Jarhead -
Read Gillette Edmunds book on how to retire early. Its available on Amazon.com and other places. That is the catalyst that started making me think a little differently about investments.
The book and this web site reinforced some basic things I had already "sort-of" learned. Perhaps all of this is fundamental to many and even is covered elsewhere, and its certainly off-topic to "best place to park cash", but here goes...
- Investment experts who take your money are simply selling you a cookie cutter approach that they've developed once and re-used, or steering you into something that they'll make money off of if you buy it. The old adage of "if you're so smart, why arent you sitting on a yacht somewhere instead of doing this" applies. I get great exposure to this from my dads neighbors. He lives in an affluent retirement community, although he owns the smallest and cheapest model that isnt a lot more expensive than a typical home on the street. He has tons of friends and neighbors in their 60's-90's. Lots of them are paying 3%+ to advisors to help them lose their money in buckets. Learn the ropes, use low cost investment services like those from vanguard if necessary, and once you get yourself into the right distribution of instruments, it shouldnt take a lot of time or knowledge to keep things going. Buying 3 uncorrelated index funds and doing a yearly rebalance of assets may be all you need.
- Non-correlated assets, IE not puting all your eggs in one basket. Many think this is splitting your money between US stocks and bonds, and the only question is how much. The "real savvy" guys might throw in a little european stock or some small cap US stocks. Only problem here is the US stock and bond market have experienced periods of stagnant behavior, sometimes for a decade or more. Some argue we're smarter about how the economy works and that this wont happen again. I doubt that. Also US stocks and bonds often "move in the same direction" to certain stimuli. So the trick is to find 3-5 non-correlated assets like real estate, bonds of different duration, stocks of different sized companies, stocks and bonds in established countries such as most of europe, stocks but probably NOT bonds in the wild west emerging market countries, oil and gas pumpers, precious metals, etc. Some of these "move" the same way to a certain stimuli, like inflation or rising interest rates. Several move in different directions or not at all.
- Investing "in the rear view mirror". You look at 20 stock funds and buy the one with the best 10 year return record, and put no thought into the one with the 10 year losing record. Only problem there is the "good one" might be tapped out while the crappy one might be about to take off. Japan has sucked for a long time, but there is some belief that "new management" is going to enact the economic reforms that will recharge the country and its stock market. Hence the lousy investment prospects there might turn out to be the best opportunity to make a lot of money. Same with emerging markets. Some of the african, latin american and pacific rim countries are just starting to pull together some semblance of consistentcy and a number of lively companies might just make a long term go of it. A few bucks in the right places there might add a lot of juice.
- US stocks and bonds may not be the place for your money. Many non traditional experts think the US market is overdone and we may be locked into a trading range for some time. It may be too many highly developed companies - what retailer is going to push wal-mart over? - or just that the economy is fully developed overall. Some say europe and japan are where the US was 25-35 years ago and the big bargains and run-ups could be in one of those countries. Some say even europe is already "done" and you need to focus on the emerging markets.
- So that brings us to the crux. Pick 3-5 of Edmunds proposed asset classes in a mix that should produce the level of return you need, coupled with risk you can swallow, in a ratio that spreads the cash around satisfactorily. Then periodically take money away from the 'winners' that have run up and put it into the 'losers' that went the other way. This takes into consideration that the winners have already run up and the losers are now better bargains than when you first bought them.
Bottom line is read a lot, keep an open mind, and realize that many "experts" dont know any more than you do.
