problem was I was brought into commodities options which is a much different animal than stock options. In stock options you can make money relatively easily, in commodities options it is a lot more difficult because your time frame to succeed is a lot shorter (back then, your time frame was a maximum three to six months). Thus, I got my head handed to me. It was a good learning experience though. It made me a much more conservative investor and now, with all the experience I've gained, I could probably re-enter the commodity market and make a nice living. I don't need to at this point because I can do what I need to do in the stock market. It is a bigger and safer market (and I like safe :)).

Trading is very much like a video game. You grow, learn and gain experience points. If it is something you are interested in then you stick with it and reap the rewards. It is challenging because you are competing with the best 'players' in the world and they aren't kidding around. They don't have a problem cutting your heart out metaphorically speaking. Being in such a meat market helps you to look in the mirror as I already said and, for most people, that is what they don't like about being in the market. It is the reflection of their hearts that is what scares them

Title: Re: Investment plans
Post by moneymarketing on 28th Sep, 2013 at 8:57pm

SolidSnake wrote on 28th Sep, 2013 at 7:53pm:
I guess investing has always been pretty close to gambling.. not just consdering the risk included in each case,
but also the way people feel about it. Same thrill, same need of luck, and similar history in money loss..

(Sorry for being a bit away since yesterday.. I'm in bed with a high fever.. somehow got the flu :( )



Anything involving money, especially large amounts of it, is going to make people act crazy. Just look at our industry. You saw how people reacted to the big hope and dream regarding PTCBox. That wasn't a lot of money by most standards. Or another example is these ponzi schemes that keep popping up. Even though the math is totally against the logic of the program, once it gets momentum, people go nuts for it.

Title: Re: Investment plans
Post by dansbanners on 29th Sep, 2013 at 8:47pm
Maybe we should stick to internet marketing as it was the original intention of the forum?

Lately, I've been logging in only to see that the latest posts have all been from "Investment plans" and all.

Although I'll go by the majority rule.

Title: Re: Investment plans
Post by SolidSnake on 29th Sep, 2013 at 9:31pm
Well, this an online business forum mainly dedicated to internet marketing as you say.

However as it goes with all forums there is a generic section where people can discuss
other things as long as they're interested in doing so. This is a such general section
and the reason it exists is people here requested it and feel like discussing in.

I don't have much knowledge on this subject myself and it's not on the top of my interests
list, but since members do, I don't like to be stubborn or something so I decided to go with it.

Sites need to adapt to stay within their members' needs.. and besides.. there's always something
to learn here just like in all the other sections.  [smiley=sorry.gif]

Title: Re: Investment plans
Post by ruicarlov on 29th Sep, 2013 at 10:00pm
It's not as this section is stealing post from the internet marketing area. There jut hasn't been much to talk about, and here me and money have got an interesting discussion going on (see what I did there :P)

Title: Re: Investment plans
Post by dansbanners on 30th Sep, 2013 at 2:33pm
It's just that if the latest 10 posts are all from the "Investment" forum it makes it harder to keep track of the internet marketing posts unless there's a way around it?

Title: Re: Investment plans
Post by ruicarlov on 30th Sep, 2013 at 4:34pm
I usually just check the sections that have the flashing icon. Never even used the latest posts function. Actually, I only noticed that after you mentioned it  :P

Title: Re: Investment plans
Post by dansbanners on 1st Oct, 2013 at 5:04pm

ruicarlov wrote on 30th Sep, 2013 at 4:34pm:
I usually just check the sections that have the flashing icon. Never even used the latest posts function. Actually, I only noticed that after you mentioned it  :P

I find it convenient to use the Latest link. Other forums have something similar as well.

Title: Re: Investment plans
Post by SolidSnake on 1st Oct, 2013 at 5:41pm

ruicarlov wrote on 30th Sep, 2013 at 4:34pm:
I usually just check the sections that have the flashing icon. Never even used the latest posts function. Actually, I only noticed that after you mentioned it  :P

Actually I also find it very useful and use it since the beginning. It's much easier this way to track the updated topics.
However maybe it would be about time now to increase the number of the results in the "Latest" command.
That would also prevent losing track when there are a lot of new posts within a day..

