I have a serious question:
Differential citizenship is generally verboten - It's generally considered abhorrent to offer different sets of rights or protections to people on the basis of race, ethnicity, religion, sex, gender, sexual orientation, geographical origin and national origin.
Yet differential citizenship on the basis of a financial characteristic - like wealth - is not only embraced, but encouraged by the same people who call for other types of equality from the state.
If you are philosophically in support of the state treating all people equally regardless of their race or religion, shouldn't you be against wealth-based social welfare programs and the progressive income tax?
I understand the logic behind progressive taxation and a social safety net for the most vulnerable, but doesn't a commitment to the equality of mankind in the eyes of the state also mean that inequitable treatment by the state, no matter the basis, becomes an abhorrence?
Nov 2, 2016
The attempts by Hillary Clinton and Donald Trump, their camps, and their supporters to destroy each other through negative campaigning have been so ineffective, it might be time to put the strategies of both their campaigns to rest for good. Here we are 6 days from the election and we're back to the virtual tie/slim Clinton lead we had heading into the conventions. We could have skipped the last several months of mudslinging altogether. Neither candidate has convincingly moved polls in their favor our out of their opponent's favor. All that money on consultants and television spots and a big convention and data mining has essentially been wasted. All that time memorizing quips for the debates, creating social media memes and writing commentary for the partisan press has essentially come to naught. And what's worse, the candidates are more unlikeable than ever.
"I think we should fit Hillary Clinton for an orange jumpsuit. Then again, if you gave (Donald Trump) an enema, he'd fit in a shoebox." Sen. Alan Simpson
What's the point of attacking Hillary Clinton when she's already one of the most thoroughly vetted and well-known public figures of our time? What's the point of attacking Donald Trump when he has constantly worn his personal faults on his sleeve? Does either side really think that the electorate is unaware of their opponents' negatives? Ironically, you know who used a different strategy that actually posted results and worked better than anyone could have expected it to?
Bernie. Frickin'. Sanders.
"Bernie Sanders should replace Lenin in his tomb." - Sen. Alan Simpson
I don't think anyone would call me a Bernie man, but what he did in the primaries should be studied and replicated by every presidential candidate moving forward. He found a way to resonate with voters using issues that most candidates fail to connect on at all, but they happen to be the exact issues that presidents are supposed to wield influence over. I also don't think a vote for Hillary Clinton is going to have anything to do with indicting Trump for sexual assault, harassment or ripping off his workers, and I don't think a vote for Donald Trump is going to get to the bottom of Hillary Clinton's inability to competently use email or whether she really did put essential classified data at risk, yet these are the issues that the campaigns and their supporters seem to be obsessed with. What was Bernie talking about the entire time? Jobs. Education. Health care. Geopolitics. Trade. Environmental stewardship. I know that both Clinton and Trump have positions on these issues that they have occasionally attempted to air, but the rhetoric always descends back towards attacks and avoidance. Heck, Clinton spent almost a year avoiding the national media, and look where it got her -- a campaign mired in negativity with very little enthusiasm, and we're just six days away from the election. It leaves one with the impression that Donald and Hillary care about Donald and Hillary, and that the only two people who really care about Donald and Hillary being elected are - again, Donald and Hillary. I get the feeling that Bernie wouldn't have wasted so much time attacking Donald Trump, but continued his invective against the traditional centers of power in politics and finance. It might be a misleading message, but at least it's a message that's about him, and what he would do for us, the voters. I disagreed with him often, but I miss what Bernie brought to the campaign.
Oct 10, 2016
I'm not making a political judgment, but there's a cultural issue I want to discuss regarding Donald Trump and his now infamous conversation with Billy Bush from 11 years ago in which he refers to women as "It" and talks about grabbing them "by the pussy" without their consent - AKA sexual assault.
I can't remain on the sidelines. This is about more than P.C. principles.
At Sunday night's debate, Trump in an attempt to rehabilitate his image dismissed his statements as "locker room" talk.
