All posts by Rob H

I’m a new investor: What is asset allocation? and what are my options?

Definition: In simple terms- asset allocation is about choosing how much to invest in each asset class.
Asset class: Well, there are three major asset classes: stocks, bonds and cash. Moving beyond these common asset types, however, and you could invest in real estate, private equity, natural resources, foreign currencies, and more.
It doesn’t matter if your investment account is an IRA, 401(k) or 403(b), or a regular brokerage account, asset allocation works for any portfolio.  You can select from among different stocks, bonds, mutual funds, exchange traded funds, Treasuries, and money market accounts. Your portfolio mixture is determined by your investment goals.
In investing, you never want to be overly invested in one asset class and avoid investing in assets of poor quality. The proper asset allocation is to provide the ideal mix of investments that gets you the greatest long term gains for a minimal amount of risk.
Determining your asset allocation: Consider the following factors: your age, years to retirement, goals, and risk tolerance of course. Rule of thumb- maximum stock market exposure tends to be riskier. Always have a balanced portfolio tailored to your goals, and needs. Younger investors can be aggressive and invest more into stocks (75% and up); since they have time to make back their losses if market tanks (like it did back in 2008/09). While older investors will primarily focus on capital preservation, then tend to invest less in stocks and more in bonds or cash, since they rely on their nest egg for annual income and can’t afford losses.
The objective of asset allocation is broad diversification and minimizing risks as much as possible.  Diversification gives you the opportunity to make money with one asset class even while another declines.
If you have any questions on this matter, don’t hesitate to contact me.

Perfect depiction of asset allocation below (courtesy CNNMoney) asset-allocation-grocery-basket

Where do I invest my money

Investment platforms:

If you are fairly new to investing, you might be asking yourself: where do I invest my money??!

First, you’ll need to choose where to invest your hard earned money. There are many financial institutions, online brokers that will be happy to have you as a new investor.  Here are few well known platforms where you can place your money (to name a few):

  • Online brokerages such as Charles Schwab, TDAmeritrade, Vanguard or Fidelity (I currently use Fidelity, Schwab, Vanguard, and Schwab)
  • Full-service brokers or financial advisors
  • Specialty brokerages like Betterment
  • Direct mutual fund accounts
  • Dividend reinvestment programs (DRIPs)

Until you become a comfortable investor, I strongly recommend buying mutual funds and/or ETFs through an online broker or direct mutual fund account. Get the feel for it, then expand on that. Make sure you do plenty of research before jumping in.

Investing vs. gambling

All investing involves risk. But there’s a big difference between smart investing and gambling. Trading a few stocks without knowing what you’re doing is gambling. Diligently setting aside money, putting it in the best stocks or funds for your goals, and leaving it put for the long run. That’s investing.
If you love researching stocks and making fast trades in search of short-term profits, fine. It’s fun. I just don’t recommend doing it with more than 10 percent of your money.

Market volatility & what it means to you

Last week, we had $23.3B of Securities outflow, and $14.8B Bond funds inflow. Does that mean we are heading towards a market correction. Personally I would wait on sidelines. As an investor, you must think long term: buy on the dip and hold. Those market swings are just scary. If you’re a swing trader, tread carefully!

16 Vanguard funds on the “Money 50” list

Money magazine selected 16 Vanguard mutual funds and exchange-traded funds (ETFs), including our Target Retirement Fund series, for its “Money 50″ list of recommended funds, published in the magazine’s January/February 2014 Investor’s Guide.

The “Money 50″ list is a more concise rendition of the annual “Money 70″ list, as the publication eliminated fund and ETF duplications, removed several active funds that have consistently underperformed, and reorganized the categories based on investment goals to help simplify investor decisions.

This year, once again, Vanguard has more funds on the list than any other fund family, with nearly three times as many as the next largest competitor. In addition, Vanguard is also the only fund family that has funds listed in each of the magazine’s new categories: building-block funds (9 of the 14 listed), custom funds (5 of 32), and one-decision funds (2 of 4).

This is the 13th consecutive year Money has recognized Vanguard on its list of recommended funds. The criteria for inclusion on the list are based on a low expense ratio, a strong record for putting shareholder interests first, a consistent investment strategy, experienced and trustworthy managers, and long-term performance.

The following Vanguard funds made this year’s “Money 50″ list, arranged according to the magazine’s categories:

Building-block funds (9 of 14 listed):

One-decision funds (2 of 4 listed):

Custom funds (5 of 32 listed):


Questions about Vanguard funds?

If you’re new to Vanguard, call 800-252-9578. If you’re already a Vanguard client, call 800-888-3751.

How to open an account »

Most recent performance data for all Vanguard mutual funds »


Do financial housekeeping

Start the New Year by reviewing all of your finances to reassess your financial priorities and make sure you’re still on track to reach your goals. Build up your emergency fund to keep at least six months’ worth of essential expenses in a savings account. Rebalance your portfolio so your investments match your time horizon and risk tolerance, especially if some have performed much better than others over the past year. Start using a budgeting program if you haven’t already.

Balanced portfolio consist of Stocks & Bonds

One minute it’s stocks getting all the attention (and the glory), then the next it’s bonds. When one asset swings up and the other is down, it’s natural for your focus to swing too. But we believe both can play vital—and not mutually exclusive—roles in a well-balanced portfolio.  Read the full article at Vanguard: Stocks and bonds: Not an “either/or” proposition 

Make sure you have health insurance in 2014

You’ll have to pay a penalty if you don’t have health insurance in 2014. If you’re still uninsured, you have until March 31, 2014, to buy a policy on the a state health insurance exchanges without being subject to the penalty. The penalty starts at $95 per person or 1% of your household income, whichever is higher, which you’ll have to pay when you file your 2014 taxes next year. If you already have health insurance, your coverage is likely to meet the requirements. It can also help to check out prices for coverage on your state’s exchange if you currently have expensive COBRA or individual coverage and may might want to switch policies before open-enrollment ends on March 31—especially if you qualify for a subsidy to help with the premiums.