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 Asset Allocation Investing using US ETF, Basic approach to asset Allocation ETF

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TSdreamer101
post Jun 15 2013, 12:56 AM

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QUOTE(JohnL77 @ Jun 15 2013, 12:10 AM)
Oooh.. you have the book. Hmm, disappointed to hear you say that. I wanna buy the book.

Which brokerage do you use? Please, what do you think about commission-free ETFs? What's the drawback?

Buy Public Bank Stock, hehehe.. good idea. Buffett also got rich by buying an insurance company.

Please can you share your portfolio? ^.^ Interested.

Oh, and I read a lot of bad reviews about Better World Books.... Anyway, the books I want aren't any cheaper there at the moment.
*
JohnL77,

http://www.investopedia.com/articles/mutua...tfindexfund.asp

VWENX, VGSLX, VFWAX, VTSAX, DFSVX, VBTLX

Approximately 65/35 portfolio.

I buy Vanguard fund directly..

<< Oh, and I read a lot of bad reviews about Better World Books.... Anyway, the books I want aren't any cheaper there at the moment.>>

Another cheap way to buy book is to buy a Kindle from Amazon and buy Kindle e-book.

http://ebookfriendly.com/2011/12/06/buying...road-checklist/

http://www.mobileread.com/forums/showthread.php?t=161093

Dreamer

This post has been edited by dreamer101: Jun 15 2013, 12:59 AM
TSdreamer101
post Jun 15 2013, 02:20 AM

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QUOTE(JohnL77 @ Jun 15 2013, 01:03 AM)
"Another cheap way to buy book is to buy a Kindle from Amazon and buy Kindle e-book."

Hmm.. yes, one day. smile.gif

0.o How do you buy Vanguard fund directly? They said foreigner cannot buy their fund. Please share. >.<

*EDIT: Oh, you are a US citizen. Admiral Shares. WOW. 0.0 So you do use Ameritrade. Do you enjoy their service? What's the cost of having an account with them?

*EDIT: Age as bond allocation... you are in your mid 30s?
*
JohnL77,

<<IT: Age as bond allocation... you are in your mid 30s?>>

No. I choose not to use that rule of thumb...

<<So you do use Ameritrade. Do you enjoy their service? What's the cost of having an account with them?>>

Not quite sure. That A/C is for my play money. It is for trading some very speculative stock. It is less than 5% of my portfolio. In that A/C, I buy stock either give me 10X return or go down to zero.

Dreamer
TSdreamer101
post Jun 15 2013, 02:22 AM

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QUOTE(JohnL77 @ Jun 15 2013, 01:31 AM)
You need to minus the mutual fund costs.
*
JohnL77,

Actually, I should thank the person for contributing to my PBB profit...

Dreamer
TSdreamer101
post Jun 15 2013, 06:59 AM

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QUOTE(JohnL77 @ Jun 15 2013, 04:24 AM)
They only charge you for trading, right? Are there account maintenance fees, something like that?

So how old are you? You seem like someone who is pretty much on path to his financial goals. I bloody hell hope I can qualify for Admiral Shares by the time I'm in my mid 30s. Lol.

Hahaha, perhaps there should be a mutual fund company index fund/ETF.

What's the weightings of your portfolio? No gold/precious metals?

*I'm especially interested in your small value weighting. Since Damodaran and Fama have proven that value stocks perform better, why don't value investors have a completely value index stock portfolio? Is that a good idea?
*
JohnL77,

<<They only charge you for trading, right? Are there account maintenance fees, something like that? >>

There is minimal amount that you need to have in order to avoid account maintenance fee. I meet that. Hence, I only pay for trading.

<<Hahaha, perhaps there should be a mutual fund company index fund/ETF.>>

VT and BND are ETF of Vanguard mutual fund. So, you have that...

<<What's the weightings of your portfolio? No gold/precious metals?>>

My wife has enough gold jewelry..

<< *I'm especially interested in your small value weighting. Since Damodaran and Fama have proven that value stocks perform better, why don't value investors have a completely value index stock portfolio? Is that a good idea?>>

VWENX aka Wellington Fund stock portion is focused on Large Value Stock.

DFSVX is Small Value focused. It is only 5% of my portfolio.

<<why don't value investors have a completely value index stock portfolio? Is that a good idea?>>

Too much of a good thing is a bad thing.. I believe in BALANCE. I tilted slightly toward value.

BALANCE let you win SAFELY In the long run.

<<I bloody hell hope I can qualify for Admiral Shares by the time I'm in my mid 30s. Lol.>>

Most admiral shares' minimum is only USD $10K.... That is not a lot of money...

Dreamer
TSdreamer101
post Jun 15 2013, 09:18 AM

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Folks,

There is something FUNDAMENTAL and PROFOUND in asset allocation approach.

