What’s Your Asset Allocation

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Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor’s risk tolerance, goals and investment time frame.

You will often be told to have a portion in Stocks, a portion in Bonds and a portion in Cash or cash equivalents. You will be told this but not really provided any further detail in the types. There are different types of bonds, seven different types actually.

1.) Treasury bonds;
2.) other U.S. government bonds;
3.) investment-grade corporate bonds (high quality);
4.) high-yield corporate bonds (low quality), also known as junk bonds;
5.) foreign bonds;
6.) mortgage-backed bonds; and
7.)municipal bonds.

There are also different types of stocks as well as stock categories.

Types of stocks are:

1.) Common stock. This is well, the stock you buy.                                                                       2.) Preferred stock. This is stock you get while in or a part of a certain company, however, this stock usually doesn’t come with voting rights. Honestly, voting rights doesn’t play much of a part unless you own a fair share of the company you hold stock in.

Stock categories are mainly divided out by size and sector. By size, you will generally hear them referred to as either: Small Cap, Mid-Cap and Large Cap. Large Cap is your more stable companies in the billions of dollars worth of value or trillion as it were for say Amazon at this time. These, again are more stable companies and many but certainly not all, pay our dividends which at times make up for it lack in growth as the latter is the case for Small Cap companies. Small Cap companies are newer companies or companies still early on in their life cycle, at times the end so be sure to understand the value of that company.

Moreso than size, you need to know the category of sectors than you do say the size of the company, however, both are important.

The categories are as follows:

1. Financials
2. Utilities
3. Consumer Discretionaries
4. Consumer Staples
5. Energy
6. Healthcare
7. Industrials
8. Technologies
9. Telecom
10. Materials
11. Real Estate

Each category has is benefits and uses within a portfolio. You may utilize only a few inside your own portfolio, or you may utilize them all.

A portfolio is very, very personal. Can you read the seriousness of my voice? Well, it sounded serious in my head. Take it as you will, however, it’s not only personal, it’s strategic as well.

You may hear a very generic saying of having your money in Stocks and Bond. There is a basic computation for how much you should have too. Did you know that? (I don’t agree with it but I will share it with you.) The way most financial gurus advise you on how much stocks versus bonds you should have is based on your age. Weird right? They say to take 100 years and minus your age. So let’s say you are 50 years old right now, they would tell you to subtract 50 from 100 and of course your left with 50. this means you should have 50% of your portfolio in Stocks and 50% in BONDS. Same applies if you are 40 years old. Utilizing the same mathematical principal 60% of your portfolio should be in Stocks and 40% should be in Bonds. There are numerous variations of these Stocks versus Bonds concept. Honestly, I have multiple setups account depending, goal depending and I change it up based off of need and or opportunity.

I would like to provide you with a few portfolio setups. Some go against conventional thinking and some fall in line with it. It may test your feelings on Stocks and Bonds. Hint, Bonds aren’t always safe either.

Consistency & the Law of Averages

 

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I have been getting a great deal of push back over investment strategies, over what the best way and how to invest money is. While I dont claim to know any ins and outs of buying the dips or worse betting against companies, nor do I have success at buying on the cheap and selling high as a day trader. I just don’t have that skill. Although at times I wish I did.

The arguments are stemming from building and making wealth. How to do it and the reasons for the differences. The best answer I can give stems from the law of averages. Your average Joe/Jane may understand the concepts of buying low and selling high, but doing it, are two very different things. Your average Joe/Jane may read the how to day trade dummy books, and likely are not any better for it. Your average Joe/Jane will lose more times then they gain, often depleting any gains or even possibly placing them in the red. Your average Joe/Jane may buy “classes” or buy into millionaire traders groups and likely just end up with what is known as a stupid tax. Honestly, if people were making millions upon millions, do you really believe they would be ‘teaching’ people!?  You will never get something for nothing. But let’s say you are more than capable, to choose the best stocks that are going to be long term performers. In a wealth article written this year by  Nick Maggiulli if you were able to buy the best lows of all time, you still would only have a 30% chance of beating the consistent average investor. He also goes on to show that if you miss the lowest of the lows by as little as two months, only two months; your 30% chance drops to just 3%.

Let’s take this on a different perspective. Let’s say, that you get a small windfall of $10,000 and lets just assume an average return of the market at 10% (buy S&P Index) and let’s assume your 20 years old. You place it into a retirement account until you reach 65 years of age. You will have $876,240. Not a bad return. Of course, it is a long period of time which is what makes the difference with compounding. Now the average 20 year old won’t put away $10,000. That money is going to burn a hole in their pocket faster than a bad burrito shoots from your colon. But hey, this is just an example.