Apparently "locker room" talk is something that 59-year-old men still engage in. Apparently "locker room" talk is something that grown adults are supposed to find "normal." Apparently "locker room" talk is okay if you're doing it with the guys outside of a woman's earshot. Apparently "locker room" talk is so trivial that we shouldn't worry about it. Apparently, some of this candidate's other past behavior, like ogling nude pageant contestants, refusing to date women over 35, calling his own daughter a "piece of ass," and appearances in Playboy videos shouldn't be viewed as a clear and stunning pattern of misogyny.
That bothers me. First, it presents an appearance to women that men talk this way when they're not in the company of women and that it's normal. I have not been party to a conversation like this in almost 17 years - I was an 18-year-old college freshman the last time I was in the company of a group of men who talked about women in such a way. Grown, mature people generally don't talk about other human beings like they're things to be used without a shitload of "sarcasm tags" around the discussion. There was nothing flippant about what Trump said, and it's insulting for him and his surrogates to pretend like it was flippant. This was another nasty comment about women in a long line of nasty comments about women.
To pretend like this kind of shit goes on all the time in men's locker rooms is also offensive to me as a man. To tell you the truth, most of us seem to be too busy trying to get showered and dressed to have any more than the "how's the weather" kind of talk in the locker room. My guess would be that, just as in bathrooms overall, there's more talking going on on the women's side of things. My locker room memories are of being ashamed of my own body and of being nervous about other peoples. I was always trying to avoid accidentally looking at other people's junk by strictly minding my own business in the damn locker room. Men's locker rooms are awkward, sweaty, stinky, hairy places, and most men enter with the goal of getting out with as little interaction as possible.
To pretend like this kind of shit goes on all the time in the private company of other men is also a little insulting. Yes, straight men do talk about women, and they talk about sex, and they talk about sex with women, and they talk about which women they want to have sex with, and they talk about what kind of sex they want to have with which women, sometimes in explicit detail - but those are the conversations usually had by high school- or college-aged men who are exploring their social relationships and sexualities, and those conversations center around consensual sex - not assault.
For me, these so-called "locker room" conversations about women usually happened in someone's car or on someone's couch or in a coffeehouse, not at the gym. I admit to talking about women as if they were sexual objects at times when I was a teenager, but it's a sin I've never committed as a rational adult in thought, word or action. Barring the truly sociopathic among us, most people reach the point where they acknowledge that there's a human being in the second half of their sentences with thoughts, feelings and a life of their own.
Trying to be magnanimous, I have usually remained uncomfortably silent whenever I heard racist, sexist and homophobic comments from my peers. In the face of men like Donald Trump, however, that well-intentioned silence might not be enough. I feel like my silence accommodates the acceptance of Trump's views towards women, and though I don't expect many people to read this blog, I can't allow that to happen. We can't allow for statements that reduce women and minorities to objects or that otherwise dehumanize them to stand as part of our political discourse. It's totally not okay.
Yet we have also imbibed gallons of culture that treats men and women as objects - or less - mostly without saying a peep. Not only in salacious movies and magazines, but also in television shows purported to be made for women and in R&B and rap songs by artists who have publicly staked a claim to "feminism." It's generally acceptable for men and women to be reduced to their appearance, or their sexual prowess, or parts of their bodies, or even just their genitalia, in lyrics, in sports, and in the fashion magazine articles of our time. Should we really be surprised that Trump does the same?
I don't hold the common feminist view that this kind of language and treatment is a direct, overt attempt to oppress women - but it is the kind of thought and behavior that minimizes sexual assault and also encourages men and women to dehumanize each other for their natural feminine and masculine traits. Feminism's response, after the outrage and snark is filtered out, seems to be an appeal to some sort of gender neutrality or, if men are intransigent, a dissociation from inter-gender relations altogether.
But we're sexual beings, and men and women should be free to think and to talk about each other in overtly sexual ways in private and in public forums.
We can't appeal to young men by asking them to think of their sisters, mothers, daughters, aunts or nieces before speaking or acting in a misogynist manner because young men's views of these relationships are (hopefully) purely non-sexual. We can't strip sexuality away from other social relationships, as sexual attraction and tension are healthy, naturally occurring elements of those relationships.
