The investment suggestions as below:
Showing posts with label Asset Allocation. Show all posts
Showing posts with label Asset Allocation. Show all posts
Wednesday, June 4, 2008
Saturday, May 24, 2008
The rule of investing success
From: Internet
THE RULE
You must have stocks and bonds in your investment portfolio
Asset allocation
Or simply
% stocks = 120 - age
Index mutual funds
You really only need 3 mutual funds to cover entire stock and bond market.
1) Total US market stocks index fund
2) Total foreign stocks index fund (10% to 15% of your stock portfolio, most large US companies already are global company.)
3) Total bonds index fund
THE RULE
You must have stocks and bonds in your investment portfolio
Asset allocation
| TYPE | Age | Stocks | Bonds |
| GROWTH | 40s or younger | 70% | 30% |
| BALANCED | 50s to 60s | 50% | 50% |
| CONSERVATIVE | 70s or older | 20% | 80% |
Or simply
% stocks = 120 - age
Index mutual funds
You really only need 3 mutual funds to cover entire stock and bond market.
1) Total US market stocks index fund
2) Total foreign stocks index fund (10% to 15% of your stock portfolio, most large US companies already are global company.)
3) Total bonds index fund
Friday, May 23, 2008
Asset allocation with Vanguard index funds
From Morningstar.com
Assuming you want to build a portfolio of 70% stocks and 30% fixed income
Please note that you could easily build a similar portfolio with all Fidelity funds.
Assuming you want to build a portfolio of 70% stocks and 30% fixed income
% | Index funds | ETF |
50 | ||
20 | - | |
25 |
Please note that you could easily build a similar portfolio with all Fidelity funds.
Free tools for asset allocation
From: Internet
Moringstar: Instant X-ray
Tip: If you have ETF in your portfolio, enter its corresponding mutual fund instead.
SEC: Asset Allocation 101
Iowa Public Employees Retirement System: Online Calculator
Moringstar: Instant X-ray
Tip: If you have ETF in your portfolio, enter its corresponding mutual fund instead.
SEC: Asset Allocation 101
Iowa Public Employees Retirement System: Online Calculator
Sunday, May 18, 2008
Fidelity's asset allocation strategies
Source: Fidelity
Why we need to allocate our portfolio:
The following table shown the updated annual returns from 1926 to 2007
Why we need to allocate our portfolio:
The following table shown the updated annual returns from 1926 to 2007
| FI vs Stocks | 100:0 | 80:20 | 50:50 | 30:70 | 15:85 |
| Average return | 3.7 | 6.2 | 8.2 | 9.2 | 9.9 |
| 1 yr best | 15 | 31 | 77 | 110 | 136 |
| 1 yr worst | -0 | -18 | -41 | -53 | -61 |
| 5 yr best | 11 | 17 | 22 | 27 | 32 |
| 5 yr worst | +0 | -0 | -6 | -10 | -14 |
Saturday, August 4, 2007
Rebalancing your portfolio annually
Source: When It Comes to Rebalancing, a Little Means a Lot By PAUL J. LIM of nytimes.com
Over the long term, stocks tend to outperform bonds.
If you have not rebalance your portfolio for several years, chances are that you probably have more exposure in stocks than you intended.
Moreover, you are probably overexposed to the most volatile types of stocks.
So some rebalancing may be better than no action at all.
Example of asset allocation
Over the last half-century, the worst one-year stretch for a portfolio of 60 percent stocks, 30 percent bonds and 10 percent cash was a loss of 24.1 percent. That occurred in the 12 months that ended in September 1974.
By comparison, the worst one-year loss for a more conservative mix — 40 percent stocks, 40 percent bonds and 20 percent cash — was just 15.5 percent during the same period.
Yet to achieve this lower risk, you would have to give up a decent amount of gains. The switch in asset allocation strategy would have reduced your average annual returns to 8.3 percent from 9.2 percent.
