…it’s National Relaxation Day, so, well, relax! Go out and do a bit of de-stressing today. Go on a swim. Hit the sauna. Take a nature walk. Sucker punch a sleazeball mortgage broker.

It goes without saying (but I will anyway) that into every life a little rain must fall. Likewise every market must have the occasional correction. I’ve been paying attention to the financial news, so I knew there was going to be a pretty hefty ding to the bottom line. But as long as our investment allocation doesn’t go too far out of whack, I’m the tortoise — just keep plodding forward; darting all over the place just wastes energy money.

So I hadn’t checked the actual numbers for some time. And all I can say is, wow, am I glad I’m not hung up on the day to day performance of it all!

Perhaps a mojito or two may be in order?

Possibly by this afternoon, if it stays quiet here, I’ll have our new portfolio.

Well, of course, I shouldn’t have written that qualifying statement in there. Because it just tempted the universe to fill the rest of my day right after I posted it… C’est la vie. Even though I was thrown off task a bit, people came in with a handful of interesting problems so I wasn’t bothered by the interruption.

After everyone went to bed Friday night, I had more than enough time to do the research I wanted anyway. And the decisions are in for this round of rebalancing. By tomorrow everything should be where I want it:

1. Put in all sell orders today.
2. Wait until market close for them to execute (mutual funds, so no instant trading).
3. Put in buy orders today after the sells have cleared
4. Buys get executed Tuesday morning

It’s not like I’m in a huge hurry to do the trades, but that delay in #2 is one minor reason why this round I’ve decided to shift quite a bit out of mutual funds and into ETFs. Well, that, and the lowered fees in most ETFs compared to their mutual fund counterparts (if there is one). Oh, and the fact that no-load mutual fund transactions have went from free to $9.95 while stock trades remain $6.95 where our accounts are held.

So, enough blathering. How about the meat already? The breakdown, largest allocation to smallest:

I will incur a bit more in transaction costs this time around versus the last time I did this. In fact, they will be infinitely more, since last time I don’t believe I had any transaction costs. Unfortunately, as I said before, Firstrade’s free mutual fund trades recently disappeared. The total was still less than $100, so not crushing or anything. But it would certainly eat into any gains if I had to do this often.

As to the overall allocation, it probably looks a little risk-heavy to some. I have no need to invest these funds conservatively – I’m perfectly comfortable with the risk, and have many years before I intend to tap these accounts. Some day I may consider a bond fund like DODIX in there for diversification reasons, but I’ve never been all that attracted to bonds. I’m not that old yet…

Despite my desire to focus most of our attention on debt reduction, that doesn’t mean other aspects of our finances can be entirely pushed to the wayside. Certain areas just need a bit of consideration to keep things going along as smoothly as possible. Plus, now that I finally have a little time to contemplate anything other than numbers, what better time to think about a few more of them?

If you are tracking the performance of your investments, you’ll notice that the separate portions of your portfolio like, for instance, your US Large Cap and your Emerging Market Micro Cap sections aren’t necessarily moving in the same direction, in the same amount, all the time. (Hopefully so anyway, or you’ve got a bit of diversification to do.) Over time, these disparities can cause one or more areas of the portfolio to be overweighted while leaving other areas underweighted. Which is just another way of saying that you’re taking on more or less risk than you desired when you set up your portfolio. So a little reallocating of funds between the different classes becomes necessary.

• Rebalance periodically – Whether annually, biannually, monthly(!) or whatever arbitrary time frame chosen, you pick some date and decide “that day is the day to rebalance.” And when that day arrives, do so. Then put a reminder in your date book for that next arbitrary date in the future to do it all over again.
• Rebalance when a your allocation is off by a particular percent – Pick an arbitrary percentage off your ideal portfolio, and decide “this is how far off perfect my allocation must be for me to rebalance“. And when some portion of your portfolio hits that percentage, rebalance.
• Rebalance when you feel a the market is heading in a particular direction – Give the separate areas of your portfolio a range of allocations – i.e. 20-40% Large Cap Value, 30-50% Small Cap, etc., etc. – and based on how you view the market, you allocate somewhere in that range when you feel that the market is about to change.

The first method is just too arbitrary for me. Too short a time between rebalancing and “if it ain’t broken, don’t fix it” would apply – and you’d needless be incurring transaction fees. Too long a time period and things get too far out of whack, and the portfolio would no longer reflect the level of risk one is comfortable taking. The problem is, there is no perfect time frame; the market just doesn’t move at a steady pace.

