Investment

» allancoleman - Winter 2006

In response to Winter 2006 posted by Happy_2:

all fixed income , Happy_2 . with most of that in a ' stable value ' fund in my 401(k) paying almost 6% and the rest in money market funds all paying over 4% .

with the stock market presently below where i got out the end of december , i'm in no rush for risk until i get the pitch i want . figure the market has to keep throwing pitches and i'll just wait until later this year before i swing . until that time , i'm happy ( pun intended ) selling real estate , living exclusively off those sales , and paying for Roth conversions on those sales . by not taking any distributions on my 401(k) , IRAs , and Roths , i'm able to focus on my Roth conversions at this time .

-- posted by allancoleman

» Happy_2 - Converting IRA's

In response to Winter 2006 posted by allancoleman:
Paying all those taxes to convert your IRA's to Roths, may work for you, but I would much rather have put my money in the stock market many years ago. Those who did are now able to take their capital gains when they need money. The tax rate on capital gains for married couples with taxable incomes below about $60,000 is only 5%!

-- posted by Happy_2

» allancoleman - Converting IRA's

In response to Converting IRA's posted by Happy_2:

your point is excellent , Happy_2 . but with my calculated RMD already being at probably well over $200k a year , the only solution i have to being in the highest tax bracket at age 70 and beyond is to do Roth conversions now . besides , i look for tax rates to increase in later years and nothing beats ' taxfree ' . .

-- posted by allancoleman

» Happy_2 - Converting IRA's

In response to Converting IRA's posted by allancoleman:
I wonder if there is some point at which it pays to stop putting more money into deferred accounts. When you go beyond 60K taxable income with MRD, maybe that is the point it is better to just forget about, non-matched of course, IRA's. With average life expectancy at about 85 when one reaches, 70 1/2, I guess you have to take out about 7% of your total non-roth IRA's each year.

These things have never been an issue with me since most of my income comes from rents, interest and dividends.

-- posted by Happy_2

» allancoleman - Converting IRA's

In response to Converting IRA's posted by Happy_2:

i suppose there is some point at which it probably does pay to stop putting money into deferred accounts , Happy . however i agree with most analysists who advise people when they ask how much to save for their retirement , who say , ' as much as you can ' . i'm fortunate that most of my critical mass was in deferred accounts that i could rollover into IRAs and therefore convert to taxfree Roths . i'm also very fortunate that i probably also have a separate critical mass in real estate that i've been able to retire on while dealing with my Roth conversions .

course there is also the separate point that i've been fortunate ( lucky ) in my timing in being able to sell most of my real estate into the teeth of this buyers with ' no fear ' era . i can remember years , or even decades , in the past when there were no buyers and you couldn't hardly give the stuff away and when real estate wasn't so hot .

also fortunate to have pulled out of stocks in the past , especially mid - 1999 , before losing serious money in past corrections .

as far as how much to take out of one's critical mass , you should spend down your accounts so your last check to the funeral home bounces . . for myself , it doesn't matter what my wife does with it cause it's been as much fun for me in the ' making ' of it than it has been in the ' spending ' of it . especially the real estate end of it . really enjoyed hunting for and wheeling and dealing on it .

it's so now in retirement that the simple things like surfing or walking or biking for my wife is enough and those hardly take alot of critical mass to be able to do . it is nice though to have enough critical mass to be able to focus on my health . and for my money to last longer than i will . have more money at this point than i can spend intelligently .

-- posted by allancoleman

» Happy_2 - Converting IRA's

In response to Converting IRA's posted by allancoleman:
Like you, I feel quite fortunate to have participated in the greatest bull stock market in history, and the greatest real estate market in history.

Last year I sold a ranch, an office building and a condo, all for top price, thanks to the incredibly low interest rates offered by the Farm Bureau, the SBA, and the FHA respectively. Thank you Uncle Sam.

-- posted by Happy_2

» allancoleman - Converting IRA's

In response to Converting IRA's posted by Happy_2:

sounds like you are liquidating real estate too as i've been doing for years now . feel this ' no fear ' buyer era will ultimately end at some point in the future . not concerned cause i've obtained my properties at such a low price years ago , i could sell at much lower prices and still make money . and i purchased all of my real estate for personal enjoyment and not speculation so i can live with what i have with no worries .

the stock market in the 90's was exceptional . i actually pulled a ' double ' in as little as three years durning that period . felt my fortune obtained in my deferred accounts was the result of me buying into the stock market beginning in 1972 durning the depths of the last secular bear market . for well over a decade i kept buying , dollar cost adveraging , in my 401(k) and not making any money . however i was purchasing cheaper and cheaper shares ( n.a.v. ) that ultimately exploded in the secular bull market that began in 1982 . course i rode that horse until mid 1999 and moved into fixed income that , at that point , was returning over 6% a year .

feel that i'm been very fortunate , but then again those that are successful , ' make ' or take advantage of their opportunities . i was always fascinated with real estate and throughly enjoyed looking for it and buying it and it's paid off . just as i've always been a ' net saver ' in my career and always maxed out on my 401(k) , profit sharing , and ESOP shares . usually paid myself first before budgeting for other living expenses . and i feel as you do , " Thank you Uncle Sam " for providing us with such a wonderful country full of opportunities .

as i said , my pleasure isn't in the spending of my critical mass , but in the enjoyment of making it . still having fun trying to figure out how to grow it even though i don't need any more . nice talking with ya Happy_2 .

