Easy Change

 So in my previous post, I detailed that I had started to experiment with Options Trading. None of this is advice, but just a description of my experience and thinking. I think that this was an interesting part of my experience in the past year because I didn't previously understand the appeal of some of the more complicated parts of the financial system despite being interested in it for a very long time.  In the past few months, I've begun to take additional opportunities when I can with the shares that I own free and clear via covered calls. I've heard about this option more and I encourage people to read about it more if they are interested. However, this strategy works well for me. In my case, I own a large number of shares in my trading account of certain stocks or ETFs.  It is my intention to buy more if we ever see a market drop. That said, I certainly don't intend to sell. Even in a crazy, 80% style drop like the great depression. I'm holding to zero. It...

 In all the time that I have been investing in the stock market, both as an individual investor and as a future retiree, I've never invested in stock options. However, in the world of stimulus checks, these have become more and more popular and even more so in the world of meme stocks like Gamestop GME . What is an Option In my brokerage account I had to first ask for permission to trade options. Presumably, this was to ensure that I had enough money and I understood that there were risks that were not clearly understood to the average stock market investor. Indeed, in some cases your losses could be severe -- much more severe than in the case that you actually bought a stock. Put simply, a put option is a bet the price of a stock will go down. A call option is a bet the price will rise. On a stock that is at 100, you could buy a put at a strike price of 90. That means, you're betting that the price will drop below 90 dollars, and the put option gives you the right to sell the ...

 In recent weeks my circumstances have changed with my retirement account and the bulk of my retirement savings is in a self-directed rollover IRA. I am able now to look and invest more broadly. This has caused me to be more and more interested in mutual fund alternatives like ETFs.  ETFs are Exchange-Traded Funds which are a newer investment vehicle that are traded on the open market during the day with most mainstream brokerages and you're able to know the going price during the day instead of waiting for the close of market to have the mutual funds be priced. Also, whereas traditional mutual funds often have a fee in order to get in, many of the ETFs have no load and also very low expenses.  Impact to the Market I've followed Consuelo Mack WealthTrack for some time. This week's guest is a longtime expert in the industry and while he previously has favored mutual funds, in particular index funds, he now believes that their days are numbered.  Indeed, Morningstar ...

 I attended an interesting presentations given by IShares/Blackrock with the goal of showing how to use their ETF products to capitalize on investing themes for 2021: Gargi Pal Chaudhuri - Head of iShares Markets & Investments Strategy Dorothy Lariviere - iShares Product Consultant iShares (by BlackRock) - 2021 Outlook: New President, COVID-19, and Policy I found that this presentation was quite interesting. The presenters included two women which was a pleasure to see and they were quite intelligent and well-spoken. I don't advocate for any particular investment or forecast, but I thought that the summary was interesting and if you want to review the particular symbols they mention as ways to act on these themes, they are included at the end. US GDP Forecasts Above 6% for 2021 This presentation included a forecast that perhaps is not too shocking, but a positive report that GDP looks to be positive and a substantial number. The drivers for this include the ongoing fiscal and...

 In the book A Random Walk Down Wall Street  author Burton Malkiel argues that the stock market is, as the title suggests, a random walk. In the book, which is cited and echoed by famous industry titans like Jack Bogle of Vanguard fame, it: 1. Makes little sense to think that you can beat the market. Indeed, on average you'll lose money when picking stocks. 2. In looking at when to invest and cash out of stocks, if you try to time the market you'll inevitably do worse.  This advice really stuck with me and I still believe this to be the case. But in the current environment, as many smart people do, I do find myself asking myself if it is different this time. Much of this is due to the performance of "broad market" indices. Diversification is the idea that by spreading your investment over many companies, you lower the volatility. You might have less upside, but you also have less downside risk. In the end, you're hoping the market as a whole does well, more than a...

  The Economist writes on January 16, 2021 that "the pandemic has ushered more robots into factories, warehouses and back offices." and that "they are here to stay." The article cites information surveyed from a variety of manufacturers and shows that the increase is marked for these firms' increase in digital consumer interaction and collaboration along with Artificial Intelligence and automation. So, in short, what does that mean for society and how will that impact investing into the future? Society continues to find new and innovative ways to make our lives better with technology. The amazon effect on retail has translated into the destruction of brick and mortar. Many people are happier with this setup. For advocates of online shopping, they are spending less time doing these errands and more time on hobbies, with family, or able to do other things that they feel are a better use of their time.  Amazon continues to forge ahead with its use of technology, u...

Wealthtrack remains one of the most fascinating and enjoyable shows out there for financial topics. Consuelo Mack continues to host this show with a variety of guests ranging from the practical experts on retirement like Erin Botsford and Mary Beth Franklin to more bookish and technical guests like Donald Yacktman and Cliff Asness who have 'been there, done that' with respect to investing large sums of money for their clients. This week was interesting because for one of the few times I've seen on the show Consuelo took a personal turn with her guest, Erin Botsford. She described a scenario when Erin was young where she was involved in an accident and was subsequently involved in a lawsuit as a result of a death in the accident. Being very young at the time, this sounded like a terribly challenging event for Erin (it was made clear that she was not at fault during the episode). This tragic story turned to news you can use: get umbrella insurance for your house and your...

