Intro
So I was listening to an episode of the Tim Ferriss show a few weeks ago with Tony Robbins as the guest. The topic of discussion was mainly around his new book Money: Master the Game in which Tony details his interviews of several of the most profitable finance movers and shakers today. Oddly enough, that very next day my mother warned me that if I didn’t start investing soon I wouldn’t have anything for retirement. So I figured I would devote a few hours to research and reporting on investing.
Summary
My personal breakdown of investing for retirement. Funds are auto-deposited each month into my Roth-IRA trading account. Stocks and ETFs are purchased quarterly based on a balanced and diversified portfolio while targeting stability over the long term, ease of access, low cost, and broad market exposure. This page should not be taken as investment advice: this is only a recording.
Choices
Targets
- Low cost
- Low gross expense ratio
- High volume
- High diversity
Vanguard and iShares ETFs seem to fit well with all the requirements. Vanguard seems a little more expensive, but not always. Unfortunately, I cannot find a good commodities ETF provided by either so I went with Powershares.
Diversification
- 40% Long term bonds
- 30% Stocks
- 15% Intermediate bonds
- 15% Commodities
- 50% Gold
- 50% Other Commodities (oil, pork bellies, etc.)
Rebalancing
- Purchase ETFs with quarterly deposits
- buy as many shares as possible up to deposit percentage split amount (e.g. if $1,000 deposited, only purchase up to $75(7.5%) in gold)
- Identify sectors that have unbalanced the portfolio
- Purchase underperforming sectors with leftover deposit cash
- Sell overperforming sectors, buy underperforming sectors if needed
- Review saved searches for alternative picks
Since I do not contribute enough money to purchase all of my picks each month, I am forced to buy stocks quarterly. Hence my choice of lower cost options (ETFs). I figured I can just rebalance, purchase, and evaluate all at the same time: every three months. My trading account will continue to withdraw funds each month so I don’t feel compelled to spend that money. Alternatively, every month I could choose the most affordable ETF to purchase making sure that every quarter I meet my requirements from each sector. This might help advance dollar-cost averages as well as greater long term performance from earlier investing.
Every quarter I will shift funds from high performing to underperforming sectors in an effort to maintain my portfolio balance. Furthermore, the accrued deposits can be used to purchase new shares. Sectors on the downturn will be given priority. Only the percentage alloted to each sector can be spent at any given quarter which leads to dollar cost averaging in the long term.
Current Stock/ETF Picks
- Long term bonds: ILTB - iShares Core 10+ Year USD Bond ETF
- Stocks: VT - Vanguard Total World Stock Index Fund ETF Shares
- Intermediate bonds: BIV - Vanguard Intermediate-Term Bond Index Fund ETF Shares
- Gold: IAU - iShares Gold Trust
- Commodities: DBC - PowerShares DB Commodity Index Tracking Fund
Further Research
- Real Estate Investment Trusts (REIT) diversification
- Further stock picks research
- possible single company investing to play around with
- Broader market sectors: currency exposure, domestic/foreign, market cap, etc.
- Prioritize for dividends?
- Purchasing each month instead of quarter?