| |
| |
|
Investing Information |
|
|
|
Makin The Sauce
Let's face it, you're on a roll. After getting down to your attorney's office to sign the new Living Trust and then diligently tracking down your assets to fund the trust, you should be congratulated. You're one of the responsible ones - 70% of the people who die each year in the United States haven't even bothered to get a will. Frankly, you're an inspiration to us all. But to seal the nomination for the financial Oscars, a little work on your investments could go a long way. Asset Allocation anyone? Does this term sound familiar? It should - financial planners, mutual fund companies, trust companies and stock brokers have drilled this into our heads for the last decade or so. It's the latest and greatest. (Actually, Harry Markowitz was playing around with this back in the 1950's but, until the advent of powerful PCs, Modern Portfolio Theory was only used by the big institutional investors). For the most part, asset allocation also works. As long as we keep it in perspective and understand that our most important investment objective is our "well being" and not some bonehead's "optimum portfolio allocation"; we'll be okay. Our money is meant to work for us, not the other way around. Basically, Asset Allocation divides investments into three major asset classes: Growth, Income, and Cash. Like making spaghetti sauce, combining the ingredients in different ratios is going to give us different results. Ultimately, we will stay with the ratio that suits us best. Don't worry about the neighbors' tastes. They can peel their own garlic. Like any good recipe, though, it does help to have some guidelines. Here's three common growth allocations: 1. The Aggressive Growth Portfolio - 100% Growth / 0% Income and Cash. In the short term, these portfolios should come with a warning label. The volatility can upset all but the strongest constitutions. Historically, this is a long-term strategy. If you want to smooth out the ride, time horizons of at least 10 years are often suggested. Returns over the long term should equate to overall stock market returns. The pattern of return will also reflect the various up and down years of the market. This should be obvious, but you shouldn't be looking for much income from this allocation because it's not going to be there. Sure, you may be able to go into principal for income needs, but growth allocations generally don't like to be tampered with. If you need income, other allocations will probably suit you better. This portfolio is best for those with a high risk tolerance and a time horizon of some duration. 2. The "Classic" Growth Portfolio - 80% Growth / 20% Income and Cash. Like the Aggressive Portfolio, this places a high priority on long-term investment growth. It just does it without quite the extreme volatility, which of course is accomplished by adding some bonds and cash to the mix. The time horizon to enjoy the results are also shortened. There may be some give up in overall return, but many people will readily trade return for lessened volatility. Income yield typically can approach 1.5%. This still isn't for the meek, but does start to define mainstream investing in the United States. 3. The Balanced Growth Portfolio - 60% Growth / 40% Income and Cash. This portfolio seeks both long term growth and income. Because the optimum time horizon is cut to 7 years or so, it doesn't demand a lifetime commitment prior to enjoying its rewards. Again we continue to trade risk for return, but with an average income return of a little over 2%, we begin to shift the focus off pure growth. For those following the "prudent person" rule, the 60/40 allocation is a favorite. Often seen in trusts, this model can serve both income and principal beneficiaries. Although other models are allocated toward income, the above models are the major allocations appearing in most financial readings. As guideposts to putting together your portfolio, you should become comfortable with how each of these models operates in determining both risk and return. Common Sense Investing Glenn "Chip" Dahlke has 28 years of experience in investing and is a principal of Dahlke Financial Group. He maintains a private investment clientele and is also a Senior Contributor to The Living Trust Network and a principal with Dahlke Financial Group. He is licensed to transact securities with persons who are residents of the following states: CA. CT, FL, GA, IL. MA, MD. ME, MI. NC, NH, NJ, NY.OR, PA, RI, VA, VT, WY. Contact him at dahlkefinancialgroup@sbcglobal.net.
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Why Do You Want to Become a Online Trader? Motivational guru Tony Robbins teaches that the reason for doing something rates much higher than the methods you use to get the job done. In order to make your goal REAL, you need to attach severe, horrifying, intense and profound fear to failure. Straddle Strategies in Option Trading The straddle strategy is an option strategy that's based on buying both a call and put of a stock. Note that there are various forms of straddles, but we will only be covering the basic straddle strategy. Investing As A Sport? I said last week that money doesn't generally buy happiness, but the lack of it can buy absolute misery. This, by the way, is not just my personal observation. Landlording 101, Tricks of The Trade Looking Inside Your Tenant's Mind Basic Mind-Reading Report 101 for LandlordsIt goes without saying but I will say it anyway. The better you understand your tenants and their personal situation, the better you can serve their needs and your own. How to Invest Overseas - Intelligently! In recent months, many advisors have talked a lot about the wisdom of investing overseas, but most have failed to really address the way to do that. For new investors, investing in the U. Exchange Traded Funds They call 'em ETFs.There are hundreds of them. Get Wealthy With the Rule of 72 When it comes time to retire how many people would like to have a nest egg that is 2 or 3 or even 4 times larger than what they have? With an answer so obvious allow me to explain how you can make it happen for yourself.First we'll explain the Rule of 72. Day Trading Strategy or Stock Trading Software? The Way You Pick Stocks Affects Your Results The trading method you employ to approach the stock market can make a big difference in your results.Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation. Approaches to Investing Here is a small summary of the three major approaches to investing:1. Fundamental AnalysisTruly superior companies exist, are sometimes undervalued by markets, and can be identified by mostly financial research. Discipline in Trading and Investing The one thing I can think of that most affects both trading and investing has to be self-discipline.Being disciplined is fully 50% of the job of trading or of investing. Why You Need To Buy and Sell Gold Coins (Part 2) How to Collect Rare Coins For Fun and ProfitTime has proven that collectors tend to make the most money in rare coins because they search out "undervalued coins" and buy during market lulls. Buying in today's market climate offers you superb upside profit potential. Direcway & Wildblue Set to Square Off this Fall? There is a cat fight brewing between Direcway LLC, Starband and Wildblue Communications for the large number of people in the U.S. The Power of Small Numbers: Trading Success is Based on Consistency, Not Home Runs Online trading is so seductive - just sit, click, and rake in the profits! But as anyone who has ever seriously attempted online trading will probably tell you, it's just not as easy as it sounds.Many beginning traders are seduced by the lure of the "home run", that big trade that makes you an instant millionaire and retires you overnight to your own private island paradise. Economic Survival in the 21st Century - the Three Key Questions to Ask In this "special report", I want to pose a few important "philosophical questions" to my readers. Firstly -- our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a speech that he made last Friday. Chinas Great Missed Opportunity While a U.S. Inflation Proof Your Investment Portfolio with ETF's Even though inflation has been relatively quiet in the U.S. High Volatility Investments Penny stocks and options are high volatility investments that attract both the trader and the long term investor because of the small amount of capital required to make substantial gains as compared with less volatile higher priced stocks. The long term investor buys a stock believing that a company's value will increase over time and the stock price along with it. How to Use Annual Report There are many steps in calculating the fair value of a company. However, before we even do that, it is imperative to know how a company earns its profit. Trading Tips No 7: Developing a Casino Mentality for the Day Trader I submit that the successful day trader would profit well to adopt a casino mentality. At first glance, this sounds reckless and nothing more than a gambling attitude - but it's not. Foreign Investing - US Investors Still Missing Out? Investors are still too slowly realizing what the academics have long pointed out -- adding foreign stocks to your portfolio will, over the long term, increase your returns and lower the overall risk of your portfolio.US investors embracing foreign investing are both realists and optimists.
|
| home | site map |
| © 2006 |
