Thursday, November 16, 2006

Our investments (the general broad brush anyways)


I promised when I started this BLOG that I would talk a little about our own families assets and investments. I believe I said something to the effect that I wanted to figure out exactly what I wanted to disclose and how to dislose it.

I actually have little issue disclosing things to friends and people I know and trust, but the internet being a sort of "open book" means there are all kinds of people out there and while I am sure only "good" people read me....I figured I would just keep it general....after all, who really cares about little old me.

The first thing I think I will address is our risk tolorance. We have answered a number of worksheet questionaires that assess our risk tolorance, and I have to say my wife and I are a bit conservative when it comes to investing. I hate to lose money because I feel we have saved it and it feels as though all my work was for not if I lose it.

My proof of that assesment is found in my consern back in 2001 when the market was starting to tank. (I think it started in about March 2001) I was sick of seeing my portfolio drop, so on about September 4th I told our advisor to move it all to bonds. (just a few days before September 11th)

We lost about 25% in the big downturn in 2001....and I know people who lost a lot more. Of course I also did not get back in very early either, so I missed some of the subsequent ride back up too. (I told that story not to show you my "luck", but our risk aversion.)

So now that I told you that story about being conservative/worry wart investors, I am going to show you an asset allocation that sort of flies in the face of what I just said. To the right you will see that for all my worry, we actually have 77% of our portfolio in stock! (actually, we have only two individual stocks and a very small amount of those too...the rest of the investments are all in mutual funds)

I can already see the value of looking at this because in doing so the hairs on the back of my neck came up....leading me to think that in our next meeting with our advisor, I might ask that this percentage be shifted a bit more to bonds. (but I need to talk to Cheryl and our advisor first....whats the back back-of-the envelope rule for percent stocks, something like 110-your age in percent.....so for me that would be 63%)

The other thing I didn't mention is that our conservative nature also means we have a very diversified portfolio of funds and fund families. But I'm not going to drag you through that detail.

As with stocks, our bond holdings come mostly in bond funds, although we do have some money in EEE Savings bonds (small bonds that my mother gave me as birthday gifts over the years) and a few iBonds. (again, not any large number of dollar value) We also own a City of Manchester zero coupon bond that I can honestly say I do not totally understand, but that seems to have appreciated in value quite nicely and I liked the idea of investing locally. (again, not very large in value)

The cash is mostly in a high yield savings account. (fully FDIC insured)

Now in terms of our return, the graph to the left shows the value of our portfolio over the past two years. You can see the general ups and downs of the market in that period, but also that we have made very decent gains. (about 8% per year, which is OK given the conservative natur of the portfolio and since I think inflation has been something like 3.4% in 2005 and about 2.7% so far this year)

Well, I am not sure that any of this information was helpful to anyone but myself. I think I will be looking to move some money out of stocks, and into bonds....and then into a bit move of it into foreign investments. (and am also thinking a small amount of non-dollar demonimated equities....but my advisor is not too keen on that....and I listen to him more times than not....except back there on September 4th, 2001....hmmm)

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