Rebalancing your portfolio once a year
Say you started investing at the end of 1984, in a portfolio consisting of 60 percent stocks, 30 percent bonds and 10 percent cash. And further assume that you never rebalanced this portfolio back to that 60-30-10 ratio. Instead, you let the market take your investments for a ride.
Through the end of June, this strategy would have earned an average annual gain of 11.1 percent since 1984.
Now, had you started in 1984 with the same strategy, but this time rebalanced your portfolio annually, you would have earned nearly as much on your investments: 10.7 percent a year, on average.
But at the same time, that portfolio would have been 18 percent less volatile, based on standard deviation.
The buffering effect of rebalancing might have been enough to let you sleep better at night.
More on rebalancing
Rebalancing is not just about resetting your mix of stocks and bonds. You should also consider periodically resetting the types of stocks you own.
For instance, over the last five years, many of the best-performing areas of the stock market have also been among the most volatile.
Those include the basic materials, telecommunications and technology sectors, all of which have a “beta” of more than 1.0. (Beta measures the tendency of an investment to go up or down, relative to the market — in this case the S&P 500 index. So a beta of more than 1 implies that if the S&P 500 were to rise or fall 5 percent, for example, that investment would rise or fall even further.)
On the other hand, two of the lowest beta sectors in the market — health care stocks, with a beta of 0.6, and consumer staples stocks, at 0.5 — have been the market’s worst performers over the past five years.
One way that investors might consider rebalancing the stock portion of their portfolios is to gravitate toward areas with lower volatility, like health care and consumer staples, while avoiding those highly volatile areas that have already done exceptionally well..
Another way to rebalance — without selling any holdings — is simply to take your new money and invest it in areas that many investors have ignored in recent years, like large-capitalization domestic growth stocks and stock funds. These may be worth buying now.
Over the long term, stocks tend to outperform bonds.
If you have not rebalance your portfolio for several years, chances are that you probably have more exposure in stocks than you intended.
Moreover, you are probably overexposed to the most volatile types of stocks.
So some rebalancing may be better than no action at all.
Example of asset allocation
Over the last half-century, the worst one-year stretch for a portfolio of 60 percent stocks, 30 percent bonds and 10 percent cash was a loss of 24.1 percent. That occurred in the 12 months that ended in September 1974.
By comparison, the worst one-year loss for a more conservative mix — 40 percent stocks, 40 percent bonds and 20 percent cash — was just 15.5 percent during the same period.
Yet to achieve this lower risk, you would have to give up a decent amount of gains. The switch in asset allocation strategy would have reduced your average annual returns to 8.3 percent from 9.2 percent.
Rebalancing your portfolio once a year
Say you started investing at the end of 1984, in a portfolio consisting of 60 percent stocks, 30 percent bonds and 10 percent cash. And further assume that you never rebalanced this portfolio back to that 60-30-10 ratio. Instead, you let the market take your investments for a ride.
Through the end of June, this strategy would have earned an average annual gain of 11.1 percent since 1984.
Now, had you started in 1984 with the same strategy, but this time rebalanced your portfolio annually, you would have earned nearly as much on your investments: 10.7 percent a year, on average.
But at the same time, that portfolio would have been 18 percent less volatile, based on standard deviation.
The buffering effect of rebalancing might have been enough to let you sleep better at night.
More on rebalancing
Rebalancing is not just about resetting your mix of stocks and bonds. You should also consider periodically resetting the types of stocks you own.
For instance, over the last five years, many of the best-performing areas of the stock market have also been among the most volatile.
Those include the basic materials, telecommunications and technology sectors, all of which have a “beta” of more than 1.0. (Beta measures the tendency of an investment to go up or down, relative to the market — in this case the S&P 500 index. So a beta of more than 1 implies that if the S&P 500 were to rise or fall 5 percent, for example, that investment would rise or fall even further.)
On the other hand, two of the lowest beta sectors in the market — health care stocks, with a beta of 0.6, and consumer staples stocks, at 0.5 — have been the market’s worst performers over the past five years.
