|
BEFORE
RETIREMENT
Income/Expenses
Savings
Calculations
Investments
Criteria
Stocks
|
INVESTMENTS
Basic Philosophy
Make your own decisions !
Gather lots of information and opinions, but finally , you make all
investment decisions. No one will ever put your best interests first, except
yourself.
Big is beautiful !
Those big companies, the
industry leaders, got there by being better in all respects to their competion.
Winners win, losers loose !
Stay with the winners. Buying a stock just because it looks cheap, can
be a major mistake. Stocks get cheap because they fail to execute.
Diversify !
Own 10 or more stocks, initially with an equal amount
invested in each.
Use a discount broker !
I like both Fidelity and Schwab. Both offer online and telephone
trading hence the commissions are low.
Minimize trading !
Invest for the long haul. Very few investors can make money
in short term trading.
Never buy on margin !
Borrowing money to invest is a certain path to disaster.
Never buy or sell options!
You can't win. Even the professionals loose money on
70 % of their trades.
Never invest in commodities!
You can't predict the weather, and you can't beat the pros
at their own game.
Make your own decisions !
This is so important that it should be your first,
and your last rule, for successful investing.
Resource Allocation
The standard allocation mix in a portfolio is 65 % stocks, 25 % bonds, and 10 % cash.
I recommend an allocation based on age. When you are younger , you can take more
risk (i.e. attempt to get a greater return) because you have more time to recover from any
downdraft in the market. As you get older, you need more certainty, less risk, hence must
tolerate less per cent return.
My recommended allocation is:
- Age 40-: 100 % stocks
- Age 50: 85 % stocks, 5 % bonds, 10 % cash.
- Age 60: 70 % stocks, 20 % bonds, 10 % cash.
- Age 70+: 65 % stocks, 25 % bonds, 10 % cash.
Mutual funds
The only mutual funds that I recommend, are those that simulate the S & P 500
Index. These three are all no-load, and are basically equal. Any one of these
can be used instead of "stocks" in the above allocation.
- Vanguard 500 Market Index ()
- Fidelity Spartan Market Index Fund (FMKTX)
- Schwab 500 Market Index Fund ()
Specific Stocks
See the Stock Selection Criteria page.
and then the Stockspage.
|