Instead of creating a public that is sterilized from mention or acknowledgement of sex, perhaps we should be creating a public that is a safe place to discuss sex, sexuality and sexual thoughts - even among *gasp* coworkers and classmates. Instead of creating a world that suppresses thought and speech in favor of language and culture that pushes us towards gender neutrality, we should create a world safe for expressions of masculinity and femininity, positive and negative. I believe that "locker room" talk needs to be pushed out into open forums so it can be dissected, discussed and checked as it occurs. Perhaps that will do more to heal a world where many women still live in fear of sexual assault, harassment, domination and unequal treatment - after 35 years or so of third-wave feminism, perhaps we need to try a different approach.
In spite of our pop culture promiscuity, we are awfully Victorian when it comes to personal conversations about sex and sexuality. It's been banished from the dinner table and challenged in the classroom. Politicians are afraid to discuss it. Parents dread having the conversations with their children. Even churches, once the outspoken authority, for better or for worse, on Western sexuality, now fear to broach the subject in the wake of scandals of prostitute-soliciting televangelists and pedophile priests.
Young men especially are forced to learn about sex from pop culture, and then talk about it in their private settings - and preferably in private settings free from the curious ears of young women, "safe spaces" if you will. As gender divisions have slowly been obliterated in government, business and culture, men's "safe spaces" have dwindled down to the locker room. What kind of lesson does pop culture teach young men about women, sex and sexuality, and what kind of confirmation do we think they're going receive within private settings like a locker room?
A lot has been made at the speed and ease at which Donald Trump moved from "locker room" talk with Billy Bush on his tour bus to shaking hands and interacting with one of the women he had just been denigrating. Look, politicians and celebrities are more likely to have two different personas within their public and private lives, and everyone does this to some extent. It was not surprising to see Donald Trump move from the crude, juvenile language of his private conversation to a warm, sanitized public persona.
We all sanitize ourselves for public consumption. For most of us, though, our public facade hides only a little bit of politically incorrect ribaldry and perversion and anarchism and dark humor that comes through unfiltered in private settings - we're essentially the same person in public and in private, just with different filters.
Trump, on the other hand, has a private persona that's clearly misogynist and potentially bigoted in other ways. Think of the divide between what Trump is willing to say publicly about women - which isn't great - and what he's now revealed to have said privately about them. Now apply that change in persona to what Trump has said about Latinos, or Muslims, or African Americans, or the disabled. It's totally not okay.
That concerns me as someone who desires more diversity not just in their own life, but also in the public's eye. Gone unchecked, this sort of dialogue not only pushes women and minorities away from public life, but also isolates men, white people, straight people, cisgendered people, abled people - and, tragically, their children - from being immersed in and understanding the diverse world they're surrounded by. How can we be effective workers, teachers, fathers or leaders if we're so isolated by our own boorishness - and how could one of us be an effective president?
I don't think that private conversations should be fair game in a presidential campaign. I hate it when our electoral discourse wanders away from the issues and into such salacious, character-driven stories. But I don't think we can afford to be flippant about what has been said about women and minorities in this election. None of my views about *why* or *how* Trump made his comments makes them acceptable - or even tolerable. Silence, inaction and ignorance will only deepen our divisions - and even my journalist's objectivity has its limits. It's totally not okay.
Trump's "obscene" thinking inevitably leads to true obscenities like sexual assault and domestic violence. His speech is the speech that legitimizes that thinking - it happens, it's meant to be private, so it's okay. But it's totally not okay. Not in the least.
Trump's "obscene" thinking inevitably leads to true obscenities like sexual assault and domestic violence. His speech is the speech that legitimizes that thinking - it happens, it's meant to be private, so it's okay. But it's totally not okay. Not in the least.
Jan 28, 2016
Bilbo: "Alas, eleventy-one years is far too short a time to live among such excellent and admirable hobbits. I don't know half of you half as well as I should like, and I like less than half of you half as well as you deserve."
