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How do you pick your investments?
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 2014-02-25 9:07 AM |
Regular  5477    LHOTP |  Subject: How do you pick your investments?Curious how others decide where and how to invest their money, both what product(s) and what sectors, if any. Do you use a financial advisor? If not, how do you educate yourself about your choices? If there is a specific learning tool (book, website, podcast) that you like, I'd love to hear about it :) I have a few different products, 529s for each kid and 401ks from work, but talking with Tuwood has me wanting to learn about ETFs. I only actively pick funds in one 401k account, and pretty much go with whatever the "very aggressive" growth recommendation is for the others (kids are 8,7,3 so I'm cool with that). In the 401k I have been active with, I have been all healthcare/biotech, which has been great. That sector makes sense to me because of what I do for a living, and I guess I like it because I "believe" in it and understand it.
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| 2014-02-25 11:00 AM in reply to: switch |
Pro 9391 Omaha, NE | Subject: RE: How do you pick your investments? I personally like index ETF's such as QQQ, SPY, and DIA because they track the main indexes which will always go up to some extent over time and predictably rise and fall with the economy as a whole. With an individual company equity it goes up and down with the sector to an extent, but ultimately it's truly tied to the individual company. I worked for Worldcom in the late 90's and got to see first hand the collapse of an individual equity and how it effected many close friends so I've vowed to never own an individual equity ever again. The cool part is that there are so many ETF's out there that you can get very focused with them to track whatever you want to invest in. Now, which ETF do you pick? Yet again it depends on your strategy as a whole. If you're looking for buy and hold you can look for bullish ETF's or if you think the market is in for a correction you can buy bearish ETF's that go up when the market goes down. For me personally I love QQQ because it follows the NASDAQ 100 and I'm in the tech industry. It is also very liquid and has very tight spreads on their options. It also has weekly options which are my primary investment mechanism. I'm probably not helping, because there's no easy answer. I always tell people to play around with the index ETF's and then explore out from there. ;-) |
| 2014-02-26 8:36 AM in reply to: tuwood |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Thanks Tony :) I'm actually a little surprised nobody else has commented. That's almost more interesting than the original question. People don't care about this stuff? Don't want to comment? I would have thought something like this would get lots of input on a tri board. Maybe it's too personal... |
| 2014-02-26 8:51 AM in reply to: switch |
Master 2802 Minnetonka, Minnesota Bronze member | Subject: RE: How do you pick your investments? We have used a Financial Advisor since right before our first child was born back in the early 90s and we are in our early 50s now. We have a fee-only advisor, meaning we pay him a % of our portfolio amount each year and we get investment management, insurance advice, retirement planning, education funding planning and yearly tax planning. He doesn't get any money from the investments themselves, so is not tied to any particular set of funds. We are WAYYY more diversifed then I ever would be on my own, and I have an MBA and know finance and like fairly well. We basically talk to him about goals and risk tolerance and he does the rest. We do not own any individual stocks since cashing out of our last stock grants and options that my wife got through her last job. Equities are mostly in Mutual Funds in many different sectors. We are in a combination of: US stocks, US bonds, corp. bonds, Muni bonds, REITs, hedge funds, Intl stocks, Intl bonds, commodities (gold, etc), and cash. |
| 2014-02-26 9:27 AM in reply to: switch |
Regular 1023 Madrid | Subject: RE: How do you pick your investments? Originally posted by switch Thanks Tony I'm actually a little surprised nobody else has commented. That's almost more interesting than the original question. People don't care about this stuff? Don't want to comment? I would have thought something like this would get lots of input on a tri board. Maybe it's too personal... I don't think its any of the aboive really but more a case of its such a massive topic to cover. Books have been written on the topic as well as it being the subject matter of enormous studies and analysis. To do it justice in a couple paragraphs on tri board is a reach. That said here's a couple ideas. - Know your profile. Meaning what is your financial base, what are your goals, what sort of tolernace do you have for volatility and what could be losses. - Due your own research. Don't blindly trust someone without knowing somewhat what you are getting into. - Pick up a book or do some background checking on Warren Buffet style investing. He tends to take a very common sense approach that most people can relate to. - Figure out if you are going to invest based on a top down approach meaning the general state of the economy, growth, financial health, or bottom up approach maening you like a product, the company seems sound, and well placed with no significant barriers to entry. - Pick something you know about. For example maybe you know a lot about running shoes. Maybe you like Hoka's. They're owned by a company named Decker. Do some company research. Figure out if the risk is worth the reward. Dont start out trading credit default swaps if you don't know what a credit default swap is. Anyhow, there's a start.... |