Title: Re: Investment plans
Post by moneymarketing on 1st Oct, 2013 at 7:20pm

SolidSnake wrote on 1st Oct, 2013 at 5:41pm:
Actually I also find it very useful and use it since the beginning. It's much easier this way to track the updated topics.
However maybe it would be about time now to increase the number of the results in the "Latest" command.
That would also prevent losing track when there are a lot of new posts within a day..



Yes, I use it too and not having enough of the latest posts in the cache has always been a weakness. Of course, it keeps me checking more often in order to keep up but then that can add to server load. If it could be possible to extend the latest to two or three pages that would be great

Title: Re: Investment plans
Post by dansbanners on 2nd Oct, 2013 at 4:19pm

SolidSnake wrote on 1st Oct, 2013 at 5:41pm:
Actually I also find it very useful and use it since the beginning. It's much easier this way to track the updated topics.
However maybe it would be about time now to increase the number of the results in the "Latest" command.
That would also prevent losing track when there are a lot of new posts within a day..

It's less tedious rather than scrolling up and down looking for the new topics or posts.

Title: Re: Investment plans
Post by dansbanners on 2nd Oct, 2013 at 4:21pm

moneymarketing wrote on 1st Oct, 2013 at 7:20pm:
Yes, I use it too and not having enough of the latest posts in the cache has always been a weakness. Of course, it keeps me checking more often in order to keep up but then that can add to server load. If it could be possible to extend the latest to two or three pages that would be great

Keep it to one page. Perhaps, maybe just extend it to the latest 15 posts or something. As long it's still one page otherwise it becomes more tedious having to click on the "next arrow" in order to get to the next page, etc. Again, just keep it to one page.

Title: Re: Investment plans
Post by SolidSnake on 3rd Oct, 2013 at 12:20am
Fixed to show the latest 20 posts (yep in one page).

Title: Re: Investment plans
Post by dansbanners on 3rd Oct, 2013 at 3:07pm

SolidSnake wrote on 3rd Oct, 2013 at 12:20am:
Fixed to show the latest 20 posts (yep in one page).

Ok, it was nice of you. Thanks!

Title: Re: Investment plans
Post by SolidSnake on 3rd Oct, 2013 at 3:37pm

dansbanners wrote on 3rd Oct, 2013 at 3:07pm:
Ok, it was nice of you. Thanks!

Always a pleasure my friend! :)

Title: Re: Investment plans
Post by moneymarketing on 28th Jan, 2014 at 2:03am
WOW! Total chaos in the markets today. I made 8 trades based on my trading strategy.

To put that in perspective, I usually make, in an average week, one trade every two days  :phew

Title: Re: Investment plans
Post by SolidSnake on 28th Jan, 2014 at 2:23pm

moneymarketing wrote on 28th Jan, 2014 at 2:03am:
WOW! Total chaos in the markets today. I made 8 trades based on my trading strategy.

To put that in perspective, I usually make, in an average week, one trade every two days  :phew

Now where has Rui been today..?  :-?

[smiley=lolx.gif]

Title: Re: Investment plans
Post by ruicarlov on 28th Jan, 2014 at 6:10pm
I'm a passive investor. I ride the waves up and down and only rebalance once there's a been a significant change in my defined asset allocation percentages.

Markets fell today. No prob. They also rallied during Christmas. It's all about sticking to the plan.  8-)

Title: Re: Investment plans
Post by moneymarketing on 28th Jan, 2014 at 6:46pm

ruicarlov wrote on 28th Jan, 2014 at 6:10pm:
I'm a passive investor. I ride the waves up and down and only rebalance once there's a been a significant change in my defined asset allocation percentages.

Markets fell today. No prob. They also rallied during Christmas. It's all about sticking to the plan.  8-)



I'm a volatility trader. IOW, I make my money when the markets move. Suffice it to say, we had a lot of volatility yesterday. I bought and sold one security four times as it went up and down my trading scale.

Today, not a peep. It can be like that. It keeps you on your toes but I wouldn't miss it for the world  :)

Title: Re: Investment plans
Post by ruicarlov on 12th Feb, 2014 at 6:26pm
Just to give you a quick update, since December that I changed my strategy a bit, but the biggest change was the broker.
Using a Portuguese bank for my porfolio was expensive in terms of transaction comissions and was kind of hard to activated the conventions to avoid double taxation of dividends.
With a high enough capital (around 25K€), using a broker like Interactive Brokers becomes more atractive, since we have to spend $120 per year on comissions (they charge you the difference if you spend less), but we have very cheap comissions per transaction ($1 for USA, 4€ for Europe), allowing for some more frequent rebalancing and/or adding more money (how is this called in English?)