One way that investors might consider rebalancing the stock portion of their portfolios is to gravitate toward areas with lower volatility, like health care and consumer staples, while avoiding those highly volatile areas that have already done exceptionally well..
Another way to rebalance — without selling any holdings — is simply to take your new money and invest it in areas that many investors have ignored in recent years, like large-capitalization domestic growth stocks and stock funds. These may be worth buying now.
Thursday, June 21, 2007
Higher yield strategies for your money
From Money magazine
TIMELINE: 1 year or less
OBJECTIVE: Best yield while taking NO risk
STRATEGY:
- Bank CD
- Bank money market account
- Money market fund
- Treasury bill
TIMELINE: 5 to 10 years
OBJECTIVE: Beat short-term yields while taking NO BIG risk
STRATEGY:
- 50% - Bank CD ... Bank money market account ... Money market fund ... Treasury bill
- 25% - Bond market index fund;
- 25% - High-yield or junk bond fund
TIMELINE: 10 to 20 years
OBJECTIVE: Diversification 101
STRATEGY:
- 20% - Bond funds;
- 30% - Growth funds;
- 50% - Equity-income fund
TIMELINE: Rest of your life
OBJECTIVE: Current income while beat the inflation
STRATEGY:
- 35% - Bond market index fund;
- 20% - High-yield or junk bond fund;
- 45% - High-yielding stock funds
Sunday, June 3, 2007
How to manage your portfolio
Source: Seeking Solid Middle Ground by Tomoeh Murakami Tse, Washington Post staff writer
First, you should figure out what your target asset allocation should be. What should be the % of stocks and fixed incomes.
Rebalancing
Is there anything new that would cause me to change my asset allocation?
Do my financial circumstances really fit what's happening in my personal life?
Why
Rebalancing helps you control your risk; it's not a way to make more money; it's a way to protect what you have.
Rebalancing is a simple enough concept -- selling the stars and buying the lesser performers.
It allows investors to implement a famous but difficult investment strategy: buy low, sell high.
How
You should check on a portfolio once a year; and fight the urge to look at your accounts more often than that..
Rebalance your portfolio if a particular asset class is off by more than 10% movement is a good trigger, with more room if necessary to let winners run their course.
If you rebalanced every time the market moved 5% on its way up, you would have rebalanced 18 times during stocks' recent four-year recovery.
First, you should figure out what your target asset allocation should be. What should be the % of stocks and fixed incomes.
Rebalancing
Is there anything new that would cause me to change my asset allocation?
Do my financial circumstances really fit what's happening in my personal life?
Why
Rebalancing helps you control your risk; it's not a way to make more money; it's a way to protect what you have.
Rebalancing is a simple enough concept -- selling the stars and buying the lesser performers.
It allows investors to implement a famous but difficult investment strategy: buy low, sell high.
How
You should check on a portfolio once a year; and fight the urge to look at your accounts more often than that..
Rebalance your portfolio if a particular asset class is off by more than 10% movement is a good trigger, with more room if necessary to let winners run their course.
If you rebalanced every time the market moved 5% on its way up, you would have rebalanced 18 times during stocks' recent four-year recovery.
Monday, January 15, 2007
Smartest investment advice
By Dan Solin
1) Asset allocation
Determine what % should the stocks and bonds be in your portfolio.
2) Index mutual funds
All you really need is only three low-cost index funds in your portfolio
- Total U.S. stock market index fund
- Total international stock market index fund (10% to 20% of stocks allocation)
- Total bond market index fund
3) Rebalance the allocation once or twice every year
1) Asset allocation
Determine what % should the stocks and bonds be in your portfolio.
2) Index mutual funds
All you really need is only three low-cost index funds in your portfolio
- Total U.S. stock market index fund
- Total international stock market index fund (10% to 20% of stocks allocation)
- Total bond market index fund
3) Rebalance the allocation once or twice every year
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