Author's Note: I have recently restarted my blog and I will be posting old posts as a way to show how things have changed in my original thinking versus when I wrote the article. Also, it is a great way to look back. I'll label these posts as "FromTheArchives". This post was originally written in March 2013. Recently, it was a short week at work with the Good Friday holiday. There were only four working days available. Then to make matters worse, I was coming off a few days of vacation. But all of this lamenting makes it important to reflect on the upside of something that I decided to do recently: rebalance. At my current position, I am fortunate to have a 401k match and safe harbor contribution that I will continue to cherish as long as I have it. Additionally, I am working to continue to put myself in a better financial situation each month. One major way in which I do this is to aggressively monitor my retirement accounts. I think this is essential because o...

For those of you who follow this blog you will know that I have long been a fan of the show Consuelo Mack: Wealthtrack. This morning, with my dog on my lap, I decided to clear out some recent episodes off of my DVR. I thought that the show was interesting and it was also somewhat surprising how much more I noticed about each of the guests as I was working on getting the ideas of the guests and the shows all at once when I was just trying to get through the episodes. I generally think that Saturday is a good time for me to watch these shows and I think that this is one of the most interesting things I can watch that will not be too much for me to work on in terms of actual work -- something that I really strive to avoid on my weekends where possible since there is enough of that during the week -- and also something that makes me very interested and engaged but at the same time is relaxing. It sounds strange but listening to the show and also reading and writing about money more gene...

This weekend, Donald Luskin had an interesting and compelling piece in the Wall Street Journal that forecasted the impending doom to stock and bond prices were we to see the adjustments that are slated for the end of the year. I encourage you to read Donald Luskin 's piece to see if you agree with him. Then come back here....its ok. I will wait. For me, what is most interesting about this piece is not the doom-and-gloom scenario that Luskin is talking about. Instead, it is about what to do next? I recently found myself wondering what the correct next course of action would be in light of such a decline and how I might reduce risk to be better positioned. I am fortunate enough to be in the high end as far as US Household Income is concerned and measured. And of course, these numbers change all of the time and there is very little certainty about things. So, the question becomes, if you are lucky enough to be well positioned, you have more to lose if you're sandwiched. Of c...

This morning I watched WealthTrack with Matt Mclellan, who is now running several First Eagle funds, including the global funds which has some amazing records for the trailing periods. He provided some new ideas that were very compelling for me...but the main idea that I like was this: The real risk is not investing because there are no real risk free assets. This, simply put, is that with the real inflation numbers taken into account, preservation of capital is impossible, Mclellan states, unless you invest. Put simply, the challenge and fear for most individual investors is that there is entirely too much volatility in the markets. Looking at a good overall measure of volatility in the market, the VIX as a component of certain ETNs, you can look at this as an example: http://www.google.com/finance?q=NYSEARCA%3AVXX In the end, McLellan argues, you must construct your portfolio from good individual businesses.

As you might have noticed, I left a mutual fund ticker as a teaser at the end of my one of my earlier posts: DFSAX. This ticker is a mutual fund that is managed in part by Andrew Lo, a renowned MIT professor which is designed as a multi-strategy mutual fund. Multi-strategy funds exist as a mechanism to reduce the overall risk in the market by hedging. Hedging/Multi-Strategy funds allow more freedom within the fund to choose different investments. According to Google, these are the top 10 holdings of the fund as of 1/22/2012: Top 10 holdings Security Net Assets German Euro Schatz Futures Dec11 Xeur 8.25% 10yr Japan Govt Bond Ftrs Tse Dec11 Xtks 7.50% 3yr Australian Tbond Futures Dec11 Xsfe 4.22% 10yr Us Treasury Note Futures Mar12 Xcbt 3.41% German Euro Bund Futures Dec11 Xeur 2.81% Uk Long Gilt Bond Futures Mar12 Xlif 2.76% German Euro Bobl Futures Dec11 Xeur 2.28% Msci Taiwan Index Futures Dec11 Xses 1.10% 10yr Govt Of Canada Bond Ftrs Mar12 Xmon 1.04% As...

Consuelo Mack: Wealthtrack is fast becoming one of my favorite shows to watch on the weekend. This weekend, Consuelo had on David Einhorn from Greenlight Capital, a firm that made its name by shorting large firms during the fiscal crisis and made a killing doing so. Greenlight Capital is a hedge fund, and its investors have been quite happy with the returns. But while he is known for being short, Greenlight capital is about 1.5 long versus 1.0 long in terms of a mix of investments. As for Quantitative Easing, Einhorn referenced the fact that the Fed is targeting inflation, but notes that there is a problem with it. The problem is that the inflation might come, but not where you expect it to. It may come in clothing, energy, food etc. These would be things that everyone needs, not things that are real luxury-type items that people are looking for to increase demand. On Gold, to Einhorn, Gold is money. "The merit of gold is that given [the current crisis] is how we want our assets d...

