few questions:

1. can 5/25 rule be applied to unit trust funds?
2. if 5/25 rule is breached, instead of selling, can we use the rule to top up assuming that the underlying funds/ETFs are good and we have spare cash to invest?

I'm talking about this - http://www.investopedia.com/articles/stocks/07/dcavsva.asp. William Bernstein advocates it. I want to know if anyone practices it.

jutamind,


1) You could but Unit Trust Fund for this strategy. But, Unit Trust is lousy investment too begin with. ETF is 0% load and less than 0.5% annual fee. Unit Trust:-( :-(. I buy Public Bank Stock because PBB make a lot of money from people buying Unit Trust.

2) Yes, you cold do that. But, it may not be practical after a while. Please note that it is good to sell. You are "Selling High" and "Buy Low" at the same time. This rule prevent you from getting caught in a bubble. It is a GOOD THING. It keep you SAFE.


http://www.amazon.com/Value-Averaging-Stra...value+averaging

JohnL77,

I have this book and I read it. I consider it as too troublesome and not worth the effort.

I am not an optimizer. And, I do not need the BEST STRATEGY. My goal is to live my life and enjoy my money. It means spend JUST ENOUGH TIME on my investment.

Dreamer

This post has been edited by dreamer101: Jun 14 2013, 11:52 PM

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.

This post has been edited by JohnL77: Jun 15 2013, 12:12 AM

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

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

Hmm.. yes, one day.

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?

This post has been edited by JohnL77: Jun 15 2013, 01:46 AM

You need to minus the mutual fund costs.

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

JohnL77,

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

Dreamer

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?

This post has been edited by JohnL77: Jun 15 2013, 04:39 AM

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

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

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.

This post has been edited by JohnL77: Jun 15 2013, 12:38 PM

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

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

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?

This post has been edited by JohnL77: Jun 16 2013, 03:21 PM

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

"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

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.

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.