Now, what if we looked at a consistent investor, who buys in all markets, up or down, doesn’t matter. The highs the lows and keeps putting their investment into the index fund. Let’s say from age 20 to age 65 as our example before. And they only put in $100 per month. That it. That’s a cup of coffee per day at Starbucks. Based on the same 10% average return, the Joe/Jane would have ended up with $1,048,150. ?yes they would have invest more of their own money over a very long period of time, however, their chances of a better return more than doubled during the down years whereas if the first investor gambled on only a few stocks could have lost a great deal of money.

Don’t get me wrong, investing from a lump sum is a great way to leave a legacy for children and grandchildren. See our earlier post on leaving a legacy. But for the average Joe/Jane, it’s better to start early and contribute small amounts over a long span of time.  Build wealth consistently over a long period of time is far more advantageous than gambling with stock picks. Even those that say they know, have no clue.

Leaving a Legacy

 

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I have been thinking deeply about leaving a legacy when my ‘time’ comes. Not that I am sickly or anything. I am still young(ish) after all. Having a new small child will inherently cause you to think about such a subject.

While I am focused on my career and working on financial goals, I began thinking about my young child and my teenager.

With what I have learned about wealth building, is that having cash on hand, or making boat loads of money with a high salary, isnt what builds wealth. Time, is the greatest factor. Time, is the best friend of investing. Time is the greatest gift.  They say that making faithful investments, on regular intervals without breaking stride and being blessed with long life, is all you need. Let me give you an example:

Say you never make a large salary. You work in a career that you love and you make just enough to live a comfortable life. This could be making $29,000 a year or even less. Let us assume you began this job when you were 20 years old and you never got an increase in pay. You got paid every two weeks, which seems to be the standard. Lets just assume as well, you invest into an S&P 500 Market Index fund adding$50 every paycheck, no more, no less. You simply ride the market putting in that $50 every paycheck. The S&P 500 averages 10% since its inception, but for argumentative sake, lets assume a 9.5% return. When ready to retire at 65 years old, you have $1,160,853.00

Let’s say now that we as parents start making our children work around the house and pay them for their chores. Not just developing them as little humans, but teaching them the value of money, teaching them to use money as a tool and not simply living paycheck to paycheck. We pay them enough let’s say we match them dollar for dollar and we invest on their behalf the same $50 every paycheck starting when they can do real chores around the house, lets say age 7. (Im not a monster.) So giving them just an extra 13 years ahead of my first example would provide them a retirement portfolio valued at roughly 4.8 Million!

I’ll go one step further here. What if we started a retirement account for our newborn. And we as parents placed in the same $50 every check for them. Let’s also assume that as they aged, they continued to put away their $50 every check after they became adults and we no longer contributed. They will have roughly 8 Million dollars when they retire.

Now I understand. Its their responsibility to do this o their own, and yada yada, but what a gift, it would be. What a legacy you could leave knowing this. What a difference you could make. You could change the future opportunities or more accurately, the ease of opportunities your bloodline has. You would essentially be planting the seeds.

What if you did this for your children, and grandchildren and great-grandchildren. You have just changed your entire family tree!!

“Who cares about what grandma and grandpa left us in the will- They left us open to work for what we love. To never worry in retirement. They gave us the opportunity to retire when we were in our late 30’s if we so desired.”

Let’s say your well off and you did this for your grandchild. You are well off enough, you simply invest for her/him $250 every month. (Remember you love them) . When this grandchild of your retires, they will have 50+ Million dollars.

Now I know money isn’t everything, and I honestly don’t think people would take things to this level. Plus if I had millions at 40 I probably wouldn’t be slaving away full of stress and worry either. But you have provided the opportunity. You see, not everyon gets to take advantage of the same opportunities. But you and your family have the ability to create that opportunity not only for yourself but your children, and their children and their children’s children. Stop thinking of just yourself! Think long and hard about the opportunities you can create for the next generation of your family with small continuous contributions. $50 a month.

Time for Travel

Ever wonder what it would be like to travel around the world? Ever had that dream? To leave it all for a while, take a skip year and just go? Do you have these thoughts and then wake up to do your normal mundane routine all over again? Get up and do it again, and again. You question it all; what about my bills, what about the cost, what about the kids, what about my spouse, what about the fur babies, what about my medicine. Can I take time off work for a couple weeks, maybe just one week, but where can I really go and what can I do in just a week? It’s not just the ticket cost, what about the hotel or hostel costs,  the taxi costs, the train ride.  – I can really go on forever here.  It’s a subject that has kept me from traveling for nearly my entire life. These are called responsibilities. I have begun to think, that if we only wish to make something happen and plan appropriately, action, instead of just complaining that we can’t do this or that – then it can eventually be done.