We know in investing, if you can buy low and sell high, you will make money. So, guess what we are doing so far in every step of the asset allocation process?? We are buying low and sell high.

A) We fixed the asset classes at fixed percentage.

B) When we investing with additional money, we invest on asset class that is cheaper as compare to other asset in our portfolio. If we follow the rule, we will always buy the CHEAPEST asset class at the moment in relation to our asset.

C) When we do annual rebalancing, we sell asset that exceed our allocation. That means we sell high. And, we buy asset that is lower in allocation. We sell low.

D) We do the same thing with 5/25 band rebalancing, we sell asset that is high and buy asset that is low.

Now, if you keep on sell high and buy low, you will make money most of time.

Yes, that is ONE situation that you will not make money. Aka, all THE ASSET classes went down at the same time. But, even in this case, you are limiting your damage by sell high and buy low in relative sense between your asset classes.

Dreamer
TSdreamer101
post Jun 15 2013, 08:00 PM

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QUOTE(JohnL77 @ Jun 15 2013, 12:36 PM)
What's the minimum amount?

No no no, I meant, a fund that owns the shares of companies that own mutual funds like Public Bank.

"My wife has enough gold jewellery"

LOL.

$10k is RM30,000. Plus, $10k only lets you participate in one fund. Are there Vanguard funds that let you diversify without a minimum $50k? Anyway, not like I can take part, only option for M'sians are ETFs, I guess.

Btw, this is a great thread. Thanks for sharing what you know about asset allocations.
*
JohnL77,

<<What's the minimum amount?>>

Check their web site...

<< "My wife has enough gold jewellery"

LOL.>>

That is the actual statement from my wife when I was thinking of buying some gold (coin or jewellery) to hedge inflation. I am still trying to convince her to let me buy some silver coins.

<<No no no, I meant, a fund that owns the shares of companies that own mutual funds like Public Bank. >>

The largest mutual fund company is Vanguard.

https://investor.vanguard.com/about/why-invest-with-us

Your interests are the only interests we serve

<< Most investment firms are either publicly traded or privately owned. Vanguard is different: We're client-owned. Helping our investors achieve their goals is literally our sole reason for existence. With no other parties to answer to and therefore no conflicting loyalties, we make every decision—like keeping investing costs as low as possible—with only your needs in mind.>>

Vanguard is directly / mutually owned by the investors on the Vanguard fund and ETF. Vanguard is a non-profit. Hence, it has the lowest costs.

The other mutual fund companies are not good investment.

Dreamer
TSdreamer101
post Jun 16 2013, 10:48 AM

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Folks,

Some other points about asset allocation:

1) You should use interest income and dividend income to rebalance your portfolio.

2) You could add more asset classes if you want to. But, for most of the studies done, stock / bond ratio has the highest impact of your portfolio return.

3) Each asset class should have 5% or more of your portfolio or else it has too little impact to matter.

4) Most popular asset class addition to the portfolio are REIT since it usually does not correlate to stock or bond. The asset class that does not correlate to other asset classes in your portfolio tend to provide better diversification and return enhancement.

Dreamer
TSdreamer101
post Jun 16 2013, 08:01 PM

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QUOTE(JohnL77 @ Jun 16 2013, 03:15 PM)
I did contact them, they said no minimum balance is required.

"That is the actual statement from my wife when I was thinking of buying some gold (coin or jewellery) to hedge inflation. I am still trying to convince her to let me buy some silver coins."

I guess it's no laughing matter then. Lol.

What I meant was like what you said, Public Bank owns Public Mutual and if people still believe in Public Mutual then Public Bank will make more money. So there you should be an "index fund" that tracks the performance of companies that own mutual fund companies. But then again, it's silly to think that income from mutual fund companies alone will make companies like Public Bank a lot richer, right? Or is it not? Lol.

Yes, I know Vanguard is owned by the shareholders. I just read about it recently in The Four Pillars of Investing. Xuzen is hoping that mutual fund expenses in Malaysia will drop, but I think until we have an ownership structure like Vanguard, it will never happen.

But how long do you think this situation will last? Will there be a day when we don't realize that Vanguard has raised its fees because we've forgotten what they used to charge us?

So Dreamer, what do you think is the best way for Malaysians to invest in index funds/ETFs? Is it like what Gark said, open an account with a broker in Singapore because they don't charge withholding tax?
*
JohnL77,

<<Yes, I know Vanguard is owned by the shareholders. I just read about it recently in The Four Pillars of Investing. Xuzen is hoping that mutual fund expenses in Malaysia will drop, but I think until we have an ownership structure like Vanguard, it will never happen. >>

Why wait for that to happen when you can buy ETF directly?? Do not wait for world to change. Do what is best for you at any time.. Life is too short.