| 2014-02-26 9:28 AM in reply to: ejshowers |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Originally posted by ejshowers We have used a Financial Advisor since right before our first child was born back in the early 90s and we are in our early 50s now. We have a fee-only advisor, meaning we pay him a % of our portfolio amount each year and we get investment management, insurance advice, retirement planning, education funding planning and yearly tax planning. He doesn't get any money from the investments themselves, so is not tied to any particular set of funds. We are WAYYY more diversifed then I ever would be on my own, and I have an MBA and know finance and like fairly well. We basically talk to him about goals and risk tolerance and he does the rest. We do not own any individual stocks since cashing out of our last stock grants and options that my wife got through her last job. Equities are mostly in Mutual Funds in many different sectors. We are in a combination of: US stocks, US bonds, corp. bonds, Muni bonds, REITs, hedge funds, Intl stocks, Intl bonds, commodities (gold, etc), and cash. Thanks for the response :) OK, so you have a financial advisor even though you know and like finance. That speaks pretty highly of your advisor. You mention diversification and say you're "way more" diversified with your advisor than you would be on your own. I'm assuming that's generally been a good thing for you, as you've stayed with him for 20+ years. How would things have looked different had it not been for your advisor? Would you have a similar percentage of your portfolio dedicated to bonds? |
| 2014-02-26 9:35 AM in reply to: 0 |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Originally posted by gr33n Originally posted by switch I don't think its any of the aboive really but more a case of its such a massive topic to cover. Books have been written on the topic as well as it being the subject matter of enormous studies and analysis. To do it justice in a couple paragraphs on tri board is a reach. That said here's a couple ideas. - Know your profile. Meaning what is your financial base, what are your goals, what sort of tolernace do you have for volatility and what could be losses. - Due your own research. Don't blindly trust someone without knowing somewhat what you are getting into. - Pick up a book or do some background checking on Warren Buffet style investing. He tends to take a very common sense approach that most people can relate to. - Figure out if you are going to invest based on a top down approach meaning the general state of the economy, growth, financial health, or bottom up approach maening you like a product, the company seems sound, and well placed with no significant barriers to entry. - Pick something you know about. For example maybe you know a lot about running shoes. Maybe you like Hoka's. They're owned by a company named Decker. Do some company research. Figure out if the risk is worth the reward. Dont start out trading credit default swaps if you don't know what a credit default swap is. Anyhow, there's a start.... Thanks Tony :) I'm actually a little surprised nobody else has commented. That's almost more interesting than the original question. People don't care about this stuff? Don't want to comment? I would have thought something like this would get lots of input on a tri board. Maybe it's too personal... Maybe I didn't word my post well. I completely agree it is a massive subject. I was looking to hear how others have chosen their investments, where they like to get their information, and how active they are in managing their own accounts. It was meant to be more of a conversation thread than a thread to teach me how to invest :) Edited by switch 2014-02-26 9:46 AM |
| 2014-02-26 9:53 AM in reply to: switch |
Master 2802 Minnetonka, Minnesota Bronze member | Subject: RE: How do you pick your investments? I don't know how it would look if I did it myself, but I know our portfolio would be much simpler as it takes a lot of time to learn, understand and research all the funds, fund managers, track records, global economic analsyis, etc., and I realized as our portfolio grew and the needs with family coming started to get more complicated, that I didn't want to spend the amount of time to do it all justice. I also don't know how I would have found or gotten into some of the things we are in now that really help diversification. Non-traded REITS and F-Squared Investments (Google it) are two examples. Our returns have generally been good and usually slightly lag the S&P 500 in big up years, but it is primarily the great reduction in market risk that has helped us weather the downturns much better than the overall market. So, we give up a little in big years, but only assume about 20% of the risk of big downturns. Conserving principal is also getting more and more important as we near retirement, and he can change our portfolio makeup to match our changing risk tolerance much easier than I could, if I could at all at least in a real analytical way. |
| 2014-02-26 9:55 AM in reply to: switch |
Regular 1023 Madrid | Subject: RE: How do you pick your investments? Ah ok understood. I think it just depends. Different strokes... Personally I like to follow mega trends for long term investments. I follow macro news and data for cyclical trades. I try to stay with index etf's for this. I stay with what I know if I'm stock picking. I work for a bank so I know banks. I havent owned any bank shares for a long time. I like following charts for opportunistic trading. Thats stocks. Bonds I look for decent coupons on names that I know are going to be around in 5 to 10 years. I trade a lot of FX but thats just short term sitting in front of screens anticipating news and watching charts. Strategically I like yield enhancement strategies doing covered writes meaning I'll buy an underlying and sell calls against it. I'll also sell puts outright if I want to buy something but maybe not at its current price. |