Method three, well, that’s just a market timing play. Which, to a me, is just shy of gambling without any of the fun (ala sharing a few good cigars and drinks with friends). I generally believe in the efficient market theory, though I probably lean more towards weak-form efficiency than strong-form. Either way, market timing doesn’t sit in either ends of that spectrum.

Which leaves method two, the route I take – it personally makes the most logical sense. The Large Cap Value portion of our overall portfolio has been creeping away from ideal for some time now, and is finally enough off that the time to take some of the gains in the winners and stock up on the beaten down has arrived.

And so now the fun begins: deciding if the investments we are in are the most appropriate, and, if not, with what to replace them. Changes at the broker I use – namely, no more free mutual fund trades – initiated some looking around before the rebalance trigger hit, and I actually stumbled across an interesting group of prospective investments that I may let run for a bit.

Possibly by this afternoon, if it stays quiet here, I’ll have our new portfolio. I’ll even throw it up here, just to see if anyone has an opinion or two on my choices….

I’ve always liked Morningstar‘s portfolio tracker, and even signed up briefly as a paying member just to use some of the more interesting investment planning tools like their Portfolio X-Ray. But I don’t look for new investments nearly often enough – maybe a couple times a year, if I notice some of my holdings performing particularly poorly – to justify the cost of subscribing to Morningstar.

But here’s a little something I ran across today: T. Rowe Price offers the same portfolio tracker, plus all those tools normally reserved for subscribing Morningstar members, for free. Yes, you do have to register to access it. But it’s a free sign up, and at worst I may get a little T. Rowe Price spam that Gmail will cheerfully delete for me if they get too aggressive about it…

[tags]Morningstar,T. Rowe Price,investments,tools, x-ray,portfolio[/tags]

Apparently stuck on the extra-special super-extended hold line (when and how did customer service get so incredibly bad that 10 15 20+ minutes waiting on hold isn’t anything but outrageous anymore?) and thought I’d take a little initiative and get this done before a week of November has passed! How about taking a quick peek and see how that ol’ balance sheet did this month. Of course followed by a few notes if interest, to me at least…

a little random commentary

• Must say that a 4% gain on the retirement investments for the month was a pleasant surprise. A couple of our fund allocations are enough out of line to probably need a little rebalancing, but I’m going to continue our plan and wait until the beginning of next year to do so. (mental note to myself: our investment strategy might make a good post!)
• Well, I was enjoying seeing our assets increase and our liabilities decrease. At least until we hit that line of credit. No surprise at all, but I wouldn’t have complained if my mental calcalutions weren’t quite as accurate as the one on screen! And just going to get larger, I’m afraid. Ah, well, someday I’ll have to assess what our home value actually is and not feel so bad about taking on all of this extra debt…
• Not directly PF-related, but our migraine-inducing contractors (plumbers, if you were interested) did actually show up over an entire weekend – including a Sunday – following my warning and the parade of interested parties I mentioned earlier. We’re not done with them quite yet – they still have to attach a few faucets and other minutae after a bit of drywall work is done. No bill of any type from them yet, and I expect I’ll see a few charges on there that I’m going to refuse to pay – i.e. any non-regular working hours charges, seeing as the only reason they had to work those hours is because they blew our job off so long that I had to threaten to fire them. But the vast majority of their job is done and we will soon be rid of them forever.
• So, obviously we’re still renovating away, and progress on the total debt is still going the wrong way for the time being. But for the first time in a while, I’m seeing light at the end of the tunnel. Here’s hoping it’s not a train…

[tags]debt,renovations,report card,balance sheet,credit card,investments[/tags]

FMF at Free Money Finance recently asked this very question.

First off, I have to share his amusement with the comment that “a million just isn’t what it used to be!” Spoken generally by those who have substantially less than that million in the first place. Of course a million would change your life unless you happened to have several million already socked away. In which case, I’d imagine your average personal finance blog probably wouldn’t be where you’d be hanging out! It might not change your life to the point where you were, for instance, considering which port city you were going to be docking the yacht in this week. Still, that piddly one million bucks would certainly change it.