-- posted by allancoleman

» webagogue - splitting explore across regular and ira?

I'm sure this has been covered before but I could not find it... I am subscriber to Kirk's newsletter and would like some suggestions on how I should utilize by IRA and regular investment accounts I have at ETrade. Since the IRA is tax-deferred, I would imagine that I would try to put in there the most volatile stocks from the Explore portfolio. My thinking now is that I would just go through the list and of the stocks that have the most auto-buys and auto-sells listed, put as many of those in the IRA. Anyone have any other ideas or advice?

-- posted by webagogue

» Normxxx - Some Strategic Guesswork

A Fresh Take On Strategic Guesswork

By The Capital Spectator | 19 August 2006

The tactical is vastly more interesting than the strategic when it comes to investing, but the latter is vastly more important for determining results. Unfortunately, coming up with reliable numbers is a challenge, and even in the best of circumstances the estimates are only guesses. Ideally, they're informed guesses, but guesses nonetheless.

No matter, as guesses are all we've got for strategic portfolio design. The three building blocks in the endeavor of building efficient portfolios (i.e., portfolios that maximize return for a given level of risk) are expected returns, volatility (standard deviation) and correlations for the major asset classes. The latter two tend to be relatively easy to project based on a careful sampling of history. Expected returns, however, are another animal, and this is where the challenge lies. Simply put, projecting returns far into the future is at once immensely critical for long-term portfolio design, and immensely difficult. The reason: history is of limited value in determining performance in the years ahead.

That said, we're more than a little interested when a respected research team brings fresh numbers to the genre of strategic projections. On that score, we refer you to EnnisKnupp. The Chicago-based institutional investment consultant last month updated its Capital Markets Modeling Assumptions, with an eye on assessing the outlook for returns, correlations and volatility among the major asset classes. Strategically minded investors would do well to give the research paper a read and consider the implications for portfolio design. Granted, the paper dispenses estimates, but robust ones nonetheless. As a result, the numbers offer a starting point for deciding how to structure a portfolio. As a preview, here's a sampling from the paper's statistical offerings:

Asset Class Expected Long-Term Compound Return
US Equity 7.5%
Non-US Equity 7.2
US Bonds 5.6
Real Estate 6.5

Historical Asset Class Standard Deviation (1978-2005)
US Equity 16.7
Non-US Equity 18.7
US Bonds 6.6
Real Estate 11.3

Historical Asset Class Correlations (1978-2005)*
Relative to US Equity:
US Equity 1.00
Non-US Equity 0.71
US Bonds 0.20
Real Estate 0.59

Relative to Non-US Equity:
US Equity 0.71
Non-US Equity 1.00
US Bonds 0.20
Real Estate 0.63

Relative to US Bonds:
US Equity 0.20
Non-US Equity 0.20
US Bonds 1.00
Real Estate 0.58

* 1.0 is perfect positive correlation; 0.0 is no correlation

We're fairly confident that the standard deviations and the correlations will prove reliable, if not perfect benchmarks for the future for the simple reason that history is a fairly good guide for such measures. Expected returns, of course, are another matter, requiring more than a little suspicion as to their accuracy relative to what the future brings.

That said, one thing stands out in the numbers: the low correlation of bonds relative to equities. In fact, that's consistent with history. The no-brainer diversification decision has long been one of adding bonds to a stock portfolio. If nothing else, the EnnisKnupp numbers reaffirm that the strategic does in fact trump the tactical as a vital issue for investing success. We can debate what the Fed will do next, and whether inflation is rising, falling or standing still. Exciting as all this is, it pales in importance next the recognition that bonds are likely to remain excellent diversification tools for equities. This, at least, is one paradigm that looks set in stone.

Normxxx    
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The contents of any third-party letters/reports above do not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.

-- posted by Normxxx

» Normxxx - Some Strategic Guesswork

In response to Some Strategic Guesswork posted by Normxxx:

[ Normxxx Here: The average correlation between commodities and other major asset classes is generally very low— even to asset classes like real estate and hedge funds. From a portfolio perspective, these very low correlation values of commodities with other asset classes make them a very attractive means of diversification.

Considerations about the diversification characteristics of commodities leads us to conclude that Commodities should be included in a portfolio because of their ability to stabilise the returns of a mixed portfolio, and hence reduce total portfolio risk. Correlations of Commodities versus Asset Classes is shown at the link address.

http://www.investopedia.com/images/artic...
Source: "Commodities as an Asset Class", Frank Armstrong III, CFP®, www.investorsolutions.com ]

Normxxx
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The contents of any third-party letters/reports above do not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of any message or post by normxxx anywhere on this site is not to be construed as constituting market or investment advice. Such is intended for educational purposes only. Individuals should always consult with their own advisors for specific investment advice.

-- posted by Normxxx