Some tips I have figured out to help:

1. When searching for air fair tickets round trip- use a google search and type the departing airport symbol to the arriving airport symbol. Don’t worry about the dates. The closest airfare come up first- then choose the departing date and you can search through 11 months and it already places the prices for you so you can get the cheapest possible fight when booking ahead of time. Just try it and see. Super easy. The norm is about 1K roundtrip but I got a round trip flight direct flight by the way from the central US to London for less than $500 round trip.
2. Buy un-refundable tickets. I have overthought trips so many times and came up with a million reasons to cancel them. Take the choice away, remove the possibility of canceling.
3. When you have removed the ability to cancel you have an added benefit- that you are forced to figure a safe cost and begin saving for it. Best done over time. If going to a European country then your savings will need to be higher then if you were going to South America or Asia.  Keep that in mind.
4. Think about what you want out of the trip. You can actually travel around the entire world for a year on less than 20K including your airfare and train fare. That’s a YEAR straight. How are you willing to live during that year? Live like a local and really soak up the cultures and you’ll see its easy. Choose to live like an American (Luxury driven) and 100K won’t get you there.
5. If you don’t have time as in a month or taking a fabulous skip year than first, rethink how you’re living. But hey, that’s just me. Let’s say you can’t take a month off- how about two weeks? Let’s say a flight from Atlanta, GA International airport to London is an 8 hour straight flight. You can time your travel to coincide with their time zones- sleep on the plane and arrive in the morning (their time). Spend 4 days in London then hop on a train to Paris, France that’s 2 hours long. Enjoy 4 days and then get on a plane in Paris going to Dubai, UAE (roundtrip $300) and spend three days. When you arrive back in Paris, France, hop back on the train and head back to London or even take a quick stop in Amsterdam before returning to London to spend the last couple days before your return home. Let’s do a cost down:

• Ticket (Round Trip from Atlanta, GA USA to London, England) $540
• Train Ticket from London to Paris $65
• Plane Ticket from Paris, France to Dubai, UAE (Round Trip) $350
• Train Ticket from Paris to Amsterdam $100
• Train Ticket from Amsterdam to London $40

TOTAL: $1,095 usd. Don’t tell me that most of you don’t get that back on your “tax refunds.” I know you do.

Lets factor $150 for food and shelter per day as well so that another $2,100 so TOTAL $3,200 and yet those of you that are always complaining you can’t go anywhere because you can’t afford that- I call bullshit.  If you’re too poor you think, then you’re probably getting a nice tax refund. If you make too much money to get a refund- then you have money to save then don’t you! Remember, not only in traveling but you are the only thing that is stopping you from doing what YOU want to do. It’s 2019 people. The world has never been more open, more tolerant, less judgemental, less discriminatory than it is right now this very minute in time. If you don’t believe that, then you’re not educated enough or you’ve been brainwashed. Go out and do what you wish to do. Do you think your child is going to have a mental breakdown if you leave them with a grandparent for a week or two while you travel for some much-needed R&R? Can a friend watch your dog/cat/goldfish for a week if you promise to host the Christmas Party? Don’t feel bad about it. Hey, leave your spouse at home too. Why not? Remember it’s good to have some self-time traveling. Exploring the world. It will help make you a more interesting spouse/person.

Make time for travel. You never know when the powers of the world will change hands. You never know if socialism or corruption could come in and devastate the current situation. We had men turn entire nations at one time in history- enjoy what the world is now. Experience the life and love that is all over. You may find a new passion. You may find a cause. Make the time.

Medical Care Rant!

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I had a medical issue come up here recently. I am not one to go to the doctors’ office or go to a congested emergency department at a hospital. I don’t even go for annual check-ups as there is no need at my age, or so I thought. Let me start from the beginning and it will come to my main point I think.

Two weeks ago in the middle of the night, I went to go lay down for bed and began feeling short of breath. Not so much in the ways of gasping for breath as much just feeling like I couldn’t get enough air.

The following day, it continued on but a little more mildly. That night came and the same thing happened, only this time worse. I got up and began to worry. Of course, I would worry, who wouldn’t? I began to feel my heart pounding and then tingling on my face and arms. these are signs of a panic attack for sure. Caused by my shortness of breath.

I remembered that I had a pulse oximeter in the closet, and that would show my heart rate and 02 SAT rate. I pulled that bad boy out, stuck my finger in there and the heart rate showed 146bpm and 02 SAT rate showed 94%.  I’m in my early thirties – These levels are not normal, especially at bedtime.

