J
johnblake
Guest
As 2004 draws to a close I'm finishing up year end tax and investment planning. I thought I'd share some of what I've learned and hope that you will do the same.
I'm a conservative investor and target an stock/bond allocation of approximately 55/45. At the end of 2002 I did some research using Morningstar to select the best mutual funds. My research showed that Indexing works great for large caps, and bonds, and not as well for mid/small caps, and international stocks. I came to this conclusion by observing the performance of Vanguard's index funds relative to managed funds in the same category. I selected funds based on 1, 3, 5, and 10 year returns versus their prospective benchmarks. All selected funds are no load, and have relatively low management fees.
Later in 2003, I read the 'The Intelligent Asset Allocator' and 'Four Pillars of Investing'. Guess what happened to the six funds I bought over the next 2 years? They ALL underperformed their index in 03, all but one are on track to under perform in 04! My conclusion is that it's extremely difficult (possibly impossible) to find a fund manager who can consistently beat the indexes.
I also started planning for tax time. I'm selling some funds that have been losers, and investing the $ the same day in index funds so that my asset allocation doesn't change (even for a day). At the end of 2004 I'll have a $3000 capital loss to deduct from ordinary income (dividends in my case). I found that some companies just don't want to give me my money. For example. I issued a withdrawal from Ameritrade's web site, and checked my account a few days later, it never happened. I had to call Ameritrade, they told me that there was a problem -- but they never even called or emailed me!! Thank you, please close my account. I had a similar issue with a mutual fund company. I mistakenly thought I was set up to receive electronic withdrawals to my bank account. Turns out, that it only works for deposits. This wasn't obvious when I set up electronic banking (it may have been in the small print). Thank you, please send me a check and close my account. Luckily, I had enough cash to cover the transactions so my allocation stayed constant. I've been using Vanguard for 15 years and have never had these kinds of problems with them. Over time, I'm moving more and more of my assets over to Vanguard.
Thanks to this board I discovered that I wasn't using my cash efficiently. I had significant cash in Money Market Mutual funds which pay substantially less than the banks and credit unions I discovered here. Thank you.
Thanks to this board I discovered TreasuryDirect, and am now using I-Bonds as part of my portfolio. Thank you.
I also realized that I need to update my estate plan. It's out of date, and a recent event opened my eyes. I'll probably just use a standard will, power of attorney, and living will. I'm considering a living trust, but I think the management overhead may be a bit high relative to the benefits for me (no kids yet, I'm only 39).
I also stumbled across this group where I've learned about the social aspects of ER, some of the issues other people have, and some valuable investing lessons. The members here are bright, interesting, and often different than me in many ways. Thank you all and have a happy new year, and holiday season.
I'm a conservative investor and target an stock/bond allocation of approximately 55/45. At the end of 2002 I did some research using Morningstar to select the best mutual funds. My research showed that Indexing works great for large caps, and bonds, and not as well for mid/small caps, and international stocks. I came to this conclusion by observing the performance of Vanguard's index funds relative to managed funds in the same category. I selected funds based on 1, 3, 5, and 10 year returns versus their prospective benchmarks. All selected funds are no load, and have relatively low management fees.
Later in 2003, I read the 'The Intelligent Asset Allocator' and 'Four Pillars of Investing'. Guess what happened to the six funds I bought over the next 2 years? They ALL underperformed their index in 03, all but one are on track to under perform in 04! My conclusion is that it's extremely difficult (possibly impossible) to find a fund manager who can consistently beat the indexes.
I also started planning for tax time. I'm selling some funds that have been losers, and investing the $ the same day in index funds so that my asset allocation doesn't change (even for a day). At the end of 2004 I'll have a $3000 capital loss to deduct from ordinary income (dividends in my case). I found that some companies just don't want to give me my money. For example. I issued a withdrawal from Ameritrade's web site, and checked my account a few days later, it never happened. I had to call Ameritrade, they told me that there was a problem -- but they never even called or emailed me!! Thank you, please close my account. I had a similar issue with a mutual fund company. I mistakenly thought I was set up to receive electronic withdrawals to my bank account. Turns out, that it only works for deposits. This wasn't obvious when I set up electronic banking (it may have been in the small print). Thank you, please send me a check and close my account. Luckily, I had enough cash to cover the transactions so my allocation stayed constant. I've been using Vanguard for 15 years and have never had these kinds of problems with them. Over time, I'm moving more and more of my assets over to Vanguard.
Thanks to this board I discovered that I wasn't using my cash efficiently. I had significant cash in Money Market Mutual funds which pay substantially less than the banks and credit unions I discovered here. Thank you.
Thanks to this board I discovered TreasuryDirect, and am now using I-Bonds as part of my portfolio. Thank you.
I also realized that I need to update my estate plan. It's out of date, and a recent event opened my eyes. I'll probably just use a standard will, power of attorney, and living will. I'm considering a living trust, but I think the management overhead may be a bit high relative to the benefits for me (no kids yet, I'm only 39).
I also stumbled across this group where I've learned about the social aspects of ER, some of the issues other people have, and some valuable investing lessons. The members here are bright, interesting, and often different than me in many ways. Thank you all and have a happy new year, and holiday season.