The past few weeks I have been watching the mini series "the pacific" on HBO. There are a couple of things that strike me abot this as I was talking to a co worker about this that I thought might be very interesting in terms of personal finance. The amount of television you watch certainly seems to impact your situation in terms of personal finance. I notice that I watch more tv now than I probably did a year or two ago. I think that some of this is because I haven't played as much poker which I think saves money but I also think that I would be stupid to not consider the productivity aspects of it. The other aspect of it was simply how easy it is to get caught up in worrying about things that in comparison to soldiers worrying every minute on a battlefield just seem a bit trivial. I hope I can maintain that perspective. A nice thing that I found out about today was that I have recalculated my household liquid cash and it has now reached the 1 year mark. With additional f...

So, if you've already figured out what to do with your savings, and you're aware that you should pay yourself first. But the question is what to do when things get busy and you're already on automatic with your money? Even the best plans need some occasional changes and tweaking. So, make sure that you're taking the opportunity to revamp your freedom fund and expense estimates each year. I find that the best time to do that is tax time. This year, I reduced my additional increase from 3.0% to 2.0%. Inflation seems to be in check and fortunately, things seem to not be expected to change in the near term. So, I determined that I needed to save approximately an additional thousand dollars in my freedom fund in order to stay current. Then I did something similar for my emergency fund (or e-fund as some like to call it). Once those two were satisfied, I had to decide what to do with any additional funds that I might have available. One option that many like to use is to fini...

So, after a couple of years, prosper is gone. I can't say that I am terribly surprised. They are still around and doing business but they are no longer lending any significant amount of money, according to Eric. I'd like to say that I am surprised and that this was a great site that just went badly, but in many ways they reaped what they sowed. Personally, I invested several hundred dollars there and my money would have been safer and made just as much, if not more in a bank CD with a lot less stress and hassle. Of course, it would not have provided me with the diversion of looking at loans and trying to size up who was a good credit risk, but that's not really what we should be interested in doing when it comes to our investments. Investing (at least for me) is not gambling. Now many of my loans are almost done and I've made just short of 2.5% on my money but with tons of hassle. And if there is just one more default, I will be negative. This sucks. And it would be eas...

I've been using a tool to track my household net worth for years and I think that it has been an enormously helpful tool as a motivating factor for helping me to make the correct decisions. The tool I have been using is NetWorthIQ. You can view a small sample chart that they produce. But I think that more than the chart, it is about the motivation that the chart provides. Besides providing a simple line of how your net worth has grown or shrunk, it shows how your net worth can be impacted by the events of the day and how well you've navigated those storms. Personally, the great opression of 2008/2009 has been awful. It has left me feeling somewhat void. My feelings are not that unique, and my approach is not that unique. From the perspective of making money, it is difficult because the people that tend to do well are people who are far out on the risk curve, people who are doing something different. So, with the net worth tracking tool, I am able to determine that my approach,...

This week Wealthtrack's Consuelo Mack had a sit-down with PIMCO's co-CIO Bill Gross. This was part of a new series of interviews with great investors. It was an interesting episode where Consuelo Mack pointed out some of the clear and present dangers for the United States of America: 1. An increasing reluctance on the part of large foreign nations to take on more treasury debt due to the lack of good real returns and the lack of strong returns on the US investments. 2. Increasing debt levels of the United States being rather sticky since the only way to really combat them is to re-inflate the economy and then pay down the debts with cheaper dollars. Interestingly, Bill was asked the question whether or not there were any investments that he was excited about long term and he answered with a resounding "No." When the conversation drifted into why that was the case, it seemed that the "mean" return for investments long term would be in the 6-8 percent/5-7 perc...

I'll confess, that now, as we are easily in the midst of a down economy (some would say we're coming out of it), it is easy to become somewhat down. For me, this has not been a simple matter of just putting my head down and becoming more of a hard worker. Instead, this has made me realize a few things. Perhaps you have had these observations as well, in which case this will be somewhat of a confirmation of your ideas. First, this economy hurts more than just the people who have lost their jobs. In many ways, this down economy hurts the people who still have jobs in several ways. First, in families that are usually dual income homes, there may be a sole bread winner now. This adds to the stress for that individual where there is fear that there could be a job loss. Second, in all situations, there are people who are still working at some companies where there have been layoffs etc. As a result, there is just as much work but fewer people to do it. In fact, due to hiring freezes ...

The funny thing about nearly every decline in a market, whether it is stocks, bonds, or housing is that people are incredibly fixated on calling the bottom. In fact, just this past week, the market came back up over 7000 and there was a bit of hoping going on that the bounce was an indication of the bottom. I get it. I really do get it. But even if you think that you have a good chance of being right...and even if you are right this time and you think you can get out and back in at the right time, (There are many studies that say statistically that you can't do this reliably....) the more practical question for many people is: so what? Most people at this point are over leveraged with debt up to their eyeballs. It is a combination of consumer debt, mortgages, credit lines, and loans for education, cars, or even rehab projects on homes. It doesn't matter what kind of debt it is; the average consumer in America cannot afford to be in the business of calling a bottom. The reason t...