But since the game is $5 million, I’ll play it that way. I’m going to assume after-tax dollars because otherwise we’re talking about the $1 million range again… Here’s how my $5 million would be spent:

• First off, all of our debts would disappear. As would our sisters’/brothers’/parents’ – we’ve got a few farmers in the immediate family and, unfortunately, some hefty long-term debt often goes hand in hand with farming. I don’t know exactly what this amount would be (we’re Midwesterners – we don’t talk about our money, whether we have a lot or whether we owe a lot), but I’m going to guess substantially short of $500,000. For the sake of simple calculations, a half million it is…
• $250,000 invested in a few reasonably safe investments to take care of our two-year-old’s education. By reasonably safe, I’m talking along the lines of something like the Vanguard Target Retirement Fund 2025.
• I ascribe to no particular religious beliefs, so I won’t be tithing. But I would take $750,000 of it and set up a charitable foundation. I don’t want to commit myself to contributing it all in one shot, because you just never know what great advance or what great need will arrive tomorrow.
• $2 million would be socked away for retirement investing, allocated pretty much exactly as they are now, percentage-wise, just with bigger dollar amounts… Though I’d probably be on the lookout for a few more tax-advantaged investments as I deal with the capital gains taxes I can generally avoid today. Oh, and the date I’d consider myself retired may be much earlier than I assumed the day before I found this money…
• $1 million would used for much more aggressive investing. For instance, a prospectus for a very interesting new business in search of a few local angel investors recently crossed my desk. A client wanted me to look through it, just to see if their numbers passed the smell test. I really like the business idea. And the numbers, while likely a little optimistic – as all prospectuses tend to be – are definitely not out of line. The kicker: minimum investment of $100k. I certainly couldn’t do that today, and the potential risk is just too great for me to even consider borrowing that amount. But if I had it sitting in an account put aside for these opportunities when they arise, I wouldn’t hesitate to do a bit more researching today, followed by a little investing tomorrow. No, I wouldn’t throw the whole million at it – all my eggs in one basket and such – but I certainly would be considering a couple hundred thousand.
• The rest? Blow money. That $500,000 would last us through quite a lot of screwing around. We aren’t aggressive spenders, despite the fact that we had (and still have) a good chunk of credit card debt – it took us many years to build that up, and all on stupid little junk. We’d probably do a little more home renovation (but not a lot, because we already like our little house), replace our old cars with a couple new reasonable ones, do a bit of clothes shopping, grab several hundred books and CDs, do a little travelling, yada, yada, yada. I’d bet that blow money would actually last quite a few years.
• Would I quit my job? Doubt it – I like my job. Plus, it gives me easy access to those aggressive investing opportunities I mentioned above! Though I’d imagine a good long vacation may just have to be scheduled in there more often than they are today…

Hmmm, that all sounds pretty good. Now the question is, where exactly do you stumble upon a quick five mill?

[tags]dreaming,five million,angel investor,charitable foundation,retirement,blow money[/tags]

Are you looking for an easy way to blow through potentially thousands and thousands of dollars worth of your savings, all while getting the opportunity to have your own small part in a little criminal activity while you’re at it? Have I got a deal for you…

Lately, I’ve been doing a fair amount of research into various ways one can make money from more passive sources than the ol’ 9 to 5. After all, who doesn’t want to make more money while doing less? (The mood is striking me especially hard these last few days, what with beautiful fall weather while I’m spend entirely too much time, for example, trying to explain standard practices in very basic bookkeeping to one of my denser clients). There are the old standbys of rental property or limited partnerships, but both generally require a bit more in terms of monetary investment than the extra room shown on my balance sheet has reflected as of late.

So I’ve been specifically looking for substantially cheaper options. In particular, the various possibilities in the online arena have attracted my attention. You can run Adsense or YPN or whoever’s ads alongside content you create (or have someone else create in your stead). Or get some commission from affiliate products you recommend to your readers. Or set up your own storefront and sell others items picked up at wholesale (Better yet, have them dropshipped straight to your customers – inventory management can be a pain!). Or create your own products and sell them. Or create your own products and have others sell them. Or…

Well, you get the point. What I’m saying is, there are tons and tons of possibilities out there, and I’ve been enjoying the education. But one ‘opportunity’ in particular caught my attention, simply because I thought these type of things were much more policed than they apparently are: high yield investment programs aka HYIPs.

Recently, I stumbled across a little news item on one of these ‘investment’ called 12DailyPro detailing how many thousands of people lost many millions of dollars (FYI, the accountant’s report has a lot more meaty details than the news snippet). The gist of 12DailyPro was:

• Buy into the program at whatever level you wanted to ‘invest.’
• Install an autosurf program on your computer (more on autosurf from the SEC). The program purportedly would automatically visit many websites, which would then generate advertising revenue. I’ll bet advertisers just love this kind of junk, assuming the program actually did anything at all!
• Magically receive a 12% return on your ‘investment’ – daily – for 12 days.
• Rinse. Repeat.
• Oh, and somewhere in there, it sure would be nice if you could bring a few new investors into this grand opportunity.