Thank you friends for all the birthday wishes, they have really been overwhelming, but I have to ask:
A birthday is just another day in another year, right? I’ve simply completed another ride around the sun, right? Am I really to count out the years and days and hours from my birth, to my death? Am I to measure out my life with coffee spoons?
Birthdays feel like they stopped being fun years ago – the parties usually occur on the weekends around the birthday, and I’m on a strict spending diet so I’m not about to start my own celebration after I finish the day’s work; I’m an adult now – or at least I’m trying.
When you get to middle age, it’s hard not to look around at your former classmates and friends and then use their progress as a measuring-stick for your own. I have pangs of regret that I have no children, that I do not own my own house, that I haven’t gotten a master’s degree, that I left my home town and started anew as an adult.
Hell, if I had made a few decisions differently, my life could be measurably better or worse than it is now, and I’m the kind of analyst who would obsess over the hypotheticals if I fail to exercise some self-control. My list of regrets would take up a year’s worth of blog entries.
I really wish I had taken more pictures of my life from 18 years old to today. Recently, an old friend of mine started uploading some vintage pictures of us and our circle of friends, and it opened my eyes. These pictures were of me between age 14 and 22. This was a time period where most of my outward confidence and joy was masking depression, uncertainty, confusion, fear, doubt, anger – the usual adolescent emotions exacerbated by my own unique brain chemistry and recreational substance use.
I used to feel like I was ugly. I have a facial deformity that has always affected my self-confidence –because of a birth defect, my face, my nose and lips especially, is asymmetrical.
I look at those decade-plus old pictures now and I think that I looked like a million bucks. If only I was as attuned to myself and as able to recognize beauty then as I am now, my life might be totally different.
But would I want it to be?
I've done well for a guy with low self esteem. I feel like I have a lot to celebrate at 35 years old.
I am so lucky to be loved. I have a wonderful wife who has put up with my awful jokes and curmudgeonliness for 13 years (10 of them married). I have parents who have sacrificed and fought for me at every stage of my life. I have a close family held together by fidelity and affection, despite being sundered by great distances.
I have friends that I haven’t seen in years who still personalize their birthday messages to me – because they haven’t forgotten me. I don’t know how they’ve managed it, some of them are from the ‘scene missing’ portion of my past. While my circle of local friends has remained small, to some extent purposefully, they are the kind of friends that I would keep around for 20 or more years if I could.
I have a chinchilla that steals kisses – it started as a trick, she’d give Mrs. Chris or myself a kiss on the lips in exchange for a treat, a sliced almond. Now she just scurries up to us and steals kisses, probably hoping to be rewarded with a treat. How bad can life be when one has an affectionate chinchilla as one of your companions?
I live a life of abundance – I’m not rich, I don’t have a ton of shit, I don’t even do that much with my spare time, but I feel fulfilled, and also grateful that I’m lucky enough to be that way. In 35 years, I don’t think I’ve seriously wanted for much – though I’ve been poor, sick, tired, disabled, lonely, cold and unemployed at times through those years, overall the balance of my life has been fantastic.
At any given time, I can look around and find that I am surrounded by good music, good art, good company and/or good food.
I enjoy the work I do and the people I work for. I am successful, and I am responsible for that success. My coworkers are funny, helpful and down-to-earth.
The industry we serve, the financial services/advice industry, is one of the most misrepresented industries on the planet. People in the business tend to be humble but confident, friendly but competitive. It’s an environment that generally brings out the best of the best of people, but can occasionally bring out the worst of the worst in people. For a journalist, that’s grist for the writing mill.
I live in one of the safest, wealthiest and healthiest places in the world. I can’t say enough about how awesome it is to live on the Jersey Shore. I feel sorry for everyone who doesn’t.
The Cats won last night.
Most importantly, while I live in the now and I embrace today, I have a lot of hope that the future will be even better. I don’t need to live the dream, I just need to live my life.
And right now, at 35 years old, that life isn’t bad.
Jan 25, 2016
The Stranger: Sometimes you eat the bear, sometimes the bear eats you.The Dude: What is that, some sort of Eastern thing?The Stranger: Far from it, dude.