| 2014-02-26 10:01 AM in reply to: gr33n |
Pro 15655 | Subject: RE: How do you pick your investments? Originally posted by gr33n Ah ok understood. I think it just depends. Different strokes... Personally I like to follow mega trends for long term investments. I follow macro news and data for cyclical trades. I try to stay with index etf's for this. I stay with what I know if I'm stock picking. I work for a bank so I know banks. I havent owned any bank shares for a long time. I like following charts for opportunistic trading. Thats stocks. Bonds I look for decent coupons on names that I know are going to be around in 5 to 10 years. I trade a lot of FX but thats just short term sitting in front of screens anticipating news and watching charts. Strategically I like yield enhancement strategies doing covered writes meaning I'll buy an underlying and sell calls against it. I'll also sell puts outright if I want to buy something but maybe not at its current price. What were your profits from last year (in % of course, not trying to pry into your business) using that strategy? |
| 2014-02-26 10:09 AM in reply to: Left Brain |
Regular 1023 Madrid | Subject: RE: How do you pick your investments? Originally posted by Left Brain Originally posted by gr33n Ah ok understood. I think it just depends. Different strokes... Personally I like to follow mega trends for long term investments. I follow macro news and data for cyclical trades. I try to stay with index etf's for this. I stay with what I know if I'm stock picking. I work for a bank so I know banks. I havent owned any bank shares for a long time. I like following charts for opportunistic trading. Thats stocks. Bonds I look for decent coupons on names that I know are going to be around in 5 to 10 years. I trade a lot of FX but thats just short term sitting in front of screens anticipating news and watching charts. Strategically I like yield enhancement strategies doing covered writes meaning I'll buy an underlying and sell calls against it. I'll also sell puts outright if I want to buy something but maybe not at its current price. What were your profits from last year (in % of course, not trying to pry into your business) using that strategy? Last year 2013 my breakdown was something like My Stocks 0%. I was not invested at all in stocks. Non believer apart from some penny stocks. My Kids stocks +8% (approx). Bonds +6% (coupon + appreciation) FX +13% Real Estate (which may be irrelevant here) +3% net income generating. Appreciation +10% (approx) |
| 2014-02-26 10:21 AM in reply to: gr33n |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Originally posted by gr33n Originally posted by Left Brain Last year 2013 my breakdown was something like My Stocks 0%. I was not invested at all in stocks. Non believer apart from some penny stocks. My Kids stocks +8% (approx). Bonds +6% (coupon + appreciation) FX +13% Real Estate (which may be irrelevant here) +3% net income generating. Appreciation +10% (approx) Originally posted by gr33n Ah ok understood. I think it just depends. Different strokes... Personally I like to follow mega trends for long term investments. I follow macro news and data for cyclical trades. I try to stay with index etf's for this. I stay with what I know if I'm stock picking. I work for a bank so I know banks. I havent owned any bank shares for a long time. I like following charts for opportunistic trading. Thats stocks. Bonds I look for decent coupons on names that I know are going to be around in 5 to 10 years. I trade a lot of FX but thats just short term sitting in front of screens anticipating news and watching charts. Strategically I like yield enhancement strategies doing covered writes meaning I'll buy an underlying and sell calls against it. I'll also sell puts outright if I want to buy something but maybe not at its current price. What were your profits from last year (in % of course, not trying to pry into your business) using that strategy? I must be missing something. Bear with me :) Do you have money invested in other products? Mutual funds? Do you believe in them? Why would real estate be irrelevant?
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| 2014-02-26 10:27 AM in reply to: ejshowers |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Originally posted by ejshowers I don't know how it would look if I did it myself, but I know our portfolio would be much simpler as it takes a lot of time to learn, understand and research all the funds, fund managers, track records, global economic analsyis, etc., and I realized as our portfolio grew and the needs with family coming started to get more complicated, that I didn't want to spend the amount of time to do it all justice. I also don't know how I would have found or gotten into some of the things we are in now that really help diversification. Non-traded REITS and F-Squared Investments (Google it) are two examples. Our returns have generally been good and usually slightly lag the S&P 500 in big up years, but it is primarily the great reduction in market risk that has helped us weather the downturns much better than the overall market. So, we give up a little in big years, but only assume about 20% of the risk of big downturns. Conserving principal is also getting more and more important as we near retirement, and he can change our portfolio makeup to match our changing risk tolerance much easier than I could, if I could at all at least in a real analytical way.
