For most accounts, my primary investing objective is risk-adjusted return with dividends reinvested. I have set up automated withdrawals to transfer money from a conservative Traditional IRA (Core TIRA) in the Intermediate Investment Bucket to the Short-Term Investment Bucket. Having a steady income just took on a higher priority.
In this article, I look at how historical distributions fluctuate according to either the interest rate cycle or the stock market cycle, along with Continue reading →
I recently automated withdrawals from one conservative Traditional IRA (Core TIRA) into my short-term investment bucket for basic spending needs and emergencies. Previously, I automated withdrawals from a more aggressive Traditional IRA for longer-term discretionary spending needs. This exercise increased my focus on income. I just added Janus Henderson AAA CLO ETF (JAAA) to my Core TIRA sub-portfolio as a lower-risk income fund rather than to pursue higher returns.
The Core TIRA is conservate Traditional IRA, within the Intermediate Investment Bucket, that is intended to have long-term returns of Continue reading →
Setting aside uncertainty this year over tariffs, affordability, a slowing economy, high stock market valuations, and government shutdowns, this article is focused on the long-term risk of the next financial crisis. I am not worried about a gloom and doom scenario. I do want to have a portion of my overall portfolio prepared for another financial crisis or currency devaluation, whether it is associated with the next bear market or one after that.
This Time Is Different – Eight Centuries of Financial Folly (2009) by Carmen M. Reinhart and Kenneth S. Rogoff covers debt cycles and financial crises: Continue reading →
I just finished reading Principles for Dealing with the Changing World Order – Why Nations Succeed and Fail by Ray Dalio. Mr. Dalio states:
“Dealing with the future is all about 1) perceiving and adapting to what is happening, even if it can’t be anticipated; 2) coming up with probabilities for what might happen; and 3) knowing enough about what might happen to protect oneself against the unacceptable, even if one can’t do that perfectly.”
I recently spent a weekend in the historic mining town Continue reading →
In this topsy-turvy world, characterized by unprecedented tariffs, rapidly changing policies, spending cuts, geopolitical risk, high deficits, and elevated valuations, I tend to be more conservative. I have added toggles to my “Rate and Rank” spreadsheet, allowing me to evaluate funds through the lenses of “Risk Off” and “Yield” for a conservative, tax-advantaged account. Table #1 shows how I rank sector Lipper Categories from highest-ranked category to lowest, along with the highest-ranked five funds. Some sectors are in Continue reading →
Using historical data on funds to make assumptions about future performance involves correctly interpreting the trends. Over the past six years, the U.S. has experienced an extraordinarily unusual period:
I am well on my way to implementing my version of the all-weather portfolio, where some funds will perform well in any environment. This conservative retirement portfolio is a subset of my overall portfolio and fits into tax-advantaged accounts within the intermediate bucket, along with several traditional bond funds and bond ladders. The goal for this “basket” of funds is to have income that meets most withdrawal needs with some Continue reading →
Gold is considered one of the best hedges against inflation and uncertainty. Gold fell from about $385 in 1995 to a low of around $250 by 2001, to a high of $1,750 in 2011 before falling to $1060 in 2015. It is now over $3,750. For the past ten years, iShares Gold Trust (IAU) has had a total return of 195% compared to 289% for Vanguard 500 Index ETF (VOO). In this article, I compare funds with lower volatility than stocks and gold to protect from inflation. Preparing for inflation should be part of an overall strategy and not just timing the market when inflation rises.
Most of my career was in the precious metals industry Continue reading →
What a month it has been. The jobs numbers for May and June were revised lower, and the July numbers were below expectations as a wakeup call to a slowing economy. Two weeks later, wholesale prices rose 3.3% compared to a year earlier, and the producer price index rose 0.9% compared to the month before as tariffs began to raise the cost of inputs. National debt hit $37 trillion in August. Underlying growth for the economy year-to-date is a weak 1.4%, but it is distorted by imports. Federal Reserve Chairman Jerome Powell gave his speech following the Jackson Hole Symposium, in which he expressed rising risks to employment, persistent inflation pressures, and an openness to interest rate cuts. The markets reacted Continue reading →
Reducing my risk profile for accounts that Fidelity manages allows more flexibility in what I manage. In other words, the intermediate investment bucket aggressive sub portfolio that Fidelity manages became more conservative, while I added a little risk to the conservative sub portfolio that I manage.
I would like to design a low-risk sub-portfolio that has a low correlation to stocks and bonds, returns about 5%, and has some inflation protection. The objective is to always have at least one fund that is up while still having decent returns. I began with the MFO Premium fund screener and Lipper global dataset, limited by correlations to the S&P 500 and bonds, low losses for the minimum rolling three-year period, and an MFO Risk rating of average or lower. I trimmed Continue reading →
In my former life in the private sector prior to retiring, part of my role was risk mitigation; identifying potential bad things that might happen and minimizing their impact in case they do happen. I have carried that practice into investing. The financial landscape is constantly changing, but these changes are extreme this year. In preparation for the known unknown, I lowered my stock-to-bond allocation from 65% to 55% by changing what I manage. I desired to lower my stock-to-bond ratio even further to 50% within a range of 50% to 60% and was able to do so by changing my profile with my Financial Advisor at Fidelity.