A bear market occurs when the major indexes post a decline of 20 percent or more. Statistically speaking, U.S. stock markets and many markets globally, including those in the Middle East and southeast Asia, are in bear market territory.
Now I think back to my outdoorsman training and what to do in the case of a bear attack. As a fat, fleshy human who normally doesn’t carry around a gun, bow, or large blade, my first instince upon seeing something like a huge grizzly would be to turn around and run – but that’s not what you’re supposed to do. The first and easiest correct response to an aggressive bear is to play dead – in the investing world, this would mean to not do anything — If you’re under 40, that’s not necessarily terrible advice in a bear market.
The second thing you can do is to fight back – specifically, hit and kick the bear in the face as hard as you possibly can. In the markets, this would mean buying more stocks and funds, and buying aggressively.
As a relatively young investor who’s accounts are more impacted by my regular contributions than the temperament of stock market investors, I love a bear market. I love it so much that I’m going to punch the bear in the face. In fact, I’ll do one better: I’m going to eat the damn bear.
How often do these opportunities come about? Since 1945, there have been 20 market corrections and 12 bear markets, not counting the current one. This happens once out of every six or seven years. This isn’t time to panic.
See, for long-term investors, the typical advice during bear markets and market corrections (market declines between 10 and 20 percent) is to bargain hunt, because stocks are cheap, and to rebalance your portfolio, because a decline in stocks will by necessity cause the fixed income, or bond, portion of a person’s portfolio to take up a larger portion.
For example, if my portfolio is 60 percent stocks and 40 percent bonds and stock markets decline by 20 percent, the stock portion of my portfolio also declines by 20 percent. If, for the sake of simplicity, we say that the bond portion is static, my portfolio is now 48 percent stocks and 52 percent bonds. Rebalancing means selling off 12 percent of those bonds and re-investing in stocks. That way, if-and-when the market turns around, I have repositioned capital to take advantage of the recovery.
But my super-aggressive passive-growth philosophy has me 100 percent in stocks, and it has declined about 20 percent since the beginning of the year. Time to panic, right?
Not really. Instead, it’s time to bargain hunt – and even though I’m a passive index fund investor, I can still take advantage of ‘bargains.’ In fact, it’s a perfect time for me to consider buying while the prices are low. For example, my core investment, Vanguard’s S&P 500 index ETF, dipped down below $168.00 a share last week, triggering a ‘limit order’ I placed with my brokerage to buy some shares. Now, share prices are back over $173 as stocks have enjoyed a mini-bounce over the past few days.
I call it a bounce, and not a recovery, because most market analysts predict more downward momentum before the market begins to recover as the impacts of interest rate hikes, a sputtering Chinese economy, and low oil resonate globally.
For those of us working with a brokerage or a discount brokerage directly as retail investors, a limit order sets up a contract to buy shares of a particular stock or fund when the share price goes below a certain level, or to sell shares when the price goes above a certain level.
If I set limit orders at regular increments, I can average into my favorite stocks and funds as market panics cause other investors and traders to sell at increasingly lower prices without the worry of timing the market.
Example: During the first week in January, I had a little bit of extra cash in a money market settlement account with my broker, and that was enough to buy shares of the Vanguard 500 index ETF, or VOO, when they reached $168. So, acknowledging that the market was heading downward, I set a limit order at $168. My brokerage will honor a limit order up to 90 days after it is established, so on Wednesday when the markets continued their plunge and VOO’s price sank below $168, my order executed and I became the proud owner of additional shares.
Now if my guess moving forward is that economic data won’t help the markets moving forward, I can set additional limit orders, preferably at lower prices – so I could order to buy when VOO shares pass below $166, or $160, or $120 (while there are some prognosticators who believe the S&P 500 could lose enough of its market capital to push VOO shares that low, I think that’s pessimistic), and if the price goes that low in the next three months, I own more of the fund.
Keep in mind that at the beginning of November, I bought eight shares of VOO at a price of $193 a share, so if the market corrects back to that level this year, I’ll have made $25 per share in unrealized gains on the VOO I bought earlier this month, and even more from shares bought while VOO was lower.