Of course, the scheme was nothing more than a Ponzi Scheme. Early investors were simply paid with money from later investors. Amazingly, I still see some ‘investors’ blaming the pay processor for the failure of the program rather than the fact that they were involved in a scam that was sustainable only as long as they could convince bigger fools than themselves to ‘invest.’ Anyone with a tenth of a clue and an honest bone in their body had to realize that getting an easy 12% daily return can’t be legitimate, so I don’t feel particularly bad for most of those who lost money. But I’m sure there are a few less-than-a-tenth-of-a-clue people out there, and I do feel for them. Hopefully acquiring this clue wasn’t too expensive for them!

12DailyPro is now shut down. But that doesn’t mean there aren’t lots of other copies of the same plan for blowing your hard earned cash. Want to find your own ‘investment opportunites’? Google for autosurf or HYIP, and you can find links to probably hundreds of these scams. Maybe you can make some money off the more gullible, or maybe you can lose your shirt.

Me? I’m going to keep reading, keep learning, keep experimenting, continue making a little – and hopefully, some day, not quite so little – money on the side, and sleep well at night.

[Read a bunch more 'How To...'s at the latest group writing project on Darren Rowse's ProBlogger.]

[tags]HYIP,high yield investment program,12 Daily Pro,scam,investment,making money online,passive income[/tags]

Hey, whaddya know, August ended – a weeks ago!

First off, a bunch of numbers, lined up all purty (excuse the drawl; I’ve been meeting with cattle ranchers most of the afternoon… ):

And like always, a thought or twelve:

• 2% (calculated with my SIMPLE contributions netted out) just isn’t too bad a return on our investments for an altogether boring August in the markets. I’ll take that any month…
• Despite my vow to switch over those funds from the ING 457 plan last month, they’re still there. The paperwork has been filed for the rollover, but as of this moment, I still see those monies sitting at ING instead of their new home in my wife’s IRA.
• Still renovating away. Amazing how much delay some people can put into their work. Especially considering the fact that I haven’t prepaid a single thing. You’d think a big payday would be a bit of motivation, but apparently not. Nevertheless, we did end up adding a bit more to our running total on the ol’ line of credit. I’d still trade that upcoming bigger number today in a heartbeat for them to just finish…
• Finally got tired of ING Direct’s lackluster interest rates and transferred everything over to HSBC. HSBC may not have the top rate today (for instance, EmigrantDirect looks like it’s paying 5.15% right now), but at least they’re still playing the game. ING Direct’s 4.40% just tells me they aren’t trying anymore. I left $10 to make sure they don’t close the account on the off chance they decide they’d like to be competitive again. But leaving over half a percent on the table just because their site has a slightly better user interface isn’t worth it anymore.

So, not a heck of a lot of change from last month. Investments did a bit better, credit card debt down a little, and the renovations inching ever-so-slowly along. Yada, yada, yada. Slow and steady’s getting a little boring, but at least the bottom line is going the right direction!

[tags] debt, renovations, report card, balance sheet, credit card, ING, credit, line of credit[/tags]

After writing up a few of my thoughts on SocialPicks, I submitted my application to be a part of the private beta and expected to hear nothing for awhile. To my surprise a couple hours later not only did I receive an invite, but a personal emailed response to my post. I haven’t had the time to do much more than take a few quick glances at the site so far. So no real insight yet other than, as expected, the early adopters all seem to be talking about tech stocks so far (I see lots of GOOG, AAPL, EBAY, DELL, etc. and not so much, say, C or GE despite the latter being the largest companies in the US.)

I also been given 20 invites to hand out. If any of my four readers happen to want to give SocialPicks a try, drop me a line with your email address and I’ll send you an invite…

(Oh, and if you happen to catch this post as well Jason: I will get back to you on my thoughts… some days I just get buried with all kinds of time black holes, but I’d like to put a little thought into my reply.)

[tags]socialpicks,investing[/tags]

Despite my aforementioned belief in the shortcomings of individual stock picking, an investing site with a twist caused a little twinge in a few of those information junky receptors in my brain: SocialPicks, a social stock picks & research site, just went into limited beta.

Now, what the heck does ‘social stock picks‘ mean? That’s what has me tweaked a bit. By the looks of it, amateur investors get to enter their investments picks and, if so inclined, their own analysis of the particular company. Over time, the wheat will presumably separate from the chaff, and maybe members will discover a few investing strategies that they’ve never considered. I can see the a lot of pump’n'dumpers trying to game the site initially, which in and of itself would be interesting to watch. But who knows, if the site becomes popular, something of actual use may come from the information gleaned by all those eyes.

(On preview, I see the InvestorGeeks threw up their own review of SocialPicks, a short four months ago… cutting edge, I probably am not! )

[via TechCrunch]

[tags]socialpicks,investing,community,stocks, pump and dump[/tags]