This happened for two more days/nights until I couldn’t take it. Now I was becoming more and more fixated on my heart rate and 02SAT rate. Not considering going through it another night as it had been a week, I decided to call the phone physician service I have with my insurance carrier. I called and spoke with the doctor for about 5 minutes, and the doctor said it was best to go to the emergency room. I went to the emergency room, thankfully I didn’t need to wait long before they took me back and began running tests. The drew blood, took an X-Ray of my chest- all came back clear. they sent me home an hour later and said I needed to follow up with a regular doctor. I went home thinking it was all in my head. Defeated, feeling like a hypochondriac.

Two days pass by, symptoms still in full swing, heart rate has yet to drop below 110 BPM and 02SAT rate hovering between 95%-97%. When morning came on the third day I went to the local urgent care as I didn’t have a regular family physician to follow up with. I went there and the doctor was very nice, listened to what I had to say and came up with a few possibilities. #1: I am over stressed and it is causing me to have anxiety attacks. #2: I was depressed and maybe I should think about starting on an anti-depressant or #3: There was something that he could see. I explained the first two, are not likely. He said, that he believes it really is anxiety but maybe to help me feel better, he would refer me to a Cardiologist and he sent me home.

Three days pass by and I receive no call on my referral so I decided to call. After a few more phone tags back and forth, I got a referral but I needed to call and get an appointment. I did make the call and this office was very accommodating. They got me in the very next day as a work in.

I get to the doctor’s office and waited all of 5 minutes. they were very timely. The office had an MA sit with me the entire time and go over everything. Shortly after, the cardiologist came in and we went over it all again. He was a man of little words but told me he will order some tests. I asked when was the soonest we could get these tests scheduled- he said immediately, he would do them right there in his office and he would oversee them all. I was very surprised, to say the least. He left the room and the stress test began, he came back in the room while I was 3 minutes in and he stopped the test at around 5 minutes as it didn’t take long for my heart rate to hit the number they needed. He sat me down and said, “this is not normal, we will check more.” Even though that wasn’t good news, I was so relieved that it wasn’t in my head. He then did an EKG and then told me to come back in an hour and he would do an ECG. I returned and he did the ECG himself. Again he was of little words, only asking me if I drink a lot of coffee. BPM never went below 120 even while lying down. He completed and then gave me a prescription to lower my heart rate and said come in the morning to get a fasting blood work completed. He also scheduled my follow up for 5 days later to allow time for the results. Before he walked out, he said, “don’t worry, we won’t stop until we find out the problem, this is not normal, take care.” I don’t care about the language barrier he also had, this level of caring, was beyond what all the others had given me.

So this is where I am left standing, or sitting as the case may be. I went and got the prescription filled and I have to say I do feel a little better but not completely. While he was a doctor of little words, I think I understand why; it’s because he doesn’t know what to say yet, and he wouldn’t want to make a wrong statement when dealing with such a serious issue as the hearts function. Awaiting tests still.

the point is. Why does it take so much to get physicians to run tests instead of feeling like everyone wants a prescription from them? Why are they so quick to dismiss symptoms in relation to my age? Don’t think it’s X because he’s only Y sort of mentality.

Is it because of the abuse of our medical systems by the masses? I gave them my insurance just as I did the cardiologist as well as paid a $300 copay. I would do it again too. But they are getting paid for a service and expertise. With service comes to care, why wasn’t I receiving any “care” from the three doctors I had seen prior to going to the cardiologist. the cardiologist, a 62-year-old man made me feel better and more cared for than the phone doctor, the ER doctor and the primary care physician. Just with his care and concern for my well-being.

I have thought if we have insurance that we pay tons of money for and have never used it before- if we aren’t feeling well- wouldn’t it be better to go and allow us to have our own blood work done without a physicians order to do so? They could send it to the doctors to check and of course, follow up on but wouldn’t this save money as well- for the insurance carrier and the public as well?

The United States has the top medical minds in the world and yet the caring side of Medical “Care”, is missing by so many. What has happened here? We pay $800USD each month for insurance- then when we go to the doctor’s office they charge us there, then the insurance only pays 75% of the charges and then I am still billed for the other 25% all for care that is sub-par. Seems like double dipping to me.

Yes, I am ranting and this isn’t written as a proper “paper” should be. I’m just pissing and moaning over the corruption of the insurance companies and how our systems have become so corrupt that doctors have to push us through on a convair belt pushing the numbers just to break even, that we don’t get the proper care and attention that we are going for in the first place. This is what happens when government gets involved in the insurance business. Of course this is a multifaceted subject of cause and effects but still! How hard is it to take my concerns seriously?! Run a damn test for heaven’s sake!

Still, have to go for follow-ups to get the results of more tests this wonderful cardiologist has ordered. Symptoms have mostly subsided with the new medication but the root cause has yet to be found.

Have any of you ever had symptoms that physicians wouldn’t take seriously? What was your journey? What was your cost? How much time did it take you in suffering? Did you find a resolution?