For young investors, then, bear markets are an opportunity. I’m considering increasing my 401(k) contributions and taking a little money out of my cash reserves to buy in while the buying is good.
How long, on average, does a bear market last? Around 14 months. I hold that the market decline really started at the end of Aug. 2015, when the markets were down significantly on bad news from China. That gives me until the beginning of November this year to buy in.
Thanks to having some hunters in my group of family and friends, I’m no stranger to game meat, but I’ve never eaten bear.
But from an investing perspective, bear markets are pretty delicious.
Jan 14, 2016
Slow and steady wins the race.
Last week I wrote about how the lottery is for suckers. As it turns out, almost every ‘get rich quick’ scheme is like playing the lottery. Sure, if you buy the ticket, your numbers might come up and you might get rich, but for the most part you’re going to lose some or all of your initial investment.
Investing in stocks is no different. In stocks, the lottery tickets might be small companies or bargain value buys that on their surface have the potential to be more lucrative than the Apples, Exxons and Wal-Marts of the world — but in reality, you’re gambling that your number — your stock picks — are going to be called in the next drawing (or the next trading day, week, quarter, year or decade).
I am going to be writing a lot more about personal finance in this blog as I undo many of my past mistakes and put myself on better footing. It’s not a ‘get-yourself-out-of-debt-and-get-rich’ plan, it’s a measured process of paying down debts, saving in cash and investments, and planning for a better future. Hand-in-hand with those strategies goes my investment philosophy, which in general is best described by the moral to the age-old fable of “The Tortoise and the Hare.”
Keep in mind that I’m a 35-year-old journalist, not a financial advisor, and that the universe of possibilities when it comes to investments is huge. I am also married with no kids. There is no one-size-fits-all solution for my financial situation, or for anyone else’s. This is a matter of personal preference.
If you read my previous post about my poor financial planning and debt, you already know the core holdings of my retirement portfolio – index funds based on the S&P 500. I consider the S&P 500 my portfolio’s benchmark, too, and there’s a good reason: I believe the S&P 500 is the most accurate index of overall U.S. stock market performance. In the past, economists and investors have looked to the Dow Jones Industrial Average, or as we transitioned to the high-tech information economy, the Nasdaq – but these indices are smaller and less comprehensive than the S&P 500.
I am a passive investor. My balances are still too low to start picking stocks, even if I felt like I had enough knowledge and skill to beat the market. While my risk tolerance is extremely high, I’m not at the point where I can take any chances with my money.
I am seeking beta – to match the growth and performance of the market. Until 2015, the S&P 500 was growing at an average rate of around 10.5 percent per year. I would be incredibly happy to match that performance, as my assumptions for retirement are only 7 or 8 percent a year of asset growth depending on which scenario I’m using.
Why, with all my investment knowledge, my access to advanced financial products and my ability to call some of the greatest living financial minds from my desk at work, would I settle for matching a stock index? Because I don’t really believe in active strategies. Because in general, I subscribe to the efficient markets theory.
The efficient markets theory holds that stock markets, where thousands or millions of trades can occur at the blink of an eye, already price in information about their constituent investment products. That’s important because believers in active management must have faith that they or their investment managers have some kind of knowledge about an investment, a class of investments, or a sector of investments that the market as a whole has not anticipated and factored into its pricing of investments.
For example, a good active investor may feel like the market is underestimating the volume of retail sales or the price of oil in the coming year, and therefore they would buy retail sale stocks, energy companies or oil on the commodities market, believing that their fellow traders are paying too low a price for the investments and that they could turn it around for a profit in the future.
Some of the most successful investors, including Warren Buffet, Vanguard founder Jack Bogle and Princeton University economics professor Burton Malkiel, argue that the market is now moving faster than these active managers can, making it impossible for them to time the optimal moments to buy an investment when it is undervalued or at a low and to sell when it is high. The markets, in other words, know more about the price of an investment as a unified entity than any of the experts could possibly know as individuals or firms.
