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Profile Information

Name: Cade
Gender: Male
Hometown: Atlanta, GA
Home country: USA
Current location: Dominican Republic
Member since: Sun Jun 15, 2014, 04:01 PM
Number of posts: 30

About Me

Retired Chemical and Environmental Engineer living off-grid on an old coffee farm in the Dominican Republic. Life is good. Also known as: google.com/+CadeJohnson

Journal Archives

Risk Tolerance

Money Magazine and other financial publications have a variety of "model portfolios" that cover a range of risk tolerances ranging from aggressive investor to very important to preserve investment, such as might befit a person with only a short time-horizon of investment. From my prior experience, market volatility only creates major deviations from a long-term upward trend for periods of a year or two - though certainly there have been longer market downturns prior to my time in the market. I think most of the money I invest is still going to be in the market in 15 years, so although I am retired I consider myself to be a fairly long term investor. But I cannot quite stomach the wild gyrations that a truly aggressive portfolio would entail. So I have not sought the high returns of REITs, junk bonds, emerging markets, or various specialty industry funds. These types of investments can lead to higher returns as befits their higher risk. But neither do I grasp my investment compulsively - money market fund returns are so low as to be of no interest, IMHO. But it is a very subjective matter. It depends on individual disposition, investment horizon, living circumstances and personal flexibility to deal with loss. There can only be guidance but no "correct" solution.

another good investment strategy

I want to get rich in the stock market, but I hate doing all the research. So I take the lazy way out as recommended by Peter Bogle - founder of Vanguard Mutual Funds: I have determined from reading and experience that my current "risk tolerance" equates to about 70% investment in stocks. I keep the remaining investment in long-term treasury bonds. I do not own any individual stocks or bonds, but purchase the S&P500 index fund and the long term bond index fund (VFINX and VBLTX, respectively). Every six months, I check the balance. If it is still at 70% I do nothing. If stocks are up, then I sell some to get back to 70% (sell high, right?). If stocks are down, then I sell some bonds and buy stocks (buy low, right?). I have followed this approach since 1994 and I have averaged a tidy 8.5% return on my investments. It does not take much time and I do not have to do any research or stress out about market calamities - when it is time to rebalance I just do it.

When I have money to invest, I invest it gradually over many months. When I need money, I take it out gradually over many months. I dollar-cost-average. Not all my investment moves come at the best or worst time. It might be that I lose an opportunity but it is very safe (well, safe for stock market investing anyway).
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