Sunday, September 20, 2009

Blogging WealthTrack

This morning I watched Conseulo Mack: Wealthtrack and I found that it was extremely interesting advice about Diversification and Asset Allocation.

The most interesting point is one that is probably proved out in your own investments and 401k: International Indexes and US Stock Indexes have extremely high correlations. One graphic at the beginning of the show shows that the correlation of the S+P 500 to the MSCI EAFE Index from about 2003-2009 is between 80 and 90% with some small changes.

The point of this graphic really hits home for me. In my personal 401k, there is a basket of mutual funds to choose from, but if I am interested in equities, there's not much diversification necessarily when shifting from US to outside of the US for stock investing.

A guest, David Darst, author of The art of Asset Allocation - The little book that saves your assets explained that asset allocation had to include a different asset class to prevent losses during the last downturn (I'm paraphrasing). "If you had high quality bonds - Municipals - with adequate allocation and cash, those folks cut their losses in half...down 12-15% rather than 38%."

Another guest, Richard Bookstaber, author of "A demon of our own design" stated the issue succintly. "Diversification works really well until it really matters." In short, If you think that you're diversifying, it doesn't matter when there is a crisis. Two things matter in a crisis. Risk matters and liquidity matters. He also stressed that diversification and deleveraging (in other words, taking risk off the table) are two different issues.

In the end, I was interested in internalizing this point and deciding how I should change my strategy (if at all) for retirement investing. Inflation definitely appeared to be a medium to long-term concern for the guests.

The one investment for each of the guests:

David Darst: Inflation Protection, WIP, SPDR DB Intl Govt Infl-Protection
Richard Bookstabler: Inflation proctection, 20 Year TIPS.
Mark Cortazzo: Templeton Global Bond A Fund (TPINX)

Wealthtrack Action Point: Decide which flood (crisis) protection you want in your portfolio....
extreme 100 year, ST Treasuries, etc
30-70 year, corp bonds, gold, etc
10-25 year, broad;y diversify, change according to preferences.

Of course, the one-investment choices all focus on inflation, so I think that this is an interesting point. Do we really think that inflation will become similar to Turkey or to a South American country?

Thursday, September 17, 2009

5 Ideas For Keeping Wedding Costs Down

With the season of weddings behind us and having just finished working through my own big day, I thought it might make sense to share some of the key items that would make sense to consider if you're doing a cost-sensitive wedding.

Of course, that first paragraph is a big disclaimer. But seriously, if you were not cost-sensitive, you probably wouldn't be reading this. Furthermore, anyone else reading this and thinking about a wedding should be cost sensitive in my opinion. Weddings are crazy expensive. Many vendors charge more for a service simply because they know it is in connection with a wedding and that people feel like they are going to spend through the nose on those events.

Before reading this, understand that I am practical person before I am romantic. So, before the flames start coming about how I "don't understand," simply realize that these are my views. Take them or leave them.

All that said, here are five ideas:
1. Keep the guest list small. Figure out what you're going to do at the low end and then chop another 5-15% of the total. In other words, make the hard choices at the beginning about who to "not invite" and simply have that discussion with your significant other and family members.
2. Avoid cash gifts if practical. Most people tend to give cash when they are not sure what you need. If you have something you need to buy anyway, register. This will likely get you a gift instead of cash and you'll possibly end up with more value than if it was just cash.
3. Exploit your relationships. Almost everyone knows someone who can help out with something. And when it comes to loved ones and friends, everyone is usually more than willing to help. Use those connections to score free labor, discounted centerpieces, etc. Every little bit helps.
4. Consider avoiding the rehearsal dinner, gifts for the wedding party, or other expensive "traditions" that might not mean much to you. Or, perhaps just scale them back. No matter what you decide to do, you might be able to shave some of the cost off by simply adopting a "do less" attitude.
5. Pay cash. Like any vendor, some vendors can provide a cash discount and even if you just write a check, you can avoid interest fees. This will also force you to only spend what you can really afford. My personal feeling is that it should be in the 2-4 months worth of net income range. Anything more than that is likely too much if you're paying for it yourself and you don't have much in savings. (I'm talking <= 12 months of expenses.)