Furthermore, in the rare cases where an active fund manager or investment advisor is beating the markets, their investment fees tend to diminish or destroy their ability to outperform. In investment lingo, outperformance, or beating the market, is often referred to as ‘alpha.’ Alpha happens, but whether it can occur consistently due to an investors intention is still a raging debate among those in academic finance. I personally believe that on a long enough timeline, even the best educated and best informed active manager's chances of beating the market will approach zero. Slow and steady, folks.
My belief is that by investing in broad indexes, even though I might experience down years or flat years (2015 was a flat year – the S&P ended in pretty much the same place it began), I can pick up that 8 to 10 percent per year average gain in the market, and by averaging into the market at a steady rate, I don’t risk buying mass quantities of stocks when the market is at a peak and about to decline 20-40 percent.
Despite my passive, long-term tack, I also prefer exchange traded funds, or ETFs, to mutual funds for a few reasons. One, ETFs are traded in real time on stock exchanges with prices that are allowed to fluctuate throughout the day. If I’m trying to buy a fund off its bottom, its lowest level, the ETF format is superior to mutual funds. Because they’re traded on exchanges during the day, ETFs are more liquid – meaning if I ever wanted to convert my investments to cash, I would have an easier time doing so with most ETFs than I would with most mutual funds. Furthermore, ETF shares can be 'built' by buying the constituent investments and trading them for their equivalent in fund shares - which contributes to their liquidity. Finally, ETFs are very transparent. While most mutual funds are also transparent – meaning that information about their management, fees and underlying components are widely available – they often aren’t transparent in real time. With ETFs, if I was to start making more active moves in the markets, I could easily compare the value of a fund’s underlying components with its share price and trade accordingly. Not so simple with mutual funds.
Keep in mind that I self-describe as an aggressive investor with a high risk tolerance. I consider myself 30 to 35 years out from retirement – I’m targeting 2051 as my retirement year, I’ll be turning 70. I’m willing to experience severe market fluctuations this far out from my retirement date. Furthermore, when I figure in some of my personal information – fair health, married, childless, moving up in my career (even though I work in a not-so-stable industry), living in an area with a strong economy – I (mostly) fit the profile of an aggressive investor. Thus, I’m not really worried about investing in bonds at this point in my life, I want to capture the growth potential of the stock market.
We can split my personal investing into two areas, with two different philosophies and concerns: a portfolio solely for retirement, consisting of my 401(k) accounts and IRAs, and a portfolio for other savings, which does not yet exist (and won’t for some time, as any income it generates would be taxable).
While I count around $12,000 from my wife in a T. Rowe Price large-cap growth mutual fund as part of what I manage, I won’t be discussing it here. I also have around $5,000 in old employer 401(k)s that is allocated to target date funds. That will remain untouched for the time being, and won’t be counted for the purposes of this discussion. What’s left is my current 401(k), a rollover IRA and a Roth IRA.
My Roth IRA account is currently in cash — with less than $100 in it, I haven’t bought an investment with it yet. When the account reaches the minimum price for the Vanguard S&P 500 ETF (VOO), which is around $175 today, I’ll start buying.
My rollover IRA – a traditional IRA – has eight shares, around $1,500, of VOO in it. I will diversify this IRA as a roll over more of my former 401(k)s into it, but for now VOO is my base investment.
Which leaves my workplace 401(k). I have a love-hate relationship with 401(k)s. For one thing, if you are offered one with an employer match, I don’t think I’m going against the grain telling you to get the free money in your employer match. That’s what I’m doing, my employer will match me up to 3 percent, and will match me half a percent for every percentage point I contribute between 3 and 5 percent. So if I contribute 5 percent, I can get my employer’s maximum match of 4 percent, which as it turns out is what I am currently doing. I love that. I also love that, like a traditional IRA, the money can be deducted right out of my paycheck before taxes, and I won’t pay any taxes on it until I start taking distributions from the account in retirement.