Some people argue you should just pick an indexed fund and leave it alone and you will beat most financial advisors over time. Did you consider that, or did you need to minimize the risk of "big downturns" because you needed to have a percentage liquid/available on short notice? |
| 2014-02-26 10:37 AM in reply to: switch |
Regular 1023 Madrid | Subject: RE: How do you pick your investments? Originally posted by switch Originally posted by gr33n Originally posted by Left Brain Last year 2013 my breakdown was something like My Stocks 0%. I was not invested at all in stocks. Non believer apart from some penny stocks. My Kids stocks +8% (approx). Bonds +6% (coupon + appreciation) FX +13% Real Estate (which may be irrelevant here) +3% net income generating. Appreciation +10% (approx) Originally posted by gr33n Ah ok understood. I think it just depends. Different strokes... Personally I like to follow mega trends for long term investments. I follow macro news and data for cyclical trades. I try to stay with index etf's for this. I stay with what I know if I'm stock picking. I work for a bank so I know banks. I havent owned any bank shares for a long time. I like following charts for opportunistic trading. Thats stocks. Bonds I look for decent coupons on names that I know are going to be around in 5 to 10 years. I trade a lot of FX but thats just short term sitting in front of screens anticipating news and watching charts. Strategically I like yield enhancement strategies doing covered writes meaning I'll buy an underlying and sell calls against it. I'll also sell puts outright if I want to buy something but maybe not at its current price. What were your profits from last year (in % of course, not trying to pry into your business) using that strategy? I must be missing something. Bear with me Do you have money invested in other products? Mutual funds? Do you believe in them? Why would real estate be irrelevant?
Having some connectivity issues here. Other products- No. Mutual Funds- Not currently but I have in the past. They are good for geographic or sector exposure as well as certain managers with a decent record for outperformance. BUT have to be careful of fees. These days ETF's can accomplish much of the same thing for less cost. Real Estate I thought might be irrelevant to this conversation as I don't consider it a liquid investment. Its also subject to a lot of non market influences like out of control insurance costs and rogue tenants. |
| 2014-02-26 10:46 AM in reply to: switch |
Master 2802 Minnetonka, Minnesota Bronze member | Subject: RE: How do you pick your investments? No, we wanted full planning for retirement planning, education funding and tax planning mainly, so went with a Financial Planner way back and now the conservation of principal is way more important to us so would'nt want to be just in an indexed fund or even a few different ones. It was also nice to not be personally repsonsible for the household financial planning when and if the sh*t hit the fan. Hey - I wanted to avoid the stick-eye from the wife! It was a way to get her more involved in our planning acutally. He also really helped with understanding the timing of exercising various stock options we have had over the years. I had never heard of the Black-Schole's Option Pricing model which he used and it led to an analytical way of timing the exercising our options versus a more emotional or by-the-gut one. I don't regret using him for a minute - great peace of mind and frees up a lot of time. Our short term needs are held in easily liquidated investments and our truly liquid needs (rainy day fund, around $50,000) are in a Money Market. |
| 2014-02-26 10:54 AM in reply to: ejshowers |
Regular 5477 LHOTP | Subject: RE: How do you pick your investments? Originally posted by ejshowers No, we wanted full planning for retirement planning, education funding and tax planning mainly, so went with a Financial Planner way back and now the conservation of principal is way more important to us so would'nt want to be just in an indexed fund or even a few different ones. It was also nice to not be personally repsonsible for the household financial planning when and if the sh*t hit the fan. Hey - I wanted to avoid the stick-eye from the wife! It was a way to get her more involved in our planning acutally. He also really helped with understanding the timing of exercising various stock options we have had over the years. I had never heard of the Black-Schole's Option Pricing model which he used and it led to an analytical way of timing the exercising our options versus a more emotional or by-the-gut one. I don't regret using him for a minute - great peace of mind and frees up a lot of time. Our short term needs are held in easily liquidated investments and our truly liquid needs (rainy day fund, around $50,000) are in a Money Market. Completely get it :) Rainy day fund? You're set for a monsoon!
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