<< So Dreamer, what do you think is the best way for Malaysians to invest in index funds/ETFs? Is it like what Gark said, open an account with a broker in Singapore because they don't charge withholding tax?>>

You could do that but it is closer and more convenient to go to Singapore to check your A/C if you need to. But, I am not sure how big a deal withholding tax is. Is it only on the dividend??

You only pay tax if you make money. Sometime, a person can be "penny wise pound foolish" and do too much to avoid tax.

How much is the cost of buying fund from fund supermarket??

Dreamer
TSdreamer101
post Jun 17 2013, 12:01 AM

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QUOTE(JohnL77 @ Jun 16 2013, 11:26 PM)
"How much is the cost of buying fund from fund supermarket??"

I don't know man.

William Bernstein disfavors ETFs. His outlook seems to have been kinder to ETFs since he wrote The Four Pillars compared to his stance when he wrote The Intelligent Asset Allocator, but he still prefers index funds. Why?

Hey, Dreamer, what books would you recommend reading?

And how is it like living in the US? What's your job there? Dude, have you seen monolithic domes? Round houses made of Styrofoam and concrete? I've been in love with these kind of houses. Not sure if it would be wise to build one.
*
JohnL77,

You are not US resident and you do not have USD $200K. So, buying fund directly is not possible. Hence, ETF is the only way to go...

<< Dude, have you seen monolithic domes? Round houses made of Styrofoam and concrete? I've been in love with these kind of houses. Not sure if it would be wise to build one.>>

You are too much of a city person. There are plenty of nice and beautiful places in USA. Live in a RV and tour all the national park all the times seem nicer.

http://en.wikipedia.org/wiki/List_of_natio...e_United_States

Dreamer
TSdreamer101
post Jun 17 2013, 06:15 AM

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QUOTE(JohnL77 @ Jun 17 2013, 01:42 AM)
I just have this dream of having a monolithic dome in a green area surrounded by trees. Something like that. Lol. Travelling the world in an RV sounds good too. Is that what you do? Please don't tell me your wife doesn't let you do that. sad.gif

Hey, what do you think about owning real estate? Jim Altucher doesn't like the idea, and I agree with him that it can be a drag.
*
JohnL77,

I owned VGSLX...

<<Hey, what do you think about owning real estate? Jim Altucher doesn't like the idea, and I agree with him that it can be a drag.>>

Who the hell is Jim Altucher?? How does that RELEVANT to you??

If you KNOW how to invest on Real Estate, it will work for you. If not, do something else..

There are many people that invest on many things and became very successful. But, they are not YOU. You need to know what will work for you and pick that.

If you asked the WRONG question, you will NEVER get the RIGHT answer!!!

Dreamer
TSdreamer101
post Jun 17 2013, 09:19 PM

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QUOTE(JohnL77 @ Jun 17 2013, 12:38 PM)
No, I'm definitely going to own REITs as part of my investment. But taking a loan to buy a house... I have some doubts about that. Besides, you have this great idea of owning an RV. Do you live the dream? smile.gif

I'd just like to hear your opinion on owning a house.
*
JohnL77,

<<I'd just like to hear your opinion on owning a house.>>

Owning a house to stay is an expense. It is not an investment. Now, as to buying rental property to earn income, I am not interested. It takes too much active involvement and I do not want that.

I believe doing rent versus buy calculation for my primary residence. If it costs less to buy, I will buy. Or else, I will rent.

Dreamer
TSdreamer101
post Jun 17 2013, 10:19 PM

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QUOTE(JohnL77 @ Jun 17 2013, 10:03 PM)
Looks like we pretty much agree on this. I think REITs are the best way to invest in rental property. But I don't know anything about how to pick REITs. Any book recommendations?

Yes, I just read an article on Time mentioning P/R ratio, haha.
*
JohnL77,

Don't pick... VGSLX (mutual fund) or VNQ (ETF) is the REIT index fund for all the REIT in USA.

Dreamer
TSdreamer101
post Jun 17 2013, 10:30 PM

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Folks,

In this approach, other than the effort to establish the A/C and transfer money, the amount of effort and intelligence required is minimal. You do not have to be SMART in order to get this to work. You just need to have a plan and stick with it.

This plan provides you with LOW COST and DIVERSIFICATION. You are investing on 4,000 to 5,000 largest companies in the world and 3,000 bonds in USA.

You just need to get started and re-calculate and invest when you have new money. You can do either

A) Annual rebalancing -> calculate every year.

B) Band based rebalancing -> calculate every week.

You can do this via Spreadsheet or pencil and paper.

Please note that any investment approach that require you to be VERY SMART probably will not work for a lot of people.

Dreamer
TSdreamer101
post Jun 18 2013, 05:39 AM

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Folks,

The followings are my personal story / journey of how I come about to this investment approach.