However, like most workplace 401(k)s, my investment options are limited, in this case to some of mutual funds. I would much rather be able to select from an unlimited range of ETFs, but instead I have to chose from 20 or so mutual funds. Luckily, there are some great options in the list.
Out of the gate, I chose to begin contributing to this new account 90 percent stocks, 10 percent bonds. This is still considered a very aggressive portfolio allocation, but when I first set up my contributions I hadn’t considered how aggressive I really am. As a result, I’m now slowly averaging out of contributing to the two bond funds I chose.
Here’s a list of my investments:
91.7% in EQUITY (or stocks)
40.3% in SWPPX – The Schwab S&P 500 Index Fund $560
10.7% in BEGQX – The American Century Equity Growth Fund, Investor Shares $149
10.6% in VIMAX – The Vanguard Mid Cap Index Fund, Admiral Shares $148
10.1 % in GSSIX –The Goldman Sachs Small Cap Value Fund, Institutional Shares $141
10.1% in OIDYX – The Oppenheimer International Diversified Fund $141
9.9% in EKJYX –The Wells Fargo Premier Large Company Growth Fund, Institutional Shares $139
8.3% in FIXED INCOME (or bonds)
5.1% in PHYZX – The Prudential High Yield Z fund $71
3.2% in VSGDX – the Vanguard Short Term Federal Bond Fund, Admiral shares $45
The Schwab S&P 500 fund is a mutual fund similar in composition and goals to the VOO ETF. With an expense ration of 9 basis points, it costs almost twice as much to buy and hold as its Vanugard ETF cousin, but 9 basis points comes out to .09 percent per year. I think we can afford that. The other funds range from 9 basis points for VIMAX to 94 basis points for GSSIX and 101 basis points for OIDYX.
Originally, when the account was opened around four months ago, the portfolio was 40 percent in SWPPX, 10 percent in each of the other equity holdings (for 90 percent equity total) and 5 percent in each of the fixed income holdings (for 10 percent equity total). Since then, equity markets have had a bumpy ride and the value of the fixed income investments has sagged.
Currently, I’ve set my my future contributions to look like this:
6% Fixed Income:
By the end of 2016, I will average out of contributing to fixed income altogether, and begin averaging out of my other equity contributions and into SWPPX, the lowest cost investment in this portfolio. Eventually, contributions to this account will be 100 percent SWPPX – at which point I will have to decide how I want to diversify. I believe I will start averaging out of contributing to GSSIX and OIDYX first among the equity funds, as they come with a 1 percent sandbag to whatever alpha they might happen to generate.
And that’s really how I’ve arrived at my current allocation and contribution levels — I’m slowly reducing contribnutions to PHYZX and VSGDX and raising my contributions to whichever equity mutual fund has had the worst year-over-year performance on that particular day.
So why not just sell my bond funds and my non-S&P equity funds and buy into SWPPX? For one thing, a little diversity is a good thing, in investments and in life.
For another, when you’re a passive, long-term investor, you want to avoid selling as much as possible. Selling and buying stocks repeatedly is costly, you being to rack up commission expenses, you risk selling at a trough or buying at a peak, and in general it doesn’t work. Instead, I’m going to balance my portfolio through future contributions – I’m young enough and my account balances are low enough for that to be an effective tactic. Again, slow and steady wins the race.
As it turns out, Mrs. Chris and I are going to be enjoying a slight bump in household income this year, and our expenses for debt, fuel and food are probably going to decline. I strongly believe that I’m best off saving and investing this additional revenue. I’m waiting until the end of the month – just after my 35th birthday – to figure out whether I want to put the bulk of this money towards my growing emergency savings, or either or both of my retirement accounts.
What I do know is that I want to invest aggressively, in index funds, with responsible management at a low expense ratio — and unless a young person sitting on a pile of money, or your blood pressure rises at the thought of a market downturn, that’s probably the ideal way for the millennial generation to invest.
So coming up on the financial side of things, I’ll reveal a little more about how I am budgeting and saving for the future, and I’ll also expand upon the benefits and detriments of adhering to the efficient market theory through index investing.
Also, long live David Bowie and Alan Rickman. I hate cancer.