View
227
Download
0
Category
Tags:
Preview:
Citation preview
Presentation to AAII Baltimore1/09/2010
By Robert Wasilewski, PresidentRW Investment Strategies
Background Emotional Roller Coaster DIY Investor Advantages
◦ Save investment management costs◦ Understand philosophy and process
What the DIYer Needs to Do and to Know Suggested Approach Conclusions
Background
Pension fund Insurance Company Investment Manager
Bank Trust Departments Private Money Managers
Active Management Indexed
Emotions continued to play havoc with investor returns in 2008. DALBAR’s update of its Quantitative Analysis of Investor Behavior (QAIB) study found that, while the S&P 500 has returned 8.35% over a 20-year period ending in 2008, the average equity investor earned just 1.87%, which was less than the inflation rate of 2.89%. Bond investors fared no better. They earned returns of just 0.77% compared to 7.43% for the index.
Roller coaster:
The time to buy is when
there is blood in the streets.
The market can stay irrational
longer than you can stay solvent.
Stock prices have reached what looks like a permanently high plateau.
10/21/1929
"In 30 years in this business, I do not know
anybody who has done it successfully and
consistently, nor anybody who knows anybody who has done it successfully
and consistently. Indeed, my impression is that
trying to do market timing is likely, not only not to add
value to your investment program, but to be counterproductive."
Save investment management fees Cost of professional investment
management◦ $1.0 million◦ 55 years old◦ 1%/year = $10,000◦ Rule of 72 @ 7.2%/year money doubles in 10
years $80,000 in 30 years
Understand Philosophy and Process
Individual stocks/mutual funds/etfs Fundamental/technical analysis Asset allocation Benchmark Measure performance
Individual security risk and industry riskMarket risk
◦Portfolio allocation
OBJECTIVE: SIMPLIFY
◦ By Broker
◦ By Account Type (Rollover 401 (k)s to IRAs)
***NUA
◦ Avoid “reverse $ cost averaging” when drawing down your “nest egg”
◦ Try not to draw down more than 5% (adjusted for inflation) of your “nest egg”
◦ Put interest-bearing investments in qualified accounts and earn qualified dividends and long- term cap gains in taxable accounts
◦ Draw down taxable accounts first◦ Be careful reaching for yield◦ Establish fund for withdrawals to weather
downturns
Suggested Approach/10-Minute Approach◦ Seek market returns
70% STOCKS/30% BONDS 1/1/2008
70% SPY 30% AGG
Portfolio return -24% S&P 500 return -37%
1/1/2009 Portfolio return +19% S&P 500 return +26%
Suggested Approach Use ETFs
◦ Invest in total market indices
Focus on Portfolio Allocation◦ Start w/ rule of thumb• Bonds = age
Suggested Approach/More Involved◦ Seek market returns/look at expense ratios/avg.
volume/look at bid-ask spread◦ Vanguard
VTI Total Stk. Mkt. BND Total Bond VEU FTSE All-World ex. U.S.
◦ I Shares IVV S&P 500 AGG Total Bond EFA Global Excludes U.S. & Canada
Think about the emotional roller coaster Exploit advantages Think about indexing at least a portion of
assets Hold sufficient reserves to make it through
market downturn
Hourly consulting◦ “Do-it-yourself” investor◦ Second opinions◦ Company presentations
Investment Management◦ Low fee indexed approach
rwasilewski@howardcc.edu443-896-4123 (c)
Recommended