The PROBLEM with adopting this approach is you have to admit that you are not very smart in term of investing. You cannot beat the average. You might be smart in many other different area but beating the market average is not what you can do.

10+ years ago I lost half of my life savings in stock trading. I got so scared of the stock market that I convert everything into cash except one S&P 500 stock index. After the crash, this stock fund survive. But, this is a lesson that I need to learn. I could not sleep at night during the crash. I have to sell everything in order to get a good night sleep.

As a result of this lesson, I searched and studied an approach that I have confident in and I can keep going even with a bad crash. And, this the approach that I settled in. I cannot know this approach works for me until I survive the 2008/2009 crash without losing my sleep.

Dreamer
TSdreamer101
post Jun 18 2013, 08:34 PM

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QUOTE(jutamind @ Jun 18 2013, 01:32 PM)
Hi Dreamer,

Do you invest in ETF using DCA/VCA or as and when you want to invest?
*
jutamind,

I invest whenever I have extra cash. What I buy is based on which asset is below allocation. Normally, I invest on the increment of USD 1K.

Dreamer
TSdreamer101
post Jun 20 2013, 05:22 AM

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QUOTE(JohnL77 @ Jun 20 2013, 03:27 AM)
» Click to show Spoiler - click again to hide... «

*
JohnL77,

<<Hmm.. yes, but what about global property? For some reason, I feel I should diversify. >>

https://personal.vanguard.com/us/funds/snap...&FundIntExt=INT

VNQI is international REIT ETF. However I am not convinced that it is good investment. REIT is not well developed all over the world. Hence, International REIT is not as diversified as you think.

<<Since bond yields are so low right now, wouldn't it be better to put your money in fixed deposit for say... 1 year or half a year? >>

You are doing market timing...

<< Also, saying you can make money by day trading isn't very objective and clear in telling people just how many people lose money day trading. Yeah, anyone can be rich, but not everyone. People need to learn what investing really means. >>

My uncles won the lottery 3 times. He can win money by gambling at Genting. But, I am not my uncle. There might be people that can make money by day trading. But, that is THEM and their ways. I know it is not for me.

Don't worry too much about what others do and do not do. Focus and execute your own plan for your life.

Know what is right for you.

Dreamer
TSdreamer101
post Jun 20 2013, 08:33 PM

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QUOTE(JohnL77 @ Jun 20 2013, 02:00 PM)
Sorry, I don't really understand how investing in bonds work. Especially since retail investors cannot buy bonds directly in Malaysia. (Correct me if I'm wrong)

Haha, I'm just giving a warning to those who will heed. I especially don't want any of my friends or family to gamble their savings away. It would pain me to see that. (since I've already seen it first hand)

Your uncle is one of those coin flippers that has been destined to get heads all the time, lol.

Hmm.. should I own domestic REITS?
*
JohnL77,

BND is US bond index ETF...

<<Hmm.. should I own domestic REITS?>>

I do not invest locally except for PBB. Malaysia is TOO SMALL and it is totally dependent on the government. IMHO, Malaysia's economy will crash soon and may never recover. Anyhow, I do not believe in dependent on any single country to begin with.

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TSdreamer101
post Jun 21 2013, 02:08 AM

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QUOTE(JohnL77 @ Jun 21 2013, 01:45 AM)
What about the United States.
*
JohnL77,

What is the question??

A) Will USA crashes??

B) What happened if USA crashes??

I am diversifying across the world. I invest on 4500 largest companies all over the world.

Dreamer
TSdreamer101
post Jun 21 2013, 06:42 AM

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QUOTE(JohnL77 @ Jun 21 2013, 03:00 AM)
Yes, will the USA crash? How much of your portfolio is US stocks?
*
JohnL77,

40%.

Dreamer
TSdreamer101
post Jun 21 2013, 11:07 PM

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QUOTE(JohnL77 @ Jun 21 2013, 02:38 PM)
Hmm.. I think it's hard to say whether Malaysia will crash. Why do you think Malaysia definitely will crash?

What about the US? Don't you think it will crash? Or is it recovering now? Is it recovering for a crash?

40% of your entire portfolio or 40% of your stock portfolio?
*
JohnL77,

<<Hmm.. I think it's hard to say whether Malaysia will crash.>>

It is not hard. You just need to open your eyes and see.

<<Why do you think Malaysia definitely will crash?>>

The question should be in reverse. What makes you think that Malaysia can sustain itself??

<<What about the US? Don't you think it will crash?>>

http://www.shadowstats.com/alternate_data/...ployment-charts

US had crashed. TRUE UNEMPLOYMENT is 10+%.

<<Or is it recovering now? Is it recovering for a crash?>>

It is still in a crash.

<<40% of your entire portfolio or 40% of your stock portfolio?>>

40% of my entire portfolio.

Please note that stock market is not necessary a reflection of REAL ECONOMY.

Dreamer
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