Another decision was to leave dividend-paying ETFs behind (as much as possible) and use ETFs the accumulate dividends. Since the market for these kinds of ETFs is smaller (US-based ETFs don't allow this), I had to use multiple ETFs for some categories (like Pacific region - divided into Pacific ex-Japan and Japan). But since I'm now at IB, the number of ETFs isn't much of a problem. My current allocation is the following:

5% XEMB.MI - db-Trackers Emerging Markets Eurobonds
8% IAU - iShares COMEX Gold Trust
5% DBC - Powershares DB Commodity Index Tracking Fund
12% TLT - Barclays 20+ Year Treasury Bond Fund
4% CBU3 - iShares USD Government Bond 1-3 years
9% CBU7 - iShares USD Government Bond 3-7 years
5% EGIL - iShares Global Inflation-Linked Government Bond
9% XGPD - db x-trackers FTSE Global Real Estate
14% SXRG - iShares MSCI USA Small Cap
10% ERO - SPDR MSCI Europe
4.5% EUNN - iShares MSCI Japan
5% SXR1 - iShares MSCI Pacific ex-Japan
9.5% SPYX - SPDR MSCI Emerging Markets Small Cap

TLT is the only one that pays dividends, but there's no other ETF that has US-government treasuries with those maturities. I probably should have done some more rebalancing on TLT. Maybe I'll do that later, when I put some money I've saved this year onto ETF. I've read some interesting arguments favoring actively managed ETFs when it comes to bond markets, which is more exotic than stock markets. I realized I don't have much exposure to bond markets outside US. Something along the lines of a PIMCO Global Bond ETF is something that crossed my mind.

Title: Re: Investment plans
Post by moneymarketing on 12th Feb, 2014 at 8:24pm

ruicarlov wrote on 12th Feb, 2014 at 6:26pm:
adding more money (how is this called in English?).


I think the term you are searching for is dollar cost averaging

I see you have quite a bit in interest rate sensitive securities.

My interest rate allocation is below 10% at this point and it is mainly in my emergency fund.

Have you looked at an ETN called SVXY. This is a play against the volatility index and it has a strong upward bias due to the fact that it trades futures that expire. I liken it to one of the few securities that accurately tracks inflation. It is very volatile but, as i said, the long term trend is up and will stay up. If we do have a panic this will tank but it will snap back pretty quick and any drop would be a great buying opp.

I'll just suggest you put it in your 'securities to research' pile. I am very pleased with the results from it.

Title: Re: Investment plans
Post by ruicarlov on 25th Aug, 2014 at 7:26pm
Since most of the (financial) internet is targeted for US investors, it's somewhat a pain to get a good (free) site to create a portfolio using european ETFs. Most of the time they don't exist, quotes are as accurate as a bling man throwing darts, and charting functions are bad or non-existant.

Financial times is good for quotes, and now I found out the Portfolio manager of Morningstar. It has good quotes, and while the charts are not very flexible, it does allow you to compare the portofolio to a certain number of benchmarks.
Below is the performance of my portfolio (the version with capitalizing dividends) ever since I started it in December. Written by Paint are the allocation %.


Title: Re: Investment plans
Post by moneymarketing on 25th Aug, 2014 at 7:59pm
So what do you think of the S&P500 hitting 2K Rui? Are we at the peak or is there room to grow?

Title: Re: Investment plans
Post by ruicarlov on 26th Aug, 2014 at 12:57pm
I don't know. It's bound to come down sometime, but as for 'when', nobody knows. Many analysts have been saying a correction is imminent for quite a while now, yet the stocks keep on rising....
That's why I'm not into market timing. The market is totally unreasonable  ::)

Title: Re: Investment plans
Post by moneymarketing on 26th Aug, 2014 at 10:42pm

ruicarlov wrote on 26th Aug, 2014 at 12:57pm:
I don't know. It's bound to come down sometime, but as for 'when', nobody knows. Many analysts have been saying a correction is imminent for quite a while now, yet the stocks keep on rising....
That's why I'm not into market timing. The market is totally unreasonable  ::)



Yes, very true. I think it is manipulated due to all the central bank money printing so I am hedged pretty well because they could pull their support at any time

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