I use Vanguard to manage a portion of my investments and enjoy reading Vanguard Capital Markets Model forecasts for insights about long-term returns. In January of this year, Isabel Wang described Vanguard’s view that investors could Continue reading →
My strategy involves looking at what is trending according to my rating system, and buying what fits into my portfolio if I can build a storyline behind it. My rating system of nearly a thousand funds is based mostly on data from Mutual Fund Observer to reflect my assessment of short and intermediate-term trends. I selected the funds using MFO Family ratings, assets under management, risk, and risk-adjusted performance, and availability without loads and transaction fees through Fidelity and Vanguard.
From the S&P 500 PE Ratio – 90 Year Historical Chart by Macrotrends, I estimate that the price-to-earnings ratio today is at the Continue reading →
The US Treasury first implemented Inflation-Protected Bonds (TIPS) in 1997, and they now make up about 7% of the Treasury market. Since then, inflation has rarely gone above 3% until 2021. Tariffs (customs duties) began surging in 2018, and President Trump is now implementing widespread tariffs. With retailers having low profit margins, these tariffs will mostly be passed on a tax on consumers. This article represents my research on how to invest the bond portion of a portfolio to reduce volatility and prepare for higher inflation.
Inflation by various measures has fallen below 2.3%. Tariff increases were announced on April 2nd, and it takes time for products with the additional tariffs to reach the shelves. The Fed – Monetary Policy: Beige Book describes prices increasing at a Continue reading →
I like Will Rogers’ quote, “Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” A good friend of mine once said that a balanced portfolio will usually have funds that are losing money. Then there are the unusual years like 2022 when few categories other than money market funds, short-term bonds, and commodities had positive returns. This article looks at how Vanguard Global Wellesley Income Fund (VGWIX) may fit into the portfolio of a timid investor, or how WisdomTree Dynamic Currency Hedged International Equity Fund (DDWM) might fit into the portfolio of a somewhat Continue reading →
I created my best laid plans of mice and men for retirement, or as Dwight D. Eisenhower said, “plans are worthless, but planning is indispensable”. I follow much of what Christine Benz recommends in How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. I divide my intermediate investment bucket, consisting of Traditional IRAs, into conservative sub-portfolios of bonds that I manage and more aggressive sub-portfolios of stocks and bonds managed by Fidelity and Vanguard for growth and income. In this article, I look at managing withdrawals in a secular bear market with Continue reading →
Each month, I update my ranking system for the thousand or so funds that I track using the MFO Premium fund screener and Lipper global dataset. I then compare the funds that I own to the trending funds to see if I want to make any changes. I follow a diversified traditional portfolio approach with over half managed by Fidelity and Vanguard. In this article, I look at the Lipper Categories and highest ranked funds for bonds, mixed assets, and equities.
Bond funds are ranked based upon 1) three-year risk-adjusted returns (Martin Ratio), 2) short-term returns and momentum, 2) risk (drawdowns and Ulcer Index), 3) bond quality, and 4) yields, among other metrics. The funds Continue reading →
With the high volatility over tariffs, uncertainty, and concerns over the independence of the Federal Reserve, parts of this article may be out of date within hours of completing it. How does one invest in this environment? I have updated my Investment System to reflect my current strategy. In short, it is set up as a traditional 60% stock/40% bond portfolio within a range of 55% to 65% stocks based on my investment model. I set the model up to make small quarterly adjustments based on volatility-adjusted momentum and a shift between international and domestic growth based on valuations and momentum.
In April, I searched for and found that I can Continue reading →
The typical response from someone when they find out that I have retired is, “Congratulations! What do you do in your spare time?” To which I reply, “I volunteer at Habitat For Humanity and Neighbor To Neighbor, go to the gym, visit family, take day trips, and write financial articles.” I would get a more excited response if I replied that I go paragliding in Costa Rica. I do occasionally get a response from people wanting to know more about investing.
This article summarizes how Continue reading →
A young lady where I volunteer asked me when I started saving. I started saving as a child, but had no money saved until nearly thirty years later when I started down a “stable” career path after graduating with an engineering degree and an MBA. I described to her that Fidelity’s guideline is to have one year’s income saved by age 30 and 10 times your income by the time you retire. The next question was, “How do you protect your savings from severe corrections in retirement?” I explained that inflation is the silent risk of being too conservative and described target date funds as perhaps being ideal for someone starting out in savings when the daily challenges of home and work life weigh heavy on time requirements. Continue reading →
I have had conversations with friends and family, and the question comes up, “Where should I put my money [cash] to earn a safe yield. This comes from younger people starting to build a nest egg and older people wanting to protect their nest egg. The options asked about are high yield savings accounts, certificates of deposits (CDs), or paying off mortgages. One concept has confused people when talking about bond funds. There are two components to fixed income return: 1) the yield, which is typically paid daily, monthly, quarterly, or annually, and 2) changes in yield that impact the price of the bonds. If the yield Continue reading →
